What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-03-31 compared with 2025-03-19 · 218 added, 368 removed, 764 unchanged (43% of the section changed)

3 unchanged sentences

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Financial Statements:

1 unchanged sentence

Consolidated Statements of Operations

Consolidated Statements of Shareholders’ Equity

Consolidated Statements of Shareholders’ Equity (Deficit)

Consolidated Statements of Cash Flows

3 unchanged sentences

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Charlotte’s Web Holdings Inc.

(the “Company”) as of December 31, 2024, the related consolidated statement of operations, changes in shareholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Notes 2 and 15 to the financial statements, the Company adopted the provisions of Accounting Standard Update 2023-07 Segment Information in 2024 on a retrospective basis.

We have also audited the adjustments necessary to retrospectively apply the change in the December 31, 2023 segment information as provided in Note 15.

In our opinion, such adjustments are appropriate and have been properly applied.

We were not engaged to audit, review, or apply any procedures to the Company’s December 31, 2023 financial statements other than with respect to the adjustment and, accordingly, we do not express an opinion or any other form of assurance on the December 31, 2023 financial statements as whole.

We have audited the accompanying consolidated balance sheets of Charlotte’s Web Holdings, Inc.

(the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of operations, changes in shareholders’ equity (deficit) and cash flows for each of the two years in the period ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America..

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit includes performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

/s/ PKF O’Connor Davies, LLP

We have served as the Company’s auditor since August 2024.

We have served as the Company’s auditor since 2024.

New York, New York

March 31, 2026

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Charlotte’s Web Holdings, Inc.

Opinion on the Financial Statements

We have audited, before the effects of the adjustments to retrospectively apply Accounting Standards Update 2023-07—Segment Reporting (Topic 280):

Improvements To Reportable Segment Disclosures (“ASU 2023-07”) described in Notes 2 and 15, the consolidated balance sheet of Charlotte’s Web Holdings, Inc.

(the Company) as of December 31, 2023, the related consolidated statement of operations, shareholders’ equity and cash flows for the year ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”) (the 2023 consolidated financial statements, before the effects of the adjustments discussed in Notes 2 and 15, are not presented herein).

In our opinion, the consolidated financial statements, before the effects of the adjustments to retrospectively apply ASU 2023-07 described in Notes 2 and 15, present fairly, in all material respects, the financial position of the Company at December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with U.S.

generally accepted accounting principles.

Change in Accounting Principle

We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively apply ASC 2023-07 described in Notes 2 and 15 and, accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied.

Those adjustments were audited by PKF O’Connor Davies, LLP.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We served as the Company’s auditor from 2019 to 2024.

Denver, Colorado

March 21, 2024

CHARLOTTE’S WEB HOLDINGS, INC.

3 unchanged sentences

Cash and cash equivalents

$ 22,618 $ 47,820

Accounts receivable, net

Inventories, net

18,907 21,538

Prepaid expenses and other current assets

Total current assets

46,982 78,172

Property and equipment, net

2 unchanged sentences

Investment in unconsolidated entity

SBH purchase option and other derivative assets 1,075 2,602

Intangible assets, net

Other long-term assets 632 703

$ 113,442 $ 152,548

LIABILITIES AND SHAREHOLDERS’ EQUITY

Derivative and other long-term assets

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

Current liabilities:

Accounts payable

$ 3,426 $ 2,860

Accrued and other current liabilities

2 unchanged sentences

Total current liabilities

15,936 23,646

Convertible debenture

Lease obligations

13,652 15,655

License and media rights payable

1 unchanged sentence

Total liabilities

86,355 96,990

Commitments and contingencies (Note 9)

Shareholders’ equity:

Shareholders’ equity (deficit):

Common shares, nil par value;

2 unchanged sentences

Additional paid-in capital

328,655 327,280

Accumulated deficit

( 301,569 ) ( 271,723 )

Total shareholders’ equity 27,087 55,558

Total liabilities and shareholders’ equity

$ 113,442 $ 152,548

Total shareholders’ equity (deficit)

Total liabilities and shareholders’ equity (deficit)

See Notes to Consolidated Financial Statements

3 unchanged sentences

Year Ended December 31,

Revenue $ 49,667 $ 63,155

Cost of goods sold

Gross profit 21,260 35,566

Selling, general and administrative expenses

Asset impairment

Operating loss

( 31,987 ) ( 40,612 )

Gain on initial investment in unconsolidated entity — 10,700

Change in fair value of financial instruments

Other income (expense), net

1,565 ( 2,694 )

Loss before provision for income taxes

$ ( 29,807 ) $ ( 23,267 )

Income tax expense

( 39 ) ( 529 )

$ ( 29,846 ) $ ( 23,796 )

Income tax benefit (expense)

Per common share amounts (Note 12)

Net loss per common share, basic and diluted

$ ( 0.19 ) $ ( 0.16 )

See Notes to Consolidated Financial Statements

CHARLOTTE’S WEB HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share amounts)

3 unchanged sentences

Balance—December 31, 2023

152,135,026 $ 1 $ 325,431 $ ( 247,927 ) $ 77,505

Common shares issued upon vesting of restricted share units, net of withholdings

Share-based compensation

Net loss — — — ( 23,796 ) ( 23,796 )

Balance—December 31, 2024

154,332,366 $ 1 $ 327,280 $ ( 271,723 ) $ 55,558

Common shares issued upon vesting of restricted share units, net of withholding

Share-based compensation

— — — ( 29,846 ) ( 29,846 )

Balance—December 31, 2025

158,009,541 $ 1 $ 328,655 $ ( 301,569 ) $ 27,087

See Notes to Consolidated Financial Statements

4 unchanged sentences

Cash flows from operating activities:

$ ( 29,846 ) $ ( 23,796 )

Adjustments to reconcile net loss to net cash used in operating activities:

1 unchanged sentence

Change in fair value of financial instruments

( 615 ) ( 9,339 )

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

Convertible debenture and other accrued interest

Gain on foreign currency transaction

( 3,631 ) 1,142

Share-based compensation

(Gain)/loss on foreign currency transaction

Changes in right-of-use assets

Allowance for credit losses

Share-based compensation

Inventory provision

Asset impairment — 548

Other 611 3,313

Other non-cash items

Changes in operating assets and liabilities:

1 unchanged sentence

Inventories, net

( 1,520 ) 4,376

Prepaid expenses and other current assets

Operating lease obligations

( 2,247 ) ( 2,304 )

Accounts payable, accrued and other liabilities

( 1,664 ) 151

License and media rights payable

Income tax and other receivable

Other operating assets and liabilities, net

Net cash used in operating activities

( 21,261 ) ( 15,386 )

Cash flows from investing activities:

1 unchanged sentence

Proceeds from sale of assets

Net cash provided by/(used in) investing activities

( 3,796 ) ( 3,506 )

Net cash used in investing activities

Cash flows from financing activities:

1 unchanged sentence

Net cash used in financing activities

( 145 ) ( 251 )

Net decrease in cash and cash equivalents

( 25,202 ) ( 19,143 )

Cash and cash equivalents —beginning of year

47,820 66,963

Cash and cash equivalents —end of year

$ 22,618 $ 47,820

Non-cash activities:

Non-cash issuance of note receivable — ( 170 )

Non-cash purchases of property and equipment and intangibles

( 3 ) ( 233 )

See Notes to Consolidated Financial Statements

5 unchanged sentences

Charlotte's Web Holdings, Inc.

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

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

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

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

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

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

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

Hemp extracts are produced from the plant Cannabis sativa L.

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

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

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

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

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

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

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

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

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

The Company's products are distributed through its e-commerce website, third-party e-commerce websites, select distributors, and healthcare practitioners.

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

21 unchanged sentences

All intercompany balances and transactions have been eliminated in consolidation.

Unless otherwise indicated, comparisons are to comparable prior periods, and 2024 and 2023 refer to the 12 months ended December 31, 2024, and December 31, 2023, respectively.

Unless otherwise indicated, comparisons are to comparable prior periods, and 2025 and 2024 refer to the 12 months ended December 31, 2025, and 2024, respectively.

Use of Estimates

2 unchanged sentences

On an ongoing basis, management evaluates such estimates and assumptions for continued reasonableness.

In particular, management makes estimates with respect to any (i) inventory provision, (ii) underlying assumptions that affect the potential impairment of goodwill and long-lived assets, (iii) ability to realize income tax benefits associated with deferred tax assets, (iv) underlying assumptions that affect the fair value of the SBH purchase option, other derivative instruments, and investments in unconsolidated entities.

In particular, management makes estimates with respect to any (i) inventory provision, (ii) underlying assumptions that affect the potential impairment of goodwill and long-lived assets, (iii) ability to realize income tax benefits associated with deferred tax assets, and (iv) underlying assumptions that affect the fair value of derivative instruments and investments in unconsolidated entities.

Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation.

9 unchanged sentences

As such, the Company has one operating segment, which is the business of hemp-based CBD wellness products, which makes up substantially all of the revenue at this time.

Substantially all long-lived assets are located in the United States and substantially all revenue is attributed to customers based in the United States.

All long-lived assets are located in the United States and substantially all revenue is attributed to customers based in the United States.

Cash and Cash Equivalents

31 unchanged sentences

Prepaid expenses and other current assets were comprised of the following amounts (in thousands):

Deposits $ 1,404 $ 1,172

Prepaid expenses

2 unchanged sentences

Total prepaid expenses and other current assets

$ 4,194 $ 6,864

CHARLOTTE’S WEB HOLDINGS, INC.

4 unchanged sentences

Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows:

Building 30 years

Machinery and equipment 3 - 12 years

Furniture and fixtures 2 - 7 years

Leasehold improvements Shorter of useful life or term of lease ( 2 - 15 years)

Machinery and equipment

Furniture and fixtures

Leasehold improvements

Shorter of useful life or term of lease ( 4 - 10 years)

Construction-in-process assets are capitalized during construction and depreciation commences when the asset is placed into service.

21 unchanged sentences

If the useful life is shorter than originally estimated, the Company amortizes the remaining carrying value over the new shorter useful life.

See Note 5 "Property and Equipment, net" for further discussion.

CHARLOTTE’S WEB HOLDINGS, INC.

21 unchanged sentences

Operating leases are presented separately as operating lease right-of-use assets, net and lease obligations, current and non-current, in the accompanying consolidated balance sheets.

Leases with an initial term of 12 months or less, that do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise, are not recorded on the balance sheet.

Convertible Debenture

29 unchanged sentences

Estimates are based on actual historical and current specific data.

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

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

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

The majority of the Company’s revenue is derived from sales of branded products to consumers via the Company's e-commerce website, third-party e-commerce websites, select distributors, and health practitioners.

The Company and DeFloria, Inc.

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

Refer to Note 16 for additional disclosure on the DeFloria Service Agreement.

2 unchanged sentences

Product revenue

$ 49,019 $ 63,155

Service revenue

Total revenue

$ 49,667 $ 63,155

Substantially all of the Company’s revenue is earned in the United States.

15 unchanged sentences

The Company has a defined contribution plan, under which the Company contributes based on a percentage of the employees’ elected contributions.

Defined contribution expense of $ 493 and $ 565 was recorded during the year ended December 31, 2024 and December 31, 2023, respectively.

Defined contribution expense of $ 346 and $ 493 was recorded during the year ended December 31, 2025 and 2024, respectively.

Share-based Compensation

19 unchanged sentences

The Company’s 2019 tax year was opened for examination by the IRS during the second half of 2023.

The statute of limitations on assessment with respect to the Company’s 2019 Form 1120 remains open until December 31, 2025, pursuant to an agreed-upon extension to the applicable statute of limitations.

The Company’s 2021 through 2023 tax years remain open until the general statute of limitations lapses for each respective tax year.

The statute of limitations on assessment with respect to the Company’s 2019 Form 1120 remains open until June 30, 2027, pursuant to an agreed-upon extension to the applicable statute of limitations.

The Company’s 2022 through 2024 t ax years remain open until the general statute of limitations lapses for each respective tax year.

Refer to Note 14 "Income Taxes" for disclosures on uncertain tax positions.

4 unchanged sentences

New accounting pronouncements recently adopted

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

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

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

Refer to Note 15 "Operating Segment" for additional disclosures.

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

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

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

ASU 2023-09 is effective for the Company beginning with its fiscal year ended December 31, 2025.

Refer to Note 14, Income Taxes for additional disclosures.

Recently Issued Accounting Pronouncements

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

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

Induced Conversions of Convertible Debt Instruments.

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

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

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270):

Narrow-Scope Improvements.

The guidance clarifies and improves the guidance in Topic 270, including reorganizing the Codification, clarifying the scope of interim reporting guidance, adding a consolidated list of required interim disclosures, and introducing a disclosure principle for material events or changes occurring after the most recent annual reporting period.

ASU 2025-11 is effective for public business entities for interim periods within annual periods beginning after December 15, 2027, with early adoption permitted.

The Company is currently evaluating the effect of adopting this ASU

In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40).

This guidance modernizes and clarifies the accounting model for costs related to internal-use software, eliminating the historically used stage-based framework.

The new guidance supersedes ASC 350-50 on website development costs, folding relevant guidance into ASC 350-40.

ASU 2025-06 is effective for the Company beginning after December 15, 2027, and early adoption is permitted as of the beginning of an annual reporting period.

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

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

Disaggregation of Income Statement Expenses.

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

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

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

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

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

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

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

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

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

FAIR VALUE MEASUREMENT

8 unchanged sentences

The categorization of a financial instrument within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The Company’s financial instruments include cash and cash equivalents, accounts receivable and other receivables, notes receivable and payable, SBH purchase option and asset derivatives, accounts payable and accrued liabilities, cultivation liabilities, convertible debenture, liability derivatives, investment in unconsolidated entity, and other current assets and liabilities.

At December 31, 2024 and 2023, the carrying amounts of cash and cash equivalents, accounts receivable and other receivables, accounts payable and other current assets and liabilities approximated fair values because of their short-term nature.

The carrying value of the notes

The Company’s financial instruments include cash and cash equivalents, accounts receivable and other

CHARLOTTE’S WEB HOLDINGS, INC.

1 unchanged sentence

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

receivable and cultivation liability approximates the fair value as the stated interest rate approximates market rates currently available to the Company.

receivables, notes receivable and payable, asset derivatives, accounts payable and accrued liabilities, cultivation liabilities, convertible debenture, liability derivatives, investment in unconsolidated entity, and other current assets and liabilities.

At December 31, 2025 and 2024, the carrying amounts of cash and cash equivalents, accounts receivable and other receivables, accounts payable and other current assets and liabilities approximated fair values because of their short-term nature.

The carrying value of the notes receivable and cultivation liability approximates the fair value as the stated interest rate approximates market rates currently available to the Company.

The carrying value of the convertible debenture approximates the fair value after adjustments for the bifurcated embedded derivatives and other discounts , refer to Note 8 "Debt" note for additional fair value disclosures.

1 unchanged sentence

December 31, 2025

Level 1 Level 2 Level 3 Total

Financial assets:

2 unchanged sentences

Total financial assets

$ — $ — $ 1,075 $ 1,075

Investment in unconsolidated entity:

$ — $ — $ 10,800 $ 10,800

Financial liabilities:

1 unchanged sentence

December 31, 2024

Level 1 Level 2 Level 3 Total

Financial assets:

2 unchanged sentences

Total financial assets

$ — $ — $ 2,602 $ 2,602

Investment in unconsolidated entity:

$ — $ — $ 11,000 $ 11,000

Financial liabilities:

Debt conversion option

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

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

Investment in Unconsolidated Entity

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

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

AJNA is a botanical drug development company.

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

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

As of December 31, 2024, BAT holds an equity interest in DeFloria in the form of 2,000,000 or 100 % preferred units ( 200,000 preferred units as of December 31, 2023) following its $ 10 million initial investment and has the right to participate in future equity issuances to maintain its pro rata equity position.

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

The Company and AJNA each hold 4,000,000 or approximately 50 % ( 400,000 common shares as of December 31, 2023), respectively, of DeFloria's voting common units following a 1-10 stock split when DeFloria converted from a Limited Liability Comp to a Corporation.

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

Additionally, the Company has a supply agreement with DeFloria, under

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

The seven Stanley brothers (the "Stanley Brothers") founded CWB Holdings, Inc (predecessor to Charlotte's Web, Inc).

CHARLOTTE’S WEB HOLDINGS, INC.

1 unchanged sentence

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

which the Company supplies the oils at cost used to produce and develop the new drug.

As of December 31, 2025, BAT holds an equity interest in DeFloria in the form of approximately 2,000,000 or 100 % preferred units ( 200,000 preferred units as of December 31, 2024) following its $ 10 million initial investment and has the right to participate in future equity issuances to maintain its pro rata equity position.

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

The Company and AJNA each hold 4,000,000 or approximately 50 % ( 400,000 common shares as of December 31, 2024), respectively, of DeFloria's voting common units following a 1-10 stock split when DeFloria converted from a Limited Liability Company to a Corporation.

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

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

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

2 unchanged sentences

Management determined the warrant should be accounted for in accordance with ASC 321, which requires the warrant to be measured at fair value at issuance and subsequently remeasured at fair value each reporting period.

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

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

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

As of December 31, 2025, AJNA warrants have expired and as such have no value.

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

5 unchanged sentences

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

For the year ended December 31, 2023, the Company recognized a gain for the initial investment in DeFloria of $ 10,700 within the consolidated statement of operations.

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

For the year ended December 31, 2024 and December 31, 2023, a loss of $ 200 and a gain of $ 300 , respectively, related to the investment in DeFloria was recognized as a change in fair value of financial instruments in the consolidated statement of operations.

As of December 31, 2024 and December 31, 2023, the DeFloria investment represents an investment of $ 10,800 and $ 11,000 , respectively, within the consolidated balance sheets.

For the year ended December 31, 2025 and 2024, a loss of $ 2,000 and $ 200 , respectively, related to the investment in DeFloria was recognized as a change in fair value of financial instruments in the consolidated statement of operations.

As of December 31, 2025 and 2024, the DeFloria investment represents an investment of $ 8,800 and $ 10,800 , respectively, within the consolidated balance sheets.

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

5 unchanged sentences

Expected term (years)

Volatility 83.6 % 70.0 %

Risk-free interest rate

1 unchanged sentence

Discount for lack of marketability

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Convertible Debt Derivatives

2 unchanged sentences

BATS and NYSE:

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

The debenture is convertible into 19.9 % ownership of the Company's common

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

shares at a conversion price of C$ 2.00 per common share of the Company on the TSX.

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

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

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 .

5 unchanged sentences

Debt Interest Rate Conversion Feature

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

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

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

For the year ended December 31, 2024 and December 31, 2023, a gain of $ 228 and a loss of $ 471 , respectively, related to the debt interest rate conversion feature was recognized as a change in fair value of financial instruments in the consolidated statement of operations.

As of December 31, 2024 and December 31, 2023, the debt interest rate conversion feature represents a financial asset of $ 1,023 and $ 872 , respectively, within SBH purchase option and other derivative assets in the consolidated balance sheets.

To determine the value of the option, the Company utilizes a probability weighted income approach.

For the year ended December 31, 2025 and 2024, a loss of $ 865 and a gain of $ 228 , respectively, related to the debt interest rate conversion feature was recognized as a change in fair value of financial instruments in the consolidated statement of operations.

As of December 31, 2025 and 2024, the debt interest rate conversion feature represents a financial asset of $ 211 and $ 1,023 , respectively, within Derivative and other long-term assets in the consolidated balance sheets.

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

This method calculates the present value of the reduced interest accrued on the debenture assuming the feature is triggered at a certain time, after accounting for the probability of federal regulation of CBD.

5 unchanged sentences

Implied debt yield

Federal regulation probability various various

Year of event various various

Federal regulation probability

Year of event

Debt Conversion Option

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

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

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

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

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

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

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

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

The assumptions used by the Company are the

CHARLOTTE’S WEB HOLDINGS, INC.

1 unchanged sentence

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

For the year ended December 31, 2024 and December 31, 2023, a gain of $ 2,265 and $ 10,080 , respectively, related to the debt conversion option was recognized as a change in fair value of financial instruments in the consolidated statements of operations.

As of December 31, 2024 and December 31, 2023, the debt conversion option represents a financial liability of $ 786 and $ 3,213 , respectively, within derivative and other long-term liabilities in the consolidated balance sheets.

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

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

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

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

For the year ended December 31, 2025 and 2024, a loss of $ 4,352 and a gain of $ 2,265 , respectively, related to the debt conversion option was recognized as a change in fair value of financial instruments in the consolidated statements of operations.

As of December 31, 2025 and 2024, the debt conversion option represents a financial liability of $ 5,187 and $ 786 , respectively, within derivative and other long-term liabilities in the consolidated balance sheets.

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

1 unchanged sentence

Expected volatility

87.9 % 87.4 %

Expected term (years)

2 unchanged sentences

Value of underlying share

C$ 0.13 C$ 0.27

Exercise price C$ 2.00 C$ 2.00

Exercise price

Stanley Brothers USA Holdings Purchase Option

In 2021, the Company entered into an optionpurchase agreement (the "SBH Purchase Option") with Stanley Brothers USA Holdings, Inc.

In 2021, the Company entered into an option purchase agreement (the "SBH Purchase Option") with Stanley Brothers USA Holdings, Inc.

("Stanley Brothers USA").

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

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

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

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

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

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

As part of the SBH Purchase Option agreement, Stanley Brothers USA issued the Company a warrant exercisable to purchase 10 % of the outstanding Stanley Brothers USA shares and convertible securities that are considered in-the-money, subject to certain conditions and exclusions.

4 unchanged sentences

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

For the year ended December 31, 2024 and December 31, 2023 , a loss of $ 1,678 and $ 570 , respectively, related to the SBH Purchase Option was recognized as change in fair value of financial instruments in the statements of operations.

As of December 31, 2024 and December 31, 2023 , the SBH Purchase Option represents a financial asset of $ 52 and $ 1,730 , respectively, within SBH purchase option and other derivative assets in the consolidated balance sheets.

For the year ended December 31, 2025 and 2024, a loss of $ 52 and $ 1,678 , respectively, related to the SBH Purchase Option was recognized as change in fair value of financial instruments in the statements of operations.

As of December 31, 2025 and 2024, the SBH Purchase Option represents a financial asset of $ 0 and $ 52 , respectively, within Derivative and other long-term assets in the consolidated balance sheets.

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

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

The Company chose to not exercise the unexercised option as of the expiration date of February 26, 2026.

CHARLOTTE’S WEB HOLDINGS, INC.

1 unchanged sentence

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

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

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

of December 31, 2024, the primary assumptions utilized include financial projections of Stanley Brothers USA and the probability and timing of exercise.

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

Year Ended December 31,

Expected volatility

112.0 % 125.0 %

Expected term (years)

1 unchanged sentence

Weighted average cost of capital

52.9 % 50.6 %

Inventories consist of the following:

Harvested hemp and seeds

$ 2,312 $ 9,300

Raw materials

Finished goods

20,483 25,346

inventory provision

( 1,576 ) ( 3,808 )

$ 18,907 $ 21,538

Inventory Provision

For the year ended December 31, 2024, inventory provisions of $ 4,154 were expensed through cost of goods sold in the consolidated statements of operations.

For the year ended December 31, 2024, write-offs of inventory previously reserved of $ 6,386 were recognized.

For the year ended December 31, 2025, inventory provisions of $ 205 were expensed through cost of goods sold in the consolidated statements of operations, and write-offs of inventory previously reserved for of $ 606 were recognized.

For the year ended December 31, 2024, inventory provisions of $ 4,154 were expensed through cost of goods sold and write-offs of inventory previously reserved for of $ 6,386 were recognized.

Additionally, for the year ended December 31, 2024 and 2023, the Company sold harvested hemp that had a full inventory provision.

The sale of hemp resulted in a $ 4,573 and $ 12,854 reduction to the inventory provision as of December 31, 2024 and 2023, respectively.

Additionally, for the year ended December 31, 2024, the Company sold harvested hemp that had a full inventory provision.

The sale of hemp resulted in a $ 4,573 reduction to the inventory provision.

CHARLOTTE’S WEB HOLDINGS, INC.

3 unchanged sentences

Property and equipment consist of the following:

$ 2,860 $ 2,860

Machinery and equipment

16,238 16,237

Furniture and fixtures

Leasehold improvements

26,919 26,919

$ 47,162 $ 47,161

Accumulated depreciation

( 27,219 ) ( 23,553 )

Construction-in-process

Total property and equipment, net

$ 26,337 $ 27,513

Depreciation expense for the year ended December 31, 2024 and December 31, 2023, was $ 4,111 and $ 5,080 , respectively, of which $ 1,135 and $ 1,901 , respectively, was recorded in Selling, general, and administrative expense in the consolidated statements of operations.

For the year ended December 31, 2024 and December 31, 2023, depreciation expense of $ 2,976 and $ 3,179 , respectively, was recorded in Cost of goods sold in the consolidated statements of operations.

During the year ended December 31, 2023 , an impairment loss to building assets of $ 548 was recorded within Asset Impairment in the consolidated statement of operations.

The impairment resulted from a decline in market conditions at the Company's hemp farm that indicated a fair value less than the carrying value.

Depreciation expense for the year ended December 31, 2025 and 2024 , was $ 4,004 and $ 4,111 , respectively, of which $ 895 and $ 1,135 , respectively, was recorded in Selling, general, and administrative expense in the consolidated statements of operations.

For the year ended December 31, 2025 and 2024 , depreciation expense of $ 3,109 and $ 2,976 , respectively, was recorded in Cost of goods sold in the consolidated statements of operations.

I NTANGIBLE ASSETS

2 unchanged sentences

Weighted-Average Remaining Useful Life (in years)

Accumulated Amortization Net

Accumulated Amortization

Definite-lived intangible assets:

18.26 $ 3,847 $ ( 2,948 ) $ 899

Indefinite-lived intangible assets:

Total $ 3,997 $ ( 2,948 ) $ 1,049

As of December 31, 2024

Weighted-Average Remaining Useful Life (in years)

Accumulated Amortization Net

Accumulated Amortization

Definite-lived intangibles assets (1) :

18.50 $ 3,478 $ ( 2,741 ) $ 737

Indefinite lived intangible assets:

Total $ 3,628 $ ( 2,741 ) $ 887

CHARLOTTE’S WEB HOLDINGS, INC.

1 unchanged sentence

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

For the year ended December 31, 2024 and December 31, 2023, amortization expense of intangible assets of $ 218 and $ 849 , respectively, was recorded in Selling, general, and administrative expense in the consolidated statements of operations.

(1) For the year ended December 31, 2024, certain amounts have been reclassified to conform to current period presentation.

These reclassifications had no impact on total intangible assets or net income.

For the year ended December 31, 2025 and 2024 , amortization expense of intangible assets of $ 226 and $ 218 , respectively, was recorded in Selling, general, and administrative expense in the consolidated statements of operations.

As of December 31, 2025 , expected amortization of intangible assets is as follows:

6 unchanged sentences

The First Amendment extended the agreement through December 31, 2027, with an aggregate rights fee of $ 23.0 million for the remainder of the term.

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

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 term of the MLB Promotional Rights Agreement.

As consideration under the MLB Promotional Rights Agreement, the Company was committed to pay a combination of cash over the license period, along with upfront non-cash consideration in the form of equity, as well as contingent consideration in the form of contingent payments based on revenue.

The consideration was as follows:

2 unchanged sentences

10 % royalty on the Company’s gross revenue from the sale of MLB branded products, after cumulative gross sales of all such branded products exceed $ 18.0 million.

As of December 31, 2024 and 2023, the carrying value of the licensed properties was $ 11,691 and $ 14,589 , respectively, recorded as a license and media rights asset within the consolidated balance sheets.

As of December 31, 2024 and 2023, the carrying value of the media rights was $ 3,000 and $ 4,982 recorded as a prepaid asset and a license and media rights asset within the consolidated balance sheets.

The Company recognized $ 4,897 and $ 9,794 , respectively, in amortization expense related to the license and media rights assets for the year ended December 31, 2024 and 2023.

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

For the year ended December 31, 2024 and December 31, 2023 , the Company paid MLB $ 5,000 and $ 8,000 as part of the committed cash payments.

The PRA Letter Agreement terminated the MLB Promotional Rights Agreement.

As a result of the termination, the license and media rights assets as well as the current and non-current payable previously recorded on the consolidated balance sheets were written off.

This write-off resulted in the recognition of a gain of $ 2,326 , which is included in Other income (expense), net within the consolidated statements of operations.

The gain reflects the net impact of the derecognition of related obligation exceeding the carrying value of the associated assets.

As of December 31, 2024, the carrying value of the licensed properties was $ 11,691 recorded as a license and media rights asset within the consolidated balance sheets.

As of December 31, 2024, the carrying value of the media rights was $ 3,000 recorded as a prepaid asset and a license and media rights asset within the consolidated balance sheets.

The Company recognized $ 4,897 in amortization expense related to

CHARLOTTE’S WEB HOLDINGS, INC.

1 unchanged sentence

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

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

Year Ending December 31:

Total payments

Imputed interest

Total license and media rights payable

Current license liabilities

Total non-current license and media rights payable

As of December 31, 2024 , expected amortization of licensed properties is as follows:

Year Ending December 31:

Total future amortization

the license and media rights assets for the year ended December 31, 2024.

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

For the year ended December 31, 2024, the Company paid MLB $ 5,000 as part of the committed cash payments .

Convertible Debenture

8 unchanged sentences

As of December 31, 2025

Principal Amount Unamortized Debt Discount and Costs Net Carrying Amount

Principal Amount

Unamortized Debt Discount and Costs

Net Carrying Amount

Convertible Debenture

2 unchanged sentences

As of December 31, 2024

Principal Amount Unamortized Debt Discount and Costs Net Carrying Amount

Principal Amount

Unamortized Debt Discount and Costs

Net Carrying Amount

Convertible Debenture

Convertible debenture due November 2029

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

The Company remeasures the debenture at each balance sheet date using the CAD to USD exchange rate as of that balance sheet date.

The Company recognizes the resulting foreign currency gain or loss within the statement of operations during the period.

For the year ended December 31, 2024 and 2023 , the Company recognized a foreign currency gain of $ 3,546 and a loss of $ 866 , respectively, related to the net carrying value of the debenture within o ther income (expense), net in the statement of operations.

The Company recognizes the resulting foreign currency gain or loss within the consolidated statement of operations during the period.

For the year ended December 31, 2025 and 2024 , the Company recognized a foreign currency loss of $ 2,146 and a gain of $ 3,546 , respectively, related to the net carrying value of the debenture within o ther income (expense), net in the consolidated statement of operations.

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

1 unchanged sentence

As of December 31, 2025 and 2024 , the principal amount of the debenture includes $ 9,057 and $ 6,078 , respectively, of accrued interest expense.

The following is a summary of the interest expense and amortization expense, recorded within the statement of operation, of the Company's convertible debenture for the year ended December 31, 2024 and 2023 :

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The following is a summary of the interest expense and amortization expense, recorded within the consolidated statement of operation, of the Company's convertible debenture for the year ended December 31, 2025 and 2024 :

For the Year Ended December 31,

2 unchanged sentences

Amortization of debt discounts and costs

Total $ 4,649 $ 4,240

COMMITMENTS AND CONTINGENCIES

4 unchanged sentences

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

The leases have remaining lease terms of less than 0.7 years to 10.2 years, some of which include options to extend the leases for up to 5 years.

The leases have remaining lease terms of less than 0.09 to 9.2 years, some of which include options to extend the leases for up to 5 years.

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

5 unchanged sentences

Fixed lease cost

$ 1,346 $ 1,653

Variable lease cost

Total lease cost

$ 1,879 $ 2,048

Sublease income

7 unchanged sentences

Operating cash flows for operating leases

$ 2,247 $ 3,411

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

6 unchanged sentences

Total non-current lease liabilities

SHAREHOLDERS’ EQUITY

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

SHAREHOLDERS’ EQUITY (DEFICIT)

As of December 31, 2025 and 2024, the Company’s share capital consists of one class of issued and outstanding shares:

Common Shares.

2 unchanged sentences

Common Shares

As of December 31, 2024 and December 31, 2023, the Company was authorized to issue an unlimited number of common shares, which have nil par value.

As of December 31, 2025 and 2024, the Company was authorized to issue an unlimited number of common shares, which have nil par value.

Dividend Rights – Holders of common shares are entitled to receive dividends out of the assets available for the payment of dividends at such times and in such amount and form as the Board of Directors may determine from time to time.

12 unchanged sentences

Year Ended December 31,

Net loss $ ( 29,846 ) $ ( 23,796 )

Weighted-average number of common shares - basic

1 unchanged sentence

Weighted-average number of common shares - diluted

157,563,671 152,940,352

Loss per common share – basic and diluted

5 unchanged sentences

Outstanding restricted share units

7,998,156 13,030,900

Convertible debenture conversion

1 unchanged sentence

The Company can settle the convertible debenture in shares.

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

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

For the year ended December 31, 2025 and December 31, 2024, the price of the Company’s shares did not exceed the conversion price and therefore there was no impact to potential common share diluted EPS during those periods.

Conversely, income available to common stockholders will be impacted by interest expense of $ 9,057 and amortization of debt issuance costs of $ 5,445 related to the debenture.

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

On March 27, 2026, the Company announced that they have entered into an agreement to complete a transaction with BAT, which will result in the issuance of approximately 110 million of Charlotte's Web's common shares to BAT.

Refer to Note 17 for additional details.

Additionally, the Company evaluated the calculation for diluted EPS for the non-contingent conversion feature.

4 unchanged sentences

The Company will consider the conversion feature only if it will have dilutive impact, not anti-dilutive.

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

SHARE-BASED COMPENSATION

4 unchanged sentences

The Company’s Board of Directors established the terms and conditions of the grants under the 2015 Plan.

No further grants are authorized to be made under the 2015 Plan.

No further grants are authorized or outstanding under the 2015 Plan.

On August 31, 2018, the Company adopted the Charlotte’s Web Holdings, Inc.

10 unchanged sentences

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

D etail of the number of stock options outstanding for the year ended December 31, 2025 and 2024 under the 2015 and 2018 Plans is as follows:

CHARLOTTE’S WEB HOLDINGS, INC.

1 unchanged sentence

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

There were no options granted for the year ended December 31, 2024.

The fair values of options granted for the year ended December 31, 2023 were determined using a Black-Scholes valuation model, which requires assumptions and judgments regarding stock price, volatility, risk-free interest rates, dividend yields and expected option terms.

The Company uses the historical volatility and grant date closing price of its publicly traded shares to estimate the grant date fair value of its stock options.

Due to the lack of historical exercise history, the expected term of the Company’s stock options for employees has been determined utilizing the "simplified" method for awards.

The risk-free interest rate is determined by reference to the U.S.

Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.

Expected dividend yield is zero based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

Share-based compensation is recognized net of actual forfeitures when they occur.

All share-based compensation costs are recorded in the consolidated statements of operations in selling, general and administrative expense.

The following principal inputs were used in the valuation of awards issued for the year ended December 31, 2023:

Year Ended December 31,

Expected volatility

88.8 % - 89.5 %

Expected term (years)

Risk-free interest rate

3.4 % - 3.5 %

Expected dividend yield

Value of underlying share

$ 0.33 - $ 0.56

Detail of the number of stock options outstanding for the year ended December 31, 2024 and 2023 under the 2015 and 2018 plans is as follows:

Number of Options

2 unchanged sentences

Outstanding as of December 31, 2024

5,780,134 $ 0.75 8.56 $ —

Forfeited (and expired)

1 unchanged sentence

Outstanding as of December 31, 2025

3,513,079 $ 0.88 7.30 $ —

Exercisable/vested as of December 31, 2025

2,721,715 $ 0.94 6.98 $ —

For the options outstanding at December 31, 2024, the weighted average remaining contractual life is 7.30 years.

There were no options granted during the year ended December 31, 2024.

For the options outstanding at December 31, 2023, weighted average remaining contractual life is 8.56 years.

The weighted average grant-date fair value of options granted during the year ended December 31, 2023 was $ 0.38 .

For the year ending December 31, 2024 and 2023 there were no exercise of options, respectively.

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

For the options outstanding at December 31, 2025 and 2024, the weighted average remaining contractual life is 6.57 years and 7.30 years, respectively.

There were no options granted or exercised during the year ended December 31, 2025 and 2024.

Vesting of awards under these plans were generally time based over a period of one to four years .

1 unchanged sentence

For the 1,918,063 option awards vested during the year ended December 31, 2024, the weighted average grant date fair value was $ 0.64 .

Of the 3,513,079 options outstanding at December 31, 2024, the 2015 Plan has 985,012 options outstanding with an exercise price of $ 0.56 , and the remaining 2,528,067 options per the 2018 Plan have an exercise price ranging between $ 0.32 and $ 11.92 .

As of December 31, 2025, a total of 1,967,426 options were outstanding.

No options remained outstanding under the 2015 Plan.

All 1,967,426 outstanding options under the 2018 Plan have an exercise price ranging between $ 0.32 and $ 11.92 .

Restricted share units

10 unchanged sentences

( 1,876,404 )

( 1,481,930 ) 0.23

( 4,540,035 ) 0.32

Outstanding as of December 31, 2025

4,485,077 $ 0.26

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Share-based Compensation Expense

1 unchanged sentence

As of December 31, 2025, and 2024, there was approximately $ 543 and $ 1,164 of total unrecognized share-based compensation expense, related to unvested options granted to employees under the Company’s share option plan that is expected to be recognized over a weighted average period of 1.82 years as of each year ended.

Loss before provision for income taxes for the year ended December 31, 2024 and December 31, 2023 consists of the following:

Loss before provision for income taxes for the year ended December 31, 2025 and 2024 consists of the following:

Year Ended December 31,

$ ( 29,807 ) $ ( 23,267 )

Foreign income (loss)

Total current

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The major components of income tax expense attributable to loss from operations consists of:

3 unchanged sentences

Total income tax (expense) benefit

$ ( 39 ) $ ( 529 )

Income tax expense attributable to loss from continuing operations for the year ended December 31, 2024 and 2023 differed from the amounts computed by applying the U.S.

federal income tax rates of 21.0 %, as a result of the following:

The following table reconciles the income tax provision with the amount calculated using the 21.0 % U.S.

federal statutory rate applied to pretax income, reflecting the adoption of ASU 2023-09:

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Year Ended December 31,

federal statutory tax rate 21.0 % 21.0 %

federal statutory tax expense

State taxes, net of federal benefit

3 unchanged sentences

Change in valuation allowance (1)

( 21.9 )% ( 34.7 )%

R&D credit 0.2 % 2.1 %

Rate change ( 0.2 )% 3.4 %

Other, net ( 2.4 )% 0.2 %

Effective tax rate

( 0.1 )% ( 2.3 )%

Income tax (benefit) expense

(1) During the year ended December 31, 2025 and 2024, the Company maintained a full valuation allowance on its deferred tax assets.

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The components of deferred tax assets and liabilities are as follows:

1 unchanged sentence

Net operating loss and other carryforwards

$ 77,922 $ 69,747

Inventory provision and UNICAP 263A

3 unchanged sentences

Total deferred tax assets

$ 87,802 $ 81,756

Valuation allowance

( 82,169 ) ( 75,644 )

Total deferred tax assets, net

$ 5,633 $ 6,112

Deferred tax liabilities:

1 unchanged sentence

Investment in unconsolidated entity

( 101 ) ( 134 )

Total deferred tax liabilities

$ ( 6,162 ) $ ( 6,650 )

Net deferred taxes

3 unchanged sentences

For the year ended December 31, 2025 and 2024, the Company’s valuation allowance increased by $ 4,583 and $ 6,525 , respectively, primarily related to the incremental net operating losses and an increase to the inventory provision.

As of December 31, 2024, the Company has US federal, US state, and Canadian net operating losses of approximately $ 283,708 , $ 236,746 , and $ 11,432 respectively.

The entire US federal NOLs are post-2017 NOL and therefore can be carried forward indefinitely and the US state NOLs will begin to expire in 2030.

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

As of December 31, 2025, the Company has U.S.

federal, US state, and Canadian net operating losses ("NOL") of approximately $ 299,974 , $ 251,063 , and $ 11,542 respectively.

The entire U.S.

federal NOLs are post-2017 NOL and therefore can be carried forward indefinitely and the US state NOLs will begin to expire in 2032.

The Canada NOLs will begin to expire in 2041.

3 unchanged sentences

Should there be additional ownership changes in the future, the Company's ability to utilize existing carryforwards could be substantially restricted.

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Net income tax payments after the prospective adoption of ASU 2023-09, as described in Note 2, consisted of the following:

Year Ended December 31,

Massachusetts

North Carolina

South Carolina

Uncertain tax positions

12 unchanged sentences

Balance at December 31, 2024

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The Company recognizes the tax benefit from an uncertain tax position only if it is probable that the tax position will be sustained based on its technical merits.

11 unchanged sentences

The Company’s 2019 tax year was opened for examination by the IRS during the second half of 2023.

The Company’s 2022 through 2024 tax years remain open until the general statute of limitations lapses for each respective tax year.

Employee Retention Credit

The Company qualified for federal government assistance through employee retention credit ("ERC") provisions of the Consolidated Appropriations Act of 2021.

During the year ended December 31, 2023, the company received $ 4,261 , which includes $ 155 of interest income, related to the ERC.

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

OPERATING SEGMENT

12 unchanged sentences

Further details of the segment's revenues are included in Note 2 under Revenue Recognition.

Further details of the segment's expenses are included in the consolidated statements of operations.

Further details of the segment's reconciliation between pre-tax net income/(loss) are included in the results of operations measures section of this Form 10-K.

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

The segment's expenses are included in the consolidated statements of operations;

and the segment's reconciliation between pre-tax net income/(loss) are included in the results of operations measures section of this Form 10-K.

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

General Information

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Factors used to Identify Reportable Segments:

7 unchanged sentences

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

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

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

Significant Segment Expenses

2 unchanged sentences

Selling, general, and administrative expenses $ 41,968 and $ 53,247 , respectively;

Asset impairment $ — and $ 548 , respectively;

Change in fair value of financial instruments $( 7,269 ) and $ 615 , respectively;

and Depreciation and Amortization $ 6,323 and $ 9,979 , respectively.

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Reconciliation to Consolidated Financial Statements

1 unchanged sentence

Product Revenue

$ 49,019 $ 63,155

Service Revenue

1 unchanged sentence

Cost of goods sold

28,407 27,589

$ 21,260 $ 35,566

Gross profit %

42.8 % 56.3 %

Selling, general, and administrative expenses

53,247 75,630

Asset impairment — 548

Operating loss

1 unchanged sentence

Other income (expense), net

1,565 ( 2,694 )

Loss before provision for income taxes

$ ( 29,807 ) $ ( 23,267 )

Other segment information

Depreciation/Amortization

Total assets 113,442 152,548

Long-term liabilities

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

RELATED PARTY TRANSACTIONS

7 unchanged sentences

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

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

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

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

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

AJNA is a botanical drug development company.

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

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

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

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

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

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

The Company and AJNA each hold 4,000,000 of the entity’s voting common units (Note 3).

1 unchanged sentence

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

As of December 31, 2024, the remaining note receivable of $ 71 is presented in other assets in the consolidated balance sheets.

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

For the year ended December 31, 2024, the Company recognized $ 648 in revenue and cost of goods sold, respectively, related to the service agreement with DeFloria.

The Company has an accounts receivable balance due from DeFloria of $ 648 as of December 31, 2024.

As of December 31, 2025, and December 31, 2024 the remaining note receivable of $ 19 and $ 71 , respectively, is presented in other assets in the consolidated balance sheets.

On April 6, 2023, the Company and DeFloria entered into a supply agreement in which the Company shall supply raw material that will be used in the development of the new drug.

The price charged by the Company is at cost of goods sold level.

For the year ended December 31, 2025 and 2024, the Company recognized $ 904 and $ 0 , respectively, in both revenue and cost of goods sold, related to the supply agreement with DeFloria.

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

For the year ended December 31, 2025 and 2024 , the Company recognized $ 300 and $ 648 , respectively, in both revenue and cost of goods sold, respectively, related to the service agreement with DeFloria.

Additionally, the Company has an accounts receivable balance due from DeFloria of $ 1,471 and $ 648 as of December 31, 2025 and 2024, respectively

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

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

Upon any event of default by DeFloria under the note, which includes DeFloria’s failure to pay amounts within 3 business days of when due and breaches of DeFloria’s obligations pursuant to the note, the Company will be entitled to exercise its rights under the note.

The funds were distributed monthly between July and November 2025, and the balance of the promissory note including accrued interest as of December 31, 2025 is $ 784 .

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

1 unchanged sentence

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

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

SUBSEQUENT EVENTS

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 ( $ 56.8 million as of November 2022) 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.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data