Charlotte's Web Holdings, Inc.
For the period ended Sep 30, 2025. Filed Nov 12, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2025 · Filed Nov 12, 2025
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-06-30; filed 2025-08-13.
0001750155-25-000054
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-09-30; filed 2025-11-12.
0001750155-25-000079
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 110 previous paragraphs and 111 current paragraphs.
68 unchanged; 31 reworded; 10 added; 8 removed; 3 previous and 2 current paragraphs rearranged.
Tables are not compared: 14 previous and 14 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (10)
Current report
Total revenue for the three months ended September 30, 2025, was$11,503, a decrease of 8.6% compared to the three months ended September 30, 2024. The decrease is driven by the Company's decision to shift the majority of the B2B business to a more margin-accretive distributor model. This strategy provides savings in selling, general and administrative expenses and is part of the overall cost efficiency direction. The Company saw a decrease in B2B revenues of approximately $1.1 million or 48% for the quarter compared to prior year.
Current report
Cost of goods sold increased 18.8% for the three months ended September 30, 2025 compared to the three months ended September 30, 2024, primarily due to increased production and depreciation costs. The Company has experienced lower inventory turns as a result of lower revenues, this has resulted in higher inventory variances impacting our cost leverage.
Current report
Gross profit was $4.5 million or 38.9% of revenue for the three months ended September 30, 2025, compared to $6.7 million, or 53.0% of revenue for the the three months ended September 30, 2024. Gross margin compression resulted from a one-time $0.5 million B2B retail chargeback reserve related to the B2B transition, as well as higher Cost of Goods Sold due to temporary scaling inefficiencies associated with the transition to in-house manufacturing operations. Excluding these anomalies, the underlying gross profit model remains aligned with the Company's historical 50% range.
Current report
Total Selling, general, and administrative expenses for the three months ended September 30, 2025 and September 30, 2024 were $9,731 and $12,693, respectively. The amended MLB Promotional Rights Agreement resulted in a decrease in amortization expense related to MLB assets of approximately $1.8 million compared to the three months ended September 30, 2024. Additionally, the decrease is due to operating expense reductions. The Company made additional cost cutting measures in the third quarter to further align with current revenue levels.
Current report
Total change in fair value of financial instruments for the three months ended September 30, 2025 and September 30, 2024 was a net loss of $1,200 and a net gain of $1,422, respectively. For the three months ended September 30, 2025, 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 loss of $0.9 million, compared to a net gain of $1.6 million for the three months ended September 30, 2024. 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.
Current report
For the Nine Months Ended September 30, 2025 and 2024
Current report
Total revenue for the nine months ended September 30, 2025 was $36,571, a decrease of 1.2% compared to the nine months ended September 30, 2024.
Current report
Total product revenue for the nine months ended September 30, 2025 was $36,346, representing a 0.5% decrease compared to the nine months ended September 30, 2024. The decrease is due to the Company's decision to shift the majority of the B2B business to a distribution model during the third quarter. This channel has had declining revenue and profit margin. B2B revenue decreased by approximately $2.4 million or 19% for the nine months ended September 30, 2025, partially offset by an increase in DTC revenue $1.6 million or 7% over the period.
Current report
Service revenuefor the nine months ended September 30, 2025 was $225 or a decrease of 51.0%, compared to the nine months ended September 30, 2024. On February 12, 2024, the Company and DeFloria entered into a Master Services Agreement ("Services Agreement") in which the Company is compensated for certain services to DeFloria. DeFloria has concluded Phase I clinical trials, as such the service revenue has been decreased for Phase II.
Current report
Net cash used in financing activities for the nine months ended September 30, 2025 and September 30, 2024 were as follows:
Removed paragraphs (8)
Previous report
Total revenue for the three months ended June 30, 2025 was$12,806, an increase of 4.2% compared to the three months ended June 30, 2024. Total product revenue was $12,731, representing a 4.2% year over year increase, supported by sales traction across the Company's expanded product portfolio, including functional mushroom wellness gummies, CBG Focus Gummies, and the newly launched Brightside™ hemp low-dose THC gummy collection.
Previous report
Cost of goods sold decreased 29.8% for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. For the three months ended June 30, 2024, the Company recorded a $3.8 million non-cash inventory provision related to a one-time wholesale hemp biomass transaction. The decrease was partially offset by increased variable operating costs in the current quarter, including startup costs associated with the transition to in-house gummy production.
Previous report
Gross profit and gross profit margin are as follows:
Previous report
Gross profit increased 132.0% for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. The increase is primarily related to the absence of a $3.8 million inventory provision that impacted the prior year quarter related to a one-time wholesale hemp biomass transaction. The current quarter gross margin of 46.8% reflects startup costs associated with the transition to in-house gummy production, as well as the impact of related-party service and supply sales to DeFloria recorded at zero gross margin to support clinical trials.
Previous report
For the Six Months Ended June 30, 2025 and 2024
Previous report
Total revenue for the six months ended June 30, 2025 was $25,068, a increase of 2.7% compared to the six months ended June 30, 2024.
Previous report
Total product revenue was $24,918, representing a 3.7% increase. Revenues growth was supported by sales of the Company’s botanical wellness innovations including functional mushroom gummies, CBG Focus Gummies, and new Brightside™ low-THC hemp gummy collection.
Previous report
Net cash provided by financing activities for the six months ended June 30, 2025 and June 30, 2024 were as follows:
Reworded paragraphs (31)
Previous wording
The Company's business consists of the farming, manufacturing, marketing, and sales of hemp-derived CBD and botanical-based wellness products. As of June 30, 2025, the Company operated in a single operating and reportable segment, hemp-derived CBD wellness products, making up the majority of the revenue of the Company. The 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.
Current wording
The Company's business consists of the farming, manufacturing, marketing, and sales of hemp-derived CBD and botanical-based wellness products. As of September 30, 2025, the Company operated in a single operating and reportable segment, hemp-derived CBD wellness products, making up the majority of the revenue of the Company. products. The 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.
Previous wording
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. Service revenue is attributable to the Company and DeFloria entering into Services Agreement pursuant to which the Company is compensated for the provision of certain services to DeFloria.
Current wording
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. Service revenue is attributable to the Company and DeFloria entering into Services Agreement pursuant to which the Company is compensated for the provision of certain services to DeFloria
Previous wording
Depreciation and amortization expense for the three months ended June 30, 2025 and June 30, 2024 was $512 and $2,489, respectively, of which $788 and $849, respectively, was expensed to cost of goods sold. The remaining depreciation and amortization expenses of $276 and $1,640, respectively, was expensed to Selling, general, and administrative expenses.
Current wording
Depreciation and amortization expense for the three months ended September 30, 2025 and September 30, 2024 was $1,689 and $2,523, respectively, of which $963 and $844, respectively, was expensed to cost of goods sold. The remaining depreciation and amortization expenses of $726 and $1,679, respectively, was expensed to Selling, general, and administrative expenses.
Previous wording
Gross profit for the six months ended June 30, 2025 and June 30, 2024 is as follows:
Current wording
Gross profit for the three months ended September 30, 2025 and September 30, 2024 is as follows:
Previous wording
Depreciation and amortization expensed to Selling, general, and administrative expenses for the three months ended June 30, 2025 was a recovery of expense of $276 due to the termination of the MLB agreement. Depreciation and amortization expensed to Selling, general, and administrative expenses for the three months ended June 30, 2024 was $1,640.
Current wording
Depreciation and amortization expensed to Selling, general, and administrative expenses for the three months ended September 30, 2025 and September 30, 2024 were $726 and $1,679, respectively. The decrease was due to the decrease in amortization related to the amended MLB agreement, offset by higher depreciation for in sourcing of inventory production.
Previous wording
Total research and development costs expensed to Selling, general, and administrative expense for the three months ended June 30, 2025 and June 30, 2024 were $522 and $648, 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.
Current wording
Total research and development costs expensed to Selling, general, and administrative expense for the three months ended September 30, 2025 and September 30, 2024 were $475 and $556, 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.
Previous wording
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. Service revenue is attributable to the Company and DeFloria entering into the Services Agreement pursuant to which the Company is compensated for the provision of certain services to DeFloria.
Current wording
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. Service revenue is attributable to the Company and DeFloria entering into the Services Agreement pursuant to which the Company is compensated for the provision of certain services to DeFloria.
Previous wording
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.
Current wording
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.
Previous wording
Cost of goods sold decreased 13.9% for the six months ended June 30, 2025, compared to the six months ended June 30, 2024. The decrease was primarily due to the prior year period including a $3.9 million non-cash inventory provision related to wholesale hemp biomass transactions partially offset by an increase in variable operating costs in the current period, including startup costs associated with the transition to in-house gummy production and expanded product offerings.
Current wording
Cost of goods sold decreased 4.6% for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. The decrease was primarily due to the prior year period including a $3.9 million non-cash inventory provision related to wholesale hemp biomass transactions partially offset by an increase in variable operating costs in the current period, including startup costs associated with the transition to in-house gummy production and expanded product offerings. The decrease was partially offset by an increase in production costs related to higher inventory variances due to lower turning revenue.
Previous wording
Depreciation and amortization expense for the six months ended June 30, 2025 and June 30, 2024 was $2,961 and $4,982, respectively, of which $1,610 and $1,705, respectively, was expensed to cost of goods sold. The remaining depreciation and amortization expenses of $1,351 and $3,277, respectively, was expensed to Selling, general, and administrative expenses.
Current wording
Depreciation and amortization expense for the nine months ended September 30, 2025 and September 30, 2024 was $4,650 and $7,505, respectively, of which $2,573 and $2,549, respectively, was expensed to cost of goods sold. The remaining depreciation and amortization expenses of $2,077 and $4,956, respectively, was expensed to Selling, general, and administrative expenses.
Previous wording
Gross profit increased 28.7% year-over-year for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The increase is primarily related to the absence of the inventory provision of $3.9 million for the six months ending June 30, 2025.
Current wording
Gross profit increased 3.3% year-over-year for the nine months ended September 30, 2025.The increase is primarily related to the absence of the inventory provision of $3.9 million for the nine months ending September 30, 2025. Partially offset by gross margin compression resulted from a one-time $0.5 million B2B retail chargeback reserve related to the B2B transition, as well as higher Cost of Goods Sold due to temporary scaling inefficiencies associated with the transition to in-house manufacturing operations.
Previous wording
Total selling, general, and administrative expenses for the six months ended June 30, 2025 and June 30, 2024 were $21,640 and $30,007, respectively. The 27.9% decrease was primarily attributable to a reduction in amortization expense of $1.9 million related to the termination of the MLB Promotional Rights Agreement. Additionally, a decrease in personal costs due to the cost cutting measures undertaken by the company between the comparable periods. These measures included adjusting the size of the workforce to properly align with the revenue scope, as well as improving the Company's insurance program and aligning with more cost-efficient software options and improved operating efficiencies.
Current wording
Total selling, general, and administrative expenses for the nine months ended September 30, 2025 and September 30, 2024 were $31,371 and $42,700, respectively. The 26.5% decrease was primarily attributable to a reduction in amortization expense of $3.8 million related to the termination of the MLB Promotional Rights Agreement. The remaining decrease is due to cost cutting measures in personnel costs undertaken by the Company between the comparable periods. These measures included adjusting the size of the workforce to properly align with the revenue scope, as well as improving the Company's insurance program and aligning with more cost-efficient software options and improved operating efficiencies.
Previous wording
Depreciation and amortization expensed to Selling, general, and administrative expenses for the six months ended June 30, 2025 and June 30, 2024 were $1,351 and $3,277, respectively.
Current wording
Depreciation and amortization expensed to Selling, general, and administrative expenses for the nine months ended September 30, 2025 and September 30, 2024 were $2,077 and $4,956, respectively. The decrease was due to the decrease in amortization related to the amended MLB agreement.
Previous wording
Total research and development costs expensed to Selling, general, and administrative expense for the six months ended June 30, 2025 and June 30, 2024 were $1,025 and $1,399, 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.
Current wording
Total research and development costs expensed to Selling, general, and administrative expense for the nine months ended September 30, 2025 and September 30, 2024 were $1,500 and $1,955, 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.
Previous wording
Total change in fair value of financial instruments for the six months ended June 30, 2025 and June 30, 2024 was a loss of $1,669 and a loss of $720, respectively. The change in fair value of financial instruments was primarily due to a loss of $1,200 for the six months ended June 30, 2025, compared to a gain of $200 for the six months ended June 30, 2024 in the investment of DeFloria. The decrease was primarily due to the financial projections extended for an additional year based on timing of completing clinical trials.
Current wording
Total change in fair value of financial instruments for the nine months ended September 30, 2025 and September 30, 2024 was a loss of $2,869 and a gain of $702, respectively. The change in fair value of financial instruments was primarily due to a loss of $1.5 million for the nine months ended September 30, 2025, compared to a gain of $0.4 million for the nine months ended September 30, 2024 in the investment of DeFloria. The decrease was primarily due to the financial projections extended for an additional year based on timing of completing clinical trials. Additionally, the loss was due to a change in fair value of debt conversion option of $0.8 million. The option is valued using the Black-Scholes option pricing model and an increase in the Company share price for the nine month ending September 30, 2025 caused the change during the period.
Previous wording
As of June 30, 2025 and December 31, 2024, the Company had total current liabilities of $10,364 and $15,936, respectively, and cash and cash equivalents of $15,268 and $22,618, respectively, to meet its current obligations.
Current wording
As of September 30, 2025 and December 31, 2024, the Company had total current liabilities of $8,873 and $15,936, respectively, and cash and cash equivalents of $9,810 and $22,618, respectively, to meet its current obligations.
Previous wording
The Company expects a reduction in overall selling, general, and administrative expenses in 2025 as a result of several actions taken in the second half of 2024, as well as additional reductions projected in the second half of 2025. This includes improvements in operating efficiency throughout the business, cost savings from a more efficient e-commerce platform and associated information technology upgrades, and a data-driven reorganization of its B2B business and retail partnering strategies.
Current wording
The Company expects a reduction in overall selling, general, and administrative expenses in the remainder of 2025 as a result of several actions taken in the second half of 2024, as well as additional reductions projected in the second half of 2025. This includes improvements in operating efficiency throughout the business, cost savings from a more efficient e-commerce platform and associated information technology upgrades, and a data-driven reorganization of its B2B business and retail partnering strategies.
Previous wording
Net cash used in operating activities for the six months ended June 30, 2025 and June 30, 2024 were as follows:
Current wording
Net cash used in operating activities for the nine months ended September 30, 2025 and September 30, 2024 were as follows:
Previous wording
For the six months ended June 30, 2025, the decrease in cash used in operations is primarily due to operating cost saving measures, as well as, a reduction in payments associated with the MLB Promotional Rights Agreement, compared to $2,500 for the six months ended June 30, 2024.
Current wording
For the nine months ended September 30, 2025,the decrease in cash used in operations is primarily due to operating cost saving measures, as well as, a reduction in payments associated with the MLB Promotional Rights Agreement, compared to $5.0 million for the nine months ended September 30, 2024. The decrease is partially offset by increased inventory cost related to the ramp on manufacturing in-sourcing and rebranding costs.
Previous wording
Net cash used in investing activities for the six months ended June 30, 2025 and June 30, 2024 were as follows:
Current wording
Net cash used in investing activities for the nine months ended September 30, 2025 and September 30, 2024 were as follows:
Previous wording
For the six months ended June 30, 2025, the project to in-source topical and gummy production is complete resulting in a decrease in cash used in investing activities compared to the six months ended June 30, 2024.
Current wording
For the nine months ended September 30, 2025, the project to in-source topical and gummy production is complete resulting in a decrease in cash used in investing activities compared to the nine months ended September 30, 2024.
Previous wording
For the six months ended June 30, 2025, the change was primarily due to the vesting of restricted stock units.
Current wording
For the nine months ended September 30, 2025, the change was primarily due to the vesting of restricted stock units.
Previous wording
On April 6, 2023, the Company jointly formed an entity, DeFloria, with AJNA and BAT. AJNA is a botanical drug development company. AJNA is partially owned and was co-founded by a member of the Stanley Brothers. BAT holds an equity interest in the entity in the form of approximately 2,000,000 preferred units following its initial $10 million investment and has the right to participate in future equity issuances to maintain its pro rata equity position. The Company and AJNA each hold 4,000,000 of the entity's voting common units (Note 3). Effective May 1, 2023, the Company entered into an 8% interest bearing note receivable with DeFloria for the 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, 2025 and December 31, 2024, the remaining note receivable of$37 and $71, respectively, is presented in other assets in the condensed consolidated balance sheets.
Current wording
On April 6, 2023, the Company jointly formed an entity, DeFloria, with AJNA and BAT. AJNA is a botanical drug development company. AJNA is partially owned and was co-founded by a member of the Stanley Brothers. BAT holds an equity interest in the entity in the form of approximately 2,000,000 preferred units following its initial $10 million investment and has the right to participate in future equity issuances to maintain its pro rata equity position. The Company and AJNA each hold 4,000,000 of the entity's voting common units (Note 3). Effective May 1, 2023, the Company entered into an 8% interest bearing note receivable with DeFloria for the 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 September 30, 2025, and December 31, 2024, the remaining note receivable of$28 and $71, respectively is presented in other assets in the condensed consolidated balance sheets.
Previous wording
On April 6, 2023, the Company and DeFloria entered into a supply agreement in which the Company shall supply raw material that will be used in the development of the new drug. The price charged by the Company is at cost of goods sold level. For the three and six months ended June 30, 2025, the Company recognized $641 in revenue and cost of goods sold, respectively, related to the supply agreement with DeFloria. Similarly, on February 12, 2024, the Company and DeFloria entered into a separate master services agreement pursuant to which the Company will be compensated for the provision of certain services to DeFloria. For the three and six months ended June 30, 2025, the Company recognized $75 and $150 in revenue and cost of goods sold, respectively, related to the service agreement with DeFloria. Additionally, the Company has an accounts receivable balance due from DeFloria of $1,059 and $648 as of June 30, 2025 and December 31, 2024, respectively.
Current wording
On April 6, 2023, the Company and DeFloria entered into a supply agreement in which the Company shall supply raw material that will be used in the development of the new drug. The price charged by the Company is at cost of goods sold level. For the nine months ended September 30, 2025 and September 30, 2024, the Company recognized $641 and $— in revenue and cost of goods sold, respectively, related to the supply agreement with DeFloria. Similarly, on February 12, 2024, the Company and DeFloria entered into a separate master services agreement pursuant to which the Company will be compensated for the provision of certain services to DeFloria. For the three and nine months ended September 30, 2025, the Company recognized $75 and $225 in revenue and cost of goods sold, respectively, related to the service agreement with DeFloria. For the three and nine months ended September 30, 2024, the Company recognized $74 and $459 in revenue and cost of goods sold, respectively, related to the service agreement with DeFloria. Additionally, the Company has an accounts receivable balance due from DeFloria of $1,134 and $648 as of September 30, 2025 and December 31, 2024, respectively.
Previous wording
On July 15, 2025, the Company entered into a promissory note, as lender, where the Company loaned $750 to DeFloria. The note and accrued interest is due and payable by DeFloria upon the later of December 31, 2026, or the date the Company shall issue and sell units of a newly-authorized series of preferred units in a bona fide financing transaction to one or more investors for aggregate cash proceeds to DeFloria or any other convertible debt of DeFloria of not less than $10 million. Upon any event of default by DeFloria under the note, which include DeFloria’s failure to pay amounts within 3 business days of when due and breaches of DeFloria’s obligations pursuant to the note, the Company will be entitled to exercise its rights under the note
Current wording
On July 15, 2025, the Company entered into a promissory note, as lender, where the Company loaned $750 to DeFloria. The note and accrued interest is due and payable by DeFloria upon the later of December 31, 2026, or the date the Company shall issue and sell units of a newly-authorized series of preferred units in a bona fide financing transaction to one or more investors for aggregate cash proceeds to DeFloria or any other convertible debt of DeFloria of not less than $10 million. Upon any event of default by DeFloria under the note, which includes DeFloria’s failure to pay amounts within 3 business days of when due and breaches of DeFloria’s obligations pursuant to the note, the Company will be entitled to exercise its rights under the note. The funds will be distributed monthly to DeFloria between July and November 2025, and the balance of the promissory note as of September 30, 2025 is $575.
Previous wording
In November 2023, the FASB issued ASU 2023-07—Segment Reporting. The guidance was issued to provide financial statement users with more disaggregated expense information about a public entity’s reportable segments. The guidance is effective for the year ended December 31, 2024, and the expanded interim disclosures are effective in entities in 2025 and will be applied retrospectively to all prior periods presented.
Current wording
In November 2023, the FASB issued ASU 2023-07—Segment Reporting. The guidance was issued to provide financial statement users with more disaggregated expense information about a public entity’s reportable segments. The guidance is effective for the year ended
Previous wording
Listed below are the accounting policies and estimates 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.
Current wording
Listed below are the accounting policies and estimates 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 the condensed consolidated financial statements for a discussion on recently adopted and issued accounting pronouncements.
Previous wording
The Company 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. The Company concluded that the investment in DeFloria should not be consolidated. 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 was not required to consolidate the investment and does not meet any of the other scope exceptions, the Company had the ability to adopt the fair value option for the investment at inception. The investment was remeasured at fair value after each reporting date, with changes recognized in condensed consolidated statements of operations, as changes in fair value of financial instruments for the period.
Current wording
The Company 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. The Company concluded that the investment in DeFloria should not be consolidated. 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 was not required to consolidate the investment and does not meet any of the other scope exceptions, the Company had the ability to adopt the fair value option for the investment at inception. The investment was remeasured at fair value after each reporting date, with changes recognized in the condensed consolidated statements of operations, as changes in fair value of financial instruments for the period.
Previous wording
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 condensed consolidated statements of operations. There were no impairment losses recognized for the three months ended June 30, 2025 and 2024, respectively.
Current wording
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 condensed consolidated statements of operations. There were no impairment losses recognized for the three and nine months ended September 30, 2025 and 2024, respectively.
Previous wording
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 2019. The Company has recorded an uncertain tax position as of June 30, 2025 and December 31, 2024. The Company's policy is to recognize interest and penalties on taxes, if any, within the condensed consolidated statement of operations as income tax expense.
Current wording
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 2019. The Company has recorded an uncertain tax position as of September 30, 2025 and December 31, 2024. The Company's policy is to recognize interest and penalties on taxes, if any, within the condensed consolidated statements of operations as income tax expense.
Previous wording
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.
Current wording
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 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.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Gross profit for the nine months ended September 30, 2025 and September 30, 2024 is as follows:
Current report — wording carried from elsewhere
December 31, 2024, and the expanded interim disclosures are effective in entities in 2025 and will be applied retrospectively to all prior periods presented.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
Total Selling, general, and administrative expenses for the three months ended June 30, 2025 and June 30, 2024 were $10,062 and $14,727, respectively. The 31.7% decrease included a reduction in amortization expense of $1.9 million related to the termination of the MLB Promotional Rights Agreement. Additionally, a decrease in personnel costs due to the cost-cutting measures undertaken by the company between the comparable periods. These measures included adjusting the size of the workforce to properly align with the revenue scope, as well as improving the Company's insurance program and aligning with more cost-efficient software options and improved operating efficiencies.
Previous report — wording carried elsewhere
Total change in fair value of financial instruments for the three months ended June 30, 2025 and June 30, 2024 was $(1,543) and $1,140, respectively. The change in fair value of financial instruments was primarily due to a loss of $1,100 for the three months ended June 30, 2025, compared to a gain of $1,000 for the three months ended June 30, 2024 in the investment of DeFloria. The decrease was primarily due to the financial projections extended for an additional year based on timing of completing clinical trials.
Previous report — wording carried elsewhere
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.