What changed in this filing

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Item 1. Business

2026-03-31 compared with 2025-03-19 · 212 added, 236 removed, 548 unchanged (45% of the section changed)

Charlotte's Web Holdings, Inc., ("Charlotte's Web", the "Company" or "we"), a benefit company under the Business Corporations Act (British Columbia) ("BCBCA"), S.B.C.

57, as amended, including the regulations promulgated thereunder, and a Certified B Corp headquartered in Louisville, Colorado, was incorporated under the BCBCA on May 18, 2018 under the name Stanley Brothers Holdings Inc.

57, as amended, including the regulations promulgated thereunder, headquartered in Louisville, Colorado, was incorporated under the BCBCA on May 18, 2018 under the name Stanley Brothers Holdings Inc.

On July 12, 2018, the Company changed its name to Charlotte's Web Holdings, Inc.

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The Company's Common Shares are listed on the Toronto Stock Exchange ("TSX") under the symbol, "CWEB".

The Company's Common Shares are also quoted on the over-the-counter stock market, the OTCQX, in the United States under the symbol, "CWBHF".

The Company's Common Shares are also quoted on the over-the-counter stock market, the OTCQB, in the United States under the symbol, "CWBHF".

The Company is a market leader in the United States in innovative hemp extract and other botanical-based wellness products under a family of brands which includes Charlotte’s Web™, CBD Medic™, and CBD Clinic™.

Charlotte's Web branded premium quality full-spectrum CBD products start with proprietary hemp genetics that are 100% North American farm grown and manufactured into hemp extracts containing naturally occurring phytocannabinoids including cannabidiol ("CBD"), cannabichromene ("CBC"), cannabigerol ("CBG"), cannabinol ("CBN"), terpenes, flavonoids and other beneficial hemp compounds.

Charlotte's Web branded premium quality full-spectrum cannabidiol ("CBD") products start with proprietary hemp genetics that are 100% North American farm grown and manufactured into hemp extracts containing naturally occurring phytocannabinoids including CBD, cannabichromene ("CBC"), cannabigerol ("CBG"), cannabinol ("CBN"), terpenes, flavonoids and other beneficial hemp compounds.

The Company operates from its cGMP (current good manufacturing practices) compliant production facility in Louisville, Colorado (the "LOFT") where it produces hemp oil tinctures and maintains distribution, quality control and research and development ("R&D") activities.

Charlotte’s Web product categories include functional mushroom gummies, and hemp extract oil tinctures (liquid products), gummies, capsules, topical creams and lotions, and pet products.

The Company also produces NSF Certified for Sport ® broad-spectrum tincture and gummy products.

Charlotte’s Web products are distributed to retail outlets and health care practitioners, as well as online through the Company’s website at www.charlottesweb.com and other third-party e-commerce sites.

Charlotte’s Web product categories include functional mushroom gummies, hemp extract oil tinctures (liquid products), gummies, capsules, topical creams and lotions, and pet products.

Charlotte’s Web products are sold through select distributors and healthcare practitioners, as well as online through the Company’s website at www.charlottesweb.com and other third-party e-commerce sites.

The information provided on the Company's website is not part of this report or any other report filed with or furnished to the SEC.

The business of the Company consists of the farming, manufacturing, sales, and marketing of hemp-derived CBD and other botanical-based wellness products, including functional mushroom gummies.

The business of the Company consists of the manufacturing, sales, and marketing of hemp-derived CBD and other botanical-based wellness products, including functional mushroom gummies.

As of December 31, 2025, the Company operated in a single operating and reportable segment, hemp-derived CBD wellness products, making up the majority of the revenue of the Company.

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Where such research indicates that a product may have a potential therapeutic use, the Company may consider pursuing development of that use in jurisdictions where it is legal to do so in accordance with applicable regulations and if consistent with the Company’s strategic vision.

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

On March 2, 2021, Charlotte's Web executed an Option Purchase Agreement (the "SBH Purchase Option") pursuant to which the Company has the option to acquire Stanley Brothers USA Holdings, Inc.

The Company does not currently produce or sell medicinal or recreational marijuana or products derived from high-THC cannabis plants and does not have any plans to expand into such in the near future.

On March 2, 2021, Charlotte's Web executed an Option Purchase Agreement (the "SBH Purchase Option") pursuant to which the Company had the option to acquire Stanley Brothers USA Holdings, Inc.

("Stanley Brothers USA"), a cannabis wellness incubator.

Until the SBH Purchase Option is exercised, both Charlotte's Web and Stanley Brothers USA will continue to operate as standalone entities in the US.

Outside of the US, the companies are able to explore opportunities where cannabis is federally permissible.

At this time, however, the Company does not have any plans to expand into high-THC products in the near future.

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, and Canada.

The Company is not obligated to exercise the SBH Purchase Option and as such the unexercised option expired as of February 26, 2026.

The Company grows its proprietary hemp domestically in the United States through contract farming operations in Arizona, Colorado, Kentucky, New Mexico, and Canada.

The hemp grown in Canada is utilized exclusively for the Canadian market and not in the Company's products sold in the United States.

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Management is working to expand the Company’s production capacity, and to find opportunities for continuous improvement in the supply chain, including in-sourcing production to reduce its dependence on third party contract manufacturers.

The Company is working to capitalize on the rapidly emerging botanical-based wellness products industry by driving customer acquisition and retention, as well as accelerating national and international retail expansion.

In addition, the Company may consider expanding its product line beyond hemp-based products and functional mushrooms should the science and the Company’s strategic vision support such expansion.

The Company may consider expanding its product line beyond hemp-based products and functional mushrooms should the science and the Company’s strategic vision support such expansion.

In furtherance of the Company’s R&D efforts, in February 2020, the Company established CW Labs, an internal division for R&D, to substantially expand the Company’s efforts around the science of hemp-derived compounds.

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BATS and NYSE:

BTI), providing for the issuance of an approximately $56.8 million ("Canadian Dollar" C$75.3 million) convertible debenture (the "debenture"), 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 Toronto Stock Exchange ("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.

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BAT holds an equity interest (a) in the form of 2,000,000 or 100% preferred units, and (b) a $5 million secured convertible indenture that can be converted upon an additional qualified financing or upon maturity of such indenture.

In October 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 an exclusive strategic partnership with MLB to promote the Company’s new NSF Certified for Sport ® product line.

On February 5, 2024, the Company and MLB entered into an amendment to extend the MLB Promotional Rights 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 (the "PRA Letter Agreement") terminating the MLB Promotional Rights Agreement and waiving the Company's obligation to pay the remaining aggregate rights fee of $18 million for the remainder of the original term of the MLB Promotional Rights Agreement.

In September 2024, the Company launched its new functional mushroom gummy product line with three formulations:

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Their directors have a duty to act honestly and in good faith with a view to conducting business in a responsible and sustainable manner and to promote the company’s public benefits and must balance this duty with their general fiduciary duties under section 142(1)(a) of the BCBCA to act honestly and in good faith with a view to the best interests of the company.

As a benefit company, the Company must balance a variety of interests that may result in actions that do not maximize Shareholder value as the board of directors of the Company (the "Board" or the "Board of Directors") must balance the interests of Shareholders and stakeholders in working to

achieve the Company’s public benefits.

See "Risk Factors – As a public benefit company, the Company has a duty to balance a variety of interests that may result in actions that do not maximize Shareholder value."

In practice, the Board of Directors of the Company takes an expanded view of decision making to balance their fiduciary duties and their duty to act honestly and in good faith with a view to conducting business in a responsible and sustainable manner and to promote the Company’s public benefits, including weighing potential conflicts of interest and ultimately making decisions that the Board believes most appropriately address all of the Board’s duties.

British Columbia courts have generally been deferential to the business decisions of directors, as directors are in the best position to take into account the diverse interests of a company and its stakeholders (including what weight to give to Shareholder interests), as long as the business decision lies within the range of reasonable alternatives.

British Columbia courts have generally been deferential to the business decisions of

directors, as directors are in the best position to take into account the diverse interests of a company and its stakeholders (including what weight to give to Shareholder interests), as long as the business decision lies within the range of reasonable alternatives.

However, as a benefit company, there is uncertainty as to how British Columbia courts would view the balancing of these interests and the weighing of Shareholder and stakeholder concerns.

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(b) a record of assessment based on a third-party standard;

and (c) the circumstances, if any, that hindered the Company’s endeavors to carry out the commitments set out in the Company’s benefit provision.

and (c) the circumstances, if any, that hindered the Company’s endeavors to carry out the commitments set out in the Company’s benefit provisions.

For so long as the Company is a benefit company under the BCBCA, the Company will include an annual benefit report as part of its annual proxy materials sent to its Shareholders and post the report to its website.

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By doing so, the Company believes that socially oriented actions will ultimately have a positive impact on the Company, its employees, and its Shareholders.

In addition to being a benefit company, the Company is a "Certified B Corp", as certified by B Lab, the US non-profit organization which administers this certification.

Certified B Corps (also referred to as "B Corps" or "B Corporations") are for-profit companies that use the power of business to build a more inclusive and sustainable economy.

Certified B Corps are required to consider the impact of their decisions on all stakeholders:

customers, workers, communities, and the environment.

These requirements are aligned with the Company’s socially conscious strategic vision.

The Company’s status as a Certified B Corp is distinct from and has no impact on its status as a benefit company under the BCBCA.

History and Development of the Company

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Charlotte’s Web sold 13,312,150 Common Shares under the initial public offering ("IPO"), for total gross proceeds to the Company of C$93,185,050, while certain selling Shareholders under the IPO sold an aggregate of 3,132,850 Common Shares, for total gross proceeds to the selling Shareholders of C$21,929,950.

On March 23, 2020, the Company announced it had entered into an arrangement (the "Arrangement Agreement") with Abacus Health Products ("Abacus"), pursuant to which the Company proposed to acquire all of the issued and outstanding subordinate voting shares of

Abacus (the "Abacus Shares").

Under the terms of the Arrangement Agreement, Shareholders of Abacus would receive 0.85 of a Common Share for each Abacus Share held.

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Upon completion of the Arrangement, Abacus became a wholly-owned subsidiary of the Company.

Financial year ended December 31, 2022

On January 4, 2022, the Company’s Board designated Jared Stanley, the Company’s Chief Cultivation and Innovation Officer, as an executive officer of the Company.

On January 12, 2022, the Company announced the completion of a reorganization of the corporate structure and a movement to a horizontal organizational structure to empower employees with increased decision making and accountability.

On February 1, 2022, the Company's Board appointed Andrés de Gortari as Chief Accounting Officer of the Company.

de Gortari joined the Company in July 2021 as the Company’s Vice President of Finance and Accounting.

On March 9, 2022, the Company announced that the Charlotte's Web line of CBD Gummies has been named Product of the Year for 2022.

Product of the Year is the largest consumer-voted award for product innovation, determined by 40,000 American shoppers through a national survey conducted by Kantar, a global leader in consumer research.

On April 25, 2022, the Company announced the departure of Wes Booysen as its Chief Financial & Operating Officer and the appointments of Lindsey Jensen as the Chief Financial officer and Jared Stanley as the Chief Operating officer.

On June 2, 2022, the Company and Jared Stanley, Chief Operating Officer of the Company, entered into an offer letter memorializing the terms of Mr.

Stanley’s service as Chief Operating Officer.

On June 20, 2022, the Company announced the appointment of Gregory A.

Gould, as the Company’s Executive Vice President – Chief Financial Officer, Chief Administration Officer, and Principal Accounting Officer, replacing former Chief Financial Officer, Lindsey Jensen, who notified the Company of her intended resignation from the Company, effective July 8, 2022.

Following the Company's annual general Shareholders' meeting on June 22, 2022, the elected Board of Directors were Jacques Tortoroli (Chief Executive Officer), John Held, Jean Birch, Tim Saunders, and Susan Vogt.

On July 27, 2022, the Company entered into a payoff letter with J.P.

Morgan to voluntarily terminate all commitments and obligations under the Company's credit agreement with J.P.

Morgan (the "Credit Agreement"), with termination effective as of July 27, 2022.

In connection with the execution of the payoff letter, the Company paid J.P.

Morgan approximately $20,000 in commitment fees and legal fees and expenses.

There were no outstanding borrowings under the Credit Agreement at the time the Company entered into the payoff letter or at the time of termination.

Effective as of July 31, 2022, the Company entered into an Extension and Second Amending Agreement to Name and Likeness and License Agreement (the "First Extension Agreement") with Leeland & Sig LLC d/b/a Stanley Brothers Brand Company, a Colorado limited liability company ("Licensor").

Pursuant to the First Extension Agreement, the term of the Name and Likeness and License Agreement dated August 1, 2018 between the Company and Licensor, as amended by the Amending Agreement to Name and Likeness Agreement effective April 16, 2021, was extended from July 31, 2022 to August 31, 2022.

Effective August 2, 2022, the Company entered into an amendment (the "Amendment") to the offer of employment, dated December 16, 2021, with Jacques Tortoroli, President, Chief Executive Officer, and Director of the Company.

Pursuant to the Amendment, Mr.

Tortoroli's annual base salary and grants under the Company’s 2018 Long-Term Incentive Plan were adjusted to better align with those of the Shareholders of the Company.

Effective August 10, 2022, the board of directors of the Company, appointed Thomas Lardieri to the Company's board of directors.

Lardieri's appointment to the Company’s board of directors was effective immediately.

Effective as of August 31, 2022, the Company entered into an Extension and Third Amending Agreement to Name and Likeness and License Agreement (the "Second Extension Agreement") with Leeland & Sig LLC d/b/a Stanley Brothers Brand Company, a Colorado limited liability company ("Licensor").

Pursuant to the Second Extension Agreement, the term of the Name and Likeness and License Agreement dated August 1, 2018 between the Company and Licensor, as amended by the Amending Agreement to Name and Likeness Agreement effective April 16, 2021, was extended from August 31, 2022 to September 30, 2022.

On September 1, 2022, the Company moved its corporate headquarters from 1801 California Street, Suite 4800, Denver, Colorado 80202 to its existing office space located at 700 Tech Court, Louisville, Colorado 80027.

Effective as of September 30, 2022, the Company entered into an Extension and Fourth Amending Agreement to Name and Likeness and License Agreement (the "Fourth Extension Agreement") with Leeland & Sig LLC d/b/a Stanley Brothers Brand Company, a Colorado limited liability company ("Licensor").

Pursuant to the Fourth Extension Agreement, the term of the Name and Likeness and License Agreement dated August 1, 2018 between the Company and Licensor, as amended by the Amending Agreement to Name and Likeness Agreement effective April 16, 2021 (as amended, the "Name and Likeness Agreement"), was extended from September 30, 2022 to December 31, 2022.

Additionally, the Name and Likeness Agreement was also amended to provide the payment of a Company event fee of $1,500 per diem for each Stanley brother that, at the request of the Company’s chief executive officer, participates in any of the following events:

(i) customer meetings;

(ii) strategic partner meetings;

(iii) speaking engagements;

(iv) presentations;

(v) social media postings;

(vi) podcasts;

(vi) public relations events;

(vii) media interviews;

(viii) trade show appearances;

and (ix) events substantively similar to any of the foregoing.

On October 11, 2022, Charlotte’s Web Holdings, Inc.

(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 an exclusive strategic partnership with MLB to promote the Company’s new NSF Certified for Sport ® product line.

In consideration for the MLB Promotional Rights Agreement, the Company pays MLB over the term of the MLB Promotional Rights Agreement, a promotional rights fee and a royalty on the Company’s gross revenue from MLB branded products of the Company sold after prior sales of all such branded products exceed $18.0 million.

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 an exclusive strategic partnership with MLB.

In consideration for the MLB Promotional Rights Agreement, the Company paid MLB over the term of the MLB Promotional Rights Agreement, a promotional rights fee and a royalty on the Company’s gross revenue from MLB branded products of the Company sold after prior sales of all such branded products exceeded $18.0 million.

The Company also entered into a subscription agreement (the "Subscription Agreement") pursuant to which the Company issued to MLB Common Shares equal to four percent (4%) of the Company’s fully diluted outstanding Common Shares (such Common Shares, the "MLB Shares").

The total number of MLB Shares issued to MLB was 6,119,121 common shares of the Company, issued pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act"), and Rule 506 of Regulation D promulgated under the Securities Act.

The total number of MLB Shares issued to MLB was 6,119,121 common shares of the Company, issued pursuant to an exemption from

registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act"), and Rule 506 of Regulation D promulgated under the Securities Act.

The Company did not receive any proceeds in respect of the MLB Shares.

Effective as of November 1, 2022, the Company entered into a Manufacturing and Sales License Agreement with Aphria, Inc., an Ontario corporation and an affiliate of Tilray Brands, Inc.

("Tilray"), providing for a strategic alliance between the Company and Tilray, pursuant to which Tilray has the rights to licensing, manufacturing, quality, marketing and distribution of Charlotte’s Web TM CBD hemp extract products in Canada.

Effective as of November 14, 2022, the Company entered into a subscription agreement with BT DE Investments, Inc.

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BATS and NYSE:

BTI), providing for the issuance of an approximately US$56.8 million (C$75.3 million) convertible debenture that is convertible into 19.9% ownership of Common Shares at a conversion price of C$2.00 per Common Share of the Company on the Toronto Stock Exchange ("TSX").

Effective December 6, 2022, the Board of Directors of the Company appointed Alicia Morga to the Company’s board of directors.

Morga’s appointment to the Company’s board of directors was effective immediately following the departure of Jean Birch, who notified the Company and the board of directors of her retirement from the board of directors, which the Company’s board of directors accepted.

On December 19, 2022, the Company announced the departure of Greg Gould as the Chief Financial Officer and the subsequent appointment of Ms.

Jessica Saxton to the position of Chief Financial Officer and Principal Accounting Officer effective January 1, 2023.

Financial Year Ended December 31, 2023

Effective as of February 22, 2023, the Company entered into an Extension and Fifth Amending Agreement to Name and Likeness and License Agreement (the "Fourth Extension Agreement") with Leeland & Sig LLC d/b/a Stanley Brothers Brand Company, a Colorado

limited liability company ("Licensor").

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Saxton’s relocation reimbursement was increased from $40,000 to $45,000, she was provided a 12-month housing assistance allowance of $1,500 per month through March 31, 2024, and she was provided a vehicle assistance allowance of $1,120 per month through January 31, 2025.

On April 6, 2023, the Company issued a press release announcing the formation of an entity with AJNA BioSciences PBC ("AJNA"), and a subsidiary of British American Tobacco PLC (LSE:

BATS and NYSE:

BTI) ("BAT") for the purpose of clinical development of a novel hemp botanical Investigational New Drug application.

On April 6, 2023, the Company issued a press release announcing the formation of an entity with AJNA , and a subsidiary of BAT for the purpose of clinical development of a novel hemp botanical IND application.

On June 13, 2023, the Company issued a press release, responding to a letter and subsequent press release issued by Joel and Jesse Stanley regarding the replacement of a majority of the Board of Directors of the Company.

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On September 13, 2023, the Company issued a press release announcing the appointment of Mr.

Morachnick as Chief Executive Officer, effective as September 13, 2023 and the departure of Mr.

Bill Morachnick as Chief Executive Officer, effective as September 13, 2023 and the departure of Mr.

Tortoroli as the Company’s Chief Executive Officer and Director.

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McCarthy’s appointment to the Company's Board of Directors followed the departure of Susan Vogt, who notified the Company and the Board of Directors of her immediate retirement from the Board of Directors.

Effective February 12, 2024, the Company and DeFloria, Inc.

entered into a Master Services Agreement, pursuant to which the Company will be compensated for the provision of certain services to DeFloria, Inc.

On April 29, 2024, the Company announced that John Held, Thomas Lardieri, and Alicia Morga will not stand for re-election at the Company's 2024 Annual General and Special Meeting.

On June 14, 2024, the Company announced that following the 2024 annual general meeting, the Board of Directors of the Company was comprised of Angela McElwee, Jonathan Atwood, Matthew McCarthy, Bill Morachnick, Jared Stanley, and Maureen Usifer.

Effective February 12, 2024, the Company and DeFloria entered into a Master Services Agreement, pursuant to which the Company will be compensated for the provision of certain services to DeFloria.

On April 29, 2024, the Company announced that John Held, Thomas Lardieri, and Alicia Morga would not stand for re-election at the Company's 2024 Annual General and Special Meeting.

On June 14, 2024, the Company announced that following the 2024 AGM, the Board of Directors of the Company was comprised of Angela McElwee, Jonathan Atwood, Matthew McCarthy, Bill Morachnick, Jared Stanley, and Maureen Usifer.

On June 18, 2024, the Company announced the departure of Jessica Saxton and the appointment of Erika Lind as Chief Financial Officer of the Company.

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On January 17, 2025, the Company announced the departure of Sarah Cambridge as the Company's Principle Accounting Officer and that Erika Lind, the Company's Chief Financial Officer, would also assume the role of Principal Accounting Officer for the Company.

On February 24, 2025, the Company announced that DeFloria, Inc.

received notification from the FDA which allows DeFloria to proceed with Phase 2 human clinical trials.

On February 24, 2025, the Company announced that DeFloria received notification from the FDA which allows DeFloria to proceed with Phase 2 human clinical trials.

On May 27, 2025, the Company introduced Brightside™ — a new line of low-dose THC gummies featuring four formulations — Recover, Unwind, Focus, and Knockout.

Brightside gummies combine micro- to moderate doses of THC with synergistic cannabinoids.

On July 15, 2025, the Company entered into a promissory note, as lender, where the Company loaned $750,000 to DeFloria, Inc.

The promissory note and accrued interest is due and payable by DeFloria upon the later of (a) December 31, 2026, or (b) the date the Company shall issue and sell units of a newly-authorized series of preferred units (or similar securities or instruments) in a bona fide financing transaction to one or more investors for aggregate cash proceeds to the Company or any other convertible debt of the Company of not less than ten million dollars ($10,000,000).

On July 31, 2025, the Company announced the departure of Stephen Rogers as Senior Vice President - General Counsel and Corporate Secretary.

Mindy Garrison, the Company’s Chief People Officer, assumed the role of Corporate Secretary.

On September 16, 2025, Mr.

Jonathan Atwood notified the Company of his intention to resign from his position as a member of the Board of Directors of the Company (and any committees upon which he sits) effective October 1, 2025.

Effective November 1, 2025, the Board of Directors of the Company, appointed Borgia Walker to the Company’s Board of Directors.

Walker was appointed as the designee to the Board of Directors by BAT, pursuant to the Investor Rights Agreement between the Company and BT DE Investments Inc., dated November 14, 2022.

On December 18, 2025, the Company announced its participation as a CBD provider supporting the treatment of senior oncology patients under a pilot program being initiated by the Center for Medicare and Medicaid Innovation (CMMI).

Financial Year Ending December 31, 2026

On March 30, 2026, the Company announced that it has entered into an agreement to complete a transaction with BAT comprised of two components:

(i) amendment and conversion of BAT’s outstanding C$75.3 million convertible debenture, as well as, all accrued interest, into Charlotte’s Web's common shares at a conversion price of C$0.94 per share;

and (ii) a concurrent additional equity investment by BAT of $10 million (approximately C$13.8 million at current exchange rates) by way of a private placement at a price equal to the greater of (a) C$0.94 per share, and (b) a dollar amount equal to the maximum discount available pursuant to section 607 of the TSX Company Manual applied to the 5-day volume weighted average price of the Company’s common shares on the TSX prior to the closing date (collectively, the “Transaction”).

The Transaction will result in the issuance of approximately 110 million Charlotte's Web's common shares to BAT and represents a total equity commitment of approximately C$103 million (approximately $75 million).

Completion of the Transaction is subject to, among other conditions, TSX and shareholder approval.

The Company's shareholders will be asked to approve the Transaction at an annual general and special meeting of the shareholders to be held on or about May 28, 2026

Business of the Company

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The Company strives to realize significant growth by expanding further into the health and wellness sector, while capitalizing on the Company’s unique differentiators to create sustainable value.

In 2024 the Company expanded its product portfolio with the introduction of hemp-free functional mushroom gummies.

In accordance with the Company’s social responsibility goals, Charlotte’s Web supports several non-profit organizations that utilize its products or that further consumer education, advocacy, and research in the hemp, CBD and wellness marketplaces.

This commitment to innovation has translated into a deliberate broadening of the Company's product portfolio beyond its core full-spectrum CBD offerings.

In 2024, Charlotte's Web expanded into minor cannabinoids with the launch of Stay Asleep CBN Gummies — the first CBN sleep product supported by peer-reviewed research — and extended its botanical expertise into the functional mushroom wellness category with a targeted line of hemp-free Functional Mushroom Gummies.

In 2025, the Company launched CBG Focus & Attention Gummies, addressing the growing nootropics market, and introduced Brightside™, a precision-formulated line of federally compliant, hemp-derived low-dose THC gummies featuring proprietary TiME INFUSION® rapid-onset technology.In accordance with the Company’s social responsibility goals, Charlotte’s Web supports several non-profit organizations that utilize its products or that further consumer education, advocacy, and research in the hemp, CBD and wellness marketplaces.

Industry Overview

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However, beginning with the publication of United States Patent No.

6,630,507 (cannabinoids as antioxidants and neuro-protectants) issued to the United States Department of Health and Human Services on October 7, 2003, consumer interest surrounding the health and wellness benefits of cannabinoids grew significantly.

6,630,507 (cannabinoids as antioxidants and neuroprotectants) issued to the United States Department of Health and Human Services on October 7, 2003, consumer interest surrounding the health and wellness benefits of cannabinoids grew significantly.

This interest continued until the passage of 2014 Farm Bill, which created a path for institutions of higher education and state departments of agriculture to cultivate hemp for research purposes under certain conditions.

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Product Portfolio The Company offers a mix of products that have been strategically developed to fit with its objective of delivering a full suite of best-in-class FSHE wellness products that meet its customers’ demands for stringent quality and consistency.

The Company currently markets its products under the "Charlotte’s Web", "CBD CLINIC", and "CBD MEDIC" trade names.

The Company’s current product categories include human ingestible products (tinctures, capsules, and gummies), topicals, pet products, and NSF Certified for Sport ® broad-spectrum products.

The Company currently markets its products under the "Charlotte’s Web", "Brightside", "CBD Clinic", and "CBD Medic" trade names.

The Company’s current product categories include human ingestible products (tinctures, capsules, and gummies), topicals, pet products, and broad-spectrum products.

Tinctures A human ingestible liquid product is a combination of oil and full-spectrum hemp extracts containing naturally occurring CBD.

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Liquid products are meant to be consumed by direct ingestion.

Capsules Ingestible capsule products have standardized amounts of FSHE.

Original capsule products were in the form of a dry powder, inside a hard-capsule shell.

In 2019, Charlotte's Web innovated its capsule offering, introducing liquid capsules.

Ingredients in liquid capsules include carrier oil (extra-virgin organic olive oil) and FSHE.

The capsules are constructed with hydroxypropyl methylcellulose, which reduces oxidation to naturally extend shelf life and maintain the integrity of the high-quality ingredients.

Capsule products are meant to be consumed by direct ingestion.

Gel Caps In 2024 Charlotte’s Web introduced its new Soft Gel Capsule, offering easy-to-swallow gel caps that provide precise, potent dosing of full-spectrum CBD.

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Gummies The Company’s FSHE gummies are made from whole-plant hemp extract and nutraceutical blends, and are flavored with natural juices.

The product is meant to be consumed by direct ingestion.

Hemp-derived THC gummies are made from isolates made from whole-plant extract and are flavored with natural juices.

These products are meant to be consumed by direct ingestion.

Topicals The Company’s topical products are delivered in cream, balm, gel, roll-on, ointment, other cosmetic type forms.

These products are combinations of hemp, plant-based oils, herbal extracts and other ingredients.

Topical products are meant to be applied externally and by topical application.

Topical products are meant to be applied externally by topical application.

Pet The Company's pet products are currently intended for canine use.

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The liquid and solid products are meant to be consumed by direct ingestion.

Mushrooms Gummies The Company's new line of adaptogenic mushroom gummies is formulated with high-quality mushrooms and functional botanicals for direct ingestion.

Mushrooms Gummies The Company's line of adaptogenic mushroom gummies is formulated with high-quality mushrooms and functional botanicals for direct ingestion.

These products are hemp-free and expand the Company's commitment to providing effective science supported plant-based wellness solutions.

Key Competitive Advantages of Product Offering

In addition to Charlotte’s Web brand and substantial goodwill generated from the Company’s legislative efforts and media exposure, the Company believes the following are also competitive advantages of the Company:

In addition to the Charlotte’s Web brand and substantial goodwill generated from the Company’s legislative efforts and media exposure, the Company believes the following are also competitive advantages of the Company:

Cultivation Experience and Capacity — With years of experience in plant cultivation, the Company has selected prime farmland to grow its hemp with access to substantial additional farmland for future capacity.

In addition to third-party cultivation in Canada, the Company is exploring additional international cultivation and distribution opportunities.

The Company believes there is no other entity in the world with more experience bringing large-scale, hemp-based operations to the market while maintaining impeccable product quality.

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This facility is staffed with professional personnel responsible for production management, quality control/assurance, analytical chemistry, product development and process engineering to ensure product quality.

This facility is also the location of corporate functions, including HR, IT, Finance, Sales and Marketing.

Control of Supply Chain — The Company is substantially vertically-integrated and maintains control over its proprietary genetics throughout the entire cultivation and extraction processes — from seed/clone to packaged products.

The Company currently uses select contract manufacturers for gummies, topicals, pet and capsules who manufacture products according to the Company’s specifications and standards.

The Company currently uses in-house manufacturing for its gummies and topical products.

Additionally, select contract manufacturers are utilized for some gummies, topicals, pet and gel caps who manufacture products according to the Company’s specifications and standards.

Some companies in the CBD industry produce their products from imported hemp pastes of unknown origin, quality, and purity.

Rigid Quality Management System — The Company has implemented a rigid quality management system that includes documented internal quality processes and both internal testing laboratories as well as independent third-party testing laboratories.

Rigid Quality Management System — The Company has implemented a rigid quality management system that includes documented internal quality processes and both internal and independent third-party testing laboratories.

Proprietary Genetics — The Company has been granted U.S.

and Canadian Utility Patents for its hemp genetics.

The Company has earned a total of six U.S.

Utility Patents and five Canadian Utility Patent covering hemp varieties as it advances the science of hemp horticulture.

The Company believes that the positive media exposure surrounding its proprietary strains have made Charlotte’s Web one of the most sought-after brands in the emerging hemp and CBD markets.

and Canadian Utility Patents covering hemp varieties as it advances the science of hemp horticulture.

The Company believes that the positive media exposure surrounding its proprietary strains has made Charlotte’s Web one of the most sought-after brands in the emerging hemp and CBD markets.

Protection of Intangible Assets — The ownership and protection of the Company's intellectual property is a significant aspect of the Company’s future success.

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The Company has sought trademark and patent protection in the United States, Canada and other countries.

The Company’s patent portfolio (patents and patent applications) covers, among other things, the Company’s plant genetics, extraction and cannabinoid isolation, and conversion processes and designs.

The Company’s patent portfolio (patents and patent applications) covers, among other things, its plant genetics, extraction and cannabinoid isolation, and conversion processes and designs.

There can be no guarantee, however, that the Company’s efforts to secure trademark or patent protection will be successful.

The duration of the protection afforded by the Company’s registered intellectual property varies by the nature of the registration, but the Company manages renewals and notices on an on-going basis to ensure that the Company’s intellectual property is protected to the full extent possible under applicable law.

The duration of the protection afforded by the Company’s registered intellectual property varies by the nature of the registration, but it manages renewals and notices on an on-going basis to ensure that the Company’s intellectual property is protected to the full extent possible under applicable law.

See Item 1A - " Risk Factors – Risks Relating to the Company's Business and Industry – The Company's intellectual property may be difficult to protect."

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The plants are then typically completely harvested and processed by the end of November of each year.

Cultivation Overview The Company has grown its proprietary hemp plants in Arizona, Colorado, Kentucky, and Canada on owned and/or leased farmland operated by the Company or third-party farming operators.

Cultivation Overview The Company has grown its proprietary hemp plants in Arizona, Colorado, Kentucky, New Mexico, and Canada on owned and/or leased farmland operated by the Company or third-party farming operators.

The Company is actively involved in all aspects of genetics development, propagation, seed production, cultivation, and harvesting.

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This allows for successful cultivation expansion in both US and international markets, as well as creating innovative cannabinoid development for expanded product development.

The breeding program has six variety patents, including two hemp hybrid varieties with proven disease resistance and increased yield which lowers cultivation costs of production.

The breeding program has a variety of patents, including hemp hybrid varieties with proven disease resistance and increased yield which lowers cultivation costs of production.

In addition to hybrid development, the division oversees the Company’s seed production and supply, import/export requirements, R&D hemp regulatory compliance, assists in state and federal legislative efforts and supports cultivation operations.

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With this harvesting process, there are limitations applicable to both available infrastructures and labor in agricultural regions.

To mitigate these challenges, the Company has focused its Arizona, Colorado, Kentucky, and Canada cultivation teams on the development of new, more scalable processes to mechanize harvesting without sacrificing quality.

To mitigate these challenges, the Company has focused its Arizona, Colorado, Kentucky, New Mexico, and Canada cultivation teams on the development of new, more scalable processes to mechanize harvesting without sacrificing quality.

The Company has successfully scaled the harvesting and drying process and believes it has enough capacity to meet the Company’s needs.

Manufacturing The Company’s manufacturing operations are centered around the quality of its products and the efficiency of their production.

The Company has proprietary extraction processes currently in use and is developing the next generation of processes and equipment to serve the Company’s expanding production requirements and product offerings.

The Company has proprietary extraction processes and recently developed the next generation of processes and equipment to serve the Company’s expanding production requirements and product offerings.

The Company operates its finished products manufacturing in accordance with cGMP to create high quality products in the market.

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The facility efficiently executes the Company’s core competencies in R&D, product development, quality control, tincture manufacturing and filling, and product delivery.

The Company also expects to begin manufacturing gummy and topical products at the LOFT in 2025.

In 2025, the Company began manufacturing gummy and topical products at the LOFT.

The Company believes it has sufficient capabilities to meet its core production requirements over the long term.

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The Company’s topical, chews, and liquid products are currently blended, flavored, filled, labeled, and packaged into consumer cartons at either its production facility or at contract manufacturer facilities.

The Company is continuously working to qualify additional third-party contract manufacturers to ensure adequate encapsulation, bottling, and packaging capabilities necessary to meet demand for the Company’s products.

Quality Management Systems In 2020, the Company was the first hemp extract company to receive an NSF certification.

NSF International’s dietary supplements certification is a globally recognized standard that establishes requirements for the ingredients in dietary and nutritional supplements and is considered the gold standard for products in the dietary supplement space.

In October 2022, Charlotte’s Web SPORT – Daily Edge, became the first broad-spectrum hemp-derived tincture to be Certified for Sport ® by NSF.

NSF's Certified for Sport ® program verifies that products do not contain unsafe levels of contaminants, prohibited substances or masking agents, and that what is on the label matches what is in the product.

The Certified for Sport ® certification is the only independent third-party certification program recognized by Major League Baseball © .

Additionally, in January 2022, the Company was the first hemp extract company to achieve International Organization for Standardization ("ISO") 17025 certification.

This certifies that the Company meets the technical and quality benchmarks by ISO 17025 for analytical chemistry testing methods.

The Company employs cGMP at each stage of its production.

cGMP refers to the current Good Manufacturing Practices regulations enforced by the FDA.

1 Adherence to cGMP regulations assures the identity, strength, quality, purity, and composition of products by requiring that manufacturers adequately design, monitor, and control manufacturing operations.

Quality Management Systems In 2020, the Company obtained NSF's certification for current Good Manufacturing Practices for dietary supplements (NSF 455-2).

NSF International’s dietary supplements certification is a globally recognized standard that establishes requirements for finished products and ingredients used, and is considered the gold standard for products in the dietary supplement space.

Additionally, in January 2022, the Company achieved International Organization for Standardization (ISO) 17025 accreditation on its internal laboratory quality systems and chemistry methodology.

In November 2025, the Company expanded its ISO 17025 accreditation to include its microbiology methodologies.

This accreditation certifies that the Company meets the technical and quality benchmarks set by ISO for testing laboratory quality systems and analytical chemistry and microbiology testing methodology.

The Company employs current cGMPs at each stage of its production.

Adherence to cGMP regulations assures the strength, quality, purity, and composition of products by requiring that manufacturers adequately design, monitor, and control manufacturing operations.

This includes establishing strong quality management systems, obtaining appropriate quality raw materials, establishing comprehensive standard operating procedures, detecting and investigating product quality deviations and maintaining reliable testing practices.

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Products are tested for, among other items:

identity, potency, residual solvents, microbial contaminants, aflatoxin, heavy metals, and pesticides.

1 See 21 C.F.R.

To create the highest quality products, the Company, when applicable, closely controls every step in the production process, including propagation, cultivation, harvesting, drying, manufacturing, and packaging.

cannabinoid potency, residual solvents, microbial contaminants, mycotoxins, heavy metals, and pesticides.

To create the highest quality products, the Company closely controls every step in the growing and manufacturing processes.

This includes procedures and controls on the propagation and cultivation, hemp refinement, ingredient sourcing, manufacturing, packaging, and distribution processes.

The control and visibility maintained through the Company’s substantial vertical integration allows for the continual monitoring and refinement of critical processes, resulting in high quality standardized products.

Sales and Distribution Strategy The Company’s products are distributed through its e-commerce website (www.charlottesweb.com), third-party e-commerce websites, select distributors, health practitioners, and a variety of brick-and-mortar retailers across multiple channels of business.

The Company’s products are sold in chiropractic and doctors’ offices, gyms, massage therapy offices, salons, direct delivery services, and pet stores.

The Company distributes its products within the United States and in select international markets through local or regional distribution partners.

Retail distribution strategy is focused on gaining broad distribution within the natural channel and conventional food and mass market ("FDM") retailers.

The Company believes broad brand recognition and increasing market demand in the adaptogenic supplements category (where CBD is typically positioned) results in strong brand sales, which helps promote increased category development and new account acquisition.

The Company believes these accounts will enable it to achieve broader distribution, opening new consumer segments and driving growth by increasing awareness, consideration, and purchase.

The Company believes it is leading the way in the category by opening conventional channels that have historically been resistant to place CBD items on their shelves.

Key to this success has been the relationships and partnerships with key natural accounts.

The Company continues to sell its CBD CLINIC products into the practitioner market comprised of naturopathies, chiropractors, acupuncturists, physical and massage therapists, and functional practitioners, and continues to expand the total number of health care practitioners in the CBD CLINIC network.

The Company’s products are sold in chiropractic and doctors’ offices, direct delivery services, and pet stores.

The Company sells its CBD CLINIC products into the practitioner market comprised of naturopathies, chiropractors, acupuncturists, physical and massage therapists, and functional practitioners, and continues to expand the total number of healthcare practitioners in the CBD CLINIC network.

The market for the CBD CLINIC products is primarily served through national distributors.

The Company believes that it can continue to capture and increase its market share in this market by increasing its sales and marketing efforts targeted at this market.

The Company’s sales are executed through customized strategies depending on the retail verticals.

For example, in specialty food accounts, a combination of sales brokers and distributors are strategically located within geographical markets.

Depending on the size of the account, some locations are deemed to be "national accounts" that receive additional support from the Company’s internal sales team.

This allows the Company’s brokers and distributors to manage multiple independent specialty food locations, while still achieving the same level of support that is expected by the Company’s larger chain retail customers.

The Company utilizes e-commerce to reach consumers and guide them through the hemp and CBD buying process.

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The Company continues to promote the awareness of its brands through investment in marketing programs, sponsorships and continued participation in events that offer wide exposure to both trade partners and consumer retail markets.

For example, the Company currently has a category exclusive sponsorship arrangement with Major League Baseball © .

Growth from the Existing Product Portfolio Through Marketing Initiatives

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Information Systems The Company's primary enterprise resource planning ("ERP") system is a cloud-based system well-known for manufacturing, shipping, and receiving, inventory control, supply chain management, sales, accounting, and finance.

In addition to this centralized ERP system, supplemental peripheral software applications are used for specialized activities in finance, human resources, customer support, manufacturing, distribution, and marketing.

In addition to this

centralized ERP system, supplemental peripheral software applications are used for specialized activities in finance, human resources, customer support, manufacturing, distribution, and marketing.

Intellectual Property The Company's intellectual property and proprietary rights are important to its business.

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plant, utility and design patent applications directed to Charlotte's Web’s most promising plant genetics, proprietary extraction technology, cannabinoid isolation methods and cannabinoid conversion processes and industrial designs.

The Company also has pending U.S.

and Canadian trademark applications.

The Company now has earned a total of six U.S.

The Company also has trademark registrations and pending applications for core Company brands, including registrations for the CHARLOTTE'S WEB mark in the U.S.

The Company now has earned a total of seven U.S.

Utility Patents covering hemp varieties as it advances the science of hemp horticulture.

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• Protection for 'CW1AS1' hemp line.

Patent / Publication Type of IP /

Title / Inventor(s) / Assignee (s)

US 10,888,059

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• Protection for 'EM15B2A170' hemp line.

Patent / Publication Type of IP /

Title / Inventor(s) / Assignee (s)

US 12,382,891

Utility- United States

HEMP PLANT NAMED 'CW-676'

Campbell, Brian

CHARLOTTE’S WEB, INC.

Related Technologies:

• Protection for 'CW-676' hemp line.

Utility- Canada

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• Protection for 'KIRSCHE' hemp line.

Patent / Publication Type of IP /

Title / Inventor(s) / Assignee (s)

Utility- Canada

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The Company values diversity in culture, race, and sexual differences and that employees may realize their professional goals through development programs and mentoring.

The Company has assembled a management team with significant professional expertise in distribution, cultivation, sales, science, intellectual property, technology, finance, customer service, consumer packaged goods ("CPG"), marketing, business development,

acquisitions, capital markets and market analysis.

The Company’s management team includes executives with many years of experience in their respective fields.

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Drug Enforcement Agency ("DEA") no longer has regulatory authority to interfere with the interstate commerce of hemp products, so long as the THC level of such products is at or below 0.3% on a dry weight basis.

The 2018 Farm Bill also provides that state and Native American tribal governments may impose separate restrictions or requirements on hemp growth and the sale of hemp products.

However, they cannot interfere with the interstate transportation or shipment of lawfully produced hemp or hemp products.

The 2018 Farm Bill also provides that state and Native American tribal governments may impose separate restrictions or requirements on hemp growth and the sale of hemp products, but they cannot interfere with the interstate transportation or shipment of lawfully produced hemp or hemp products.

As a result of the 2018 Farm Bill, federal law now provides that CBD derived from hemp is not a controlled substance under the CSA.

however, states take varying approaches to regulating the production and sale of hemp and hemp-derived CBD.

Hemp cultivation is now permitted in all 50 states.

However, federal legislation enacted in November 2025 revised the federal definition of “hemp” to, among other changes, require that hemp and intermediate hemp-derived cannabinoid products contain a total THC concentration (including THCA) of no more than 0.3% on a dry weight basis, with an effective date of November 12, 2026.

The law also limits final hemp products intended for human or animal use (ingestion, inhalation, topical use) to no more than 0.4 milligrams of total THC per container.

Although this change would significantly impact the entire hemp supply chain, including the vast majority of hemp products in the market, several legislative efforts are underway to repeal or amend these provisions before they take effect in November 2026.

States take varying approaches to regulating the production and sale of hemp and hemp-derived CBD.

A number of states prohibit the sale of ingestible CBD products based on the FDA's position that, pursuant to the Federal Food, Drug and Cosmetic Act (the "FD&C Act"), it is unlawful to introduce food containing added CBD or THC into interstate commerce, or to market CBD or THC products as, or in, dietary supplements, regardless of whether the substances are hemp-derived.

Several states have also enacted or are considering enacting THC limits and age-related sales restrictions for hemp-derived products that contain THC, such as full-spectrum hemp extracts.

Several states have also enacted or are

1 Agriculture Improvement Act of 2018 (section 10113) (defining hemp under the Agricultural Marketing Act of 1946, 7.

considering enacting sales channel limitations, THC limits and age-related sales restrictions for hemp-derived products.

In addition, some states have adopted or are considering adopting total THC limits that align with the new federal requirements.

The Company's activities related to the production, marketing and sale of its products comply with the 2018 Farm Bill, as applicable to its operations.

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The FDA’s enforcement against the sale and marketing of CBD products has to date been limited to the issuance of Warning Letters, although enforcement could include civil and criminal penalties.

The legal status of CBD non-drug products remain under active consideration by the FDA as of the date of this Form 10-K, as the agency continues to evaluate the potential regulatory frameworks that should apply to cannabis-derived products intended for non-drug uses.

In January 2023, the FDA issued a statement concluding that existing regulatory frameworks for dietary supplements and foods are not appropriate for CBD due to potential safety risks, and that it will work with Congress to develop an appropriate pathway for the regulation of CBD products.

While the Company disagrees with the position of the FDA, there is risk that this agency could take enforcement or regulatory actions against the Company.

While the Company disagrees with the position of the FDA, there is a risk that this agency could take enforcement or regulatory actions against the Company.

Legal barriers applicable to, and risks associated with, selling hemp and hemp-derived CBD products result from a number of factors, including the fact that hemp and marijuana are both derived from the Cannabis sativa L.

plant, the rapidly changing patchwork of state laws governing hemp and hemp-derived CBD, and the FDA’s position that it is unlawful to introduce food containing added CBD or THC into interstate commerce, or to market CBD or THC products as, or in, dietary supplements, i.e., the FDA’s position that CBD cannot be marketed in a dietary supplement on the basis that substantial clinical trials studying CBD as a new drug were made public prior to the marketing of any food or dietary supplement containing CBD, and therefore food or dietary supplements are precluded from containing this ingredient, referred to as the IND Preclusion.

plant, the uncertainty with respect to the newly enacted federal THC limits, the rapidly changing patchwork of state laws governing hemp and hemp-derived CBD, and the FDA’s position that it is unlawful to introduce food containing added CBD or THC into interstate commerce, or to market CBD or THC products as, or in, dietary supplements, i.e., the FDA’s position that CBD cannot be marketed in a dietary supplement on the basis that substantial clinical trials studying CBD as a new drug were made public prior to the marketing of any food or dietary supplement containing CBD, and therefore food or dietary supplements are precluded from containing this ingredient, referred to as the IND Preclusion.

However, the Company believes that the removal of hemp and its extracts, including CBD, from the CSA pursuant to the 2018 Farm Bill, and the establishment of multiple state regulatory frameworks that permit the sale of hemp-derived CBD products are positive developments.

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Timing for the FDA to develop a new pathway is also uncertain, but is likely to take several years.

2 Agriculture Improvement Act of 2018 (section 10113) (defining hemp under the Agricultural Marketing Act of 1946, 7.

3 The District of Columbia does not currently permit hemp cultivation.

In addition, several members of Congress have voiced their support for legislation that would amend or repeal the changes to the definition of hemp, and the Administration has also signaled its support for changes to federal hemp policy through the President’s Executive Order addressing hemp regulation, which may also influence FDA’s efforts to regulate hemp products.

United States Federal Regulation of Hemp

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The 2018 Farm Bill amends the Agricultural Marketing Act of 1946 to categorize hemp as an agricultural commodity under the regulatory purview of the USDA in coordination with state departments of agriculture.

Although the USDA is the primary federal regulatory agency

4 See http://www.ncsl.org/research/health/state-medical-marijuana-laws.aspx.

5 https://www.ams.usda.gov/rules-regulations/hemp/state-and-tribal-plan-review.

overseeing hemp cultivation in the United States, states, U.S.

Although the USDA is the primary federal regulatory agency overseeing hemp cultivation in the United States, states, U.S.

territories, and Indian tribes desiring to obtain (or retain) primary regulatory authority over hemp activities within their borders are allowed to do so after submitting a plan for regulation to the USDA, and receiving approval from the USDA for the same.

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This was confirmed in a May 2019 memorandum released by the USDA’s Office of General Counsel.

That memorandum reiterateed that, due to enactment of the 2018 Farm Bill, states and Native American tribes may not prohibit the interstate transportation or shipment of hemp lawfully produced under the 2014 or 2018 Farm Bills.

That memorandum reiterated that, due to enactment of the 2018 Farm Bill, states and Native American tribes may not prohibit the interstate transportation or shipment of hemp lawfully produced under the 2014 or 2018 Farm Bills.

2 https://www.ams.usda.gov/rules-regulations/hemp/state-and-tribal-plan-review.

It is important to note that the 2018 Farm Bill preserves the authority and jurisdiction of the FDA, under the FD&C Act, to regulate the manufacture, marketing, and sale of food, drugs, dietary supplements, and cosmetics, including products that contain hemp extracts and derivatives, such as CBD.

As a result, the FD&C Act will continue to apply to hemp-derived food, drugs, dietary supplements, cosmetics, and devices introduced, or prepared for introduction, into interstate commerce.

As a result, the FD&C Act will continue to apply to hemp-derived food, drugs, dietary supplements, and cosmetics introduced, or prepared for introduction, into interstate commerce.

As a producer and marketer of hemp-derived products, the Company must comply with the FDA regulations applicable to manufacturing and marketing of FDA-regulated products.

See "FDA Regulation", below.

On May 4, 2022, the FDA issued Warning Letters to five companies for selling products labeled as containing delta-8 tetrahydrocannabinol (delta-8 THC) in ways that violate FD&C Act.

This action was the first time the FDA issued Warning Letters for products containing delta-8 THC.

In addition to the violations related to FDA-regulated products containing delta-8 THC, several of the Warning Letters outlined additional violations of the FD&C Act, including marketing CBD products claiming to treat medical conditions in humans and animals, promoting CBD products as dietary supplements, and adding CBD to human and animal foods.

On November 21, 2022, the FDA posted Warning Letters to five companies selling products containing CBD, stating that these companies were selling CBD containing products that people may confuse for traditional foods or beverages which may result in unintentional consumption or overconsumption of CBD.

The FDA also stated that CBD-containing products in forms that are appealing to children, such as gummies, hard candies and cookies, are especially concerning.

As of late 2025, the FDA has issued over 100 Warning Letters to companies marketing unapproved cannabis products, including those made from hemp.

3 These Warning Letters reference violations of the FD&C Act, including marketing CBD products claiming to treat medical conditions in humans and animals, promoting CBD products as dietary supplements, adding CBD to human and animal foods, producing products with delta-8 THC, and selling CBD products that people may confuse for traditional foods and beverages or in forms that are appealing to children.

On January 26, 2023, the FDA issued a statement denying three Citizen Petitions that had asked the agency to conduct rulemaking to allow the marketing of CBD products as dietary supplements, and further stated that a new regulatory pathway would benefit consumers by providing safeguards and oversight to manage and minimize risks related to CBD products.

The agency suggested that Congress create a new regulatory pathway that balances individuals' access to CBD products with the necessary oversight to manage risks, adding it is prepared to work with Congress on this matter.

The agency suggested that Congress create a new regulatory pathway that balances individuals' access to CBD products with the necessary oversight to manage risks, adding that it is prepared to work with Congress on this matter.

In addition, the Federal Trade Commission ("FTC") has pursued enforcement actions against companies making deceptive marketing claims related to CBD products, including scientifically unsupported claims about the products’ ability to treat serious health conditions, such as cancer, heart disease, and Alzheimer’s disease.

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5 The Notice letters are intended to put advertisers on notice that they should avoid deceiving consumers with advertisements that make unsubstantiated product claims.

The Notice letters also focus on the competent and reliable scientific evidence standard in the Health Products Compliance Guidance.

Importantly, the letters are not Warning Letters and do not indicate or allege any wrongdo

6 https://www.ftc.gov/system/files/ftc_gov/pdf/Health-Products-Compliance-Guidance.pdf.

7 https://www.ftc.gov/system/files/ftc_gov/pdf/Sample-cover-letter-substantiaton.pdf.

rather, the Notice letters are a procedural tool used by the FTC to collect monetary penalties in future actions, whereby the FTC can attempt to argue that a company receiving the Notice letter knowingly violated the law as it was on "notice" of a potential violation.

Although this approach is untested and may not be defensible in court, the issuance of the Notice letters may signal the FTC is prepared to more closely scrutinize and potentially demand a higher level of substantiation to support health-related claims than in previous years.

However, the letters are not Warning Letters and do not indicate or allege any wrongdoing, and it does not appear that the FTC engaged in subsequent enforcement action against any of the companies that received the letters.

On July 5, 2023, the FDA and FTC jointly issued cease-and-desist letters to six companies for marketing "copycat" food products containing delta-8 THC 6 .

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These letters are part of the FDA and FTC’s ongoing joint effort to take action against companies selling copycat food products containing delta-8 THC 7 .

Beyond the Notice of Penalty Offense letters and letters to delta-8 THC marketers, the FTC has not publicly initiated compliance or enforcement actions involving hemp product marketers, or marketers of dietary supplements, food, and cosmetics generally.

FTC representatives under the current administration have also indicated that they believe the Health Products Compliance Guidance does not have the force of law, which suggests that the FTC is unlikely to pursue investigations based on the positions outlined in the guidance.

However, the FTC continues to actively enforce against potential violations of its Made in the U.S.A.

rule and deceptive practices related

3 https://www.fda.gov/news-events/public-health-focus/warning-letters-cannabis-derived-products

4 https://www.ftc.gov/system/files/ftc_gov/pdf/Health-Products-Compliance-Guidance.pdf.

5 https://www.ftc.gov/system/files/ftc_gov/pdf/Sample-cover-letter-substantiaton.pdf.

6 https://www.ftc.gov/news-events/news/press-releases/2023/07/ftc-sends-cease-desist-letters-fda-companies-selling-edible-products-containing-delta-8-thc.

7 https://www.ftc.gov/news-events/news/press-releases/2024/07/ftc-fda-send-second-set-cease-desist-letters-companies-selling-products-containing-delta-8-thc.

to subscription programs and other online services.

Scrutiny of social media marketing practices, e.g., disclosures of material connections by influencers, and deceptive practices related to product reviews are also priorities for the FTC.

DEA IFR On August 21, 2020, the DEA issued an interim final rule (the "DEA IFR") concerning implementation of the 2018 Farm Bill.

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The DEA IFR has caused consternation throughout the hemp industry because of concerns that it confuses the legality of in-process hemp extract material that may temporarily and unintentionally exceed 0.3% delta-9 (before returning to or below 0.3% delta-9 THC in finished form).

However, DEA spokesperson Sean Mitchell has indicated that the DEA is aware of the hemp industry’s policy concerns and "has higher enforcement priorities, such as opioids and methamphetamine." Moreover, more than 3,300 public comments were submitted in response to the interim rule, many of which emphasized that the DEA IFR is inconsistent with the 2018 Farm Bill and would create serious challenges for the hemp products industry.

Further, in the Consolidated Appropriations Act, 2021, Congress included report language that directed the USDA to develop regulations to protect the transportation, sale, and storage of in-process hemp extract.

To date, the DEA has not enforced the IFR and the Company believes the DEA IFR is improper and unconstitutional.

It is possible that legal protections for in-process hemp extract and issues such as raising the THC limit for hemp in the field and establishing permissible THC levels in finished hemp products may be addressed in the upcoming Farm Bill.

However, given the delayed passage of a new Farm Bill in 2024, non-core issues like hemp and controversial issues like THC thresholds may not be included in the final legislation, or its passage may be further delayed.

The American Relief Act, 2025, signed into law on December 21, 2024, extended the 2018 Farm Bill for one year through September 30, 2025.

Congress Currently, the timing for legislation that may include a new potential regulatory pathway for CBD developed by the FDA is uncertain.

However, DEA spokesperson Sean Mitchell has indicated that the DEA is aware of the hemp industry’s policy concerns and "has higher enforcement priorities, such as opioids and methamphetamine." To date, the DEA has not enforced the IFR and the Company believes the DEA IFR is improper and unconstitutional.

Congress Currently, the timing for legislation that may include changes to the definition of hemp and a new potential regulatory pathway for CBD developed by the FDA is uncertain.

While authorizing legislation could be introduced in 2026, the FDA’s development and implementation of a new pathway would likely take several years.

As such, it is possible Congress may introduce and move forward with legislation that would authorize a pathway for hemp-derived CBD in a more efficient manner, and would permit the use of CBD in dietary supplements and/or food.

The Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026 (H.R.

5371), enacted on November 12, 2025, ended a government shutdown but included a significant, controversial provision adversely impacting the hemp industry.

This act (Section 781) revised the federal definition of hemp by changing the THC concentration limit from 0.3% delta-9 THC on a dry weight basis to a total THC limit (including THCA) of 0.3% on a dry weight basis, with an effective date of November 12, 2026, giving the industry a one-year transition period to comply.

The new total THC limit also applies to intermediate (i.e., in-process) hemp-derived cannabinoid products.

Additional changes to the definition of hemp include limiting final hemp products intended for human or animal use (ingestion, inhalation, topical use) to no more than 0.4 milligrams of total THC per container, regardless of the container size.

This would negatively impact a large percentage of existing full-spectrum, broad-spectrum, and many other hemp products in the market and throughout the supply chain, as it also impacts hemp farming and processing activities.

Several legislative efforts are underway to repeal or amend these provisions before they take effect in November 2026.

President’s Executive Order On December 18, 2025, the President signed an Executive Order (“EO”) titled “Increasing Medical Marijuana and Cannabidiol Research” to accelerate federal research on medical cannabis, direct the Attorney General to expedite rescheduling marijuana from Schedule I to Schedule III under the CSA, and task federal agencies with developing a regulatory framework for hemp‑derived cannabinoid products such as CBD.

8 The order recognizes the evidence and growing interest in CBD and THC for pain management, while also acknowledging that the changes in federal law taking effective in November 2026 will result in full-spectrum CBD products becoming controlled under the CSA.

Thus, the order signals the Administration’s intent to work with Congress on updating the legal framework to advance research and ensure access to full‑spectrum CBD products.

In November 2025, the Center for Medicare and Medicaid Services (“CMS”) issued proposed changes to its regulations covering Supplemental Benefits for the Chronically Ill to allow access to lawful hemp-derived products, including hulled hemp seed, hemp seed oil, and hemp seed protein powder.

9 While the CMS proposed rule would allow only limited hemp products, during the EO’s signing ceremony, CMS Administrator Dr.

Mehmet Oz announced a Medicare pilot program that would allow reimbursement for certain physician-recommended CBD products.

Collectively, these actions indicate wider support for changes to the federal definition of hemp and that a lawful pathway for full-spectrum CBD is a priority for the Administration, which could positively influence federal legislative efforts.

However, if these efforts are unsuccessful and

President, Executive Order on Increasing Medical Marijuana and Cannabidiol Research, Dec.

18, 2025, https://www.whitehouse.gov/presidential-actions/2025/12/increasing-medical-marijuana-and-cannabidiol-research/.

9 Medicare Program;

Contract Year 2027 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, and Medicare Cost Plan Program, 90 Fed.

28, 2025), https://www.govinfo.gov/content/pkg/FR-2025-11-28/pdf/2025-21456.pdf

the revised definition goes into effect in November 2026, it would have a have a material adverse impact on the Company’s business, financial condition and results of operations.

State Regulation of Hemp in the United States At present, the Company sources its hemp and hemp-derived ingredients from farming operations and ingredient suppliers that are in compliance with state and federal regulations.

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Under the 2018 Farm Bill, states retain significant discretion and authority to adopt their own regulatory regimes governing hemp production.

As a result, regulation of hemp and the products derived therefrom will likely continue to vary on a state-by-state basis even

8 https://www.ftc.gov/news-events/news/press-releases/2023/07/ftc-sends-cease-desist-letters-fda-companies-selling-edible-products-containing-delta-8-thc.

9 https://www.ftc.gov/news-events/news/press-releases/2024/07/ftc-fda-send-second-set-cease-desist-letters-companies-selling-products-containing-delta-8-thc.

though the 2018 Farm Bill has been fully implemented.

As a result, regulation of hemp and the products derived therefrom will likely continue to vary on a state-by-state basis even though the 2018 Farm Bill has been fully implemented.

In addition, states take varying approaches to regulating the production and sale of hemp-derived CBD.

While some states explicitly authorize and regulate the sale of hemp-derived CBD products, or otherwise provide legal protection for authorized individuals to engage in commercial hemp activities, other states maintain outdated drug laws that do not distinguish between marijuana, hemp and/or hemp-derived CBD, resulting in hemp being classified as a controlled substance under state law.

The majority of states explicitly authorize and regulate the sale of hemp-derived CBD products subject to certain requirements and restrictions, or otherwise provide legal protection for authorized individuals to engage in commercial hemp activities.

Additionally, a number of states prohibit the sale of ingestible CBD products based on FDA’s position that, pursuant to the FD&C Act, it is unlawful to introduce food containing added CBD or THC into interstate commerce, or to market CBD or THC products as, or in, dietary supplements, regardless of whether the substances are hemp-derived.

Since the Company’s products are specifically excepted from the CSA by the 2018 Farm Bill’s definition of hemp, it is the Company’s position that such state laws would specifically except them as well.

Accordingly, the sale of CBD at the retail level in some U.S.

states remains a gray and evolving area of the law.

A number of states have passed legislation that explicitly permits the sale of CBD.

Several states also place additional requirements on the sale of CBD products such as specific testing, labeling, packaging, or registration of products.

Recently, some states have enacted milligram limits on the amount of THC in hemp-derived products and have prohibited the sale of products containing THC to those under 21.

Several states are currently considering legislation imposing similar restrictions.

The regulatory environment at the state level for hemp-derived products is highly fragmented.

States have adopted different definitions of allowable cannabinoids, potency limits, serving sizes, packaging and labeling requirements, testing requirements, age restrictions, and sales channel limitations.

Several states have enacted specific rules governing hemp-derived delta-9 THC products, including potency limits, product registration and sales channel limitations.

These divergent laws may require reformulation, labeling adjustments, packaging updates, and market-specific strategies.

Certain products may not be legal for sale in particular states, and the Company’s distribution decisions must account for these differences.

Several states are currently considering legislation imposing similar restrictions, with some contemplating updates to their laws to align with the recent federal legislative changes.

The Company understands that there are risks of state and local law enforcement or regulatory action, and the state-specific requirements may vary significantly.

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The Dietary Supplement Health and Education Act (the "DSHEA"), an amendment to the federal FD&C Act, established a framework governing the composition, safety, labeling, manufacturing, and marketing of dietary supplements in the United States.

Generally, under the DSHEA, dietary ingredients marketed in the United States prior to October 15, 1994 may be used in dietary supplements without notifying the FDA.

Generally, under the DSHEA, dietary ingredients marketed in the United States prior to October 15, 1994 may be used in dietary supplements without

10 https://www.fda.gov/about-fda/fda-basics/how-did-federal-food-drug-and-cosmetic-act-come-about.

Food and Drug Administration, Mission Statement:

https://www.fda.gov/about-fda/what-we-do.

Food and Drug Administration, "FDA Regulation of Cannabis and Cannabis-Derived Products, Including Cannabidiol (CBD), Questions and Answers," https://www.fda.gov/news-events/public-health-focus/fda-regulation-cannabis-and-cannabis-derived-products-including-cannabidiol-cbd#qandas.

notifying the FDA.

"New" dietary ingredients (i.e., dietary ingredients "not marketed in the United States before October 15, 1994") must be the subject of a new dietary ingredient notification submitted to the FDA unless the ingredient has been "present in the food supply as an article used for food" and is not "chemically altered".

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Excluded from the DSHEA definition of a dietary supplement is:

"an article authorized for investigation as a new drug, antibiotic, or biological for which substantial clinical investigations have been instituted and for which the existence of such investigations

10 https://www.fda.gov/about-fda/fda-basics/how-did-federal-food-drug-and-cosmetic-act-come-about.

Food and Drug Administration, Mission Statement:

https://www.fda.gov/about-fda/what-we-do.

Code § 350b(a)(2).

has been made public, which was not before such approval, certification, licensing, or authorization marketed as a dietary supplement or as a food unless the Secretary, in the Secretary’s discretion, has issued a regulation, after notice and comment, finding that the article would be lawful under this Act." 14 It is the FDA’s interpretation of the IND Preclusion that the preclusion date is the date in which it authorized the drug for investigation;

"an article authorized for investigation as a new drug, antibiotic, or biological for which substantial clinical investigations have been instituted and for which the existence of such investigations has been made public, which was not before such approval, certification, licensing, or authorization marketed as a dietary supplement or as a food unless the Secretary, in the Secretary’s discretion, has issued a regulation, after notice and comment, finding that the article would be lawful under this Act." 14 It is the FDA’s interpretation of the IND Preclusion that the preclusion date is the date in which it authorized the drug for investigation;

however, the Company believes there are significant arguments against this position in that all conditions of the statute must be met before the IND Preclusion applies, including (1) authorization for investigation as a new drug;

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and (4) all of the above must occur prior to the marketing of the article as a food or dietary supplement.

In response to a Citizen Petition challenging the FDA’s application of the IND preclusion to beta-nicotinamide mononucleotide (“NMN”) on similar grounds (i.e., that the conditions of the statute were not met), the FDA rejected industry’s arguments, indicating that the agency’s position is unlikely to change with respect to the preclusion date and whether “substantial” clinical investigations must have been instituted for the IND Preclusion to apply.

15 Importantly, however, the FDA reversed its position that NMN is excluded from the definition of dietary supplement under DSHEA, finding that “lawful” marketing is not required for purposes of determining whether a dietary supplement or food containing the article was marketed prior to the article being authorized for investigation as a new drug.

Although the FDA’s determination is specific to NMN and other factors like safety would play a dispositive role (since the FDA had already acknowledged the safety of NMN), it does indicate that the agency may be willing to consider evidence of CBD’s marketing in dietary supplements or food prior to its investigation as a drug, which is a positive development for CBD and potentially other cannabinoids.

On July 23, 2021, the Company was advised by the FDA of its objection to a New Dietary Ingredient Notification ("NDIN") submitted by the Company earlier in 2021.

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On May 2, 2023, the FDA issued the final monograph titled "Over-the-Counter (OTC) Monograph M017:

External Analgesic Drug Products for Over-the-Counter Human Use." The FDA allows drugs products that comply with the tentative final monograph to be marketed under its enforcement discretion policy.

External Analgesic Drug Products for Over-the-Counter Human Use." The FDA allows drug products that comply with the tentative final monograph to be

Code § 350b(a)(2).

Code § 321(ff)(3)(B).

Food and Drug Administration, Response Letter from FDA Human Foods Program to Natural Products Association and Alliance for Natural Health USA (September 29, 2025), https://www.regulations.gov/document/FDA-2023-P-0872-2754.

marketed under its enforcement discretion policy.

Formulation, labeling, and marketing must conform to the final monograph, or the OTC drug products may be considered adulterated or misbranded under the FD&C Act.

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The letters explain that, because CBD has known pharmacological effects on humans, with demonstrated risks, it cannot be legally marketed as an inactive ingredient in OTC drug products that are not reviewed and approved by the FDA.

In the letters, the FDA also alleged the products are misbranded due to the prominent featuring of CBD on the labeling, which the FDA stated is misleading because it presents the CBD inactive ingredients "in a manner that creates an impression of value greater than their true functional role in the formulation." 16 Since 2022, the FDA has not issued similar letters to

Code § 321(ff)(3)(B).

Food and Drug Administration, "FDA Warns Companies Illegally Selling Over-the-Counter CBD Products for Pain Relief," https://www.fda.gov/news-events/press-announcements/fda-warns-companies-illegally-selling-over-counter-cbd-products-pain-relief.

16 See 21 CFR 201.10(c)(4), Drugs;

statement of ingredients.

marketers of CBD-containing OTC products, or issued any public statements with respect to the use of CBD in OTC drugs.

The Company's CBD CLINIC and CBD MEDIC products are manufactured by a third-party manufacturer, Aidance, in an FDA-registered facility which complies with GMP requirements.

The CBD CLINIC and CBD MEDIC products are manufactured under the Aidance Manufacturing and Services Agreement and are marketed in compliance with the Over-the-Counter (OTC) Monograph M017:

In the letters, the FDA also alleged the products are misbranded due to the prominent featuring of CBD on the labeling, which the FDA stated is misleading because it presents the CBD inactive ingredients "in a manner that creates an impression of value greater than their true functional role in the formulation." 17 Since 2022, the FDA has not issued similar letters to marketers of CBD-containing OTC products, or issued any public statements with respect to the use of CBD in OTC drugs.

The agency has also removed the news release from its website.

The Company's CBD CLINIC and CBD MEDIC products are manufactured by a third-party manufacturer, Aidance Scientific, Inc.

(Aidance), in an FDA-registered facility which complies with GMP requirements.

The CBD CLINIC and CBD MEDIC products are manufactured under the Aidance Manufacturing, Fulfillment & Business Services Agreement and are labeled and marketed in compliance with the Over-the-Counter (OTC) Monograph M017:

External Analgesic Drug Products for Over-the-Counter Human Use as described above.

As such, the Company takes the position that these products are exempt from the requirements for an NDA or ANDA pre-market approval.

Aidance, as the manufacturer, has registered its facility as a drug establishment and Aidance and Company have submitted to FDA for National Drug Code ("NDC") numbers for the OTC drug products.

Aidance, as the manufacturer, has registered its facility as a drug establishment and Aidance and the Company have submitted to FDA for National Drug Code ("NDC") numbers for the OTC drug products.

There is no assurance that the position taken by the Company that its products are exempt from the requirements for an NDA or ANDA pre-market approval will not, in the future, be challenged by the FDA, which could result in material adverse effects to the Company and its business.

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In the meantime, stakeholders including the Company are collecting data to pursue a GRAS determination for CBD, as the FDA has indicated it cannot conclude that CBD is GRAS due to the current lack of information to support this determination.

As discussed below on March 6, 2020, the Company achieved self-affirmed GRAS status for its hemp extract, adding to the current body of scientific literature on the safe use of CBD.

On March 6, 2020, the Company achieved self-affirmed GRAS status for its hemp extract, adding to the current body of scientific literature on the safe use of CBD.

Enforcement of this prohibition on the use of CBD in food has been generally limited to products making unlawful drug or disease claims, with the FDA also asserting its position that CBD is not a permissible food or dietary supplement ingredient.

The Company’s products containing CBD derived from hemp are not marketed or sold using claims that the products are intended to diagnose, mitigate, treat, cure, or prevent disease in violation of the FD&C Act.

Of note, the FDA is likely to issue a proposed rule that would amend the GRAS regulations to require mandatory submission of GRAS notices for both human and animal food substances that are purported to be GRAS, which would essentially eliminate the self-affirmed GRAS pathway.

As of December 1, 2025, the proposed rule was pending review by the White House Office of Management and Budget, which signals that FDA could issue the rule by mid-2026 or earlier.

Because GRAS reform is a high priority for the FDA and the Secretary

16 See, e.g., U.S.

Food and Drug Administration, Waring Letter to Honest Globe, Inc., https://www.fda.gov/inspections-compliance-enforcement-and-criminal-investigations/warning-letters/honest-globe-inc-597177-03152021.

17 See 21 CFR 201.10(c)(4), Drugs;

statement of ingredients.

18 In December 2018, FDA stated it had no questions following the submission of three GRAS notifications concluding that hulled hemp seed, hemp see protein powder, and hemp seed oil are GRAS for the intended conditions of use outlined in the notifications:

https://www.fda.gov/food/cfsan-constituent-updates/fda-responds-three-gras-notices-hemp-seed-derived-ingredients-use-human-food.

of Health and Human Services, the rule may be fast-tracked with an abbreviated notice-and-comment period.

However, questions have been raised about whether FDA can require mandatory GRAS submissions without federal legislation that amends the FD&C Act’s food additive provisions, raising the possibility of a legal challenge to the proposed rule.

Several bills have also been introduced in Congress aimed at GRAS reform.

Currently, it is unclear how these proposals would affect hemp-derived ingredients given the FDA’s position and potential for a new regulatory pathway for hemp-derived products, and any changes as the result of a new GRAS rule or legislation are not expected to take effect immediately.

As noted above, in January 2023, the FDA stated that a new regulatory pathway is necessary to provide safeguards and manage the risks related to CBD products.

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Continued delays in the development of a regulatory pathway for CBD may have a materially adverse effect on the Company and its business.

Future Uncertainty of Legal Status There remain a number of considerations and uncertainties regarding the cultivation, sourcing, production and distribution of hemp and products containing hemp derivatives.

Applicable laws and regulations remain subject to change as there are different interpretations among federal, state and local regulatory agencies, legislators, academics and businesses with respect to the treatment of the importation of derivatives from exempted portions of the cannabis plant and the scope of operation of 2018 Farm Bill-compliant hemp programs.

These different federal, state and local agency interpretations, as discussed above, touch on the regulation

17 In December 2018, FDA stated it had no questions following the submission of three GRAS notifications concluding that hulled hemp seed, hemp see protein powder, and hemp seed oil are GRAS for the intended conditions of use outlined in the notifications:

https://www.fda.gov/food/cfsan-constituent-updates/fda-responds-three-gras-notices-hemp-seed-derived-ingredients-use-human-food.

18 https://www.fda.gov/news-events/public-health-focus/warning-letters-cannabis-derived-products

of cannabinoids by the FDA and the extent to which the 2018 Farm Bill-compliant cultivators and processors may engage in interstate commerce, whether under federal and/or state law.

The uncertainties likely cannot be resolved without further federal and state legislation, regulation or a definitive judicial interpretation of existing legislation and rules.

Environmental Regulation The Company’s hemp extract wellness products and cultivation operations are subject to federal, state and local environmental regulations and permitting requirements regarding air emissions, water discharges and the handling and disposal of hazardous wastes, among other matters.

Future Uncertainty of Legal Status There remain a number of considerations and uncertainties regarding the cultivation, sourcing, production, distribution, marketing and sale of hemp and products containing hemp derivatives.

Applicable laws and regulations remain subject to change as there are different interpretations among federal, state and local regulatory agencies, legislators, academics and businesses.

The interplay of these federal, state, and local regulatory frameworks creates a dynamic and often uncertain regulatory environment.

The Company expects continued evolution in the laws governing hemp-derived cannabinoids, including potential congressional action, FDA rulemaking, state legislation, and state agency rulemaking.

The uncertainties likely cannot be resolved without further federal legislation, regulation or a definitive judicial interpretation of existing legislation and rules.

Environmental Regulation The Company’s hemp products and cultivation operations are subject to federal, state and local environmental regulations and permitting requirements regarding air emissions, water discharges and the handling and disposal of hazardous wastes, among other matters.

Compliance with such regulations and requirements have not had, nor are they expected to have, any direct material effect on the Company’s capital expenditures, earnings or competitive position.

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Each of these countries regulates the import of cannabis-derived products and requires some form of importation license, permit or other documentation for products.

The exact nature of the importation documentation varies from country to country, and is affected by various factors, including the level of THC content and the intended use of the product.

The exact nature of the importation documentation varies from country to country, and

19 https://www.fda.gov/news-events/public-health-focus/warning-letters-cannabis-derived-products

is affected by various factors, including the level of THC content and the intended use of the product.

For example, in certain international jurisdictions, CBD products may be regulated as a dietary supplement and subject to local packaging and labelling requirements, whereas in certain jurisdictions a prescription from a licensed medical practitioner is required.

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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-K

Item 1. Business