Form 10-Q - Quarterly report [Sections 13 or 15(d)]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period ended June 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-56364

Charlotte's Web Holdings, Inc.

(Exact name of registrant as specified in its charter)


British Columbia									98-1508633
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)

700 Tech Court

Louisville, CO 80027

(Address of principal executive offices and zip code)

(720) 484-8930

Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A

Securities registered pursuant to section 12(g) of the Act:

Common stock, no par value

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	x
		Emerging growth company	x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

The registrant had outstanding 152,951,994 shares of common shares as of August 8, 2023.

CHARLOTTE'S WEB HOLDINGS, INC.

FORM 10-Q

For the Quarter Ended June 30, 2023

TABLE OF CONTENTS




Part I	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	2
	- Condensed Consolidated Balance Sheets	3
	- Condensed Consolidated Statements of Operations	4
	- Condensed Statements of Changes in S hareholder s ' Equity	5
	- Condensed Consolidated Statements of Cash Flows	6
	- Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosures about Market Risk
Item 4.	Controls and Procedures

Part II	OTHER INFORMATION
Item 1.	Legal Proceedings
Item 1A.	Risk Factors
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.	Defaults Upon Senior Securities
Item 4.	Mine Safety Disclosures
Item 5.	Other Information
Item 6.	Exhibits

	SIGNATURES

PART I

Item 1. Financial Statements

CHARLOTTE’S WEB HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)


	June 30,		December 31,
	2023 (unaudited)		2022
ASSETS
Current assets:
Cash and cash equivalents	$	61,728	$	66,963
Accounts receivable, net	2,479		1,847
Inventories, net	23,755		26,953
Prepaid expenses and other current assets	6,900		7,998
Total current assets	94,862		103,761
Property and equipment, net	26,608		29,330
License and media rights	22,968		26,871
Operating lease right-of-use assets, net	15,543		16,519
Investment in unconsolidated entity	10,700		—
SBH purchase option and other derivative assets	2,893		3,620
Intangible assets, net	1,500		1,771
Other long-term assets	1,515		5,770
Total assets	$	176,589	$	187,642
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,193	$	4,018
License and media rights payable - current	8,833		7,759
Accrued and other current liabilities	8,336		7,344
Lease obligations – current	2,247		2,306
Total current liabilities	22,609		21,427
Convertible debenture	40,307		37,421
Lease obligations	16,529		17,905
License and media rights payable	15,869		20,383
Derivatives and other long-term liabilities	2,914		13,001
Total liabilities	98,228		110,137
Commitments and contingencies (note 7)
Shareholders’ equity:
Common shares, nil par value; unlimited shares authorized as of June 30, 2023 and December 31, 2022, respectively; 152,825,118 and 152,135,026 shares issued and outstanding as of June 30, 2023 and December 31, 2022	1		1
Additional paid-in capital	326,355		325,431
Accumulated deficit	(247,995)		(247,927)
Total shareholders’ equity	78,361		77,505
Total liabilities and shareholders’ equity	$	176,589	$	187,642

See Notes to Unaudited Condensed Consolidated Financial Statements

CHARLOTTE’S WEB HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)


	Three Months Ended June 30, (unaudited)				Six Months Ended June 30, (unaudited)
	2023		2022		2023		2022

Revenue	$	16,006	$	18,877	$	33,016	$	38,234
Cost of goods sold	7,088		9,556		14,181		17,199
Gross profit	8,918		9,321		18,835		21,035

Selling, general and administrative expenses	19,627		17,259		37,140		37,614
Operating loss	(10,709)		(7,938)		(18,305)		(16,579)

Gain on investment in unconsolidated entity	10,700		—		10,700		—
Change in fair value of financial instruments and other	4,229		—		9,612		100
Other income (expense), net	(1,376)		68		(2,074)		(17)
Income (loss) before provision for income taxes	2,844		(7,870)		(67)		(16,496)
Income tax benefit (expense)	—		—		—		—
Net income (loss)	$	2,844	$	(7,870)	$	(67)	$	(16,496)

Per common share amounts (note 10)
Net income (loss) per common share, basic	$	0.02	$	(0.05)	$	—	$	(0.11)
Net income (loss) per common share, diluted	$	0.02	$	(0.05)	$	—	$	(0.11)

See Notes to Unaudited Condensed Consolidated Financial Statements

CHARLOTTE’S WEB HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands, except share amounts)

(unaudited)


	Common Shares			Additional Paid-in Capital		Accumulated Deficit		Total Shareholders’ Equity
	Shares	Amount
Balance—December 31, 2022	152,135,026	$	1	$	325,431	$	(247,927)	$	77,505
Common shares issued upon vesting of restricted share units, net of withholding	297,888	—		(69)		—		(69)
Share-based compensation	—	—		375		—		375
Net income (loss)		—				(2,912)		(2,912)
Balance— March 31, 2023	152,432,914	$	1	$	325,737	$	(250,839)	$	74,899
Common shares issued upon vesting of restricted share units, net of withholding	392,204	—		(6)		—		(6)
Share-based compensation	—	—		624		—		624
Net income (loss)	—	—		—		2,844		2,844
Balance—June 30, 2023	152,825,118	$	1	$	326,355	$	(247,995)	$	78,361

See Notes to Unaudited Condensed Consolidated Financial Statements

CHARLOTTE’S WEB HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands, except share amounts)

(unaudited)


	Common Shares			Additional Paid-in Capital		Accumulated Deficit		Total Shareholders’ Equity
	Shares	Amount
Balance—December 31, 2021	144,659,964	$	1	$	319,059	$	(188,614)	$	130,446
Common shares issued upon vesting of restricted share units, net of withholding	77,193	—		(45)		—		(45)
Harmony Hemp contingent equity compensation	169,045	—		165		—		165
ATM program issuance costs	239,500	—		(2)		—		(2)
Share-based compensation	—	—		1,214		—		1,214
Net income (loss)	—	—		—		(8,626)		(8,626)
Balance—March 31, 2022	145,145,702	$	1	$	320,391	$	(197,240)	$	123,152
Common shares issued upon vesting of restricted share units, net of withholding	132,463	—		(13)		—		(13)
Share-based compensation	—	—		643		—		643
Net income (loss)	—	—		—		(7,870)		(7,870)
Balance—June 30, 2022	145,278,165	$	1	$	321,021	$	(205,110)	$	115,912

See Notes to Unaudited Condensed Consolidated Financial Statements

CHARLOTTE’S WEB HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	Six Months Ended June 30, (unaudited)
	2023		2022

Cash flows from operating activities:
Net loss	$	(67)	$	(16,496)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	7,769		3,940
Change in fair value of financial instruments and other	(9,612)		(100)
Gain on investment in unconsolidated entity	(10,700)		—
Convertible debenture accrued interest	1,954		—
Share-based compensation	999		2,022
Loss on foreign currency translation	979		—
Changes in right-of-use assets	976		1,236
Inventory provision	320		1,857
Other	957		(434)
Changes in operating assets and liabilities:
Accounts receivable, net	(1,104)		2,430
Inventories, net	2,878		(2,411)
Prepaid expenses and other current assets	764		3,706
Accounts payable, accrued and other liabilities	183		(2,194)
Operating lease obligations	(1,436)		(896)
License and media rights	(4,000)		—
Income taxes receivable	4,261		3,185
Other operating assets and liabilities, net	(130)		(129)
Net cash used in operating activities	(5,009)		(4,284)
Cash flows from investing activities:
Purchases of property and equipment and intangible assets	(187)		(333)
Proceeds from sale of assets	36		—
Net cash used in investing activities	(151)		(333)
Cash flows from financing activities:
Other financing activities	(75)		(60)
Net cash used in financing activities	(75)		(60)
Net decrease in cash and cash equivalents	(5,235)		(4,677)
Cash and cash equivalents —beginning of period	66,963		19,494
Cash and cash equivalents —end of period	$	61,728	$	14,817
Non-cash activities:
Non-cash purchase of intangible asset	(163)		—
Non-cash issuance of note receivable	(156)		—

See Notes to Unaudited Condensed Consolidated Financial Statements

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(unaudited)

1. DESCRIPTION OF BUSINESS AND PRESENTATION OF FINANCIAL STATEMENTS

Description of the Business

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. 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. Hemp extracts are produced from the plant Cannabis sativa L. (“Cannabis”), and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol ("THC") concentration of not more than 0.3% on a dry weight basis ("Hemp"). The Company is engaged in research involving the effectiveness of a broad variety of compounds derived from Hemp. 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 human ingestible products: tinctures (liquid product), capsules, gummies, topicals, and pet products. The Company’s products are distributed through its e-commerce website, third-party e-commerce websites, select distributors, health practitioners, and a variety of brick-and-mortar specialty retailers.

The Company grows its proprietary hemp domestically in the United States on farms leased in northeastern Colorado and sources hemp through contract farming operations in Arizona, Kentucky, Oregon, and Canada. The Hemp grown in Canada is utilized exclusively in the Canadian market and not in products sold in the United States.

In furtherance of the Company’s Research and Development ("R&D") efforts, 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. CW Labs is currently engaged in clinical trials addressing Hemp-based health solutions. CW Labs is located in Louisville, Colorado at the Company’s current good manufacturing practice ("cGMP") production and distribution facility.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND USE OF ESTIMATES

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification ("ASC") and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements include all normal and recurring adjustments (which consist primarily of accruals, estimates and assumptions that impact the financial statements) considered necessary to present fairly the Company’s financial position as of June 30, 2023 and its results of operations for the three and six months ended June 30, 2023 and 2022, cash flows for the six months ended June 30, 2023 and 2022, and stockholders’ equity for the three and six months ended

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(unaudited)

June 30, 2023 and 2022. Operating results for the three and six months ended June 30, 2023, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2023. The unaudited interim condensed consolidated financial statements presented herein do not contain the required disclosures under GAAP for annual consolidated financial statements. Certain amounts presented in prior periods have been reclassified to conform with the current period presentation. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and related notes as of and for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 23, 2023.

Inventories

Inventories are stated at the lower of cost or net realizable value. The Company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions. The Company's inventory production process for cannabinoid products includes the cultivation of botanical raw material. Due to the duration of the cultivation process, a portion of the inventory will not be sold within one year. Consistent with the practice in other industries that cultivate botanical raw materials, all inventory is classified as a current asset.

Revenue Recognition

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Direct-to-consumer	$	10,734	$	13,277	$	22,002	$	26,415
Business-to-business	5,272		5,600		11,014		11,819
Total	$	16,006	$	18,877	$	33,016	$	38,234

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

Recently Adopted Accounting Pronouncements

As of June 30, 2023, there are no new accounting pronouncements adopted or issued by the FASB that had or may have a material impact on the Company’s condensed consolidated financial statements.

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(unaudited)

3. FAIR VALUE MEASUREMENT

The following table sets forth the Company’s financial instruments and other that were measured at fair value on a recurring basis at June 30, 2023 and December 31, 2022, by level within the fair value hierarchy:


	June 30, 2023
	Level 1		Level 2		Level 3		Total
Financial assets:
Stanley Brothers USA Holdings Purchase Option	$	—	$	—	$	2,057	$	2,057
Debt interest rate conversion feature	—		—		836		836
Total Financial Assets	$	—	$	—	$	2,893	$	2,893

Investment in unconsolidated entity:	$	—	$	—	$	10,700	$	10,700

Financial liabilities:
Debt conversion option	$	—	$	2,815	$	—	$	2,815


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Financial assets:
Stanley Brothers USA Holdings Purchase Option	$	—	$	—	$	2,300	$	2,300
Debt interest rate conversion feature	—		—		1,320		1,320
Total Financial Assets	$	—	$	—	$	3,620	$	3,620

Financial liabilities:
Debt conversion option	$	—	$	12,995	$	—	$	12,995

There were no transfers between levels of the hierarchy during the three and six month periods ended June 30, 2023 and the year ended December 31, 2022.

Investment in Unconsolidated Entity

On April 6, 2023, the Company jointly formed an entity, DeFloria LLC ("DeFloria"), with AJNA BioSciences PBC (“AJNA”), and a subsidiary of British American Tobacco PLC (LSE: BATS and NYSE: BTI) (“BAT”). AJNA is a botanical drug development company. AJNA is partially owned and was co-founded by a co-founder of Charlotte's Web. The entity was established to pursue FDA-approval for a botanical drug to target a neurological condition.

BAT holds an equity interest in the entity in the form of 200,000 or 100% preferred units following its $10 million investment and has the right to participate in future equity issuances to maintain its pro rata equity position. The Company and AJNA each hold 400,000 or 50%, respectively, of the entity’s voting common units. The Company’s contribution to DeFloria is a license permitting the use of certain proprietary hemp intellectual property, including clinical and consumer data. Additionally, the Company has a Supply Agreement with DeFloria, under which the Company supplies the oils at cost used to produce and develop the new drug. AJNA's contribution to the entity is laboratory and regulatory services, clinical expertise, and the provision of clinical services. DeFloria is expected to

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(unaudited)

use the initial $10 million cash investment for the clinical development of a hemp botanical Investigational New Drug application and to commence Phase I clinical development in 2024.

Concurrently with the formation of the DeFloria entity, the Company entered into a warrant agreement with AJNA to purchase 865,052 of Class A Common Stock of AJNA for an exercise price of $2.89 per share. 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 and other 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 June 30, 2023.

The Company determined that it has a variable interest in the investment in DeFloria. However, the Company is not the primary beneficiary of DeFloria as it lacks the power to direct DeFloria's key activities. Therefore, the Company concluded that the investment in DeFloria should not be consolidated. The maximum exposure to loss in the investment in DeFloria is limited to the Company's investment, which is represented by the financial statement carrying amount of its retained interest.

In accordance with ASC 825-10, equity method investments are eligible for the fair value option as they represent recognized financial assets. As the Company is not required to consolidate the investment and does not meet any of the other scope exceptions, the Company has the ability to adopt the fair value option for the investment at inception. The Company elected the fair value option because it allows the investment to be valued based on current market conditions. As such the investment 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 and other for the period. For the three and six months ended June 30, 2023, a gain of $— , respectively, related to the investment in DeFloria was recognized as a change in fair value of financial instruments and other in the statements of operations. As of June 30, 2023, the DeFloria investment represents an investment of $10,700 within the condensed consolidated balance sheets.

The use of assumptions for the fair value determination includes a high degree of subjectivity and judgment using unobservable inputs (level 3 on the fair value hierarchy), which results in estimation uncertainty. To determine the value of the investment, the Company utilizes an Option Pricing Model (OPM). The OPM considers the various terms of the stockholder agreements, including the level of seniority among the securities, dividend policy, conversion ratios, and cash allocations upon liquidation of the entity. The OPM is appropriate when the range of potential future outcomes is difficult to predict with any certainty.

The following additional assumptions are used in the model:


			June 30,
			2023
Expected term (years)			6.77
Volatility			66.0%
Risk-free interest rate			4.0%
Expected dividend yield			—%
Discount for lack of marketability			20.0%

Convertible Debt Derivatives

On November 14, 2022, the Company entered into a subscription agreement (the “Subscription Agreement”) with BT DE Investments, Inc. a wholly-owned subsidiary of BAT Group (LSE: BATS and NYSE: BTI) (the "Lender"),

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(unaudited)

providing for the issuance of a $56.8 million (C$75.3 million) convertible debenture (the “debenture”). The debenture is convertible into 19.9% ownership of the Company’s common shares at a conversion price of C$2.00 per common share of the Company on the TSX. The debenture will accrue interest at a stated annualized rate of 5% until such time that there is federal regulation permitting the use of cannabidiol, a phytocannabinoid derived from the plant Cannabis sativa L. (“CBD”) as an ingredient in food products and dietary supplements in the United States. The term “federal regulation" is defined as the date that federal laws in the United States permit, authorize or do not prohibit the use of CBD as an ingredient in food products and dietary supplements. Following federal regulation of CBD, the annualized rate of interest shall reduce to 1.5%. The maturity date for the debenture is November 14, 2029 (the “Maturity Date”).

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

For the three and six months ended June 30, 2023, a gain of $106 and a loss $506, respectively, related to the debt interest rate conversion feature was recognized as a change in fair value of financial instruments and other in the statements of operations. As of June 30, 2023 and December 31, 2022, the debt interest rate conversion feature represents a financial asset of $836 and $1,320, respectively, within SBH purchase option and other derivative assets in the condensed consolidated balance sheets.

To determine the value of the option, 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. This approach is useful when ultimate valuation is based on an unverifiable outcome, such as an event outside of the Company’s influence. The following additional assumptions are used in the model:


	June 30,	December 31,
	2023	2022
Stated interest rate	5.0%	5.0%
Adjusted interest rate	1.5%	1.5%
Implied debt yield	10.8%	8.6%
Federal regulation probability	various	15.0%
Year of event	various	2025

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 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

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(unaudited)

contractual term of the debenture and the risk-free interest rate is based on the implied yield available on U.S. Treasury Securities with a maturity equivalent to the expected maturity of the debenture.

For the three and six months ended June 30, 2023, a $4,066 and $10,361 gain, respectively, related to the debt conversion option was recognized as a change in fair value of financial instruments and other in the statements of operations. As of June 30, 2023 and December 31, 2022, the debt conversion option represents a financial liability of $2,815 and $12,995, respectively, within derivative and other long-term liabilities in the condensed consolidated balance sheets.

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


	June 30,	December 31,
	2023	2022
Expected volatility	87.4%	86.7%
Expected term (years)	6.3	6.9
Risk-free interest rate	4.0%	4.0%
Expected dividend yield	—%	—%
Value of underlying share	C$0.23	C$0.73
Exercise price	C$2.00	C$2.00

Stanley Brothers USA Holdings Purchase Option

On March 2, 2021, the Company executed an Option Purchase Agreement pursuant to which the Company has the option to acquire Stanley Brothers USA Holdings, Inc. (“Stanley Brothers USA”), a Cannabis wellness incubator. Until the Stanley Brothers USA Holdings Purchase Option ("SBH Purchase Option") is exercised, both the Company and Stanley Brothers USA will continue to operate as standalone entities in the US. Internationally, the companies are able to explore opportunities where Cannabis is federally permissible. The Company does not currently have any plans to expand into high THC Cannabis products in the near future.

The SBH Purchase Option was purchased for total consideration of $8,000 and has a term of five years (extendable for an additional two years upon payment of additional consideration). The SBH Purchase Option provides the Company the option to acquire all or substantially all the shares of Stanley Brothers USA on the earlier of February 26, 2025 and federal legalization of cannabis in the United States, or such earlier time as Stanley Brothers USA and the Company agree, at a purchase price to be determined at the time of exercise of the SBH Purchase Option. 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. 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. The warrant is exercisable at the Company's election for a nominal exercise price in the event the Company elects not to acquire all or substantially all shares of Stanley Brothers USA and expires 60 days after the expiration of the option.

The Company has elected the fair value option in accordance with ASC 825-10 guidance to record its SBH Purchase Option. Under ASC 825-10, a business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. The SBH Purchase Option is classified as a financial asset and is remeasured at fair value at each reporting date, with changes to fair value recognized in the statements of operations for the period. 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

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(unaudited)

estimation uncertainty. Changes in assumptions that reasonably could have been different at the reporting date may result in a higher or lower determination of fair value. Changes in fair value measurements, if significant, may affect performance of cash flows. For the three months ended June 30, 2023 and 2022, a gain of $57 and $0, respectively, related to the SBH Purchase Option was recognized as change in fair value of financial instruments and other in the statements of operations. For the six months ended June 30, 2023 and 2022, a loss of $243 and a gain $100, respectively, related to the SBH Purchase Option was recognized as change in fair value of financial instruments and other in the statements of operations. As of June 30, 2023 and December 31, 2022, the SBH Purchase Option represents a financial asset of $2,057 and $2,300, respectively, within SBH purchase option and other derivative assets in the condensed consolidated balance sheets.

The Monte Carlo valuation model considers multiple revenue and Earnings Before Interest Taxes Depreciation and Amortization ("EBITDA") outcomes for Stanley Brothers USA and other probabilities in assigning a fair value. Primary assumptions utilized include financial projections of Stanley Brothers USA and the probability and timing of exercise. The following additional assumptions are used in the model of the SBH Purchase Option:


	June 30,	December 31,
	2023	2022
Expected volatility	120.0%	115.0%
Expected term (years)	2.7	2.7
Risk-free interest rate	4.6%	4.3%
Weighted average cost of capital	45.0%	40.0%

4. INVENTORIES

Inventories consist of the following:


	June 30,		December 31,
	2023		2022
Harvested hemp and seeds	$	20,991	$	34,763
Raw materials	10,440		10,960
Finished goods	10,071		13,237
	41,502		58,960
Less: inventory provision	(17,747)		(32,007)
Total inventory	$	23,755	$	26,953

In May 2023, the Company sold harvested hemp that had a full inventory provision as of December 31, 2022. The sale of hemp resulted in a $12,899 reduction to the inventory provision as of June 30, 2023.

5. LICENSE AND MEDIA RIGHTS

MLB Promotion Rights Agreement

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

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(unaudited)

Baseball Clubs (collectively, the “MLB”), pursuant to which the Company entered into a strategic partnership with MLB to promote the Company’s new NSF-Certified for Sport® product line.

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

As of June 30, 2023 and December 31, 2022, the carrying value of the licensed properties was $18,235 and $23,399, respectively, recorded as a license and media rights asset within the condensed consolidated balance sheets. As of June 30, 2023 and December 31, 2022, the carrying value of the media rights was $7,232 and $7,482 recorded as a prepaid asset and a license and media rights asset within the condensed consolidated balance sheets. For the three and six months ended June 30, 2023, the Company paid MLB $2,000 and $4,000, respectively, as part of the committed cash payments, and recognized $2,074 and $3,897, respectively, in amortization expense related to the license and media right assets. Licensed properties are amortized straight line and media rights are amortized as incurred.

Maturities of the MLB license and media rights payable as of June 30, 2023 are as follows:


Year Ending December 31:
2023 (6 months remaining)	$	4,000
2024	10,000
2025	12,000
Total payments	$	26,000
Less: Imputed interest	(1,298)
Total license and media rights payable	$	24,702
Less: Current license liabilities	(8,833)
Total non-current license and media rights payable	$	15,869

As of June 30, 2023, expected amortization of licensed properties are as follows:


Year Ending December 31:
2023 (6 months remaining)	$	3,647
2024	7,294
2025	7,294
Total future amortization	$	18,235

6. DEBT

Convertible Debenture

As of November 14, 2022, the Company entered into the Subscription Agreement with BT DE Investments, Inc., providing for the issuance of a $56.8 million (C$75.3 million) convertible debenture. The debenture was denominated in Canadian Dollars ("CAD" or "C$"). The debenture is convertible into 19.9% ownership of the Company’s common shares at a conversion price of C$2.00 per common share of the Company. The debenture will accrue interest at a stated annualized rate of 5% until such time that there is federal regulation permitting the use of CBD as an ingredient in food products and dietary supplements in the United States. Following federal regulation of

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(unaudited)

CBD, the stated annualized rate of interest shall reduce to 1.5%. The maturity date for the debenture is November 14, 2029.

The following is a summary of the Company's convertible debenture as of June 30, 2023:


	As of June 30, 2023
	Principal Amount		Unamortized Debt Discount and Costs		Net Carrying Amount
Convertible Debenture	Principal Amount		Unamortized Debt Discount and Costs		Net Carrying Amount
Convertible debenture due November 2029	$	58,677	$	(18,370)	$	40,307

The following is a summary of the Company's convertible debenture as of December 31, 2022:


	As of December 31, 2022
	Principal Amount		Unamortized Debt Discount and Costs		Net Carrying Amount
Convertible Debenture	Principal Amount		Unamortized Debt Discount and Costs		Net Carrying Amount
Convertible debenture due November 2029	$	56,080	$	(18,659)	$	37,421

The debenture was C$75.3 million per the subscription agreement and translated to USD on the transaction date. For the three and six months ended June 30, 2023, the Company recognized a foreign currency loss of $831 and $820, respectively, related to the net carrying value of the debenture within the statement of operations.

Interest is accrued annually and payable on the maturity date or date of earlier conversion. On conversion, accrued interest will either be converted into common shares equal to the amount of accrued interest or will be paid in cash if agreed with the Lender. As of June 30, 2023, the principal amount of the debenture includes $1,777 of accrued interest expense. The following is a summary of the interest expense and amortization expense, recorded within the statement of operation, of the Company's convertible debenture for the three and six months ended June 30, 2023:


	Three Months Ended		Six Months Ended
	June 30,		June 30,
Interest and Amortization Expense	2023		2023
Interest expense	$	701	$	1,398
Amortization of debt discounts and costs	349		668
Total	$	1,050	$	2,066

7. COMMITMENTS AND CONTINGENCIES

Legal Contingencies

From time to time, the Company is a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. Although the ultimate aggregate amount of monetary liability or financial impact with respect to these matters is subject to many uncertainties and is therefore not predictable with assurance, management believes that as of June 30, 2023 there is no litigation pending that could have, individually and in the aggregate, a material adverse effect on the Company’s financial position, results of operations or cash flows.

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(unaudited)

8. LEASES

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 5 months to 11.67 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.

Maturities of operating lease liabilities as of June 30, 2023 are as follows:


	Operating Leases
Year Ending December 31:
2023 (6 months remaining)	$	1,710
2024	3,201
2025	2,892
2026	2,169
2027	1,844
Thereafter	13,647
Total lease obligation	25,463
Less: Imputed interest	(6,687)
Total lease liabilities	18,776
Less: Current lease liabilities	(2,247)
Total non-current lease liabilities	$	16,529

9. SHAREHOLDERS’ EQUITY

As of June 30, 2023 and December 31, 2022, the Company’s share capital consists of one class of issued and outstanding shares: common shares. The Company is also authorized to issue preferred shares issuable in series. To date, no shares of preferred shares have been issued or are outstanding.

Common Shares

As of June 30, 2023 and December 31, 2022, the Company was authorized to issue an unlimited number of common shares, which have no par value.

10. INCOME (LOSS) PER SHARE

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

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(unaudited)

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income (loss)	$	2,844	$	(7,870)	$	(67)	$	(16,496)
Weighted-average number of common shares - basic	152,481,470		145,168,510		152,398,273		145,079,859
Dilutive effect of securities	278,618		—		—		—
Weighted-average number of common shares - diluted	152,760,088		145,168,510		152,398,273		145,079,859
Income (loss) per common share – basic	$	0.02	$	(0.05)	$	—	$	(0.11)
Income (loss) per common share – diluted	$	0.02	$	(0.05)	$	—	$	(0.11)

As of June 30, 2023 and 2022, potentially dilutive securities include stock options, restricted share units, and convertible debenture conversion. The Company computes the effect of dilutive securities using the treasury stock method and average market prices during the period. The number of shares issuable upon the exercise of share-based awards excluded from the calculation of diluted EPS because the effect of their inclusion would have been anti-dilutive totaled 9,411,551 for the three months ended June 30, 2023.

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

When the Company recognizes a net loss, all potentially dilutive shares are anti-dilutive and are consequently excluded from the calculation of diluted net loss per share.

11. SHARE-BASED COMPENSATION

Stock options

Stock options vest over a prescribed service period and are approved by the Company's board of directors on an award-by-award basis. Options have a prescribed service period generally lasting up to four years, with certain options having a shorter vesting period or vesting immediately upon issuance. Upon the exercise of any stock options, the Company issues shares to the award holder from the pool of authorized but unissued common shares.

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(unaudited)

The fair values of options granted during the period were determined using a Black-Scholes model. The following principal inputs were used in the valuation of awards issued for the six months ended June 30, 2023 and 2022:


	Six Months Ended June 30,
	2023	2022
Expected volatility	88.8%	83.4%
Expected term (years)	5.5-6.5	5.5-6.5
Risk-free interest rate	3.4%	3.3%
Expected dividend yield	0%	0%
Value of underlying share	$0.36	$0.31

Detail of the number of stock options outstanding for the six months ended June 30, 2023 under the Company's 2015 legacy option plan and the Company's amended 2018 long term incentive plan (collectively, the "Plans") is as follows:


	Number of Options	Weighted- Average Exercise Price per Option		Weighted- Average Remaining Contract Term (in years)	Aggregate Intrinsic Value
Outstanding as of December 31, 2022	3,957,027	$	1.52	8.37	$	46,800
Granted	3,748,671	0.38
Exercised	—	—
Forfeited (and expired)	(692,991)	2.28
Outstanding as of June 30, 2023	7,012,707	$	0.83	8.99	$	—

Exercisable/vested as of June 30, 2023	2,554,000	$	1.21	7.53	$	—

The weighted average grant-date fair value of options granted during the six months ended June 30, 2023 and 2022 was $0.38 and $1.14, respectively.

The weighted average share price at the date of exercise of options exercised during the six months ended June 30, 2023 and 2022 was $0, respectively.

Restricted share units

The Company has issued time-based restricted share units to certain employees as permitted under the 2018 Plan. The restricted share units granted vest in accordance with the board-approved agreement, typically over equal installments up to four years. Upon vesting, one share of the Company’s common shares is issued for each restricted share unit awarded. The fair value of each restricted share unit granted is equal to the market price of the Company’s shares at the date of the grant. The fair value of shares vested during the six months ended June 30, 2023 and 2022 was $872 and $625, respectively.

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(unaudited)

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


	Number of Shares	Weighted- Average Grant Date Fair Value
Outstanding as of December 31, 2022	2,569,574	$	0.98
Granted	1,249,548	$	0.38
Forfeited	(299,370)	$	1.42
Vested	(690,092)	$	1.26
Shares withheld upon vesting	(152,198)	$	0.85
Outstanding as of June 30, 2023	2,677,462	$	0.67

Share-based Compensation Expense

Share-based compensation expense for all equity arrangements for the three months ended June 30, 2023 and 2022 was $624 and $643, respectively, included in selling, general and administrative expense in the condensed consolidated statements of operations. Share-based compensation expense for all equity arrangements for the six months ended June 30, 2023 and 2022 was $999 and $2,022, respectively, included in selling, general and administrative expense in the condensed consolidated statements of operations.

As of June 30, 2023, $4,074 of total unrecognized share-based compensation expense related to unvested options and restricted stock units granted to employees is expected to be recognized over a weighted-average period of 2.49 years.

12. INCOME TAXES

The Company’s effective tax rate in the three and six months ended June 30, 2023 and 2022 was 0%. The Company’s effective tax rates differ from the U.S. federal statutory rate of 21.0% for the three and six months end June 30, 2023 and 2022, respectively, primarily due to the valuation allowance. The effective tax rate for the three and six months ended June 30, 2023 is consistent with the three and six months ended June 30, 2022, as the Company has been in a full valuation allowance for both periods.

As of December 31, 2022, the Company qualified for federal government assistance through employee retention credit (“ERC”) provisions of the Consolidated Appropriations Act of 2021. Management recorded the ERC benefit of $4,106 for the year ended December 31, 2022 as an offset to Selling, general and administrative expense. During the three months ending June 30, 2023, the company received $4,261, which includes $155 of interest income, related to the ERC.

13. RELATED PARTY TRANSACTIONS

Effective November 2020, the Company entered into a secured promissory note, where $1,000 was loaned to one of the founders. The note receivable was secured by equity instruments with certain founders of the Company, and bore interest at 3.25% per annum, and required the unpaid principal and unpaid interest balances to be paid on or before the maturity date of November 13, 2021. On March 22, 2022, the founders requested an extension of the maturity date, as allowed under the terms of the promissory note, resulting in an extension of the maturity date to November 13, 2023. According to the terms of the agreement, no additional interest will accrue through the payment date. As of June 30, 2022, the note receivable of $1,037 consisted of principal and interest. As of December 31, 2022, the Company established a reserve against the note receivable due to decline in collateral and risk associated with collectability and therefore, expensed the outstanding balance of $1,037.

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(unaudited)

On March 2, 2021, the Company entered into the SBH Purchase Option with Stanley Brothers USA as discussed above (Note 3). The SBH Purchase Option was purchased for a total consideration of $8,000. Certain founders of the Company, who are or were employees 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 (the “Brand License and Option Agreement”), an entity owned by one of the Company’s founders. Pursuant to the Brand License and Option Agreement, the Company licenses certain intellectual property from JMS Brands LLC, for an annual license fee of $500. Pursuant to the terms of the agreement, the Company has the option to purchase the intellectual property rights for $2,000.

On April 6, 2023, the Company jointly formed an entity, DeFloria, with AJNA and BAT. AJNA is a botanical drug development company. AJNA is partially owned and was co-founded by a co-founder of Charlotte's Web. BAT holds an equity interest in the entity in the form of 200,000 preferred units following its $10 million investment and has the right to participate in future equity issuances to maintain its pro rata equity position. The Company and AJNA each hold 400,000 of the entity’s voting common units (Note 3). Effective May 1, 2023, the Company entered into an 8% interest bearing note receivable with DeFloria for the bill of sale of lab equipment in the amount of $170. The principal and interest of the note receivable will be paid in 36 monthly installments. As of June 30, 2023, the remaining note receivable of $156 is presented in other assets in the condensed consolidated balance sheets.

Pursuant to an amendment to the Name and Likeness and License Agreement between the Company and Leeland & Sig LLC d/b/a Stanley Brothers Brand Company, the agreement was extended to December 31, 2023. The agreement includes the payment of a nominal per diem fee for specifically requested activities as brand ambassadors for the Company. In addition, on April 16, 2021, the Company executed a separate consulting agreement which extended the services agreements of the Stanley Brothers for a period of one year, expiring July 31, 2022. Upon execution of the consulting agreement, the Company paid $2,081 to Leeland & Sig LLC d/b/a Stanley Brothers Brand Company, on behalf of the Stanley Brothers, as consideration for the consulting services to be provided to the Company over the term of the agreement and certain restrictive covenants. For the three and six months ended June 30, 2022, the Company recognized $454 and $875, respectively, of sales and marketing expenses in the condensed consolidated statements of operations related to these agreements.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Note Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q ("Form 10-Q") contains statements that are, or may be considered to be, “forward-looking statements” under Canadian securities laws and within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are intended to be subject to the "safe harbor" created by those sections and other applicable laws. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on current beliefs, expectations or assumptions regarding the future of the business, future plans and strategies, operational results and other future conditions. All statements other than statements of historical fact included in this Form 10-Q regarding the prospects of Charlotte’s Web Holdings, Inc., (“Charlotte’s Web”, the “Company” or “we”), the industry or its prospects, plans, financial position or business strategy may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking words such as “plans,” “expects” or “does not expect,” “is expected,” “look forward to,” “budget,” “scheduled,” “estimates,” “forecasts,” “will continue,” “intends,” “the intent of,” “have the potential,” “anticipates,” “does not anticipate,” “believes,” “should,” “should not,” or variations of such words and phrases that indicate that certain actions, events or results “may,” “could,” “would,” “might,” or “will,” “be taken,” “occur,” or “be achieved,” or the negative of these terms or variations of them or similar terms. Furthermore, forward-looking statements may be included in various filings that the Company makes with the SEC or press releases or oral statements made by or with the approval of one of the Company’s authorized executive officers. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, it cannot assure you that these expectations will prove to be correct. These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. (All capitalized and undefined terms used in this section shall have the same meanings hereafter defined in this Quarterly Report on Form 10-Q.)

The following discussion and analysis of financial condition and results of operations should be read in conjunction with, and is qualified in its entirety by, the unaudited condensed consolidated financial statements and the accompanying notes in this Form 10-Q and the sections entitled “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022. Except for historical information, the discussion in this section contains forward-looking statements that involve risks and uncertainties, as discussed in the “Cautionary Note Regarding Forward Looking Statements.” Future results could differ materially from those discussed below for many reasons, including the risks described in Item 1A—“Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 and in Part II, Item 1A—Risk Factors” of this Form 10-Q.

Management's Discussion & Analysis of Charlotte's Web Holdings, Inc.

For purposes of this discussion, “Charlotte’s Web,” “CW,” “we,” or the “Company” refers to Charlotte’s Web Holdings, Inc. and its subsidiaries: Charlotte’s Web, Inc. and Abacus Products, Inc., and its wholly-owned subsidiaries; Abacus Health Products, Inc., Abacus Wellness, Inc. and CBD Pharmaceuticals Ltd. The results herein have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Amounts are presented in thousands of United States dollars, unless otherwise indicated.

BUSINESS OVERVIEW

Charlotte’s Web Holdings, Inc., is a Certified B Corp headquartered in Louisville, Colorado, that does the majority of its business in the United States. The Company is a market leader in innovative hemp extract wellness products under a family of brands which includes Charlotte’s Web™, ReCreateTM, CBD Medic™, CBD Clinic™, and Harmony Hemp™. Charlotte’s Web branded premium quality 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"), terpenes, flavonoids and other beneficial hemp compounds. The Company moved into its new cGMP facility in Louisville, Colorado during the second quarter of 2020 at which the Company conducts its production of tinctures, distribution, and quality control activities, and has expanded its research and development ("R&D"). Charlotte’s Web product categories include full spectrum hemp extract oil tinctures (liquid products), gummies, capsules, CBD topical creams and lotions, as well as products for pets. As of October 2022, the Company produces NSF Certified for Sports® broad spectrum tincture products. Charlotte’s Web products are distributed to retailers and health care practitioners, and online through the Company’s website at www.CharlottesWeb.com and recreateyou.com. The information provided on such websites is not part of this MD&A.

The business of the Company consists of the farming, manufacturing, sales, and marketing of products of hemp-derived CBD wellness products. As of June 30, 2023, the Company operated in a single operating and reportable segment, hemp-derived CBD wellness products, as its executive officers reviewed overall operating results in order to assess financial performance and to make resource allocation decisions, rather than to assess a lower-level unit of operations in isolation.

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 believes the presence of these various compounds work synergistically to heighten the effects of the products, making them superior to single-compound isolates.

Hemp extracts are produced from Cannabis and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a THC concentration of not more than 0.3% on a dry weight basis. The Company is engaged in research involving a broad variety of compounds derived from Hemp. Where research provides evidence that a greater than 0.3% THC level 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 founding principles. The Company does not currently have any plans to expand into high THC products in the near future.

In the US, the Company holds the number one market share position in the CBD market relative to retail dollars, this is based on market share data from leading third-party analysts such as Nielsen Company (US), LLC (“Nielsen”), SPINS, LLC (“Spins”), and Brightfield Group (“Brightfield”), respectively.

Recent Developments

On April 6, 2023, the Company jointly formed an entity, DeFloria LLC ("DeFloria"), with AJNA BioSciences PBC (“AJNA”), and a subsidiary of British American Tobacco PLC (LSE: BATS and NYSE: BTI) (“BAT”). BAT holds an equity interest in the entity in the form of 200,000 preferred units following its $10 million investment and has the right to participate in future equity issuances to maintain its pro rata equity position. The Company and AJNA each hold 400,000 of the entity’s voting common units.

The Company’s contribution to DeFloria is a license permitting the use of certain proprietary hemp intellectual property, including clinical and consumer data. Additionally, the Company has a Supply Agreement with DeFloria, under which the Company supplies the oils at cost used to produce and develop the new drug. AJNA's contribution to the entity is laboratory and regulatory services, clinical expertise and the provision of clinical services. The entity is expected to use the initial $10 million cash investment for the clinical development of a novel hemp botanical Investigational New Drug application and to commence Phase I clinical development in 2024.

On July 11, 2023, the Company expanded its product footprint with the launch of NSF Certified for Sports® broad spectrum gummy products under the ReCreate™ brand, the Company's lifestyle and botanical wellness brand

focused on the combination of organic broad-spectrum CBD and functional botanicals. At the same time, the Company announced its partnership as the Official CBD of the Premier Lacrosse League ("PLL").

As of June 30, 2023, several states, including, but not limited to, Florida, Maryland, Minnesota, New York, Utah and Virginia, have adopted new regulations that will impact the Company's ability to sell certain products as currently formulated or packaged in these states. Many of these states have also implemented new THC/CBD limits, age verification, labeling and packaging requirements. The Company is assessing the business and financial impacts of the new regulations, including steps that can be taken to address the new product formulation and labeling requirements, as well as costs and potential revenue impacts and anticipated timing for such impacts to the Company in these states.

The Company continues to invest in R&D efforts to identify new product opportunities. The Company is working to capitalize on the rapidly emerging botanical 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 should the science and the Company’s founding principles support such expansion.

Selected Financial Information


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
Total revenues	$	16,006	$	18,877	$	33,016	$	38,234
Cost of goods sold	7,088		9,556		14,181		17,199
Gross profit	8,918		9,321		18,835		21,035
Selling, general, and administrative expenses	19,627		17,259		37,140		37,614
Operating loss	(10,709)		(7,938)		(18,305)		(16,579)
Gain on investment in unconsolidated entity	10,700		—		10,700		—
Change in fair value of financial instruments and other	4,229		—		9,612		100
Other income (expense), net	(1,376)		68		(2,074)		(17)
Net income (loss)	$	2,844	$	(7,870)	$	(67)	$	(16,496)
Total assets					$	176,589	$	153,014
Total liabilities					$	98,228	$	37,102

For The Three Months Ended June 30, 2023 and 2022

Revenue

The majority of the Company’s revenue is derived from sales of branded products to consumers via the Company’s DTC e-commerce website, and distributors, retail and wholesale B2B customers. DTC sales contributed 66% of the Company’s total net revenue in Q2 2023 with B2B sales contributing 34%.


	Three Months Ended
	June 30,				% (Decrease)
		2023				2022
Direct-to-consumer ("DTC") revenue			$	10,734		$	13,277	(19.2)	%
Business-to-business ("B2B") revenue			5,272			5,600		(5.9)	%
Total revenue			$	16,006		$	18,877	(15.2)	%

Total revenue for the three months ended June 30, 2023 was $16,006, a decrease of 15.2% compared to the three months ended June 30, 2022.

DTC net revenue from online sales was $10.7 million, a decrease of 19.2% year-over-year from $13.3 million in Q2 2022. The decrease was primarily due to lower traffic to the Company’s webstore as well as a shift in product mix, specifically tinctures. Charlotte’s Web maintains the largest e-commerce business in the CBD industry according to the Brightfield Group. E-commerce is the CBD industry’s largest sales channel representing approximately 37% of total annual industry sales. Charlotte’s Web recently launched initiatives to increase online traffic to broaden demographic exposure, including upcoming promotions with MLB, and improving the online consumer experience.

B2B net revenue of $5.3 million decreased 5.9% year-over-year from $5.6 million in Q2 2022, primarily due to product mix. In May 2023, B2B distribution was expanded in pet retail through a new partnership with Phillips Pet Food & Supplies, America’s largest distributor in the pet specialty retail channel, covering more than 6,000 retailers representing more than 14,000 retail locations.

Cost of Goods Sold

Cost of goods sold includes the cost of inventory sold, changes in inventory provisions, and other production costs expensed. Other production costs include direct and indirect production costs including direct labor, processing, testing, packaging, quality assurance, security, shipping, depreciation of production equipment, indirect labor, including production management, and other related expenses. The primary factors that can impact cost of goods sold on a period-to-period basis include the volume of products sold, mix of product sold, third-party quality costs, transportation, overhead allocations and changes in inventory provisions.

The components of cost of goods sold are as follows:


	Three Months Ended
	June 30,					% (Decrease)
		2023			2022
Inventory expensed to cost of goods sold			4,979			6,100		(18.4)	%
Inventory provision, net			127			1,857		(93.2)	%
Other production costs			1,085			753		44.1	%
Depreciation and amortization			897			846		6.0	%
Cost of goods sold			$	7,088		$	9,556	(25.8)	%

Cost of goods sold decreased 25.8% for the three months ended June 30, 2023 compared to the three months ended June 30, 2022. The improvement was primarily due to lower comparable inventory provisions recorded during the reporting quarter as well as a decrease in inventory expensed to cost of goods sold as a result of lower sales volume.

Depreciation and amortization expense for the three months ended June 30, 2023 and June 30, 2022 was $3,977 and $1,862, respectively, of which $897 and $846, respectively, was expensed to cost of goods sold. The remaining depreciation and amortization expenses of $3,080 and $1,016, respectively, was expensed to Selling, general, and administrative expenses.

Gross Profit

The primary factors that can impact gross profit margins include the volume of products sold, the mix of revenue between DTC e-commerce and B2B, the mix of products sold, the promotional and sales discount rate, third-party quality costs, transportation costs, and changes in inventory provisions.

Gross profit for the three months ended June 30, 2023 and June 30, 2022 is as follows:


	Three Months Ended
	June 30,						% (Decrease)
		2023				2022
Gross profit			$	8,918			$	9,321		(4.3)	%
Gross margin			55.7		%		49.4		%	12.8	%

Gross profit decreased 4.3% for the three months ended June 30, 2023 compared to the three months ended June 30, 2022. The decrease is directly related to the revenue drop of 15.2%, partially offset by improvements in cost of goods sold. On a rate basis, gross margin increased 12.8% despite lower revenue due to the year-over-year reduction in inventory provision.

Selling, General, and Administrative Expenses

Total Selling, general, and administrative expenses are as follows:


	Three Months Ended
	June 30,					% (Decrease)
		2023			2022
Selling, general, and administrative expenses			$	19,627		$	17,259	13.7	%

Total Selling, general, and administrative expenses for the three months ended June 30, 2023 and June 30, 2022 were $19,627 and $17,259, respectively. The increase is primarily due to the amortization of MLB license and media rights assets of $2,074.

Depreciation and amortization expensed to Selling, general, and administrative expenses for the three months ended June 30, 2023 and June 30, 2022 were $3,080 and $1,016, respectively.

Total research and development costs expensed to Selling, general, and administrative expense for the three months ended June 30, 2023 and June 30, 2022 were $916 and $1,018, respectively. Research and development expenses primarily include personnel costs related to our R&D science division as well as R&D related projects advancing Hemp cannabinoid science through research programs that provide a better understanding of the possible therapeutic uses of cannabinoids.

Total Change in Gain on Investment in Unconsolidated Entity

Total change in gain on investment in unconsolidated entity is as follows:


	Three Months Ended
	June 30,				% (Decrease)
	2023		2022
Change in gain on investment in unconsolidated entity	$	10,700	$	—	100	%

Total change in gain on investment in unconsolidated entity for the three months ended June 30, 2023 and June 30, 2022 was $10,700 and $0, respectively. For the three months ended June 30, 2023, the increase in the gain on investment in unconsolidated entity was due to the Company jointly forming an entity, DeFloria, with AJNA, and BAT. The entity was established to pursue FDA-approval for a novel botanical drug to target a neurological condition. The botanical drug will be developed from certain proprietary hemp genetics of the Company. The Company has the ability and elected the fair value option for the investment in DeFloria. As such the investment is measured at fair value and remeasure at each reporting date, with changes recognized in changes in fair value of financial instruments and other.

Total Change in Fair Value of Financial Instruments and Other

Total change in fair value of financial instruments and other is as follows:


	Three Months Ended
	June 30,				% (Decrease)
	2023		2022
Change in fair value of financial instruments and other	$	4,229	$	—	100	%

Total change in fair value of financial instruments and other for the three months ended June 30, 2023 and June 30, 2022 was $4,229 and $0, respectively. For the three months ended June 30, 2023, the increase in the change in fair value of financial instruments and other was primarily due to the revaluation of the fair value of the Company's debt conversion option and debt interest rate conversion feature resulting in a net gain of $4,173. The fair value of the Company's embedded derivatives and options are revalued at each reporting date with changes impacted by variability in the Company's share price and implied debt yields.

For the Six Months Ended June 30, 2023 and 2022

Revenue

The majority of the Company’s revenue is derived from sales of branded products to consumers via the Company’s DTC e-commerce website, and distributors, retail and wholesale B2B customers.


	Six Months Ended
	June 30,				% (Decrease)
		2023				2022
Direct-to-consumer ("DTC") revenue			$	22,002		$	26,415	(16.7)	%
Business-to-business ("B2B") revenue			11,014			11,819		(6.8)	%
Total revenue			$	33,016		$	38,234	(13.6)	%

Total revenue for the six months ended June 30, 2023 was $33,016, a decrease of 13.6% compared to the six months ended June 30, 2022.

DTC revenue decreased 16.7%, driven by lower tincture, gummy and capsule volume. Promotional activity and product mix shift away from tinctures were additional contributing factors.

B2B revenue decreased 6.8% compared to the six months ended June 30, 2023. This decrease resulted from topicals portfolio rationalization and a negative product mix shift to smaller count pack sizes. The topicals revenue decline was partially offset by increased sales of pet chews. The Company remains #1 in FDM and Natural retail channels according to Neilsen and Spins, respectively

Cost of Goods Sold

The components of cost of goods sold are as follows:


	Six Months Ended
	June 30,					% (Decrease)
		2023			2022
Inventory expensed to cost of goods sold			10,188			11,966		(14.9)	%
Inventory provision, net			320			1,857		(82.8)	%
Other production costs			1,877			1,676		12.0	%
Depreciation and amortization			1,796			1,700		5.6	%
Cost of goods sold			$	14,181		$	17,199	(17.5)	%

Cost of goods sold decreased 17.5% for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. Variable cost of goods declined proportionately with revenue, with a further reduction on the improvement of inventory provisions.

Depreciation and amortization expense for the six months ended June 30, 2023 and June 30, 2022 was $7,769 and $3,940, respectively, of which $1,796 and $1,700, respectively, was expensed to cost of goods sold. The remaining depreciation and amortization expenses of $5,973 and $3,776, respectively, was expensed to Selling, general, and administrative expenses.

Gross Profit

Gross profit for the six months ended June 30, 2023 and June 30, 2022 is as follows:


	Six Months Ended
	June 30,						% (Decrease)
		2023				2022
Gross profit			$	18,835			$	21,035		(10.5)	%
Gross margin			57.0		%		55.0		%	3.6	%

Gross profit decreased 10.5% for the six months ended June 30, 2023 compared to the six months ended June 30, 2022, due to the lower net revenue for the first six months of 2023. However gross margin improved 3.6% year-over-year as a result of improved costs of goods sold.

Selling, General, and Administrative Expenses

Total Selling, general, and administrative expenses are as follows:


	Six Months Ended
	June 30,					% (Decrease)
		2023			2022
Selling, general, and administrative expenses			$	37,140		$	37,614	(1.3)	%

Total selling, general, and administrative expenses for the six months ended June 30, 2023 and June 30, 2022 were $37,140 and $37,614, respectively. The decrease is primarily due to a reduction in personnel and consulting costs compared to the prior period. The decrease is partially offset by an increase in amortization related to the MLB license and media rights assets of $3,897.

Depreciation and amortization expensed to Selling, general, and administrative expenses for the six months ended June 30, 2023 and June 30, 2022 were $5,973 and $3,776, respectively.

Total research and development costs expensed to Selling, general, and administrative expense for the six months ended June 30, 2023 and June 30, 2022 were $1,462 and $2,188, respectively. Research and development expenses primarily include personnel costs related to the Company's R&D science division as well as R&D related projects advancing Hemp cannabinoid science through research programs that provide a better understanding of the possible therapeutic uses of cannabinoids.

Total Change in Gain on Investment in Unconsolidated Entity

Total change in gain on investment in unconsolidated entity is as follows:


	Six Months Ended
	June 30,				% (Decrease)
	2023		2022
Change in gain on investment in unconsolidated entity	$	10,700	$	—	100	%

Total change in gain on investment in unconsolidated entity for the three months ended June 30, 2023 and June 30, 2022 was $10,700 and $0, respectively. For the six months ended June 30, 2023, the increase in the gain on investment in unconsolidated entity was due to the Company jointly forming an entity, DeFloria, with AJNA, and BAT. The entity was established to pursue FDA-approval for a novel botanical drug to target a neurological condition. The botanical drug will be developed from certain proprietary hemp genetics of the Company. The Company has the ability and elected the fair value option for the investment in DeFloria. As such the investment is measured at fair value and remeasure at each reporting date, with changes recognized in changes in fair value of financial instruments and other.

Total Change in Fair Value of Financial Instruments and Other

Total change in fair value of financial instruments and other is as follows:


	Six Months Ended
	June 30,				% (Decrease)
	2023		2022
Change in fair value of financial instruments and other	$	9,612	$	100	9512	%

Total change in fair value of financial instruments and other for the six months ended June 30, 2023 and June 30, 2022 was $9,612 and $100, respectively. For the six months ended June 30, 2023, the increase in the change in fair value of financial instruments and other was primarily due to the revaluation of the fair value of the Company's debt conversion option and debt interest rate conversion feature resulting in a net gain of $9,855, respectively. The fair value of the Company's embedded derivatives and options are revalued at each reporting date with changes impacted by variability in the Company's share price and implied debt yields.

Liquidity and Capital Resources

As of June 30, 2023 and December 31, 2022, the Company had total current liabilities of $22,609 and $21,427, respectively, and cash and cash equivalents of $61,728 and $66,963, respectively, to meet its current obligations.

The Company expects its selling, general and administrative expenses in 2023 to be slightly higher than 2022 reflecting the incremental costs of the MLB Promotional Rights Agreement and related marketing activations. The investments in paid license and media rights as well as the launch of the new NSF Certified for Sport® brand products are intended to be offset by increases in online traffic, channel sales and net revenue over the long term.

The Company’s ability to fund its operations for the next twelve months and thereafter will depend on its future operating performance, particularly revenue growth, which can be affected by general economic conditions, industry regulatory changes, and other factors beyond the Company’s control.

Management continually assesses liquidity in terms of the ability to generate sufficient cash flow to fund the business. Net cash flow is affected by the following items: (i) operating activities, including the cash impacts from the statements of operations, the level of accounts receivables, accounts payable, accrued liabilities and unearned revenue and deposits; (ii) investing activities, including the purchase of property and equipment; and (iii) financing activities, including the issuance of capital shares.

The Company expects to meet our long-term liquidity requirements through various sources of capital, including cash on hand and provided by operations over time. The Company regularly considers fundraising opportunities and may decide, from time to time, to raise capital through borrowings or issuances of additional equity and/or debt securities. The Company's ability to incur additional debt is dependent upon a number of factors, including the state of the credit markets, our degree of leverage, the value of our unencumbered assets and borrowing restrictions imposed by lenders, including restrictions on the industry. The Company's ability to raise funds through the issuance of additional equity and/or debt securities is also dependent on a number of factors including the current state of the capital markets, investor sentiment and intended use of proceeds. The Company's ability to raise funds through the issuance of equity securities depends on, among other things, general market conditions for companies in the Hemp industry and market perceptions about us. There can be no assurance the Company will have the ability to raise additional funds and, if raised privately or publicly, will be available to the Company when needed or on terms which are acceptable.

Cash Flows

Cash from Operating Activities

Net cash used in operating activities for the six months ended June 30, 2023 and June 30, 2022 were as follows:


	Six Months Ended June 30,
	2023		2022
Net cash used in operating activities	$	(5,009)	$	(4,284)

For the six months ended June 30, 2023, the increase in cash used in operations is primarily due to cash outflows of $4,000 associated with the MLB Promotional Rights Agreement which was entered into in October 2022. Additionally, the increase is due to escalating rent payments compared to the prior period. For the six months ended June 30, 2022, the Company collected $3,185 from income tax refunds due.

Cash from Investing Activities

Net cash used in investing activities for the six months ended June 30, 2023 and June 30, 2022 were as follows:


	Six Months Ended June 30,
	2023		2022
Net cash used in investing activities	$	(151)	$	(333)

For the six months ended June 30, 2023, the decrease in cash used in investing activities was driven by lower capital expenditures.

Cash from Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2023 and June 30, 2022 were as follows:


	Six Months Ended June 30,
	2023		2022
Net cash used in financing activities	$	(75)	$	(60)

For the six months ended June 30, 2023, the change was primarily due to the vesting of restricted stock units.

Off-Balance Sheet Arrangements

As of June 30, 2023 and December 31, 2022, we do not have any off-balance-sheet arrangements that have, or are reasonably likely to have, a current or future effect on our results of operations or financial condition, including, and without limitation, such considerations as liquidity and capital resources.

Related party transactions

2022, the Company established a reserve against the note receivable due to decline in collateral and risk associated with collectability and therefore, expensed the outstanding balance of $1,037.

On April 6, 2023, the Company jointly formed an entity, DeFloria, with AJNA and BAT. AJNA is a botanical drug development company. AJNA is partially owned and was co-founded by a co-founder of Charlotte's Web. BAT holds an equity interest in the entity in the form of 200,000 preferred units following its $10 million investment and has the right to participate in future equity issuances to maintain its pro rata equity position. The Company and AJNA each hold 400,000 of the entity’s voting common units. Effective May 1, 2023 the Company entered into an 8% interest bearing note receivable with DeFloria for the bill of sale of machine equipment in the amount of $170. The principal and interest of the note receivable will be paid in 36 monthly installments. As of June 30, 2023, the remaining note receivable of $156 is presented in other assets in the condensed consolidated balance sheets.

Recently Adopted Accounting Principles

Refer to note 2 of the audited consolidated financial statements included in the Company's Annual Report on Form 10-K filed with the SEC on March 23, 2023 for more information on the recently adopted accounting principles.

Critical Accounting Estimates

Listed below are the accounting policies we believe are critical to our financial statements due to the degree of uncertainty regarding the estimates or assumptions involved and the magnitude of the asset, liability, revenue or expense being reported. Please also refer to note 2 of our notes to condensed consolidated financial statements for a discussion on recently adopted and issued accounting pronouncements.

Fair Value Option

The Company has elected the fair value option in accordance with ASC 825-10 guidance to record its SBH Purchase Option and the Investment in unconsolidated entity. Under ASC 825-10, a business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. These assets are remeasured at fair value at each reporting date, with changes to fair value recognized in the statements of operations for the period. 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. Changes in assumptions that reasonably could have been different at the reporting date may result in a higher or lower determination of fair value.

Inventories

Inventories are stated at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less any applicable selling expenses. Cost includes all expenses for direct raw materials inputs, as well as costs directly attributable to the manufacturing process as well as suitable portions of related production overheads, based on normal operating capacity. Cost is determined by use of the weighted average method. To determine if a provision for inventories is required, the Company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions, including forecasted demand compared to quantities on hand, as well as other factors such as potential excess or aged inventories based on product shelf life, and other factors that affect inventory obsolescence. The Company’s inventories of harvested hemp are recorded at cost to grow and harvest. Raw materials costs as well as production costs are included in the carrying value of the Company’s finished goods inventory. The Company's inventory production process for cannabinoid products includes the cultivation of botanical raw material. Because of the duration of the cultivation process, a portion of the inventory will not be sold within one year. Consistent with the practice in other industries that cultivate botanical raw materials, all inventory is classified as a current asset.

Impairment of Long-Lived Assets

The Company reviews intangible assets with indefinite useful lives for impairment at least annually and reviews all intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable. Long-lived assets, such as property and equipment and intangible assets subject to depreciation and amortization, as well as indefinite lived intangibles and goodwill are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable or that the useful life is shorter than the Company had originally estimated. Recoverability of these assets is measured by comparison of the carrying amount of each asset or asset group to the future undiscounted cash flows the asset or asset group is expected to generate over their remaining lives. If the asset or asset group is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset or asset group. If the useful life is shorter than originally estimated, the Company amortizes the remaining carrying value over the new shorter useful life. Impairment losses are recorded in selling, general, and administrative expense in the consolidated statements of operations. There were no impairment losses recognized for the three months ended June 30, 2023 and 2022.

Convertible Debenture

The Company determined that the debenture is a freestanding financial instrument, which includes embedded derivatives. The embedded derivatives have been bifurcated from the debenture and accounted for separately in accordance with the provisions of ASC 815, Derivatives and Hedging. The Company reviewed the terms of the debenture and identified two material embedded features which required bifurcation and separate accounting pursuant to the provisions of ASC 815: 1) the interest rate conversion feature based on changes in federal regulations, and 2) the debt conversion option to common shares. The debt interest rate conversion feature is classified as a derivative asset and measured at fair value using a probability weighted income approach. The debt conversion option is classified as a derivative liability and measured at fair value using a Black-Scholes option pricing model. The Company allocated proceeds first to the derivatives measured at fair value and the residual amount is allocated to the debenture. Debt issuance costs are allocated to the debenture. The debt issuance costs are presented as a direct reduction from the face value of the debenture and amortized over the stated term of the debenture.

Income Taxes

The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred income tax assets or liabilities are computed based on the temporary difference between the financial statement and

income tax basis of assets and liabilities using the enacted marginal income tax rate in effect for the year in which the differences are expected to reverse. Deferred income tax expense or benefit is based on the changes in the deferred income tax assets or liabilities from period to period. A valuation allowance is established if it is more likely than not that all or a portion of the deferred tax asset will not be realized.

Significant judgment is required in determining the Company’s provision for income taxes, deferred tax assets and liabilities and the valuation allowance recorded against net deferred tax assets. The Company assesses the likelihood that deferred tax assets will be recovered as deductions from future taxable income. The evaluation of the need for a valuation allowance is performed on a jurisdiction-by-jurisdiction basis and includes a review of all available positive and negative evidence. Factors reviewed include projections of pre-tax book income for the foreseeable future, determination of cumulative pre-tax book income or loss, earnings history, and reliability of forecasting. It is the Company's policy to offset indefinite lived deferred tax assets with indefinite lived deferred tax liabilities. The Company provided a full valuation allowance on deferred tax assets because it is more likely than not that deferred tax assets will not be realized.

The Company accounts for uncertainties in income taxes under ASC Topic 740, which prescribes a recognition threshold and measurement methodology to recognize and measure an income tax position taken, or expected to be taken, in a tax return. With respect to any tax positions that do not meet the recognition threshold, a corresponding liability, including interest and penalties, is recorded in the condensed consolidated financial statements. The Company may be subject to examination by tax authorities where the Company conducts operations. The earliest income tax year that may be subject to examination is 2018. The Company has recorded an uncertain tax position as of June 30, 2023 and December 31, 2022. The Company’s policy is to recognize interest and penalties on taxes, if any, within operations as income tax expense.

Revenue Recognition

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customer (“ASC 606”). The Company elected to early adopt ASC 606 as of January 1, 2018, as permitted by the standard. The Company performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company applies the five-step model to arrangements that meet the definition of a contract under the standard, including when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of revenue accounting, the Company evaluates the goods or services promised within each contract related performance obligation and assesses whether each promised good or service is distinct. The Company recognizes as revenue, the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

The Company recognizes revenue from customers when control of the goods or services are transferred to the customer, generally when products are shipped, at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods and services. Freight revenue is included in revenue on the consolidated statements of operations, and is generally exempt from state sales taxes. Sales tax collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from revenue in the consolidated statements of operations. Contracts are written to include standard discounts and allowances. Contracts are not written to include advertising allowances, tiered discounts or any other performance obligation. Since the Company’s contracts involve the delivery of various tangible products, the arrangements are considered to contain only a single performance obligation, as such there is no allocation of the transaction price. The Company also offers e-commerce discounts and promotions through its online rewards program. The Charlotte’s Web Loyalty Program offers customers rewards points for every dollar spent through the Company website to earn store credit for future purchases. The Company defers recognition of revenue for unredeemed awards until the following occurs: (1) rewards are redeemed by the consumer, (2) points or certificates expire, or (3) an estimate of the expected unused portion of points or certificates is applied, which is based on historical redemption patterns.

Any product that does not meet the customer’s expectations can be returned within the first 30 days of delivery in exchange for another product or for a full refund. Generally, any product sold through a distributor or retailer must be returned to the original purchase location for any return or exchange. The Company accounts for customer returns utilizing the “expected value method.” Expected amounts are excluded from revenue and recorded as a “refund liability” that represents the Company’s obligation to return the customer’s consideration. Estimates are based on actual historical and current specific data.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information under this item is not required to be provided by smaller reporting companies.

Item 4. Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of June 30, 2023, our disclosure controls and procedures were effective to ensure the timely disclosure of required information in our SEC filings.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the quarter ending June 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II

Item 1. Legal Proceedings

From time to time, the Company may be involved in various regulatory issues, claims and lawsuits arising in the ordinary course of business, none of which, in the opinion of management, is expected to have a material adverse effect on the Company’s results of operations or financial condition.

At present, the Company is not a party to any material pending legal proceedings, other than ordinary routine litigation incidental to the business. Nor is the Company or its property the subject of any legal proceedings, known or contemplated, that involve a claim for damages exclusive of interest and costs that meet or exceed 10% of its current assets.

Item 1A. Risk Factors

Our Annual Report on Form 10-K for the year ended December 31, 2022 includes a detailed discussion of our risk factors under the heading “Part I, Item 1A—Risk Factors.” Except as set forth below, there have been no material changes from such risk factors during the quarter ended June 30, 2023. You should consider carefully the risk factors set forth in this Form 10-Q and discussed in our Annual Report on Form 10-K for the year ended December 31, 2022 and all other information contained in or incorporated by reference in this Form 10-Q before making an investment decision. If any of the risks discussed herein or in the Annual Report on Form 10-K for the year ended December 31, 2022 actually occur, they may materially harm our business, financial condition, operating results, cash flows or growth prospects. As a result, the market price of our common shares could decline, and you could lose all or part of your investment. Additional risks and uncertainties that are not yet identified or that we think are immaterial may also materially harm our business, financial condition, operating results, cash flows or growth prospects and could result in a complete loss of your investment.

Compliance with changes in legal, regulatory and industry standards may adversely affect the Company’s business.

The formulation, manufacturing, packaging, labelling, handling, distribution, importation, exportation, licensing, sale and storage of the Company’s products are affected by extensive laws, governmental regulations, administrative determinations, court decisions and similar constraints. Such laws, regulations and other constraints may exist at the federal, state, provincial or local levels. There is currently no uniform regulation applicable to natural health products worldwide. There can be no assurance that the Company is in compliance with all of these laws, regulations and other constraints, and changes to such laws, regulations and other constraints may have a material adverse effect on the Company’s operations. Through June 30, 2023, several states, including, but not limited to Florida, Maryland, Minnesota, New York, Utah and Virginia, have adopted new regulations that may impact the Company's ability to sell certain of its products as currently formulated or packaged in these states.

There is substantial uncertainty and different interpretations among federal, state and local regulatory agencies, legislators, academics and businesses as to the importation of derivatives from exempted portions of the Cannabis plant and the emerging regulation of cannabinoids. These different opinions include, but are not limited to, the regulation of cannabinoids by the FDA and the extent to which manufacturers of products containing imported raw materials and/or 2018 Farm Bill compliant cultivators and processors may engage in interstate commerce. The uncertainties cannot be resolved without further federal, and potentially state-level, legislation, regulation or a definitive judicial interpretation of existing legislation and rules. If these uncertainties continue, they may have an adverse effect upon the introduction of the Company's products in different markets.

A small number of Shareholders may exercise significant influence on matters submitted to Shareholders for approval.

The Company has a small number of Shareholders who, to the knowledge of the Company, own, in the aggregate, in excess of 5.0% equity interest in the Company. Although such Shareholders may not have an agreement to act in

concert, such Shareholders may have the ability to exercise significant influence over matters submitted to Shareholders for approval, whether subject to approval by a majority of the Shareholders or special resolution. In addition, on June 16, 2023, a group of three shareholders filed a statement on Schedule 13D with the SEC indicating that they, collectively, held over 5% interest in the Company and had taken certain steps with the objective of replacing certain members of the Company’s Board of Directors.

The costs of being a public company are high and may strain the Company’s resources.

The Company incurs significant legal, accounting, insurance and other expenses as a result of being a public company, which may negatively impact its performance and could cause its results of operations and financial condition to suffer. Compliance with applicable securities laws in Canada and the United States and the rules of the TSX and the U.S. Securities and Exchange Commission ("SEC") (including, but not limited to, preparation and delivery of prescribed continuous disclosure forms, payment of listing fees, potential costs associated with shareholder actions or dissenting shareholder activity, costs associated with regulatory reviews and costs associated with changes in laws or regulations) constitutes a significant expense, including legal and accounting costs, and makes some activities more time-consuming and costly. Reporting and other obligations as a public company and the Company’s anticipated growth may place a strain on the Company’s financial and management systems, processes and controls, as well as on personnel.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Documents filed as part of this report

Exhibit No.

Description

Location

10.3

Extension and Sixth Amending Agreement to Name and Likeness and License Agreement, effective as of June 30, 2023, by and between Leeland & Sig LLC d/b/a Stanley Brothers Brand Company, a Colorado limited liability company, Charlotte's Web, Inc., and Charlotte's Web Holdings, Inc.

Exhibit 10.1 to the Current Report on Form 8-K (File No. 000-56364) filed with the SEC on July 3, 2023

31.1

Certification of Periodic Report by Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.

Filed herewith

31.2

Certification of Periodic Report by Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.

Filed herewith

32.1

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Filed herewith

32.2

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Filed herewith

101.INS

Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

Filed herewith

101.SCH

Inline XBRL Taxonomy Extension Schema Document

Filed herewith

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Filed herewith

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

Filed herewith

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

Filed herewith

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Filed herewith

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		CHARLOTTE'S WEB HOLDINGS, INC.

August 10, 2023	By:	/s/ Jessica Saxton
(Date)		Jessica Saxton
		(Chief Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.

Signatures

Title

Date

/s/ Jacques Tortoroli

Chief Executive Officer (Principal Executive Officer)

August 10, 2023

Jacques Tortoroli

/s/ Jessica Saxton

Chief Financial Officer (Principal Financial and Accounting Officer)

August 10, 2023

Jessica Saxton

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13A‑14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES‑OXLEY ACT OF 2002

I, Jacques Tortoroli, certify that:

1.I have reviewed this quarterly report on Form 10‑Q of Charlotte’s Web Holdings, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 10, 2023


/s/ Jacques Tortoroli

Jacques Tortoroli

Chief Executive Officer

(Principal Executive Officer)

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULE 13A‑14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES‑OXLEY ACT OF 2002

I, Jessica Saxton, certify that:

1.I have reviewed this quarterly report on Form 10‑Q of Charlotte’s Web Holdings, Inc.;

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 10, 2023


/s/ Jessica Saxton

Jessica Saxton

Chief Financial Officer

(Principal Financial and Principal Accounting Officer)

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Charlotte’s Web Holdings, Inc. (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2023, as filed with the Securities and Exchange Commission (the “Report”), I, Jacques Tortoroli, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as added by §906 of the Sarbanes-Oxley Act of 2002, that:


			1			The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


			2			To my knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

Dated: August 10, 2023


/s/ Jacques Tortoroli

Jacques Tortoroli

Chief Executive Officer

(Principal Executive Officer)

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Charlotte’s Web Holdings, Inc. (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2023, as filed with the Securities and Exchange Commission (the “Report”), I, Jessica Saxton, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as added by §906 of the Sarbanes-Oxley Act of 2002, that:


			1			The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


			2			To my knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

Dated: August 10, 2023


/s/ Jessica Saxton

Jessica Saxton

Chief Financial Officer

(Principal Financial and Principal Accounting Officer)

Cover Page - shares	6 Months Ended
Cover Page - shares	Jun. 30, 2023	Aug. 08, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2023
Document Transition Report	false
Entity File Number	000-56364
Entity Registrant Name	Charlotte's Web Holdings, Inc.
Entity Incorporation, State or Country Code	A1
Entity Tax Identification Number	98-1508633
Entity Address, Address Line One	700 Tech Court
Entity Address, City or Town	Louisville
Entity Address, State or Province	CO
Entity Address, Postal Zip Code	80027
City Area Code	720
Local Phone Number	484-8930
Title of 12(g) Security	Common stock, no par value
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		152,951,994
Amendment Flag	false
Entity Central Index Key	0001750155
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q2

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 61,728	$ 66,963
Accounts receivable, net	2,479	1,847
Inventories, net	23,755	26,953
Prepaid expenses and other current assets	6,900	7,998
Total current assets	94,862	103,761
Property and equipment, net	26,608	29,330
License and media rights	22,968	26,871
Operating lease right-of-use assets, net	15,543	16,519
Investment in DeFloria	10,700	0
SBH purchase option and other derivative assets	2,893	3,620
Intangible assets, net	1,500	1,771
Other long-term assets	1,515	5,770
Total assets	176,589	187,642
Current liabilities:
Accounts payable	3,193	4,018
License and media rights payable - current	8,833	7,759
Accrued and other current liabilities	8,336	7,344
Lease obligations – current	2,247	2,306
Total current liabilities	22,609	21,427
Convertible debenture	40,307	37,421
Lease obligations	16,529	17,905
License and media rights payable	15,869	20,383
Derivatives and other long-term liabilities	2,914	13,001
Total liabilities	98,228	110,137
Commitments and contingencies (note 7)
Shareholders’ equity:
Common shares, nil par value; unlimited shares authorized as of June 30, 2023 and December 31, 2022, respectively; 152,825,118 and 152,135,026 shares issued and outstanding as of June 30, 2023 and December 31, 2022	1	1
Additional paid-in capital	326,355	325,431
Accumulated deficit	(247,995)	(247,927)
Total shareholders’ equity	78,361	77,505
Total liabilities and shareholders’ equity	$ 176,589	$ 187,642

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - shares	Jun. 30, 2023	Dec. 31, 2022
Statement of Financial Position [Abstract]
Common shares, issued (in shares)	152,825,118	152,135,026
Common shares, outstanding (in shares)	152,825,118	152,135,026

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Income Statement [Abstract]
Revenue	$ 16,006	$ 18,877	$ 33,016	$ 38,234
Cost of goods sold	7,088	9,556	14,181	17,199
Gross profit	8,918	9,321	18,835	21,035
Selling, general and administrative expenses	19,627	17,259	37,140	37,614
Operating loss	(10,709)	(7,938)	(18,305)	(16,579)
Gain on investment in unconsolidated entity	10,700	0	10,700	0
Change in fair value of financial instruments and other	4,229	0	9,612	100
Other income (expense), net	(1,376)	68	(2,074)	(17)
Income (loss) before provision for income taxes	2,844	(7,870)	(67)	(16,496)
Income tax benefit (expense)	0	0	0	0
Net income (loss)	$ 2,844	$ (7,870)	$ (67)	$ (16,496)
Net loss per common share, basic (in usd per share)	$ 0.02	$ (0.05)	$ 0	$ (0.11)
Net loss per common share, diluted (in usd per share)	$ 0.02	$ (0.05)	$ 0	$ (0.11)

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - USD ($) $ in Thousands	Total	Restricted share units	Common Shares	Common Shares Restricted share units	Additional Paid-in Capital	Additional Paid-in Capital Restricted share units	Accumulated Deficit
Balance (in shares) at Dec. 31, 2021			144,659,964
Balance at Dec. 31, 2021	$ 130,446		$ 1		$ 319,059		$ (188,614)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Withholding of common shares upon vesting of restricted share units/awards (in shares)			77,193
Common shares issued upon vesting of restricted share units, net of withholding	(45)				(45)
Harmony Hemp contingent equity compensation (in shares)			169,045
Harmony Hemp contingent equity compensation	165				165
ATM program issuance costs (in shares)			239,500
ATM program issuance costs	(2)				(2)
Share-based compensation	1,214				1,214
Net loss	(8,626)						(8,626)
Balance (in shares) at Mar. 31, 2022			145,145,702
Balance at Mar. 31, 2022	123,152		$ 1		320,391		(197,240)
Balance (in shares) at Dec. 31, 2021			144,659,964
Balance at Dec. 31, 2021	130,446		$ 1		319,059		(188,614)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(16,496)
Balance (in shares) at Jun. 30, 2022			145,278,165
Balance at Jun. 30, 2022	115,912		$ 1		321,021		(205,110)
Balance (in shares) at Mar. 31, 2022			145,145,702
Balance at Mar. 31, 2022	123,152		$ 1		320,391		(197,240)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Withholding of common shares upon vesting of restricted share units/awards (in shares)			132,463
Common shares issued upon vesting of restricted share units, net of withholding	(13)				(13)
Share-based compensation	643				643
Net loss	(7,870)						(7,870)
Balance (in shares) at Jun. 30, 2022			145,278,165
Balance at Jun. 30, 2022	115,912		$ 1		321,021		(205,110)
Balance (in shares) at Dec. 31, 2022			152,135,026
Balance at Dec. 31, 2022	77,505		$ 1		325,431		(247,927)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Withholding of common shares upon vesting of restricted share units/awards (in shares)				297,888
Common shares issued upon vesting of restricted share units, net of withholding		$ (69)				$ (69)
Share-based compensation	375				375
Net loss	(2,912)						(2,912)
Balance (in shares) at Mar. 31, 2023			152,432,914
Balance at Mar. 31, 2023	74,899		$ 1		325,737		(250,839)
Balance (in shares) at Dec. 31, 2022			152,135,026
Balance at Dec. 31, 2022	77,505		$ 1		325,431		(247,927)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(67)
Balance (in shares) at Jun. 30, 2023			152,825,118
Balance at Jun. 30, 2023	78,361		$ 1		326,355		(247,995)
Balance (in shares) at Mar. 31, 2023			152,432,914
Balance at Mar. 31, 2023	74,899		$ 1		325,737		(250,839)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Withholding of common shares upon vesting of restricted share units/awards (in shares)				392,204
Common shares issued upon vesting of restricted share units, net of withholding		$ (6)				$ (6)
Share-based compensation	624				624
Net loss	2,844						2,844
Balance (in shares) at Jun. 30, 2023			152,825,118
Balance at Jun. 30, 2023	$ 78,361		$ 1		$ 326,355		$ (247,995)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Cash flows from operating activities:
Net loss	$ (67)	$ (16,496)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	7,769	3,940
Change in fair value of financial instruments and other	(9,612)	(100)
Gain on investment in unconsolidated entity	(10,700)	0
Convertible debenture accrued interest	1,954	0
Share-based compensation	999	2,022
Loss on foreign currency translation	979	0
Changes in right-of-use assets	976	1,236
Inventory provision	320	1,857
Other	957	(434)
Changes in operating assets and liabilities:
Accounts receivable, net	(1,104)	2,430
Inventories, net	2,878	(2,411)
Prepaid expenses and other current assets	764	3,706
Accounts payable, accrued and other liabilities	183	(2,194)
Operating lease obligations	(1,436)	(896)
License and media rights	(4,000)	0
Income taxes receivable	4,261	3,185
Other operating assets and liabilities, net	(130)	(129)
Net cash used in operating activities	(5,009)	(4,284)
Cash flows from investing activities:
Purchases of property and equipment and intangible assets	(187)	(333)
Proceeds from sale of assets	36	0
Net cash used in investing activities	(151)	(333)
Cash flows from financing activities:
Other financing activities	(75)	(60)
Net cash used in financing activities	(75)	(60)
Net decrease in cash and cash equivalents	(5,235)	(4,677)
Cash and cash equivalents —beginning of period	66,963	19,494
Cash and cash equivalents —end of period	61,728	14,817
Non-cash activities:
Non-cash purchase of intangible asset	(163)	0
Non-cash issuance of note receivable	$ (156)	$ 0

DESCRIPTION OF BUSINESS AND PRESENTATION OF FINANCIAL STATEMENTS	6 Months Ended
	Jun. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]
DESCRIPTION OF BUSINESS AND PRESENTATION OF FINANCIAL STATEMENTS	DESCRIPTION OF BUSINESS AND PRESENTATION OF FINANCIAL STATEMENTS Description of the Business 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. 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. Hemp extracts are produced from the plant Cannabis sativa L. (“Cannabis”), and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol ("THC") concentration of not more than 0.3% on a dry weight basis ("Hemp"). The Company is engaged in research involving the effectiveness of a broad variety of compounds derived from Hemp. 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 human ingestible products: tinctures (liquid product), capsules, gummies, topicals, and pet products. The Company’s products are distributed through its e-commerce website, third-party e-commerce websites, select distributors, health practitioners, and a variety of brick-and-mortar specialty retailers. The Company grows its proprietary hemp domestically in the United States on farms leased in northeastern Colorado and sources hemp through contract farming operations in Arizona, Kentucky, Oregon, and Canada. The Hemp grown in Canada is utilized exclusively in the Canadian market and not in products sold in the United States. In furtherance of the Company’s Research and Development ("R&D") efforts, 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. CW Labs is currently engaged in clinical trials addressing Hemp-based health solutions. CW Labs is located in Louisville, Colorado at the Company’s current good manufacturing practice ("cGMP") production and distribution facility.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND USE OF ESTIMATES

6 Months Ended

Jun. 30, 2023

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND USE OF ESTIMATES

Basis of Presentation

Inventories

Revenue Recognition


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Direct-to-consumer	$	10,734	$	13,277	$	22,002	$	26,415
Business-to-business	5,272		5,600		11,014		11,819
Total	$	16,006	$	18,877	$	33,016	$	38,234

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

Recently Adopted Accounting Pronouncements

As of June 30, 2023, there are no new accounting pronouncements adopted or issued by the FASB that had or may have a material impact on the Company’s condensed consolidated financial statements.

FAIR VALUE MEASUREMENT

6 Months Ended

Jun. 30, 2023

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENT


	June 30, 2023
	Level 1		Level 2		Level 3		Total
Financial assets:
Stanley Brothers USA Holdings Purchase Option	$	—	$	—	$	2,057	$	2,057
Debt interest rate conversion feature	—		—		836		836
Total Financial Assets	$	—	$	—	$	2,893	$	2,893

Investment in unconsolidated entity:	$	—	$	—	$	10,700	$	10,700

Financial liabilities:
Debt conversion option	$	—	$	2,815	$	—	$	2,815


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Financial assets:
Stanley Brothers USA Holdings Purchase Option	$	—	$	—	$	2,300	$	2,300
Debt interest rate conversion feature	—		—		1,320		1,320
Total Financial Assets	$	—	$	—	$	3,620	$	3,620

Financial liabilities:
Debt conversion option	$	—	$	12,995	$	—	$	12,995

There were no transfers between levels of the hierarchy during the three and six month periods ended June 30, 2023 and the year ended December 31, 2022.

Investment in Unconsolidated Entity

use the initial $10 million cash investment for the clinical development of a hemp botanical Investigational New Drug application and to commence Phase I clinical development in 2024.

The following additional assumptions are used in the model:


			June 30,
			2023
Expected term (years)			6.77
Volatility			66.0%
Risk-free interest rate			4.0%
Expected dividend yield			—%
Discount for lack of marketability			20.0%

Convertible Debt Derivatives

Debt Interest Rate Conversion Feature


	June 30,	December 31,
	2023	2022
Stated interest rate	5.0%	5.0%
Adjusted interest rate	1.5%	1.5%
Implied debt yield	10.8%	8.6%
Federal regulation probability	various	15.0%
Year of event	various	2025

Debt Conversion Option

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


	June 30,	December 31,
	2023	2022
Expected volatility	87.4%	86.7%
Expected term (years)	6.3	6.9
Risk-free interest rate	4.0%	4.0%
Expected dividend yield	—%	—%
Value of underlying share	C$0.23	C$0.73
Exercise price	C$2.00	C$2.00

Stanley Brothers USA Holdings Purchase Option


	June 30,	December 31,
	2023	2022
Expected volatility	120.0%	115.0%
Expected term (years)	2.7	2.7
Risk-free interest rate	4.6%	4.3%
Weighted average cost of capital	45.0%	40.0%

INVENTORIES

6 Months Ended

Jun. 30, 2023

Inventory Disclosure [Abstract]

INVENTORIES

Inventories consist of the following:


	June 30,		December 31,
	2023		2022
Harvested hemp and seeds	$	20,991	$	34,763
Raw materials	10,440		10,960
Finished goods	10,071		13,237
	41,502		58,960
Less: inventory provision	(17,747)		(32,007)
Total inventory	$	23,755	$	26,953

LICENSE AND MEDIA RIGHTS

6 Months Ended

Jun. 30, 2023

Commitments and Contingencies Disclosure [Abstract]

License and Media Rights

LICENSE AND MEDIA RIGHTS

MLB Promotion Rights Agreement

Baseball Clubs (collectively, the “MLB”), pursuant to which the Company entered into a strategic partnership with MLB to promote the Company’s new NSF-Certified for Sport® product line.

Maturities of the MLB license and media rights payable as of June 30, 2023 are as follows:


Year Ending December 31:
2023 (6 months remaining)	$	4,000
2024	10,000
2025	12,000
Total payments	$	26,000
Less: Imputed interest	(1,298)
Total license and media rights payable	$	24,702
Less: Current license liabilities	(8,833)
Total non-current license and media rights payable	$	15,869

As of June 30, 2023, expected amortization of licensed properties are as follows:


Year Ending December 31:
2023 (6 months remaining)	$	3,647
2024	7,294
2025	7,294
Total future amortization	$	18,235

DEBT

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

DEBT

Convertible Debenture

CBD, the stated annualized rate of interest shall reduce to 1.5%. The maturity date for the debenture is November 14, 2029.

The following is a summary of the Company's convertible debenture as of June 30, 2023:


	As of June 30, 2023
	Principal Amount		Unamortized Debt Discount and Costs		Net Carrying Amount
Convertible Debenture	Principal Amount		Unamortized Debt Discount and Costs		Net Carrying Amount
Convertible debenture due November 2029	$	58,677	$	(18,370)	$	40,307

The following is a summary of the Company's convertible debenture as of December 31, 2022:


	As of December 31, 2022
	Principal Amount		Unamortized Debt Discount and Costs		Net Carrying Amount
Convertible Debenture	Principal Amount		Unamortized Debt Discount and Costs		Net Carrying Amount
Convertible debenture due November 2029	$	56,080	$	(18,659)	$	37,421


	Three Months Ended		Six Months Ended
	June 30,		June 30,
Interest and Amortization Expense	2023		2023
Interest expense	$	701	$	1,398
Amortization of debt discounts and costs	349		668
Total	$	1,050	$	2,066

COMMITMENTS AND CONTINGENCIES	6 Months Ended
COMMITMENTS AND CONTINGENCIES	Jun. 30, 2023
Commitments and Contingencies Disclosure [Abstract]
COMMITMENTS AND CONTINGENCIES	COMMITMENTS AND CONTINGENCIES Legal ContingenciesFrom time to time, the Company is a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. Although the ultimate aggregate amount of monetary liability or financial impact with respect to these matters is subject to many uncertainties and is therefore not predictable with assurance, management believes that as of June 30, 2023 there is no litigation pending that could have, individually and in the aggregate, a material adverse effect on the Company’s financial position, results of operations or cash flows.

LEASES

6 Months Ended

Jun. 30, 2023

Leases [Abstract]

LEASES

Maturities of operating lease liabilities as of June 30, 2023 are as follows:


	Operating Leases
Year Ending December 31:
2023 (6 months remaining)	$	1,710
2024	3,201
2025	2,892
2026	2,169
2027	1,844
Thereafter	13,647
Total lease obligation	25,463
Less: Imputed interest	(6,687)
Total lease liabilities	18,776
Less: Current lease liabilities	(2,247)
Total non-current lease liabilities	$	16,529

SHAREHOLDERS’ EQUITY	6 Months Ended
SHAREHOLDERS’ EQUITY	Jun. 30, 2023
Equity [Abstract]
SHAREHOLDERS’ EQUITY	SHAREHOLDERS’ EQUITY As of June 30, 2023 and December 31, 2022, the Company’s share capital consists of one class of issued and outstanding shares: common shares. The Company is also authorized to issue preferred shares issuable in series. To date, no shares of preferred shares have been issued or are outstanding. Common Shares As of June 30, 2023 and December 31, 2022, the Company was authorized to issue an unlimited number of common shares, which have no par value.

INCOME (LOSS) PER SHARE

6 Months Ended

Jun. 30, 2023

Earnings Per Share [Abstract]

INCOME (LOSS) PER SHARE

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

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income (loss)	$	2,844	$	(7,870)	$	(67)	$	(16,496)
Weighted-average number of common shares - basic	152,481,470		145,168,510		152,398,273		145,079,859
Dilutive effect of securities	278,618		—		—		—
Weighted-average number of common shares - diluted	152,760,088		145,168,510		152,398,273		145,079,859
Income (loss) per common share – basic	$	0.02	$	(0.05)	$	—	$	(0.11)
Income (loss) per common share – diluted	$	0.02	$	(0.05)	$	—	$	(0.11)

When the Company recognizes a net loss, all potentially dilutive shares are anti-dilutive and are consequently excluded from the calculation of diluted net loss per share.

STOCK-BASED COMPENSATION

6 Months Ended

Jun. 30, 2023

Share-Based Payment Arrangement [Abstract]

SHARE-BASED COMPENSATION

Stock options


	Six Months Ended June 30,
	2023	2022
Expected volatility	88.8%	83.4%
Expected term (years)	5.5-6.5	5.5-6.5
Risk-free interest rate	3.4%	3.3%
Expected dividend yield	0%	0%
Value of underlying share	$0.36	$0.31


	Number of Options	Weighted- Average Exercise Price per Option		Weighted- Average Remaining Contract Term (in years)	Aggregate Intrinsic Value
Outstanding as of December 31, 2022	3,957,027	$	1.52	8.37	$	46,800
Granted	3,748,671	0.38
Exercised	—	—
Forfeited (and expired)	(692,991)	2.28
Outstanding as of June 30, 2023	7,012,707	$	0.83	8.99	$	—

Exercisable/vested as of June 30, 2023	2,554,000	$	1.21	7.53	$	—

The weighted average grant-date fair value of options granted during the six months ended June 30, 2023 and 2022 was $0.38 and $1.14, respectively.

The weighted average share price at the date of exercise of options exercised during the six months ended June 30, 2023 and 2022 was $0, respectively.

Restricted share units

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


	Number of Shares	Weighted- Average Grant Date Fair Value
Outstanding as of December 31, 2022	2,569,574	$	0.98
Granted	1,249,548	$	0.38
Forfeited	(299,370)	$	1.42
Vested	(690,092)	$	1.26
Shares withheld upon vesting	(152,198)	$	0.85
Outstanding as of June 30, 2023	2,677,462	$	0.67

Share-based Compensation Expense

INCOME TAXES	6 Months Ended
INCOME TAXES	Jun. 30, 2023
Income Tax Disclosure [Abstract]
INCOME TAXES	INCOME TAXES The Company’s effective tax rate in the three and six months ended June 30, 2023 and 2022 was 0%. The Company’s effective tax rates differ from the U.S. federal statutory rate of 21.0% for the three and six months end June 30, 2023 and 2022, respectively, primarily due to the valuation allowance. The effective tax rate for the three and six months ended June 30, 2023 is consistent with the three and six months ended June 30, 2022, as the Company has been in a full valuation allowance for both periods. As of December 31, 2022, the Company qualified for federal government assistance through employee retention credit (“ERC”) provisions of the Consolidated Appropriations Act of 2021. Management recorded the ERC benefit of $4,106 for the year ended December 31, 2022 as an offset to Selling, general and administrative expense. During the three months ending June 30, 2023, the company received $4,261, which includes $155 of interest income, related to the ERC.

RELATED PARTY TRANSACTIONS	6 Months Ended
RELATED PARTY TRANSACTIONS	Jun. 30, 2023
Related Party Transactions [Abstract]
RELATED PARTY TRANSACTIONS	RELATED PARTY TRANSACTIONS Effective November 2020, the Company entered into a secured promissory note, where $1,000 was loaned to one of the founders. The note receivable was secured by equity instruments with certain founders of the Company, and bore interest at 3.25% per annum, and required the unpaid principal and unpaid interest balances to be paid on or before the maturity date of November 13, 2021. On March 22, 2022, the founders requested an extension of the maturity date, as allowed under the terms of the promissory note, resulting in an extension of the maturity date to November 13, 2023. According to the terms of the agreement, no additional interest will accrue through the payment date. As of June 30, 2022, the note receivable of $1,037 consisted of principal and interest. As of December 31, 2022, the Company established a reserve against the note receivable due to decline in collateral and risk associated with collectability and therefore, expensed the outstanding balance of $1,037. On March 2, 2021, the Company entered into the SBH Purchase Option with Stanley Brothers USA as discussed above (Note 3). The SBH Purchase Option was purchased for a total consideration of $8,000. Certain founders of the Company, who are or were employees 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 (the “Brand License and Option Agreement”), an entity owned by one of the Company’s founders. Pursuant to the Brand License and Option Agreement, the Company licenses certain intellectual property from JMS Brands LLC, for an annual license fee of $500. Pursuant to the terms of the agreement, the Company has the option to purchase the intellectual property rights for $2,000. On April 6, 2023, the Company jointly formed an entity, DeFloria, with AJNA and BAT. AJNA is a botanical drug development company. AJNA is partially owned and was co-founded by a co-founder of Charlotte's Web. BAT holds an equity interest in the entity in the form of 200,000 preferred units following its $10 million investment and has the right to participate in future equity issuances to maintain its pro rata equity position. The Company and AJNA each hold 400,000 of the entity’s voting common units (Note 3). Effective May 1, 2023, the Company entered into an 8% interest bearing note receivable with DeFloria for the bill of sale of lab equipment in the amount of $170. The principal and interest of the note receivable will be paid in 36 monthly installments. As of June 30, 2023, the remaining note receivable of $156 is presented in other assets in the condensed consolidated balance sheets. Pursuant to an amendment to the Name and Likeness and License Agreement between the Company and Leeland & Sig LLC d/b/a Stanley Brothers Brand Company, the agreement was extended to December 31, 2023. The agreement includes the payment of a nominal per diem fee for specifically requested activities as brand ambassadors for the Company. In addition, on April 16, 2021, the Company executed a separate consulting agreement which extended the services agreements of the Stanley Brothers for a period of one year, expiring July 31, 2022. Upon execution of the consulting agreement, the Company paid $2,081 to Leeland & Sig LLC d/b/a Stanley Brothers Brand Company, on behalf of the Stanley Brothers, as consideration for the consulting services to be provided to the Company over the term of the agreement and certain restrictive covenants. For the three and six months ended June 30, 2022, the Company recognized $454 and $875, respectively, of sales and marketing expenses in the condensed consolidated statements of operations related to these agreements.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND USE OF ESTIMATES (Policies)	6 Months Ended
	Jun. 30, 2023
Accounting Policies [Abstract]
Basis of Presentation	Basis of Presentation The accompanying unaudited interim condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification ("ASC") and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”). In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements include all normal and recurring adjustments (which consist primarily of accruals, estimates and assumptions that impact the financial statements) considered necessary to present fairly the Company’s financial position as of June 30, 2023 and its results of operations for the three and six months ended June 30, 2023 and 2022, cash flows for the six months ended June 30, 2023 and 2022, and stockholders’ equity for the three and six months ended June 30, 2023 and 2022. Operating results for the three and six months ended June 30, 2023, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2023. The unaudited interim condensed consolidated financial statements presented herein do not contain the required disclosures under GAAP for annual consolidated financial statements. Certain amounts presented in prior periods have been reclassified to conform with the current period presentation. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and related notes as of and for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 23, 2023.
Inventories	Inventories Inventories are stated at the lower of cost or net realizable value. The Company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions. The Company's inventory production process for cannabinoid products includes the cultivation of botanical raw material. Due to the duration of the cultivation process, a portion of the inventory will not be sold within one year. Consistent with the practice in other industries that cultivate botanical raw materials, all inventory is classified as a current asset.
Revenue Recognition	Revenue RecognitionThe 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 and wholesale business-to-business customers.
Recently Adopted Accounting Pronouncements	Recently Adopted Accounting Pronouncements As of June 30, 2023, there are no new accounting pronouncements adopted or issued by the FASB that had or may have a material impact on the Company’s condensed consolidated financial statements.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND USE OF ESTIMATES (Tables)

6 Months Ended

Jun. 30, 2023

Accounting Policies [Abstract]

Disaggregation of revenue

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Direct-to-consumer	$	10,734	$	13,277	$	22,002	$	26,415
Business-to-business	5,272		5,600		11,014		11,819
Total	$	16,006	$	18,877	$	33,016	$	38,234

FAIR VALUE MEASUREMENT (Tables)

6 Months Ended

Jun. 30, 2023

Fair Value Disclosures [Abstract]

Financial instruments measured at fair value on a recurring basis


	June 30, 2023
	Level 1		Level 2		Level 3		Total
Financial assets:
Stanley Brothers USA Holdings Purchase Option	$	—	$	—	$	2,057	$	2,057
Debt interest rate conversion feature	—		—		836		836
Total Financial Assets	$	—	$	—	$	2,893	$	2,893

Investment in unconsolidated entity:	$	—	$	—	$	10,700	$	10,700

Financial liabilities:
Debt conversion option	$	—	$	2,815	$	—	$	2,815


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Financial assets:
Stanley Brothers USA Holdings Purchase Option	$	—	$	—	$	2,300	$	2,300
Debt interest rate conversion feature	—		—		1,320		1,320
Total Financial Assets	$	—	$	—	$	3,620	$	3,620

Financial liabilities:
Debt conversion option	$	—	$	12,995	$	—	$	12,995

Measurement Inputs

The following additional assumptions are used in the model:


			June 30,
			2023
Expected term (years)			6.77
Volatility			66.0%
Risk-free interest rate			4.0%
Expected dividend yield			—%
Discount for lack of marketability			20.0%

The following additional assumptions are used in the model:


	June 30,	December 31,
	2023	2022
Stated interest rate	5.0%	5.0%
Adjusted interest rate	1.5%	1.5%
Implied debt yield	10.8%	8.6%
Federal regulation probability	various	15.0%
Year of event	various	2025

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


	June 30,	December 31,
	2023	2022
Expected volatility	87.4%	86.7%
Expected term (years)	6.3	6.9
Risk-free interest rate	4.0%	4.0%
Expected dividend yield	—%	—%
Value of underlying share	C$0.23	C$0.73
Exercise price	C$2.00	C$2.00


	June 30,	December 31,
	2023	2022
Expected volatility	120.0%	115.0%
Expected term (years)	2.7	2.7
Risk-free interest rate	4.6%	4.3%
Weighted average cost of capital	45.0%	40.0%

INVENTORIES (Tables)

6 Months Ended

Jun. 30, 2023

Inventory Disclosure [Abstract]

Inventories

Inventories consist of the following:


	June 30,		December 31,
	2023		2022
Harvested hemp and seeds	$	20,991	$	34,763
Raw materials	10,440		10,960
Finished goods	10,071		13,237
	41,502		58,960
Less: inventory provision	(17,747)		(32,007)
Total inventory	$	23,755	$	26,953

LICENSE AND MEDIA RIGHTS (Tables)

6 Months Ended

Jun. 30, 2023

Commitments and Contingencies Disclosure [Abstract]

Schedule of License Liability Maturity

Maturities of the MLB license and media rights payable as of June 30, 2023 are as follows:


Year Ending December 31:
2023 (6 months remaining)	$	4,000
2024	10,000
2025	12,000
Total payments	$	26,000
Less: Imputed interest	(1,298)
Total license and media rights payable	$	24,702
Less: Current license liabilities	(8,833)
Total non-current license and media rights payable	$	15,869

Expected Amortization of intangible assets

As of June 30, 2023, expected amortization of licensed properties are as follows:


Year Ending December 31:
2023 (6 months remaining)	$	3,647
2024	7,294
2025	7,294
Total future amortization	$	18,235

Debt (Tables)

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

Convertible Debenture

The following is a summary of the Company's convertible debenture as of June 30, 2023:


	As of June 30, 2023
	Principal Amount		Unamortized Debt Discount and Costs		Net Carrying Amount
Convertible Debenture	Principal Amount		Unamortized Debt Discount and Costs		Net Carrying Amount
Convertible debenture due November 2029	$	58,677	$	(18,370)	$	40,307

The following is a summary of the Company's convertible debenture as of December 31, 2022:


	As of December 31, 2022
	Principal Amount		Unamortized Debt Discount and Costs		Net Carrying Amount
Convertible Debenture	Principal Amount		Unamortized Debt Discount and Costs		Net Carrying Amount
Convertible debenture due November 2029	$	56,080	$	(18,659)	$	37,421

Summary of Interest Expense

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


	Three Months Ended		Six Months Ended
	June 30,		June 30,
Interest and Amortization Expense	2023		2023
Interest expense	$	701	$	1,398
Amortization of debt discounts and costs	349		668
Total	$	1,050	$	2,066

LEASES (Tables)

6 Months Ended

Jun. 30, 2023

Leases [Abstract]

Maturities of Operating Lease Liabilities

Maturities of operating lease liabilities as of June 30, 2023 are as follows:


	Operating Leases
Year Ending December 31:
2023 (6 months remaining)	$	1,710
2024	3,201
2025	2,892
2026	2,169
2027	1,844
Thereafter	13,647
Total lease obligation	25,463
Less: Imputed interest	(6,687)
Total lease liabilities	18,776
Less: Current lease liabilities	(2,247)
Total non-current lease liabilities	$	16,529

INCOME (LOSS) PER SHARE (Tables)

6 Months Ended

Jun. 30, 2023

Earnings Per Share [Abstract]

Computation of basic and diluted net loss per share

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income (loss)	$	2,844	$	(7,870)	$	(67)	$	(16,496)
Weighted-average number of common shares - basic	152,481,470		145,168,510		152,398,273		145,079,859
Dilutive effect of securities	278,618		—		—		—
Weighted-average number of common shares - diluted	152,760,088		145,168,510		152,398,273		145,079,859
Income (loss) per common share – basic	$	0.02	$	(0.05)	$	—	$	(0.11)
Income (loss) per common share – diluted	$	0.02	$	(0.05)	$	—	$	(0.11)

SHARE-BASED COMPENSATION (Tables)

6 Months Ended

Jun. 30, 2023

Share-Based Payment Arrangement [Abstract]

Valuation Assumptions

The following principal inputs were used in the valuation of awards issued for the six months ended June 30, 2023 and 2022:


	Six Months Ended June 30,
	2023	2022
Expected volatility	88.8%	83.4%
Expected term (years)	5.5-6.5	5.5-6.5
Risk-free interest rate	3.4%	3.3%
Expected dividend yield	0%	0%
Value of underlying share	$0.36	$0.31

Schedule of Stock Option Activity


	Number of Options	Weighted- Average Exercise Price per Option		Weighted- Average Remaining Contract Term (in years)	Aggregate Intrinsic Value
Outstanding as of December 31, 2022	3,957,027	$	1.52	8.37	$	46,800
Granted	3,748,671	0.38
Exercised	—	—
Forfeited (and expired)	(692,991)	2.28
Outstanding as of June 30, 2023	7,012,707	$	0.83	8.99	$	—

Exercisable/vested as of June 30, 2023	2,554,000	$	1.21	7.53	$	—

Schedule of Restricted Stock

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


	Number of Shares	Weighted- Average Grant Date Fair Value
Outstanding as of December 31, 2022	2,569,574	$	0.98
Granted	1,249,548	$	0.38
Forfeited	(299,370)	$	1.42
Vested	(690,092)	$	1.26
Shares withheld upon vesting	(152,198)	$	0.85
Outstanding as of June 30, 2023	2,677,462	$	0.67

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND USE OF ESTIMATES - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Disaggregation of Revenue [Line Items]
Revenue	$ 16,006	$ 18,877	$ 33,016	$ 38,234
Direct-to-consumer
Disaggregation of Revenue [Line Items]
Revenue	10,734	13,277	22,002	26,415
Business-to-business
Disaggregation of Revenue [Line Items]
Revenue	$ 5,272	$ 5,600	$ 11,014	$ 11,819

FAIR VALUE MEASUREMENT - Financial Instruments Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Financial assets:
Stanley Brothers USA Holdings Purchase Option	$ 2,057	$ 2,300
Debt interest rate conversion feature	836	1,320
Total Financial Assets	2,893	3,620
Investment in unconsolidated entity:	10,700	0
Financial liabilities:
Debt conversion option	2,815	12,995
Level 1
Financial assets:
Stanley Brothers USA Holdings Purchase Option	0	0
Debt interest rate conversion feature	0	0
Total Financial Assets	0	0
Investment in unconsolidated entity:	0
Financial liabilities:
Debt conversion option	0	0
Level 2
Financial assets:
Stanley Brothers USA Holdings Purchase Option	0	0
Debt interest rate conversion feature	0	0
Total Financial Assets	0	0
Investment in unconsolidated entity:	0
Financial liabilities:
Debt conversion option	2,815	12,995
Level 3
Financial assets:
Debt interest rate conversion feature	836	1,320
Total Financial Assets	2,893	3,620
Investment in unconsolidated entity:	10,700
Financial liabilities:
Debt conversion option	$ 0	$ 0

FAIR VALUE MEASUREMENT - Narrative (Details) $ / shares in Units, $ / shares in Units, $ in Thousands, $ in Millions		1 Months Ended	3 Months Ended			6 Months Ended
	Mar. 02, 2021 USD ($)	Jan. 31, 2021 USD ($)	Jun. 30, 2023 USD ($)	Mar. 31, 2023 USD ($)	Jun. 30, 2022 USD ($)	Jun. 30, 2023 USD ($)	Jun. 30, 2022 USD ($)	Jun. 30, 2023 $ / shares	Apr. 06, 2023 USD ($) $ / shares shares	Dec. 31, 2022 USD ($)	Nov. 14, 2022 USD ($)	Nov. 14, 2022 CAD ($) $ / shares	Dec. 31, 2021
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Change in fair value of financial instruments and other			$ 4,229		$ 0	$ 9,612	$ 100
Investment in DeFloria			10,700			10,700				$ 0
Debt interest rate conversion feature			836			836				1,320
Purchase option	$ 8,000	$ 8,000
Purchase option, term		5 years
Extension, term		2 years
Percentage of outstanding shares		10.00%
Warrants expiration period													60 days
Gain on change in fair value of purchase option			57	$ (243)	$ 0		$ 100
Stanley Brothers USA Holdings Purchase Option			2,057			2,057				2,300
DeFloria, LLC
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Equity method ownership percentage									50.00%
British American Tobacco \| DeFloria, LLC
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Preferred units ownership percentage									100.00%
AJNA Biosciences \| DeFloria, LLC
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Equity method ownership percentage									50.00%
DeFloria, LLC
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Preferred units (in shares) \| shares									400,000
Change in fair value of financial instruments and other			0			0
Investment in DeFloria			10,700			10,700
DeFloria, LLC \| Class A Common Stock
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants outstanding (in shares) \| shares									865,052
Warrants exercise price (in USD per share) \| $ / shares									$ 2.89
DeFloria, LLC \| British American Tobacco
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Preferred units (in shares) \| shares									200,000
Capital contributed									$ 10,000
DeFloria, LLC \| AJNA Biosciences
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Preferred units (in shares) \| shares									400,000
Debt Conversion Option
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Unrealized gain (loss) on hedging instruments			(4,066)			(10,361)
Derivatives and other liabilities, noncurrent			2,815			2,815				12,995
Level 3
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment in DeFloria			10,700			10,700
Debt interest rate conversion feature			836			836				1,320
Debt Interest Rate Conversion Feature
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Unrealized gain (loss) on hedging instruments			$ 106			$ (506)
BAT Group
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Convertible ownership percentage			19.90%			19.90%					19.90%	19.90%
Conversion price (in CAD per share) \| $ / shares								$ 2.00				$ 2.00
BAT Group \| Minimum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Accrued interest rate, percentage											5.00%	5.00%
BAT Group \| Maximum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Accrued interest rate, percentage											1.50%	1.50%
BAT Group \| Convertible Notes Payable
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Principal Amount			$ 58,677			$ 58,677				$ 56,080	$ 56,800	$ 75.3

FAIR VALUE MEASUREMENT - Fair Value Measurement Joint Venture (Details) - DeFloria, LLC	Jun. 30, 2023 year
Expected term (years)
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Joint venture, measurement input	6.77
Expected volatility
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Joint venture, measurement input	0.660
Risk-free interest rate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Joint venture, measurement input	0.040
Expected dividend yield
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Joint venture, measurement input	0
Discount for lack of marketability
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Joint venture, measurement input	0.200

FAIR VALUE MEASUREMENT - Fair Value Measure Inputs Debt Interest Rate Conversion Option (Details) - Level 3	Jun. 30, 2023	Dec. 31, 2022
Stated interest rate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants, measurement input	0.050	0.050
Adjusted interest rate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants, measurement input	0.015	0.015
Implied debt yield
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants, measurement input	0.108	0.086
Federal regulation probability
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants, measurement input		0.150

FAIR VALUE MEASUREMENT - Schedule of Level 2 Fair Value Measurements (Details) - Level 2	Jun. 30, 2023 CAD ($)	Dec. 31, 2022 CAD ($)
Expected volatility
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants, measurement input	0.874	0.867
Expected term (years)
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants, measurement input	6.3	6.9
Risk-free interest rate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants, measurement input	0.040	0.040
Expected dividend yield
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants, measurement input	0	0
Value of underlying share
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants, measurement input	0.23	0.73
Exercise price
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants, measurement input	2.00	2.00

FAIR VALUE MEASUREMENT - Fair Value Measurement Inputs - Purchase Option (Details)	Jun. 30, 2023 year	Dec. 31, 2022 year
Expected volatility
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Purchase option, measurement input	1.200	1.150
Expected term (years)
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Purchase option, measurement input	2.7	2.7
Risk-free interest rate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Purchase option, measurement input	0.046	0.043
Weighted average cost of capital
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Purchase option, measurement input	0.450	0.400

INVENTORIES (Details) - USD ($) $ in Thousands	6 Months Ended
INVENTORIES (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Inventory Disclosure [Abstract]
Harvested hemp and seeds	$ 20,991	$ 34,763
Raw materials	10,440	10,960
Finished goods	10,071	13,237
Inventory, gross	41,502	58,960
Less: inventory provision	(17,747)	(32,007)
Inventories, net	23,755	$ 26,953
Reduction in inventory provision	$ 12,899

LICENSE AND MEDIA RIGHTS - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2023	Dec. 31, 2022
Other Commitments [Line Items]
Licensed Properties	$ 18,235	$ 18,235	$ 23,399
License and media rights	7,232	7,232	7,482
License and media rights	22,968	22,968	$ 26,871
Licensing Agreements
Other Commitments [Line Items]
Amortization	2,074	3,897
Major League Baseball Properties Inc \| Collaborative Arrangement, Transaction with Party to Collaborative Arrangement
Other Commitments [Line Items]
Payments for license fee	$ 2,000	$ 4,000

LICENSE AND MEDIA RIGHTS - Schedule of License Liability Maturity (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Other Commitments [Line Items]
Less: Current license liabilities	$ (8,833)	$ (7,759)
Total non-current license and media rights payable	15,869	$ 20,383
Licensing Agreements
Other Commitments [Line Items]
2023 (6 months remaining)	4,000
2024	10,000
2025	12,000
Total payments	26,000
Less: Imputed interest	(1,298)
Total license and media rights payable	$ 24,702

LICENSE AND MEDIA RIGHTS - Amortization of License (Details) - Licensing Agreements $ in Thousands	Jun. 30, 2023 USD ($)
Other Commitments [Line Items]
2023 (6 months remaining)	$ 3,647
2024	7,294
2025	7,294
Total future amortization	$ 18,235

DEBT (Details) - BAT Group $ / shares in Units, $ in Thousands, $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2023 USD ($)	Jun. 30, 2023 USD ($)	Jun. 30, 2023 $ / shares	Dec. 31, 2022 USD ($)	Nov. 14, 2022 USD ($)	Nov. 14, 2022 CAD ($) $ / shares
Line of Credit Facility [Line Items]
Convertible ownership percentage	19.90%	19.90%			19.90%	19.90%
Conversion price (in CAD per share) \| $ / shares			$ 2.00			$ 2.00
Interest Payable	$ 1,777	$ 1,777
Convertible Notes Payable
Line of Credit Facility [Line Items]
Principal Amount	58,677	58,677		$ 56,080	$ 56,800	$ 75.3
Foreign currency gain	$ 831	$ 820
Minimum
Line of Credit Facility [Line Items]
Accrued interest rate, percentage					5.00%	5.00%
Maximum
Line of Credit Facility [Line Items]
Accrued interest rate, percentage					1.50%	1.50%

DEBT - Summary of Convertible Debenture (Details) - BAT Group - Convertible Notes Payable $ in Thousands, $ in Millions	Jun. 30, 2023 USD ($)	Dec. 31, 2022 USD ($)	Nov. 14, 2022 USD ($)	Nov. 14, 2022 CAD ($)
Line of Credit Facility [Line Items]
Principal Amount	$ 58,677	$ 56,080	$ 56,800	$ 75.3
Unamortized Debt Discount and Costs	(18,370)	(18,659)
Net Carrying Amount	$ 40,307	$ 37,421

DEBT - Summary of Interest Expense (Details) - BAT Group - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2023
Line of Credit Facility [Line Items]
Interest expense	$ 701	$ 1,398
Amortization of debt discounts and costs	349	668
Total	$ 1,050	$ 2,066

LEASES - Narrative (Details)	Jun. 30, 2023
Lessee, Lease, Description [Line Items]
Renewal term	5 years
Minimum
Lessee, Lease, Description [Line Items]
Remaining lease terms	5 months
Maximum
Lessee, Lease, Description [Line Items]
Remaining lease terms	11 years 8 months 1 day

LEASES - Maturities of Operating Lease Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Year Ending December 31:
2023 (6 months remaining)	$ 1,710
2024	3,201
2025	2,892
2026	2,169
2027	1,844
Thereafter	13,647
Total lease obligation	25,463
Less: Imputed interest	(6,687)
Total lease liabilities	18,776
Less: Current lease liabilities	(2,247)	$ (2,306)
Total non-current lease liabilities	$ 16,529	$ 17,905

INCOME (LOSS) PER SHARE - Basic and Diluted (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2023	Mar. 31, 2023	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2023	Jun. 30, 2022
Earnings Per Share [Abstract]
Net loss	$ 2,844	$ (2,912)	$ (7,870)	$ (8,626)	$ (67)	$ (16,496)
Weighted-average number of common shares - basic (in shares)	152,481,470		145,168,510		152,398,273	145,079,859
Dilutive effect of stock options and awards (in shares)	278,618		0		0	0
Weighted-average number of common shares - diluted (in shares)	152,760,088		145,168,510		152,398,273	145,079,859
Loss per common share - basic (in usd per share)	$ 0.02		$ (0.05)		$ 0	$ (0.11)
Loss per common share - diluted (in usd per share)	$ 0.02		$ (0.05)		$ 0	$ (0.11)

INCOME (LOSS) PER SHARE - Narrative (Details) - $ / shares	3 Months Ended
	Jun. 30, 2023	Nov. 14, 2022
Line of Credit Facility [Line Items]
Potentially dilutive awards (in shares)	9,411,551
BAT Group
Line of Credit Facility [Line Items]
Convertible ownership percentage	19.90%	19.90%
Conversion price (in CAD per share)	$ 2.00	$ 2.00

SHARE-BASED COMPENSATION - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted, weighted average grant-date fair value (in usd per share)			$ 0.38	$ 1.14
Options exercised, weighted average share price (in usd per share)			$ 0	$ 0
Fair value of shares vested			$ 872	$ 625
Share-based compensation expense	$ 624	$ 643	999	$ 2,022
Unrecognized share based compensation expense	$ 4,074		$ 4,074
Unrecognized share based compensation expense, period for recognition			2 years 5 months 26 days
Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Prescribed service period			4 years
Restricted share units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			4 years

SHARE-BASED COMPENSATION - Fair Value Inputs (Details) - $ / shares	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility	88.80%	83.40%
Risk-free interest rate	3.40%	3.30%
Expected dividend yield	0.00%	0.00%
Value of underlying share (in usd per share)	$ 0.36	$ 0.31
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (years)	5 years 6 months	5 years 6 months
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (years)	6 years 6 months	6 years 6 months

SHARE-BASED COMPENSATION - Options Outstanding (Details) - USD ($)	6 Months Ended		12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Number of Options
Outstanding (in shares)	3,957,027
Granted (in shares)	3,748,671
Exercised (in shares)	0
Forfeited (and expired) (in shares)	(692,991)
Outstanding (in shares)	7,012,707		3,957,027
Exercisable/vested (in shares)	2,554,000
Weighted-Average Exercise Price Per Option
Outstanding (in usd per share)	$ 0.83		$ 1.52
Granted (in usd per share)	0.38	$ 1.14
Exercised (in usd per share)	0
Forfeited (and expired) (in usd per share)	2.28
Outstanding (in usd per share)	0.83		$ 1.52
Exercisable/vested (in usd per share)	$ 1.21
Weighted-Average Remaining Contract Term
Outstanding	8 years 11 months 26 days		8 years 4 months 13 days
Exercisable/vested	7 years 6 months 10 days
Aggregate Intrinsic Value
Outstanding	$ 0		$ 46,800
Exercisable/vested	$ 0

SHARE-BASED COMPENSATION - Restricted Share Units Outstanding (Details)	6 Months Ended
	Jun. 30, 2023 $ / shares shares
Number of Shares
Outstanding (in shares) \| shares	2,569,574
Granted (in shares) \| shares	1,249,548
Forfeited (in shares) \| shares	(299,370)
Vested (in shares) \| shares	(690,092)
Shares withheld upon vesting (in shares) \| shares	(152,198)
Outstanding (in shares) \| shares	2,677,462
Weighted-Average Grant Date Fair Value
Outstanding (in usd per share) \| $ / shares	$ 0.98
Granted (in usd per share) \| $ / shares	0.38
Forfeited (in usd per share) \| $ / shares	1.42
Vested (in usd per share) \| $ / shares	1.26
Shares withheld upon vesting (in usd per share) \| $ / shares	0.85
Outstanding (in usd per share) \| $ / shares	$ 0.67

INCOME TAXES (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
INCOME TAXES (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Income Tax Disclosure [Abstract]
Effective tax rate	0.00%	0.00%	0.00%	0.00%
Tax credit					$ 4,106
Income tax refund received	$ 4,261
Interest income	$ 155

RELATED PARTY TRANSACTIONS (Details) - USD ($) $ in Thousands					1 Months Ended	3 Months Ended		6 Months Ended
	May 01, 2023	Apr. 16, 2021	Mar. 02, 2021	Nov. 30, 2020	Jan. 31, 2021	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Apr. 06, 2023	Jan. 05, 2023	Dec. 31, 2022
Related Party Transaction [Line Items]
Accounts receivable, net						$ 2,479		$ 2,479				$ 1,847
Note receivable interest rate				3.25%
Purchase option			$ 8,000		$ 8,000
License and media rights						22,968		22,968				26,871
Selling, general and administrative expenses						19,627	$ 17,259	37,140	$ 37,614
DeFloria, LLC
Related Party Transaction [Line Items]
Preferred units (in shares)										400,000
DeFloria, LLC \| AJNA Biosciences
Related Party Transaction [Line Items]
Preferred units (in shares)										400,000
DeFloria, LLC \| British American Tobacco
Related Party Transaction [Line Items]
Preferred units (in shares)										200,000
Capital contributed										$ 10,000
Related Party
Related Party Transaction [Line Items]
Accounts receivable, net				$ 1,000			$ 1,037		$ 1,037			$ 1,037
Note receivable interest rate	8.00%
Related Party Consulting Services
Related Party Transaction [Line Items]
Consulting agreement, extended term		1 year
Payments to related party		$ 2,081
Related Party Consulting Services \| Related Party
Related Party Transaction [Line Items]
Selling, general and administrative expenses						454		875
License Fee \| JMS Brands
Related Party Transaction [Line Items]
License and media rights											$ 500
Notes Receivable \| Related Party
Related Party Transaction [Line Items]
Other assets	$ 170					$ 156		$ 156
Related Party Licensing Agreement
Related Party Transaction [Line Items]
Intellectual property rights, purchae option											$ 2,000

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