Flora Growth Corp

Previous wording

Based in Australia, AV was founded in 2010 and has become one of the largest online retailers of vaporizers, hardware, and accessories in Australia. It is an online expert for aromatherapy products, specializing in dry herb vaporizers. It has been providing vapes, accessories and knowledge to enthusiasts and newcomers alike through its website www.australianvaporizers.com.

Current wording

Based in Australia, AV was founded in 2010 and has become one of the largest online retailers of vaporizers, hardware, and accessories in Australia. It is an online expert for aromatherapy products, specializing in dry herb vaporizers. It has been providing vaporizers, accessories and knowledge to enthusiasts and newcomers alike through its website www.australianvaporizers.com. Due to new regulations by the Australian government, AV is in the process of modifying its business model to sell more products to pharmacies and wholesalers.

Previous wording

Consistent profitability and positive operating cash flows. A key determinant of the Company's success is to deliver profitable results and positive cashflows from operating activities. The Company's results have not yet achieved the prerequisite consistency to achieve self-sufficiency. Since its inception, only the third quarter of 2023 yielded net income and positive cashflows from operating activities. There is no assurance that the Company will be able to produce adequate levels of sustained profitability and cash flow positive, or at all. These factors, amongst others, raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are described in Note 2 of the Company's unaudited condensed interim consolidated financial statements for the three and six months ended June 30, 2024. For more information, see Item 1A "Risk Factors" in the Company’s 2023 Annual Report.

Current wording

Consistent profitability and positive operating cash flows. A key determinant of the Company's success is to deliver profitable results and positive cashflows from operating activities. The Company's results have not yet achieved the prerequisite consistency to achieve self-sufficiency. Since its inception, only the third quarter of 2023 yielded net income and positive cashflows from operating activities. There is no assurance that the Company will be able to produce adequate levels of sustained profitability and cash flow positive, or at all. These factors, amongst others, raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are described in Note 2 of the Company's unaudited condensed interim consolidated financial statements for the three and nine months ended September 30, 2024. For more information, see Item 1A "Risk Factors" in the Company's 2023 Annual Report.

Previous wording

After giving effect to Mr. Cahill's appointment, the audit committee of the Board has three independent members as required by Nasdaq Listing Rule 5605(c)(2)(A). As a result of the foregoing, the Company has regained compliance with the audit committee composition requirements of Nasdaq Listing Rule 5605(c)(2)(A).

Current wording

After giving effect to Mr. Cahill's appointment, the audit committee of the Board has three independent members as required by Nasdaq Listing Rule 5605(c)(2)(A). As a result of the foregoing, the Company regained compliance with the audit committee composition requirements of Nasdaq Listing Rule 5605(c)(2)(A).

Previous wording

The Company's operates its manufacturing and distribution business through its subsidiaries in the United States, Germany and Australia. Until the sale of the Colombia Assets, the Company also was engaged in the growth, cultivation, and development of medicinal cannabis and medicinal cannabis derivative products in Colombia.

Current wording

The Company operates its manufacturing and distribution business through its subsidiaries in the United States, Germany and Australia. Until the sale of the Colombia Assets, the Company also was engaged in the growth, cultivation, and development of medicinal cannabis and medicinal cannabis derivative products in Colombia.

Previous wording

Share-based compensation includes the cost of vesting of the Company's equity awards, including share options and restricted share awards.

Current wording

Share based compensation includes the cost of vesting of the Company's equity awards, including share options, restricted share awards and stock appreciation rights.

Previous wording

Loss from discontinued operations includes the net loss, net of tax, of the Colombian subsidiaries sold on July 5, 2023 and on November 1, 2023. It also includes an expected loss on the disposal as the carrying value of the assets being sold exceeded the expected sale price.

Current wording

Income (loss) from discontinued operations includes the net loss, net of tax, of the Colombian subsidiaries sold on July 5, 2023 and on November 1, 2023. It also includes an expected loss on the disposal as the carrying value of the assets being sold exceeded the expected sale price.

Previous wording

The following tables provide sets forth the Company's consolidated results of operations for the three and six months ended June 30, 2024 and 2023 (in thousands). The period-to-period comparisons of the Company's historical results are not necessarily indicative of the results that may be expected in the future. The results of operations data have been derived from our unaudited condensed interim consolidated financial statements for the three and six months ended June 30, 2024 and 2023 included elsewhere in this Quarterly Report.

Current wording

The following tables provide sets forth the Company's consolidated results of operations for the three and nine months ended September 30, 2024 and 2023 (in thousands). The period-to-period comparisons of the Company's historical results are not necessarily indicative of the results that may be expected in the future. The results of operations data have been derived from our unaudited condensed interim consolidated financial statements for the three and nine months ended September 30, 2024 and 2023 included elsewhere in this Quarterly Report.

Previous wording

The Company estimates that the disruption from these stop sale orders had an unfavorable impact of $0.7 million on revenue during the six months ended June 30, 2024. The total value of inventory impacted by the stop sale orders was $1.9 million. As per the agreement with the Department, all of the impacted inventory has been moved and is being sold outside the state of Florida.

Current wording

The Company estimates that the disruption from these stop sale orders had an unfavorable impact of $0.7 million on revenue during the nine months ended September 30, 2024. The total value of inventory impacted by the stop sale orders was $1.9 million. As per the agreement with the Department, all of the impacted inventory has been moved and is being sold outside the state of Florida.

Previous wording

JustCBD contributed $4.4 million in the three months ended June 30, 2024 compared to $9.0 million in the three months ended June 30, 2023. The decrease was driven by the Company's decision to discontinue several unprofitable product lines during 2023, increased competition and market saturation.

Current wording

JustCBD contributed $4.2 million in the three months ended September 30, 2024 compared to $6.5 million in the three months ended September 30, 2023. The decrease was driven by the Company's decision to discontinue several unprofitable product lines during 2023, increased competition and market saturation.

Previous wording

Vessel contributed $1.4 million in the three months ended June 30, 2024, compared to $1.7 million in the three months ended June 30, 2023.

Current wording

Vessel contributed $1.1 million in the three months ended September 30, 2024, compared to $1.7 million in the three months ended September 30, 2023.

Previous wording

Gross profit totaled $3.2 million and $4.0 million for the three months ended June 30, 2024 and 2023, respectively. The decrease was primarily driven by the decreased sales at JustCBD, which contributed $1.5 million in the three months ended June 30, 2024 compared to $3.0 million in the three months ended June 30, 2023. In addition, $0.7 million of inventory impairment was recorded at JustCBD in the three months ended June 30, 2024 related to inventory theft and recoveries of stolen inventory that is no longer saleable. The remaining fluctuation is due to increased gross margins at Vessel with $0.8 million in the three months ended June 30, 2024 compared to $0.6 million in the three months ended June 30, 2023, as well as at FGH with $0.8 million in the three months ended June 30, 2024 compared to $0.6 million in the three months ended June 30, 2023. AV was acquired in June 2024 and contributed $0.1 million during the three months ended June 30, 2024. As a percentage of net sales, or gross margin, the Company reported 20% and 18% for the three months ended June 30, 2024 and 2023, respectively. The increase is primarily due to better margins at FGH and Vessel.

Current wording

Gross profit totaled $2.8 million and $4.9 million for the three months ended September 30, 2024 and 2023, respectively. The decrease was primarily driven by the decreased sales at JustCBD, which contributed $1.7 million in the three months ended September 30, 2024 compared to $3.4 million in the three months ended September 30, 2023, Vessel, which contributed $0.6 million in the three months ended September 30, 2024 compared to $1.0 million in the three months ended September 30, 2023, and FGH, which contributed $0.5 million in the three months ended September 30, 2024 compared to $0.5 million in the three months ended September 30, 2024. TruHC and AV were acquired in 2024 and contributed a total of less than $0.1 million during the three months ended September 30, 2024. As a percentage of net sales, or gross margin, the Company reported 23% and 29% for the three months ended September 30, 2024 and 2023, respectively. The decrease is primarily due to lower margins at JustCBD.

Previous wording

Operating expenses totaled $6.7 million and $44.0 million for the three months ended June 30, 2024 and June 30, 2023, respectively. The decrease was primarily driven by increased asset impairments recorded in the three months ended June 30, 2023.

Current wording

Operating expenses totaled $6.5 million and $5.5 million for the three months ended September 30, 2024 and September 30, 2023, respectively. The increase was primarily driven by increased stock based compensation and asset impairments recorded in the three months ended September 30, 2024.

Previous wording

Consulting and management fees were $4.7 million for the six months ended June 30, 2024 compared to $7.3 million for the six months ended June 30, 2023. These fees are related to employment and consulting contracts with most of the Company's management, as well as directors. The decrease is primarily due to a substantial reduction in the Company's total headcount across all its business units.

Current wording

Consulting and management fees were $2.5 million for the three months ended September 30, 2024 compared to $2.3 million for the three months ended September 30, 2023. These fees are related to employment and consulting contracts with most of the Company's management, as well as directors. The increase is primarily due to sales commissions paid at FGH during the three months ended September 30, 2024.

Previous wording

Professional fees totaled $1.6 million for the six months ended June 30, 2024 compared to $0.7 million for the six months ended June 30, 2023. These expenses are associated with legal, accounting and audit services. The increase is due to costs related to the acquisitions of TruHC and AV during the six months ended June 30, 2024, as well as credit memos received during the six months ended June 30, 2023.

Current wording

Professional fees totaled $0.7 million for the three months ended September 30, 2024 compared to $0.4 million for the three months ended September 30, 2023. These expenses are associated with legal, accounting and audit services. The increase is due to increased legal and audit fees during the three months ended September 30, 2024.

Previous wording

General and administrative expenses totaled $0.6 million for the three months ended June 30, 2024 compared to $0.7 million for the three months ended June 30, 2023. The primary expenses included in both periods were filing services and shareholder communications, as well as professional dues and subscriptions.

Current wording

General and administrative expenses totaled $0.4 million for the three months ended September 30, 2024 compared to $0.3 million for the three months ended September 30, 2023. The primary expenses included in both periods were filing services and shareholder communications, as well as professional dues and subscriptions.

Previous wording

Promotion and communication expenses totaled $2.2 million for the six months ended June 30, 2024 compared to $2.6 million for the six months ended June 30, 2023. The decrease is due to reduced sales as well as cost-cutting initiatives by the Company aimed at reducing corporate overhead. Promotion expenses incurred in the period largely relate to the nature of JustCBD's business model, which is centered around promoting its products as a method for stimulating revenue growth.

Current wording

Promotion and communication expenses totaled $1.2 million for the three months ended September 30, 2024 compared to $1.1 million for the three months ended September 30, 2023. Promotion expenses incurred in the period largely relate to the nature of JustCBD's business model, which is centered around promoting its products as a method for stimulating revenue growth.

Previous wording

Share based compensation expenses totaled less than $0.1 million for the three months ended June 30, 2024 compared to $0.3 million for the three months ended June 30, 2023. These expenses represent the amortization of the fair value of share-based payments. The decrease is primarily due to the granting of fewer stock-based compensation awards during 2023 as well as a substantial reduction in total headcount across all its business units.

Current wording

Share based compensation expenses totaled $0.4 million for the three months ended September 30, 2024 compared to less than $0.1 million for the three months ended September 30, 2023. These expenses represent the amortization of the fair value of share-based payments. The increase is primarily due to the granting of stock appreciation rights during the three months ended September 30, 2024.

Previous wording

Depreciation and amortization expenses totaled $0.3 million for the three months ended June 30, 2024 compared to $0.9 million for the three months ended June 30, 2023. The decrease is primarily due to the impairment recorded on the Company's long-lived assets during 2023, causing reduced depreciation and amortization in 2024, partially offset by the acquisitions of TruHC and AV during the three months ended June 30, 2024.

Current wording

Depreciation and amortization expenses totaled $0.2 million for the three months ended September 30, 2024 compared to $0.3 million for the three months ended September 30, 2023. The decrease is primarily due to the impairment recorded on the Company's long-lived assets during 2023, causing reduced depreciation and amortization in 2024, partially offset by the acquisitions of TruHC and AV during 2024.

Previous wording

Bad debt expense totaled $0.2 million for the six months ended June 30, 2024 compared to less than $0.1 million for the six months ended June 30, 2023. The amounts reflect the Company's estimate of lifetime expected losses related to outstanding trade receivables.

Current wording

Bad debt expense totaled less than $0.1 million for both the three months ended September 30, 2024 and the three months ended September 30, 2023. The amounts reflect the Company's estimate of lifetime expected losses related to outstanding trade receivables.

Previous wording

Asset impairment totaled $0.2 million for the three months ended June 30, 2024 compared to $34.9 million for the three months ended June 30, 2023. The amount for the three months ended June 30, 2024 represents impairment of the property, plant and equipment at JustCBD as well as the patents at Vessel. The amount for the three months ended June 30, 2023 represents impairment of the goodwill at JustCBD and FGH and the long-lived assets at Vessel, JustCBD and FGH.

Current wording

Asset impairment totaled $0.4 million for the three months ended September 30, 2024 compared to $nil for the three months ended September 30, 2023. The amount for the three months ended September 30, 2024 represents impairment of the goodwill and brands at AV.

Previous wording

Other expenses totaled $0.5 million for the three months ended June 30, 2024 compared to $1.1 million for the three months ended June 30, 2023. For both periods, these expenses consist mainly of insurance, repairs and maintenance and royalties partially offset by miscellaneous incomes. The decrease is due to lower royalty fees and increased sublease income during the three months ended June 30, 2024.

Current wording

Other expenses totaled $0.3 million for the three months ended September 30, 2024 compared to $0.6 million for the three months ended September 30, 2023. For both periods, these expenses consist mainly of insurance, repairs and maintenance and royalties partially offset by miscellaneous incomes. The decrease is due to increased sublease income during the three months ended September 30, 2024.

Previous wording

Flora realized $0.8 million in non-operating income for the three months ended June 30, 2024 compared to non-operating income of $2.0 million for the three months ended June 30, 2023. These incomes consist of unrealized gains from changes in fair value, interest (income) expense and foreign exchange loss (gain). The decrease in income is primarily due to a $0.8 million gain on the value of the contingent consideration related to the JustCBD acquisition during the three months ended June 30, 2024 compared to a $2.0 million gain during the three months ended June 30, 2023.

Current wording

Flora realized $0.3 million in non-operating loss for the three months ended September 30, 2024 compared to non-operating income of $1.1 million for the three months ended September 30, 2023. These amounts consist of unrealized (losses) gains from changes in fair value, interest (income) expense and foreign exchange loss (gain). The increase in loss is primarily due to a $0.3 million loss on the value of the contingent consideration related to the JustCBD acquisition during the three months ended September 30, 2024 compared to a $0.8 million gain during the three months ended September 30, 2023.

Previous wording

The Company recognized less than $0.1 million and $1.1 million in income tax benefit for the three months ended June 30, 2024 and 2023, respectively. The Company's effective tax rate during the periods ended June 30, 2024 and 2023 was 1.3% and 2.9%, respectively. We maintain valuation allowances when it is more likely than not that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in the tax provision in the period of change. In determining whether a valuation allowance is required, we consider such factors as prior earnings history, expected future earnings, carry-back and carry-forward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. We continue to believe our deferred tax assets are not more-likely-than-not to be realized and a full valuation allowance remains recorded against net deferred taxes as of June 30, 2024 and 2023. The income tax benefit in the three months ended June 30, 2023 is primarily related to the tax effect of the amortization and impairment on the intangible assets at FGH.

Current wording

The Company recognized $0.2 million and $0.1 million in income tax benefit for the three months ended September 30, 2024 and 2023, respectively. The Company's effective tax rate during the periods ended September 30, 2024 and 2023 was 4.0% and -8.8%, respectively. We maintain valuation allowances when it is more likely than not that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in the tax provision in the period of change. In determining whether a valuation allowance is required, we consider such factors as prior earnings history, expected future earnings, carry-back and carry-forward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. We continue to believe our deferred tax assets are not more-likely-than-not to be realized and a full valuation allowance remains recorded against net deferred taxes as of September 30, 2024 and 2023. The income tax benefit in the three months ended September 30, 2024 is primarily related to the tax effect of the amortization on the intangible assets at TruHC and AV. The income tax benefit in the three months ended September 30, 2023 is primarily related to the tax effect of the amortization and impairment on the intangible assets at FGH.

Previous wording

Loss from discontinued operations totaled $nil in the three months ended June 30, 2024 compared to loss from discontinued operations of $7.6 million in the three months ended June 30, 2023. The sale of the Colombian subsidiaries was completed during the third and fourth quarters of 2023.

Current wording

Income from discontinued operations totaled $nil in the three months ended September 30, 2024 compared to income from discontinued operations of $0.5 million in the three months ended September 30, 2023. The sale of the Colombian subsidiaries was completed during the third and fourth quarters of 2023.

Previous wording

Flora recorded a net loss of $6.0 million for the six months ended June 30, 2024 compared to a net loss of $48.5 million for the six months ended June 30, 2023. This decrease in net loss is driven by lower operating expenses and the loss from the disposed Colombia operations in 2023 partially offset by lower gross profit, non-operating income and income tax benefit.

Current wording

Flora recorded a net loss of $3.8 million for the three months ended September 30, 2024 compared to a net income of $1.1 million for the three months ended September 30, 2023. This increase in net loss is driven by lower gross profit, increased operating expenses and non-operating losses, and the income reported from the disposed Colombia operations in 2023.

Previous wording

JustCBD contributed $9.8 million in the six months ended June 30, 2024 compared to $18.8 million in the six months ended June 30, 2023. The decrease was driven by the Company's decision to discontinue several unprofitable product lines during 2023, increased competition and market saturation, as well as the stop sales orders discussed above.

Current wording

JustCBD contributed $14.0 million in the nine months ended September 30, 2024 compared to $25.3 million in the nine months ended September 30, 2023. The decrease was driven by the Company's decision to discontinue several unprofitable product lines during 2023, increased competition and market saturation, as well as the stop sales orders discussed above.

Previous wording

This was partially offset by an increase at FGH, which contributed $21.0 million in the six months ended June 30, 2024, compared to $18.7 million in the six months ended June 30, 2023.

Current wording

This was partially offset by an increase at FGH, which contributed $28.2 million in the nine months ended September 30, 2024, compared to $27.8 million in the nine months ended September 30, 2023.

Previous wording

Gross profit totaled $7.0 million and $9.3 million for the six months ended June 30, 2024 and 2023, respectively. The decrease was primarily driven by the decreased sales at JustCBD, which contributed $4.2 million in the six months ended June 30, 2024 compared to $7.0 million in the six months ended June 30, 2023. In addition, $0.7 million of inventory impairment was recorded at JustCBD in the six months ended June 30, 2024 related to inventory theft and recoveries of stolen inventory that is no longer saleable. The remaining fluctuation is due to increased gross margins at FGH with $1.4 million in the six months ended June 30, 2024 compared to $1.3 million in the six months ended June 30, 2023. AV was acquired in June 2024 and contributed $0.1 million during the six months ended June 30, 2024. As a percentage of net sales, or gross margin, the Company reported 21% and 23% for the six months ended June 30, 2024 and 2024, respectively. The decrease is primarily due to unfavorable mix, with increased sales at FGH which distributes relatively lower margin pharmaceuticals.

Current wording

Gross profit totaled $9.9 million and $14.2 million for the nine months ended September 30, 2024 and 2023, respectively. The decrease was primarily driven by the decreased sales at JustCBD, which contributed $6.0 million in the nine months ended September 30, 2024 compared to $10.4 million in the nine months ended September 30, 2023. In addition, $0.7 million of inventory impairment was recorded at JustCBD in the nine months ended September 30, 2024 related to inventory theft and recoveries of stolen inventory that is no longer saleable. Moreover, gross profit at Vessel decreased from $2.2 million in the nine months ended September 30, 2023 to $1.9 million in the nine months ended September 30, 2024. The remaining fluctuation is due to increased gross margins at FGH with $1.9 million in the nine months ended September 30, 2024 compared to $1.8 million in the nine months ended September 30, 2023. TruHC and AV were acquired in 2024 and contributed a total of $0.1 million during the nine months ended September 30, 2024. As a percentage of net sales, or gross margin, the Company reported 21% and 25% for the nine months ended September 30, 2024 and 2024, respectively. The decrease is primarily due to unfavorable mix, with increased sales at FGH which distributes relatively lower margin pharmaceuticals.

Previous wording

Operating expenses totaled $13.0 million and $51.7 million for the six months ended June 30, 2024 and June 30, 2023, respectively. The decrease is seen across multiple expense categories and is due to management's cost-cutting initiatives implemented during the second half of 2023 as well as asset impairments recorded during the period ending June 30, 2023.

Current wording

Operating expenses totaled $19.6 million and $57.2 million for the nine months ended September 30, 2024 and September 30, 2023, respectively. The decrease is seen across multiple expense categories and is due to management's cost-cutting initiatives implemented during the second half of 2023 as well as asset impairments recorded during the period ending September 30, 2023.

Previous wording

Consulting and management fees were $2.3 million for the three months ended June 30, 2024 compared to $3.7 million for the three months ended June 30, 2023. These fees are related to employment and consulting contracts with most of the Company's management, as well as directors. The decrease is primarily due to a substantial reduction in the Company's total headcount across all its business units.

Current wording

Consulting and management fees were $7.1 million for the nine months ended September 30, 2024 compared to $9.7 million for the nine months ended September 30, 2023. These fees are related to employment and consulting contracts with most of the Company's management, as well as directors. The decrease is primarily due to a substantial reduction in the Company's total headcount across all its business units.

Previous wording

Professional fees totaled $1.1 million for the three months ended June 30, 2024 compared to $0.7 million for the three months ended June 30, 2023. These expenses are associated with legal, accounting and audit services. The increase is due to costs related to the acquisitions of TruHC and AV during the three months ended June 30, 2024, as well as credit memos received during the three months ended June 30, 2023.

Current wording

Professional fees totaled $2.2 million for the nine months ended September 30, 2024 compared to $1.1 million for the nine months ended September 30, 2023. These expenses are associated with legal, accounting and audit services. The increase is due to costs related to the acquisitions of TruHC and AV during the nine months ended September 30, 2024, as well as credit memos received during the nine months ended September 30, 2023.

Previous wording

General and administrative expenses totaled $1.0 million for both the six months ended June 30, 2024 and the six months ended June 30, 2023. The primary expenses included in both periods were filing services and shareholder communications, as well as professional dues and subscriptions.

Current wording

General and administrative expenses totaled $1.4 million for the nine months ended September 30, 2024 compared to $1.4 million for the nine months ended September 30, 2023. The primary expenses included in both periods were filing services and shareholder communications, as well as professional dues and subscriptions.

Previous wording

Promotion and communication expenses totaled $1.1 million for the three months ended June 30, 2024 compared to $1.3 million for the three months ended June 30, 2023. The decrease is due to reduced sales as well as cost-cutting initiatives by the Company aimed at reducing corporate overhead. Promotion expenses incurred in the period largely relate to the nature of JustCBD's business model, which is centered around promoting its products as a method for stimulating revenue growth.

Current wording

Promotion and communication expenses totaled $3.4 million for the nine months ended September 30, 2024 compared to $3.7 million for the nine months ended September 30, 2023. The decrease is due to reduced sales. Promotion expenses incurred in the period largely relate to the nature of JustCBD's business model, which is centered around promoting its products as a method for stimulating revenue growth.

Previous wording

Travel expenses totaled $0.2 million for the six months ended June 30, 2024 compared to $0.3 million for the six months ended June 30, 2023. These expenses were for various trips related to the subsidiaries and the Company's promotional activities.

Current wording

Travel expenses totaled $0.3 million for both the nine months ended September 30, 2024 and the nine months ended September 30, 2023. These expenses were for various trips related to the subsidiaries and the Company's promotional activities.

Previous wording

Share based compensation expenses totaled less than $0.1 million for the six months ended June 30, 2024 compared to $1.0 million for the six months ended June 30, 2023. These expenses represent the amortization of the fair value of share-based payments. The decrease is primarily due to the granting of fewer stock-based compensation awards during 2023 as well as a substantial reduction in total headcount across all its business units.

Current wording

Share based compensation expenses totaled $0.4 million for the nine months ended September 30, 2024 compared to $1.0 million for the nine months ended September 30, 2023. These expenses represent the amortization of the fair value of share-based payments. The decrease is primarily due to the granting of fewer stock-based compensation awards during 2023 as well as a substantial reduction in total headcount across all its business units.

Previous wording

Research and development expenses totaled $0.1 million for the six months ended June 30, 2024 compared to less than $0.1 million for the six months ended June 30, 2023. Research and development expenses consist primarily of contract research fees, manufacturing, consultant fees, and costs related to the launch of new brands for the Vessel business.

Current wording

Research and development expenses totaled $0.2 million for the nine months ended September 30, 2024 compared to less than $0.1 million for the nine months ended September 30, 2023. Research and development expenses consist primarily of contract research fees, manufacturing, consultant fees, and costs related to the launch of new brands for the Vessel business.

Previous wording

Operating lease expenses totaled $0.4 million for the six months ended June 30, 2024 compared to $0.6 million for six months ended June 30, 2023. The decrease is due to the impairment of the right-of-use operating lease assets during 2023, causing reduced operating lease expense in 2024.

Current wording

Operating lease expenses totaled $0.5 million for the nine months ended September 30, 2024 compared to $0.9 million for nine months ended September 30, 2023. The decrease is due to the impairment of the right-of-use operating lease assets during 2023, causing reduced operating lease expense in 2024.

Previous wording

Depreciation and amortization expenses totaled $0.3 million for the six months ended June 30, 2024 compared to $1.7 million for the six months ended June 30, 2023. The decrease is primarily due to the impairment recorded on the Company's long-lived assets during 2023, causing reduced depreciation and amortization in 2024, partially offset by the acquisitions of TruHC and AV during the six months ended June 30, 2024.

Current wording

Depreciation and amortization expenses totaled $0.6 million for the nine months ended September 30, 2024 compared to $2.0 million for the nine months ended September 30, 2023. The decrease is primarily due to the impairment recorded on the Company's long-lived assets during 2023, causing reduced depreciation and amortization in 2024, partially offset by the acquisitions of TruHC and AV during the nine months ended September 30, 2024.

Previous wording

Bad debt expense totaled $0.2 million for the three months ended June 30, 2024 compared to less than $0.1 million for the three months ended June 30, 2023. The amounts reflect the Company's estimate of lifetime expected losses related to outstanding trade receivables.

Current wording

Bad debt expense totaled $0.3 million for the nine months ended September 30, 2024 compared to less than $0.1 million for the nine months ended September 30, 2023. The amounts reflect the Company's estimate of lifetime expected losses related to outstanding trade receivables.

Previous wording

Asset impairment totaled $1.1 million for the six months ended June 30, 2024 compared to $34.9 million for the six months ended June 30, 2023. The amount for the six months ended June 30, 2024 represents impairment of the long-lived assets at Vessel and JustCBD. The amount for the six months ended June 30, 2023 represents impairment of the goodwill at JustCBD and FGH and the long-lived assets at Vessel, JustCBD and FGH.

Current wording

Asset impairment totaled $1.5 million for the nine months ended September 30, 2024 compared to $34.9 million for the nine months ended September 30, 2023. The amount for the nine months ended September 30, 2024 represents impairment of the long-lived assets at Vessel, JustCBD and AV, as well as the goodwill at AV. The amount for the nine months ended September 30, 2023 represents impairment of the goodwill at JustCBD and FGH and the long-lived assets at Vessel, JustCBD and FGH.