Charlotte's Web Holdings, Inc.
For the period ended Dec 31, 2025. Filed Mar 31, 2026.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Mar 31, 2026
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-03-19.
0001750155-25-000006
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-03-31.
0001750155-26-000029
Item 7. 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 98 previous paragraphs and 95 current paragraphs.
54 unchanged; 26 reworded; 14 added; 18 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 12 previous and 10 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 (14)
Current report
The Company launched Brightside™ precision low-dose hemp THC gummies. These products feature proprietary TiME INFUSION® rapid-onset technology—delivering effects in 5–15 minutes versus 1–2 hours for traditional edibles. The product line expanded throughout the year to include Rest & Relax, Focus & Flow, Relieve & Ease, and Brightside Knockout, a THC+CBN formulation for comprehensive sleep support. The Company further expanded its sleep category leadership with the Quiet Sleep functional mushroom gummy, building on the success of CBN Stay Asleep Gummies.
Current report
The Company also entered the cognitive wellness segment with CBG Focus & Attention Gummies, offering a plant-based alternative in the growing nootropics category. This diversified botanical wellness portfolio—spanning hemp-derived THC, minor cannabinoids, and functional mushrooms.
Current report
Charlotte's Web achieved significant milestones in vertical integration and cost optimization during 2025. The Company completed full internalization of Brightside™ gummy production, providing multi-million-unit manufacturing capacity with improved quality control and supply chain resilience.
Current report
In December 2025, the Company announced that it is planning to participate as a CBD provider supporting the treatment of senior oncology patients under the potential landmark pilot program by the Center for Medicare and Medicaid Innovation ("CMMI"). For the first time, seniors living with cancer could access science-backed CBD products with reimbursement through Medicare and Medicaid, creating a new model of care that prioritizes personalization, accessibility, and affordability. Through CMMI, this initiative represents a transformative moment in senior healthcare policy, introducing long-awaited flexibility and optionality for patients and providers seeking therapeutic hemp products. The Company will offer a set of products to address oncology patient needs early in 2026 through a secure online healthcare portal. The platform combines eCommerce with advanced data security to protect patient and physician information and is a continuing expansion to the Company's established medical channel business. This initiative introduces long-awaited optionality, with room for future product expansion.
Current report
On March 30, 2026, the Company announced that it has entered into an agreement to complete a transaction with BAT comprised of two components: (i) amendment and conversion of BAT’s outstanding C$75.3 million ($56.8 million)convertible debenture, as well as, all accrued interest, into Charlotte’s Web's common shares at a conversion price of C$0.94 per share; and (ii) a concurrent additional equity investment by BAT of $10 million (approximately C$13.8 million at current exchange rates) by way of a private placement at a price equal to the greater of (a) C$0.94 per share, and (b) a dollar amount equal to the maximum discount available pursuant to section 607 of the TSX Company Manual applied to the 5-day volume weighted average price of the Company’s common shares on the TSX prior to the closing date (collectively, the “Transaction”). The Transaction will result in the issuance of approximately 110 million Charlotte's Web's common shares to BAT and represents a total equity commitment of approximately C$103 million (approximately $75 million). Completion of the
Current report
Transaction is subject to, among other conditions, TSX and shareholder approval. The Company's shareholders will be asked to approve the Transaction at an annual general and special meeting of the shareholders to be held on or about May 28, 2026
Current report
Total product revenue increased 1.2% compared to the year ended December 31, 2024. The increase reflects the initial results of the Company's strategic transformation through product diversification and an upgraded e-commerce platform. DTC revenue increased by 6.7% or $2.2 million compared to the prior year, driven by an 11% increase in order volume. These growth drivers were partially offset by ongoing CBD category headwinds at the federal and state regulatory levels and a deliberate restructuring of the Company's B2B operations to improve profitability and scalability. As a result of the restructuring, B2B revenue decreased by 9.8% or $1.6 million.
Current report
Cost of goods sold decreased 0.7% for the year ended December 31, 2025 compared to the same period in 2024. The decrease was primarily due to the prior year 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.
Current report
Gross profit for the year ended December 31, 2025 was $21,700, compared to $21,260 for the year ended December 31, 2024. The increase is primarily related to the absence of the inventory provision of $3.9 million for the year ended December 31, 2025 which was partially offset by gross margin compression resulting from zero-margin DeFloria extract sales supporting Phase 2 clinical trials during the year, gummy in-sourcing startup costs, the B2B channel restructuring, and start-up inventory scrap due to in-sourcing.
Current report
Benefit From (Provision for) Income Taxes
Current report
The Company expects continued cost containment in overall selling, general, and administrative expenses into 2026, as a result of several actions taken in the prior 2 years. This includes improvements in operating efficiency throughout the business, cost savings from a more efficient technology upgrades, and a data-driven reorganization of its revenue and partnering strategies.
Current report
For the year ended December 31, 2025, the decrease in cash used in operations of $7.1 million is primarily due to the termination of the the MLB Promotional Rights Agreement in which the Company paid $0 for the year ending December 31, 2025, compared to $5.0 million for the year ended December 31, 2024. Additionally, operating cost saving measures contributed to the decrease in cash used in operations.
Current report
On July 15, 2025, the Company entered into a promissory note, as lender, where the Company loaned $750 to DeFloria. The note and accrued interest is due and payable by DeFloria upon the later of December 31, 2026, or the date the Company shall issue and sell units of a newly-authorized series of preferred units in a bona fide financing transaction to one or more investors for aggregate cash proceeds to DeFloria or any other convertible debt of DeFloria of not less than $10 million. Upon any event of default by DeFloria under the note, which includes DeFloria’s failure to pay amounts within 3 business days of when due and breaches of DeFloria’s obligations pursuant to the note, the Company will be entitled to exercise its rights under the note. The funds were distributed monthly between July and November 2025, and the balance of the promissory note including accrued interest as of December 31, 2025 is $784.
Current report
In December 2023, the FASB issued a final standard on improvements to income tax disclosures, ASU 2023-09, Improvements to Income Tax Disclosures. The standard requires disaggregated information about a reporting entity's effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. ASU 2023-09 is effective for the Company beginning with its fiscal year ended December 31, 2025.
Removed paragraphs (18)
Previous report
In September 2024, the Company launched its new functional mushroom line which included three products: Focus Support, Stress Support, and Energy Support. The products are hemp-free and expand the Company's ongoing commitment to providing science-supported botanical-based solutions to its customers.
Previous report
The Company's ReCreate brand has been absorbed under the recognized Charlotte’s Web brand to better penetrate the lifestyles category.
Previous report
The Company continues to invest in R&D efforts to identify new product opportunities. The Company is working to capitalize on the rapidly emerging botanical-based wellness products industry by driving customer acquisition and retention, as well as accelerating retail expansion. In addition, the Company is expanding its product line beyond hemp-based products should the science and the Company’s strategic vision support such expansion.
Previous report
Total product revenue decreased 22.4% compared to the year ended December 31, 2023. The decrease was primarily driven by lower comparable average order value sales through the Company’s web store, reflecting a price reduction of the Company’s oil tincture products introduced at the beginning of 2024. However, comparable year-over-year unit volume sales began improving in the second half of 2024. Revenue was also negatively impacted by inflationary impacts on consumer spending, reduced retailer shelf allocations to the CBD category, and the fallout of some retailers exiting the CBD category as a result of increased state regulatory pressures.
Previous report
Cost of goods sold increased 3.0% for the year ended December 31, 2024 despite lower revenue compared to the same period in 2023. The increase was primarily due to a $4.2 million increase in inventory provisions in 2024 due to the revaluation of aged hemp biomass based on current market conditions. The increase was partially offset by lower inventory expense and other variable costs associated with lower revenue in 2024.
Previous report
Gross profit for the year ended December 31, 2024 was $21,260, compared to $35,566 for the year ended December 31, 2023. The decrease primarily related to the revenue decrease of 21.4%, impacting fixed cost absorption, and lowering blended margin following price reductions on oil tincture products initiated in the first quarter of 2024. Additionally, gross profit was reduced by the $4.2 million inventory provision as described within Cost of Goods Sold.
Previous report
Gain on Initial Investment in Unconsolidated Entity
Previous report
The initial gain on investment in unconsolidated entity is as follows:
Previous report
Total change in gain on investment in unconsolidated entity the year ended December 31, 2024 and 2023 was $0 and $10,700 respectively. For the year ended December 31, 2023, the gain was due to the Company jointly forming an entity, DeFloria, with AJNA, and BAT. DeFloria was established to pursue FDA approval for a novel botanical drug to target a neurological condition, with the botanical drug being developed from certain proprietary hemp genetics of the Company. The initial investment was measured at fair value and is remeasured at each reporting date, with changes recognized in changes in fair value of financial instruments.
Previous report
Asset Impairments
Previous report
For the year ended December 31, 2023, the Company recorded an impairment loss due to the decline in market conditions at the Company's hemp farm that indicated a fair value less than the carrying value.
Previous report
Provision for Income Taxes
Previous report
On November 14, 2022, the Company entered into a subscription agreement with BT DE Investments, Inc. a wholly-owned subsidiary of BAT Group (LSE: BATS and NYSE: BTI), providing for the issuance of an approximately $56.8 million convertible debenture (the "debenture"). The debenture is convertible into 19.9% ownership of the Company’s Common Shares at a conversion price of C$2.00 per Common Share of the Company on the Toronto Stock Exchange ("TSX"). The debenture will accrue interest at a stated annualized rate of 5% until such time that there is federal regulation permitting the use of CBD as an ingredient in food products and dietary supplements in the United States. Following federal regulation of CBD, the stated annualized rate of interest shall be reduced to 1.5%. Interest is accrued annually and payable on the maturity date or date of earlier conversion. The maturity date for the debenture is November 2029. The funds from this debenture can be used for operating purposes to fund the Company, as approved by the board of directors or in accordance with the Company’s board-approved budget.
Previous report
As a result of delays in federal regulation of the hemp CBD industry and lower-than-expected revenue, management began taking actions in 2022 to reduce annual operating costs by lowering employee costs, simplifying the business through rationalizing the number of products produced and sold, reducing the number of third-party co-manufacturers, and lowering spend on non-employee-related SG&A costs. Other than an increase in MLB spend, management has continued these cost saving measures throughout 2024.
Previous report
The Company filed a final short form base shelf prospectus on May 5, 2021, with Canadian regulators, with a term of 25 months, which allowed the Company to qualify the distribution by way of prospectus in Canada of up to C$350,000 of common shares, preferred shares, warrants, subscription receipts, units, or any combination thereof. The final short-form base prospectus was set to expire on June 6, 2023. The Company filed a prospectus supplement to distribute up to C$60,000 of common shares of the Company (the "Offered Shares") under the ATM Program. As of January 4, 2022, the ATM Program ceased to be available to the Company. Thereafter, the manner in which the Company raises capital will likely require that the Company file registration statements with the SEC related to such activities, which will likely increase the time and expense associated with such activities.
Previous report
For the year ended December 31, 2024, the increase in cash used in operations of $5.9 million is primarily due to the Company's collection of $4.3 million from income tax refunds during the year ended December 31, 2023.
Previous report
Effective January 5, 2023, the Company entered into a Brand License and Option Agreement with JMS Brands LLC, an entity owned by one of the Stanley Brothers. Pursuant to the Brand License and Option Agreement, the Company licensed certain intellectual property from JMS Brands LLC, for an annual license fee of $500. As of January 5, 2024, the Brand License and Option Agreement has expired.
Previous report
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.
Reworded paragraphs (26)
Previous wording
Charlotte’s Web Holdings, Inc. is a Certified B Corp headquartered in Louisville, Colorado, which conducts the majority of its business in the United States. The Company is a market leader in innovative hemp extract wellness products under a family of brands which includes Charlotte’s Web™, CBD Medic™, and CBD Clinic™. Charlotte's Web premium quality products start with proprietary hemp genetics that are 100% North American farm-grown and are then manufactured into hemp extracts containing naturally occurring phytocannabinoids including cannabidiol ("CBD"), cannabichromene ("CBC"), cannabigerol ("CBG"), terpenes, flavonoids and other cannabinoids and beneficial hemp compounds. The Company is headquartered in a cGMP compliant facility in Louisville, Colorado, where the Company conducts its production of tinctures, distribution, and quality control activities as well as research and development ("R&D"). Charlotte's Web product categories include full-spectrum hemp extract oil tinctures (liquid products), gummies, capsules, CBD topical creams and lotions, broad-spectrum botanical CBD, functional mushrooms, and pet products. The Company also offers NSF Certified for Sport® broad-spectrum tincture and gummy products. Charlotte's Web products are distributed to retailers and health care practitioners, and online through the Company's website at www.CharlottesWeb.com. The information provided on the website is not part of this MD&A.
Current wording
Charlotte’s Web Holdings, Inc. is headquartered in Louisville, Colorado, which conducts the majority of its business in the United States. The Company is a market leader in innovative hemp extract wellness products under a family of brands which includes Charlotte’s Web™, CBD Medic™, and CBD Clinic™. Charlotte's Web premium quality products start with proprietary hemp genetics that are 100% North American farm-grown and are then manufactured into hemp extracts containing naturally occurring phytocannabinoids including cannabidiol ("CBD"), cannabichromene ("CBC"), cannabigerol ("CBG"), terpenes, flavonoids and other cannabinoids and beneficial hemp compounds. The Company is headquartered in a cGMP compliant facility in Louisville, Colorado, where the Company conducts its production of tinctures, distribution, and quality control activities as well as research and development ("R&D"). Charlotte's Web product categories include full-spectrum hemp extract oil tinctures (liquid products), gummies, capsules, CBD topical creams and lotions, broad-spectrum botanical CBD, functional mushrooms, and pet products. Charlotte's Web products are distributed to retailers and health care practitioners, and online through the Company's website at www.CharlottesWeb.com. The information provided on the website is not part of this MD&A.
Previous wording
The Company grows its proprietary hemp domestically in the United States on farms leased in northeastern Colorado and sources hemp through contract farming operations in Arizona, Colorado, Kentucky, and Canada. The hemp grown in Canada is utilized exclusively in the Canadian markets or for research purposes and not in the Company's products sold within the United States.
Current wording
The Company grows its proprietary hemp domestically in the United States on farms leased in northeastern Colorado and sources hemp through contract farming operations in Arizona, Colorado, Kentucky, New Mexico, and Canada. The hemp grown in Canada is utilized exclusively in the Canadian markets or for research purposes and not in the Company's products sold within the United States.
Previous wording
With an increased commitment to innovation, Charlotte's Web has refreshed its mission to "Unearth the Science of Nature to Revolutionize Wellness," and is evolving its wellness offerings both to strengthen the Company's core leadership in CBD, and extend beyond CBD to include a broader range of botanical-based wellness solutions, including minor cannabinoids. A testament to this expansion is the launch of Charlotte's Web Stay Asleep Cannabidiol ("CBN") gummies. Similar to CBD, CBN is a non-intoxicating cannabinoid found in the hemp plant. At the cutting edge of innovative natural sleep solutions, these new melatonin free gummies could offer distinct benefits for the approximately 67% of adults who report waking up during the night (Phillips Global Sleep Survey, 2019). This is the first CBN sleep product supported by placebo-controlled peer-reviewed research study, offering a 20 mg dose of CBN. The Stay Asleep gummy demonstrates Charlotte's Web's commitment to science-backed products, providing an effective alternative to more traditional sleep supplements and medications. Charlotte's Web believes expanding beyond CBD leverages the Company's brand recognition, intellectual property, and partnerships, including an ongoing collaboration with DeFloria, Inc. ("DeFloria") for botanical drug development.
Current wording
With an increased commitment to innovation, Charlotte's Web's mission is to "Unearth the Science of Nature to Revolutionize Wellness," and is evolving its wellness offerings both to strengthen the Company's core leadership in CBD, and extend beyond CBD to include a broader range of botanical-based wellness solutions, including minor cannabinoids. The Company's strategic transformation includes product diversification beyond CBD into functional mushroom, minor cannabinoid, and hemp-derived THC categories. Additionally, the Company has upgraded its e-commerce platform to improve conversion and consumer engagement metrics, and expanded omnichannel distribution across diverse platforms.
Previous wording
As of December 31, 2024, several states have adopted new regulations that will impact the Company's ability to sell certain products as currently formulated or packaged in these states. Many of these states have also implemented new THC/CBD limits, age verification, testing, labeling and packaging requirements. The Company continues to assess the business and financial impacts of the new regulations, including steps that can be taken to address the new product formulation and labeling requirements, as well as costs and potential revenue impacts and anticipated timing for such impacts to the Company in these states.
Current wording
Consistent with prior years, states continue to adopt new regulations that will impact the Company's ability to sell certain products as currently formulated or packaged in these states. Many of these states have also implemented new THC/CBD limits, age verification, testing, labeling and packaging requirements. The Company continues to assess the business and financial impacts of the new regulations, including steps that can be taken to address the new product formulation and labeling requirements, as well as costs and potential revenue impacts and anticipated timing for such impacts to the Company in these states.
Previous wording
On February 24, 2025, the Company announced that the U.S. Food and Drug Administration ("FDA") has completed its review of the Phase 1 data and Investigational New Drug ("IND") application submitted by DeFloria. The FDA has concluded that DeFloria may now proceed with its planned FDA Phase 2 clinical trial for its botanical pharmaceutical candidate, AJA001 Oral Solution, a treatment for symptoms of autism spectrum disorder ("ASD"). DeFloria is a collaboration including the Company and AJNA to develop AJA001 as a treatment for irritability associated with autism spectrum disorder. AJA001 employs the Company's proprietary full-spectrum cannabidiol hemp extract derived from one of its patented cultivars.
Current wording
In February 2025, the Company announced that the U.S. Food and Drug Administration ("FDA") has completed its review of the Phase 1 data and Investigational New Drug ("IND") application submitted by DeFloria. The FDA has concluded that DeFloria may now proceed with its planned FDA Phase 2 clinical trial for its botanical pharmaceutical candidate, AJA001 Oral Solution, a treatment for symptoms of autism spectrum disorder ("ASD"). DeFloria is a collaboration including the Company and AJNA to develop AJA001 as a treatment for irritability associated with autism spectrum disorder. AJA001 employs the Company's proprietary full-spectrum cannabidiol hemp extract derived from one of its patented cultivars.
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, distributors, and retail B2B customers.
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 B2B distributors.
Previous wording
Total revenue for the year ended December 31, 2024, was $49,667, a decrease of 21.4% compared to the year ended December 31, 2023.
Current wording
Total revenue for the year ended December 31, 2025, was $49,897, an increase of 0.5% compared to the year ended December 31, 2024.
Previous wording
The service revenue is attributable to the Company and DeFloria, Inc. ("DeFloria") entering into a Master Services Agreement ("Services Agreement") pursuant to which the Company is compensated for the provision of certain services to DeFloria.
Current wording
The service revenue is attributable to the Master Services Agreement ("Services Agreement") between the Company and DeFloria in which the Company is compensated for the provision of certain services to DeFloria. DeFloria has concluded Phase I clinical trials, as such the service revenue has been decreased for Phase II.
Previous wording
Depreciation and amortization expense for the year ended December 31, 2024 and 2023 was $9,979 and $15,160, respectively, of which $3,388 and $3,571, respectively, was expensed to cost of goods sold. The remaining depreciation and amortization expenses of $6,591 and $11,589, respectively, was expensed to Selling, general, and administrative expenses.
Current wording
Depreciation and amortization expense for the year ended December 31, 2025 and 2024 were $6,323 and $9,979, respectively, of which $3,541 and $3,388, respectively, was expensed to cost of goods sold. The remaining depreciation and amortization expenses of $2,782 and $6,591, respectively, was expensed to Selling, general, and administrative expenses.
Previous wording
The primary factors that can impact gross profit margins include the volume of products sold, revenue mix between DTC e-commerce and B2B, product sales mix, promotional and sales discount rate, manufacturing spend, transportation costs, and changes in inventory provisions.
Current wording
The primary factors that can impact gross profit margins include the volume of products sold, revenue mix between DTC e-commerce and B2B, product sales mix, promotional and sales discount rates, manufacturing spend, transportation costs, and changes in inventory provisions.
Previous wording
Total Selling, general, and administrative expenses for the year ended December 31, 2024 and 2023 were $53,247 and $75,630, respectively. For the year ended December 31, 2024, the 29.6% decrease was primarily due to the cost cutting measures undertaken by the company in the second half of the year, These measures included adjusting the size of the workforce to properly align with the revenue scope, improving the Company's insurance program, aligning with more cost-efficient software options, and making prudent travel decisions, among others.
Current wording
Total Selling, general, and administrative expenses for the year ended December 31, 2025 and 2024 were $41,968 and $53,247, respectively. For the year ended December 31, 2025, the 21.2% decrease was primarily attributable to a reduction in amortization expense of $4.9 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, 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 year ended December 31, 2024 and 2023 were $6,591 and $11,589, respectively, and decreased due to the amendment to the MLB agreement that allowed for the extension of the payments and amortization.
Current wording
Depreciation and amortization expensed to Selling, general, and administrative expenses for the year ended December 31, 2025 and 2024 were $2,782 and $6,591, respectively. The decrease was due to the decrease in amortization related to the termination of the MLB agreement.
Previous wording
Total research and development expenses for the year ended December 31, 2024 and 2023 were $2,332 and $2,964, respectively, expensed to Selling, general, and administrative expense. 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 therapeutic uses of cannabinoids.
Current wording
Total research and development expenses for the year ended December 31, 2025 and 2024 were $1,805 and $2,332, respectively, expensed to Selling, general, and administrative expense. R&D 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 therapeutic uses of cannabinoids.
Previous wording
Total change in fair value of financial instruments for the year ended December 31, 2024 and December 31, 2023 was a gain of $615 and $9,339, respectively. For the year ended December 31, 2024, the gain in fair value of financial instruments was primarily due to the revaluation of the fair value of the Company's debt conversion option and debt interest rate conversion feature resulting in a gain of $2.5 million, compared to a net gain of $9.6 million for the year ended December 31, 2023. 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 wording
Total change in fair value of financial instruments for the year ended December 31, 2025 and 2024 was a loss of $7,269 and a gain of $615, respectively. For the year ended December 31, 2025, the loss in fair value of financial instruments was primarily due to the revaluation of the fair value of the Company's debt conversion option and debt interest rate conversion feature resulting in a loss of $5.2 million, compared to a net gain of $2.5 million for the year ended December 31, 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.
Previous wording
The Company’s effective tax rate during the year ended December 31, 2024 and December 31, 2023 was (0.1)% and (2.3)%, respectively. The effective tax rate for the year ended December 31, 2024 is (0.1)% as the Company continues to believe its deferred tax assets are more likely to not be realized and a full valuation allowance remains recorded against net deferred taxes as of December 31, 2024 and December 31, 2023. The increase in the effective rate for the year ended December 31, 2024 compared to the year ended December 31, 2023, is primarily due to the remeasurement of the valuation allowance.
Current wording
The Company’s effective tax rate during the year ended December 31, 2025 and 2024 was 0.2% and (0.1)%, respectively. The effective tax rate for the year ended December 31, 2025 is 0.2% as the Company continues to believe its deferred tax assets are more likely to not be realized and a full valuation allowance remains recorded against net deferred taxes as of December 31, 2025 and 2024. The increase in the effective rate for the year ended December 31, 2025 compared to the year ended December 31, 2024, is primarily due to the remeasurement of the valuation allowance.
Previous wording
As of December 31, 2024, the Company had total cash and cash equivalents of $22,618, compared to $47,820 at December 31, 2023. The decrease over the twelve-month period is primarily a result of cash used in operating activities of $21,261, and capital expenditures of $3,851 primarily allocated to enabling in-house production of topical and gummy products.
Current wording
As of December 31, 2025, the Company had total cash and cash equivalents of $8,035, compared to $22,618 at December 31, 2024. The decrease over the twelve-month period is primarily a result of cash used in operating activities of $14,121.
Previous wording
Management believes that the Company's existing cash and cash equivalents, and short-term investments will provide sufficient liquidity to fund operations and planned capital expenditures for the next 12 months. The Company’s ability to fund its operations for the longer term will depend on the future operating performance, particularly revenue growth, which can be affected by general economic conditions, industry regulatory changes, and other factors beyond the Company’s control.
Current wording
Management believes that the Company's existing cash and cash equivalents, and short-term investments will provide sufficient liquidity to fund operations and planned capital expenditures for the next 12 months. The Company’s ability to fund its operations for the longer term will depend on the future operating performance, particularly revenue growth and expense management, which can be affected by general economic conditions, industry regulatory changes, and other factors beyond the Company’s control.
Previous wording
For the year ended December 31, 2024, the increase in cash used in investing activities was driven primarily by machinery purchases as part of the Company's plan to in-source topical and gummy production.
Current wording
For the year ended December 31, 2025, the project to in-source topical and gummy production was materially complete resulting in a decrease in cash used in investing activities compared to the year ended December 31, 2024.
Previous wording
For the year ended December 31, 2024, the change was primarily due to the vesting of restricted stock units.
Current wording
For the year ended December 31, 2025, the change was primarily due to the vesting of RSUs.
Previous wording
As of March 17, 2025, 158,009,541 common shares were issued and outstanding, and nil preferred shares were issued and outstanding. As of March 17, 2025, potential dilutive securities include (i) stock options exercisable to purchase 985,012 common shares pursuant to the Company’s 2015 legacy option plan with a weighted average exercise price of $0.56; (ii) stock options exercisable to purchase 2,366,675 common shares pursuant to the Company’s 2018 option plan, as amended, with a weighted average exercise price of $0.72; (iii) 4,409,234 restricted share units ("RSUs"). Each option, restricted share award, and convertible share entitles the holder to purchase one common share.
Current wording
As of March 26, 2026, 159,683,953 common shares were issued and outstanding, and nil preferred shares were issued and outstanding. As of March 26, 2026, potential dilutive securities include (i) stock options exercisable to purchase 1,924,812 common shares pursuant to the Company’s 2018 option plan, as amended, with a weighted average exercise price of $1.04; (ii) 3,532,850 RSUs. Each option, restricted share award, and convertible share entitles the holder to purchase one common share.
Previous wording
Effective November 2020, the Company issued a secured promissory note, where $1,000 was loaned to one of the Stanley Brothers. The note receivable was secured by equity instruments with certain of the Stanley Brothers, bore interest at 3.25% per annum, and required the unpaid principal and unpaid interest balances to be paid on or before the maturity date of November 13, 2021, which was subsequently extended. Effective November 13, 2024, the Company entered into a third amendment of the promissory note to extend the maturity date until November 13, 2029. According to the terms of the agreement, no additional interest will accrue through the payment date. The note has been fully reserved for as of December 31, 2024.
Current wording
Effective November 2020, the Company issued a secured promissory note, where $1,000 was loaned to one of the Stanley Brothers. The note receivable was secured by equity instruments with certain of the Stanley Brothers, bore interest at 3.25% per annum, and required the unpaid principal and unpaid interest balances to be paid on or before the maturity date of November 13, 2021, which date was subsequently extended. Effective November 13, 2024, the Company entered into a third amendment of the promissory note to extend the maturity date until November 13, 2029. According to the terms of the agreement, no additional interest will accrue through the payment date. The note has been fully reserved for as of December 31, 2025.
Previous wording
On March 2, 2021, the Company entered into the SBH Purchase Option with Stanley Brothers USA as discussed above (Note 3 "Fair Value Measurement"). The SBH Purchase Option was purchased for total consideration of $8,000. Certain of the Stanley Brothers, who are or were employees of the Company at the time, are the majority Shareholders of Stanley Brothers USA.
Current wording
On March 2, 2021, the Company entered into the SBH Purchase Option with Stanley Brothers USA as discussed above (Note 3 "Fair Value Measurement"). The SBH Purchase Option was purchased for total consideration of $8,000. Certain members of the Stanley Brothers, who are or were employees of the Company at the time, are the majority shareholders of Stanley Brothers USA. The Company is not obligated to exercise the SBH Purchase Option and as such the unexercised option expired as of February 26, 2026.
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 certain of the Stanley Brothers. BAT holds an equity interest in the entity in the form of 2,000,000, preferred units following its $10 million investment and has the right to participate in future equity issuances to maintain its pro rata equity position. The Company 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 December 31, 2024, the remaining note receivable of $71 is presented in other assets in the consolidated balance sheets. Additionally, on February 12, 2024, the Company and DeFloria entered into a separate master services agreement pursuant to which the Company will be compensated for the provision of certain services to DeFloria. For the year ended December 31, 2024, the Company recognized $648 in revenue and cost of goods sold, respectively, related to the service agreement with DeFloria. The Company has an accounts receivable balance due from DeFloria of $648 as of December 31, 2024.
Current wording
On April 6, 2023, the Company jointly formed an entity, DeFloria, Inc., with AJNA BioSciences and BAT. AJNA is a botanical drug development company and is partially owned and was co-founded by a member of the Stanley Brothers. BAT holds an equity interest in the entity in the form of approximately 2,000,000 preferred units following its initial $10 million investment and has the right to participate in future equity issuances to maintain its pro rata equity position. The Company and AJNA each hold 4,000,000 of the entity’s voting common units (Note 3). 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 are being paid in 36 monthly installments. As of December 31, 2025, and 2024 the remaining note receivable of$19 and$71, respectively, is presented in other assets in the consolidated balance sheets.
Previous wording
The Company has elected the fair value option in accordance with ASC 825-10 guidance to record its SBH Purchase Option. Under ASC 825-10, a business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. The SBH Purchase Option is classified as a financial asset in the consolidated balance sheets and is remeasured at fair value at each reporting date, with changes to fair value recognized in the statements of operations for the period. The use of assumptions for the fair value determination includes a high degree of subjectivity and judgment using unobservable inputs (level 3 on the fair value hierarchy), which results in estimation uncertainty. Changes in assumptions that reasonably could have been different at the reporting date may result in a higher or lower determination of fair value. The Monte Carlo valuation model considers multiple revenue and EBITDA outcomes for Stanley Brothers USA and other probabilities in assigning a fair value. Primary assumptions utilized include financial projections of Stanley Brothers USA and the probability and timing of exercise asserted by the Company.
Current wording
The SBH Purchase Option provides the Company the option to acquire all or substantially all the shares of Stanley Brothers USA, at a purchase price to be determined at the time of exercise of the SBH Purchase Option. The Company is not obligated to exercise the SBH Purchase Option and as such the unexercised option expired as of February 26, 2026. The Company has elected the fair value option in accordance with ASC 825-10 guidance to record its SBH Purchase Option. Under ASC 825-10, a business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. The SBH Purchase Option is classified as a financial asset in the consolidated balance sheets and is remeasured at fair value at each reporting date, with changes to fair value recognized in the statements of operations for the period. The use of assumptions for the fair value determination includes a high degree of subjectivity and judgment using unobservable inputs (level 3 on the fair value hierarchy), which results in estimation uncertainty. Changes in assumptions that reasonably could have been different at the reporting date may result in a higher or lower determination of fair value. The Monte Carlo valuation model considers multiple revenue and EBITDA outcomes for Stanley Brothers USA and other probabilities in assigning a fair value. Primary assumptions utilized include financial projections of Stanley Brothers USA and the probability and timing of exercise asserted by the Company.
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 consolidated statements of operations. There was $0 and $548 of impairment losses recognized related to long-lived assets for the year ended December 31, 2024 and December 31, 2023, 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 consolidated statements of operations. There were no impairment losses recognized related to long-lived assets for the year ended December 31, 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 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 December 31, 2024 and December 31, 2023. The Company’s policy is to recognize interest and penalties on taxes, if any, within the 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 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 2022. The Company has recorded an uncertain tax position as of December 31, 2025 and 2024. The Company’s policy is to recognize interest and penalties on taxes, if any, within the consolidated statement of operations as income tax expense.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
On April 6, 2023, the Company and DeFloria entered into a supply agreement in which the Company shall supply raw material that will be used in the development of the new drug. The price charged by the Company is at cost of goods sold level. For the year ended December 31, 2025 and 2024, the Company recognized $904 and $0 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 year ended December 31, 2025 and 2024 , the Company recognized $300 and $648 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 $1,471 and $648 as of December 31, 2025 and 2024, respectively