Charlottes Web Holdings Inc

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2023

OR

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)

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:

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

Common stock, no par value

Indicate by check mark if the regis trant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yeso No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yeso No x

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 Noo

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 Noo

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):

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. o

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yeso Nox

The aggregate market value of the voting and no-voting common equity held by non-affiliates of the Registrant, based on the closing price of the shares of the Registrant's Common Stock on June 30, 2023 (the last business day of the registrant’s most recently completed second fiscal quarter) was approximately $25.7 million.

The registrant had outstanding 156,960,668 shares of common stock as of March 18, 2024.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement relating to its 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2023 are incorporated herein by reference in Part III.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K ("Form 10-K") contains statements that are, or may be considered to be, "forward-looking statements". 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-K 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.

By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that predictions, forecasts, projections and other forward-looking statements will not be achieved. The Company cautions readers not to place undue reliance on these statements as a number of important factors could cause the actual results to differ materially from the beliefs, plans, objectives, expectations, anticipations, estimates and intentions expressed in such forward-looking statements. Risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, as applicable, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information and statements include, but are not limited to the risks described in Item 1A—"Risk Factors" of this Form 10-K.

Readers are cautioned not to place undue reliance on any forward-looking statements contained in this Form 10-K, which reflect management’s opinions only as of the date hereof. Except as required by law, the Company undertakes no obligation to revise or publicly release the results of any revision to any forward-looking statements. You are advised, however, to consult any additional disclosures the Company makes in its reports to the SEC. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements contained in this Form 10-K.

Risks Factors Summary

Set forth below is a summary of the principal risks the Company faces:

Risks Relating to the Regulatory Environment

•The regulatory environment surrounding Hemp is uncertain, varies among jurisdictions, and is subject to change.

•The future of Hemp regulation at the Federal level is unclear.

•The Company’s products are subject to numerous and diverse regulatory requirements which may restrict the Company’s ability to sell its product, and regulatory compliance costs may affect the Company’s business and financial results.

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

•The Company is subject to regulations that could impact its ability to sell its product internationally.

•Entry into international markets diverts management attention and requires financial resources that could be spent elsewhere and poses increased costs due to numerous banking, compliance, financial, legal, market, and reputational issues.

•The designation of cannabinoids as a New Dietary Ingredient (NDI) or as an impermissible adulterant are uncertain.

•The FDA Interpretation of IND Preclusion could be disruptive to the Company’s ability to sell its products.

•FDA enforcement against the unlawful sale and marketing of CBD products under the FD&C Act could target the Company and adversely impact the Company’s business and financial position.

•The FTC may take enforcement actions against companies selling CBD products, including the Company.

•The DEA Interpretation of the 2018 Farm Bill could cause the DEA to take enforcement action against the Company’s intermediate Hemp products.

•Any inability to obtain required regulatory approval and permits could limit the Company’s ability to conduct its business.

•The Company is subject to environmental, health and safety laws, compliance with such laws may be costly, and any failure to comply with such laws could negatively impact the Company’s results of operations or financial position.

•Regulatory uncertainty with respect to anti-money laundering laws and regulations impact on the CBD and marijuana-related businesses, if revised or resolved unfavorably to the Company’s interests, may have an adverse effect on the Company’s business.

•The Company could be adversely affected by violations of the Corruption of Foreign Public Officials Act (Canada), the U.S. Foreign Corrupt Practices Act and other similar anti-bribery laws.

•As a marijuana/Cannabis related business, the Company may have difficulty accessing banking services due to the illegality of marijuana under federal law.

•The Company may have difficulty accessing public and private capital and banking services, which could negatively impact its ability to finance its operations.

•The Company could be liable for fraudulent or illegal activity by its employees, contractors and consultants resulting in significant financial losses to claims against the Company.

Risks Relating to the Company’s Business and Industry

•The Company faces security risks related to its physical facilities.

•The Company depends on the success of the Company’s products, and the Company’s products may not achieve market acceptance.

•There is no assurance that the Company’s cash flows, and debt or other financing will be sufficient to fund the Company’s operations.

•The Company’s products have a limited shelf life and product inventory may reach its expiration prior to sale.

•The Company’s quality control systems may not prove successful.

•The Company depends on various third parties for the supply, manufacture, and testing of the Company’s products. No assurance can be given that these relationships will continue on favorable terms, or at all.

•The Company’s manufacturers and suppliers must meet cGMP requirements and failure on their part to do so could have adverse consequences for the Company.

•The Company’s manufacturers and suppliers must remain in compliance with the Hemp production and manufacturing laws of the states in which they operate.

•If product liability claims are brought against the Company, it could incur substantial liabilities.

•The Company's operations and industry may be subject to reputational risk.

•The Company is dependent upon agricultural production of hemp for the Company's operations, which are subject to seasonal and weather-related risks.

•There may be adverse consequences to the Company's end users should they test positive for trace amounts of THC attributed to use of the Company's products.

•The Company may be unable to obtain adequate crop insurance.

•The Company may be unable to obtain or maintain high quality farmland sufficient for its hemp cultivation needs.

•Climate change could exacerbate certain of the risks inherent in the Company’s agricultural operations.

•Hemp is subject to specific agricultural risks, which could negatively impact the Company’s cultivation efforts.

•The Company relies on third-parties for the transportation of its hemp and hemp derived products, any delay or failure by these third-parties to meet the Company’s transport needs could impact the Company’s operations and financial performance.

•The Company faces intense competition.

•Changing consumer preferences could impact the Company’s ability to attract and retain customers.

•The Company’s customers may not adequately support its products or its relationships with such retailers may deteriorate.

•The Company depends on the popularity and acceptance of its brand portfolio.

•Supply chain issues, including significant price fluctuations or shortages of materials, and distribution challenges may increase the Company’s cost of goods sold and cause its results of operations and financial condition to suffer.

•The Company may not be able to successfully implement its growth strategy on a timely basis or at all.

•The market for the Company’s products and industry is difficult to forecast due to limited and unreliable market data.

•The Company depends on key personnel and its ability to attract and retain employees.

•From time to time, the Company may rely on debt financing for some of its business activities and there can be no assurance the Company will be able to continue to access such credit, or that it will be able to comply with the terms of such credit.

•The Company may have difficulty obtaining insurance to cover its operational risks.

•The Company may be subject to growth-related risks, including capacity constraints and pressure on its internal systems and controls.

•The Company may acquire other companies which could divert management’s attention, result in additional dilution to the Company’s Shareholders and otherwise disrupt the Company’s and harm its operating results.

•The Company’s intellectual property may be difficult to protect.

•The Company is involved in litigation, including class action litigation matters, and there may be additional litigation in the future in which it will be involved.

•Trade secrets may be difficult to protect.

•The Company’s status as a public benefit company and a Certified B Corp may not result in the benefits that the Company anticipates.

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

•As a public benefit company, the Company may be subject to increased legal proceedings concerning its duty to balance Shareholder and public benefit interests, the occurrence of which may have an adverse impact on the Company’s financial condition and results of operations.

•The Company contracts with certain third parties for portions of its operations; should a third party be subject to insolvency or otherwise be unable or unwilling to perform their obligations to the Company, it could negatively impact the Company's operations.

Risks Relating to the Company’s Securities

•The Company has a history of losses and may continue to incur losses in the future.

•Debt and the Convertible Debenture Agreement that the Company currently has in place may limit other future potential strategic investor interests.

•The Company has required and in the future may require additional financing to operate its business and it may face difficulties acquiring additional financing on terms acceptable to the Company or at all.

•The Company has discretion in the use of proceeds from its securities issuances.

•There is a limited market for the Company’s Common Shares and warrants.

•The market price of the Company’s Common Shares and other listed securities may be volatile.

•The Company does not intend to pay dividends on its Common Shares and, consequently, the ability of investors to achieve a return on their investment will depend entirely on appreciation in the price of the Company’s Common Shares.

•The Company is a holding company and its earnings depend on the earnings and distributions of its subsidiaries.

•Future sales of Common Shares by Shareholders, directors or officers could create volatility in the Company’s share price.

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

•The Company may issue an unlimited number of Common Shares, and additional issuances could dilute a Shareholder’s holdings.

•Purchasers of the Company’s Common Shares may experience immediate and substantial dilution of their investment.

•The elimination of monetary liability against the Company’s directors, officers, and employees under British Columbia law and the existence of indemnification rights for the Company’s obligations to its directors, officers, and employees may result in substantial expenditures by the Company and may discourage lawsuits against its directors, officers, and employees.

•There may be difficulty in enforcing judgments and effecting service of process on directors and officers that are not citizens of the United States.

•The Company’s Articles provide that the Supreme Court of British Columbia, Canada and the Court of Appeal of British Columbia, Canada shall, to the fullest extent permitted by law, be the sole and exclusive forum for derivative actions, actions relating to breaches of fiduciary duty, and other matters, creating a conflict with U.S. federal securities laws, which may limit the ability to obtain a favorable judicial forum for disputes with the Company.

•The Company is subject to U.S. and other income tax and is treated as a U.S. domestic company for U.S. federal income tax purposes.

General Risk Factors

•Investment in the Company’s Common Shares is speculative, involves risk, and there is no guarantee of a return.

•Product recalls and returns could adversely affect the Company’s operating results and financial condition.

•The Company may be subject to impairment of goodwill and intangible assets, which could adversely impact the Company’s financial results.

•Certain employees or directors of the Company may have interests that conflict with those of the Company.

•The future growth of the Company depends on the effectiveness and efficiency of its advertising and promotional expenditures to attract and retain customers.

•The use of customer information and other personal and confidential information creates compliance risks.

•The Company faces risks related to its information technology systems and potential cyber-attacks and security and privacy breaches.

•Demand for the Company’s products and services are influenced by general economic and consumer trends beyond the Company’s control.

•The costs of being a public company in both Canada and the United States are high and may strain the Company’s resources.

•The Company’s internal controls over financial reporting may not be effective, and the Company’s independent auditors may be unwilling or unable to provide us, when required, with an attestation report on the effectiveness of internal controls over financial reporting as required by Section 404 of the Sarbanes-Oxley Act.

•The Company may have to amend prior financial reporting.

•If securities or industry analysts do not publish or cease publishing research or reports or publish misleading, inaccurate or unfavorable research about the Company, its business or its market, its share price and trading volume could decline.

•Changes in tax laws could require the Company to pay additional tax amounts, decreasing the amount of capital available to the Company.

•Recent macroeconomic trends, including inflation, a recession or slowed economic growth, may adversely affect our business, financial condition and results from operations.

CHARLOTTE'S WEB HOLDINGS, INC.

FORM 10-K

For the Year Ended December 31, 2023

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