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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of earliest event reported):
August 10, 2023
Charlotte’s
Web Holdings, Inc.
(Exact name of Registrant as Specified in Its Charter)
British Columbia |
000-56364 |
98-1508633 |
(State or Other Jurisdiction
of Incorporation) |
(Commission
File Number) |
(IRS Employer
Identification No.) |
700 Tech Court
Louisville, Colorado
|
80027 |
(Address of Principal Executive Offices)
|
(Zip Code) |
Registrant’s Telephone Number, Including
Area Code: (720) 617-7303
Not applicable
(Former Name or Former Address, if Changed Since
Last Report)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2.
below):
☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol |
Name of exchange on which registered |
N/A |
N/A |
N/A |
Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange
Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☒
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.
Item 2.02 |
Results of Operations and Financial Condition. |
On August 10, 2023,
Charlotte’s Web Holdings, Inc. (the “Company”) issued an earnings release
announcing its financial results for the three months and six months ended June 30, 2023. A copy of the earnings release is furnished
herewith as Exhibit 99.1 and incorporated in this Item 2.02 by reference.
Item 9.01. |
Financial Statements and Exhibits. |
(d) Exhibits
The information in the press release attached
as Exhibit 99.1 is intended to be furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities
Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed
incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific
reference in such filing.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
CHARLOTTE’S WEB HOLDINGS, INC. |
|
|
|
|
Date: August 10, 2023 |
|
By: |
/s/ Stephen Rogers |
|
|
|
Stephen Rogers |
|
|
|
Senior Vice President - General Counsel and Corporate Secretary |
|
|
|
|
Exhibit 99.1
Charlotte’s Web Reports 2023 Second
Quarter
Financial Results
Encouraging CBD regulatory progress in Congress
Net revenue of $16.0M vs. $18.9M YoY
Cash increased to $61.7M
Louisville, CO August 10, 2023 - (TSX:
CWEB, OTCQX: CWBHF), Charlotte’s Web Holdings, Inc. (“Charlotte’s Web” or the “Company”), the market
leader in full spectrum hemp extract wellness products, today reported financial results for the second quarter ended June 30, 2023.
Regulatory Update
During the second quarter, the U.S. Food and
Drug Administration (“FDA”) committed to “work at speed” with Congress to resolve a regulatory pathway for hemp-derived
CBD. Recent progress has been encouraging surrounding The Hemp Derived Consumer Protection and Market Stabilization Act of 2023, (bill
H.R. 1629) which aims to regulate hemp extract products under the dietary supplement regulatory framework. Charlotte’s Web and industry
peers have compiled and shared safety and toxicology data with Congress to address concerns raised by the FDA. On July 27th,
the U.S. House Oversight and Accountability Subcommittee on Health Care and Financial Services held a hearing on the FDA’s failure
to regulate hemp-derived CBD products since the passing of the 2018 Farm Bill. An RFI (Request for Information) was made public immediately
after the hearing by the Energy and Commerce Committee, with a deadline of August 18th for
the CBD industry participants to engage and support the future regulatory landscape of the category. Charlotte’s Web is actively
supporting work towards an aligned industry voice coming back to Congress.
“Executing on
one of our stated strategic pillars, ‘Winning in Washington DC’, Charlotte’s Web is pleased to be a part of the influential
collaboration among consumers and industry stakeholders under a united strategy that is proactively engaged with Congress to support
the regulation of hemp CBD as a dietary supplement,” said Jared Stanley, Chief Operating Officer. “Additionally, in July,
Coalition for Access Now (“CAN”), a 501-c4 political non-profit organization, founded and led by Paige Figi, announced a partnership
with the U.S. Pain Foundation, to further advocate for the passage of CBD products to be regulated as a dietary supplement. CAN also has
other influential groups such as the American Legion, the nation's largest veteran organization,
that has expressed support for CAN’s efforts. These partnerships acknowledge the benefits of CBD and the urgency for Congress to
pass legislation to ensure consumer access to safe and accurately labeled products for the millions of Americans who use CBD daily.”
Business Review
Charlotte’s Web progressed on its stated
strategic pillars: winning in Washington DC, returning to growth, and expanding into botanical wellness.
“Executing on our strategic pillar for
growth, in the second quarter, we launched ReCreate™ by Charlotte’s Web, a new broad-spectrum CBD brand focused on cultural
lifestyles for Millennials and GenZers who make up approximately half of the multi-billion-dollar CBD market1,” said
Jacques Tortoroli, Chief Executive Officer of Charlotte’s Web. “These groups are anticipated to become the largest consumer
group by 20262 and often view sports and fitness as a form of self-care.”
ReCreate is NSF Certified for Sport® and
is the official CBD of Major League Baseball© (“MLB”) and Angel City Football Club. In July, the Company further cemented
its leading position in professional sports by becoming the official CBD partner of the Premier Lacrosse League. Professional sports leagues
raise brand awareness and relevance to their audiences, fans, players, and teams, which are ReCreate’s target consumers.
“This exposure is particularly important
for our e-commerce channel where increased traffic and sessions to www.CharlottesWeb.com and
www.ReCreateYou.com are our highest priorities,” explained Mr. Tortoroli. “ReCreate
products are available on our webstore, and we are launching the portfolio across select retail customers later this year, including
Vitamin Shoppe, Fresh Thyme, and Stark International among others - with more to come over time.”
To drive future growth in the retail channel,
Charlotte’s Web achieved category-leading All Commodity Volume (ACV) distribution gains within the Natural Products Retail channel
over the first six months of 2023. In the U.S., Charlotte’s Web holds the number one market share position in overall retail and
e-commerce channels per Nielsen Company (US), LLC, SPINS, LLC/IRI, and The Brightfield Group. In May 2023, the Company’s distribution
was further expanded in pet retail through a new partnership with Phillips Pet Food & Supplies, America’s largest distributor
in the pet specialty retail channel, covering more than 6,000 retailers, representing more than 14,000 retail locations.
“We have
a robust pipeline of innovation-to-market products that respond to consumer needs with new formulations, formats, and packaging, leveraging
our intellectual property and leading science in minor cannabinoids and botanical wellness. We launched ReCreate gummies on July
11th on our new website www.ReCreateYou.com, which directly integrates into our current
e-commerce platform,” said Mr. Tortoroli.
“Lastly, in May, we began an initiative
to insource the production of topical products, leveraging our Louisville facility and Operations team, while driving down costs.”
Charlotte’s Web also progressed on its
third strategic pillar, expanding into broader Botanical Wellness. On April 6, 2023, Charlotte’s Web announced (Press
Release) the formation of DeFloria LLC, with a subsidiary of British American Tobacco PLC (LSE: BATS and NYSE: BTI), and AJNA BioSciences
PBC, a botanical drug development company. DeFloria was established to pursue a botanical IND through the FDA drug development pathway
for a botanical drug to target a neurological condition. In August, DeFloria received Ethics Committee approval to commence a phase 1
clinical trial in Australia.
“We continue to believe we are deploying
the right strategies and are confident in our long-term growth outlook; however, we have not yet returned to revenue growth year-over-year,
although B2B was essentially flat year-over-year in Q2. We maintain our market leading position which speaks to the overall CBD sector
remaining challenged,” added Mr. Tortoroli.
Financial Review
The following table sets forth selected financial
information for the periods indicated.
|
|
Three Months Ended, June 30, |
U.S. $ millions, except per share data |
|
2023 |
|
2022 |
|
|
|
|
|
Revenue |
|
$16.0 |
|
$18.9 |
Cost of goods sold |
|
7.1 |
|
9.6 |
Gross profit |
|
8.9 |
|
9.3 |
|
|
|
|
|
Selling, general and administrative expenses |
|
19.6 |
|
17.3 |
Operating loss |
|
(10.7) |
|
(7.9) |
|
|
|
|
|
Gain on investment in unconsolidated entity |
|
10.7 |
|
- |
Change in fair value of financial instruments and other |
|
4.2 |
|
- |
Other income, net |
|
(1.4) |
|
0.1 |
Net income (loss) |
|
$2.8 |
|
$(7.9) |
Net income (loss) per common share, basic and diluted |
|
$0.02 |
|
$(0.05) |
Consolidated net revenue for the second quarter
ended June 30, 2023, was $16.0 million, a decrease from $18.9 million in the second quarter of 2022. The Company believes that continued
positive legislative progress in Washington DC for the regulation of CBD will increase consumer interest and confidence as well as unlock
incremental customer opportunities.
Gross profit was $8.9 million, or 55.7% of revenue,
as compared to gross profit of $9.3 million, or 49.4% of revenue, in the second quarter of 2022. The improvement was primarily due to
higher inventory provisions recorded in Q2 2022.
|
|
Three Months Ended |
|
|
|
June 30, |
|
|
2023 |
|
2022 |
|
Total Revenue - U.S. $ millions |
|
$16.0 |
|
$18.9 |
|
Direct-to-consumer ("DTC”) |
|
$10.7 |
|
$13.3 |
|
Business-to-business ("B2B”) |
|
$5.3 |
|
$5.6 |
|
Direct-to-consumer
(“DTC”) net revenue through the Company’s webstore was $10.7 million, as compared to $13.3 million in Q2 2022.
E-commerce sales were negatively impacted by aggressive competitive online pricing and lower traffic to the Company’s webstore.
Charlotte’s Web holds the number one market share position across e-commerce, which
is the largest purchase channel for CBD according to the Brightfield Group. The Company continues to invest in this significant category,
including a new platform to improve the consumer experience.
Business-to-business (“B2B”) retail
net revenue was $5.3 million, as compared to $5.6 million in Q2 2022. Lower unit sales to existing retail customers were substantially
offset by retail distribution gains achieved in the first six months of 2023.
SG&A Expenses
Total selling, general and administrative (“SG&A”)
expenses in the quarter were $19.6 million, a 13.7% increase from $17.3 million in Q2 2022. The increase reflects the timing of marketing
expenses and includes the amortization of the MLB license and media rights assets of $2.1 million, which were not present in the comparable
period. Excluding amortization, SG&A increased 1.7% year-over-year. SG&A expenses in the six months ended June 30th
were comparable at approximately $37.1 million in 2023 and $37.6 million in 2022, although the prior year period did not include expenses
related to the MLB partnership.
Net Income and Adjusted EBITDA
Net income benefited from non-cash gains during
the quarter, including a $4.2 million gain in fair value of the Company’s derivative instruments, and a $10.7 million gain on a
non-cash investment in DeFloria. These gains offset the operating loss and interest expense, resulting in net income of $2.8 million,
or $0.02 per share basic and diluted, for the second quarter of 2023. This was an improvement versus a net loss of $7.9 million, or ($0.05)
per share basic and diluted, in Q2 2022.
Adjusted EBITDA3 loss for the second
quarter of 2023 was $7.1 million, compared to an Adjusted EBITDA loss of $5.4 million in the second quarter of 2022.
Balance Sheet and Cash Flow
Net cash provided from operations, for the three
months ended June 30, 2023, was $1.0 million as compared to $0.3 million in Q2 2022. Additionally, the second quarter of 2023 included
a rights fee payment to MLB, which did not occur in the prior year period.
“We reported positive cash flow in the
second quarter, including collecting our $4.2 million IRS Employee Retention Credit as well as prudent expense management, partially offset
by MLB quarterly Rights payment of $2.0 million,” said Jessica Saxton, Chief Financial Officer of Charlotte’s Web. “Our
cash balance increased to $61.7 million at quarter end, providing ample working capital to support continued execution of our strategy."
Net cash used in the six months ended June 30th
was $5.2 million and $4.3 million in 2023 and 2022, respectively. In the current year, collection of the $4.2 million Employee Retention
Credit was offset by MLB Rights payments of $4.0 million. Last year’s cashflow included $3.2 million in IRS tax refunds.
The Company’s cash and working capital
as of June 30, 2023, were $61.7 million and $72.3 million respectively, compared to $67.0 million and $82.3 million on December 31, 2022,
respectively.
Consolidated Financial Statements and
Management’s Discussion and Analysis
The Company’s audited consolidated financial
statements and accompanying notes for the three months ended June 30, 2023, and 2022 and related management’s discussion and analysis
of financial condition and results of operations (“MD&A”) are reported in the Company’s 10-Q filing on the Securities
and Exchange Commission website at www.sec.gov and on SEDAR at www.sedar.com and will be available on the Investor Relations section of
the Company’s website at https://investors.charlottesweb.com.
Conference
Call
Management will
host a conference call to discuss the Company’s 2023 second quarter at 11:00 a.m. ET on August 10, 2023. There are three ways to
join the call:
There are three ways to join the call:
| • | Register
and enter your phone number at https://emportal.ink/3JQUm05 to receive an instant automated
call back, or |
| • | Dial
1-416-764-8659 or 1-888-664-6392 approximately 10 minutes before the conference call and
provide confirmation number 98335923, or |
| • | Listen
to the live webcast online. |
Earnings Call
Replay
A recording of the
call will be available through August 17, 2023. To listen to a replay of the earnings call please dial 1-416-764-8677 or 1-888-390-0541
and provide conference replay ID 335923#. A webcast of the call will also be accessible through the investor
relations section of the Company’s website for an extended period of time.
Subscribe to Charlotte's Web investor news.
About Charlotte’s Web Holdings, Inc.
Charlotte's Web
Holdings, Inc., a Certified B Corporation headquartered in Louisville, Colorado, is the market leader in innovative hemp extract wellness
products under a family of brands that includes Charlotte's Web™, ReCreate™, CBD Medic™, and CBD Clinic™. Charlotte’s
Web whole-plant CBD extracts come in full-spectrum and broad-spectrum options, including ReCreate™
by Charlotte’s Web, broad-spectrum CBD certified NSF for Sport®. ReCreate is the official
CBD of Major League Baseball©, Angel City Football Club and the Premier Lacrosse League. Charlotte's Web branded premium quality
products start with proprietary hemp genetics that are North American farm-grown using organic and regenerative cultivation practices.
The Company's hemp extracts have naturally occurring botanical compounds including cannabidiol ("CBD"), CBC, CBG, terpenes,
flavonoids, and other beneficial compounds. Charlotte’s Web product categories include CBD oil tinctures (liquid products) CBD
gummies (sleep, calming, exercise recovery, immunity), CBD capsules, CBD topical creams and lotions, as well as CBD pet products for
dogs. Through its substantially vertically integrated business model, Charlotte’s Web maintains stringent control over product
quality and consistency with analytic testing from soil to shelf for quality assurance. Charlotte’s Web products are distributed
to retailers and health care practitioners throughout the U.S.A, and online through the Company's website at www.charlottesweb.com.
© Major League Baseball trademarks
and copyrights are used with permission of Major League Baseball. Visit MLB.com.
Shares of Charlotte's Web trade on the Toronto
Stock Exchange (TSX) under the symbol “CWEB” and are quoted in U.S. Dollars in the United States on the OTCQX under the symbol
“CWBHF”. As of June 30, 2023, Charlotte's Web had 152,825,118 Common Shares outstanding.
Forward-Looking Information
In the interest of providing the shareholders
and potential investors of Charlotte's Web Holdings, Inc. with information about the Company, certain information provided herein constitutes
forward-looking statements or information (collectively, "forward-looking statements") within the meaning of applicable securities
laws. Forward-looking statements are typically identified by words such as "may", "will", "should", "could",
"anticipate", "expect", "project", "estimate", "forecast", "plan", "intend",
"target", "believe" and similar words suggesting future outcomes or statements regarding an outlook. Although these
forward-looking statements are based on assumptions the Company considers to be reasonable based on the information available on the date
such statements are made, such statements are not guarantees of future performance and readers are cautioned against placing undue reliance
on forward-looking statements. By their nature, these statements involve a variety of assumptions, known and unknown risks and uncertainties,
and other factors which may cause actual results, levels of activity, and achievements to differ materially from those expressed or implied
by such statements. The forward-looking statements contained in this press release are based on certain assumptions and analysis by management
of the Company in light of its experience and perception of historical trends, current conditions and expected future development and
other factors that it believes are appropriate.
Specifically, this press release contains
forward-looking statements relating to, but not limited to: activities relating to, and sponsorship of, legislation to advance regulatory
framework; anticipated consumer trends and corresponding product innovation; anticipated future financial results; the conversion of the
convertible debenture held by BAT; sales volume, product, channel and international expansion plans; growth of the Company’s market
share position; the impact of the Company’s partnership with the MLB on the health and wellness of its players and fans; the impact
of the Company’s new distribution partners on sales; the Company’s ability to increase online traffic and demographic exposure
through new products and marketing; anticipated new marketing partners; the impact of certain activities on the Company's business and
financial condition; suggested regulatory developments; and the Company's anticipated trajectory, long-term growth expectations and shareholder
value creation.
The material factors and assumptions used
to develop the forward-looking statements herein include, but are not limited to, the following: the regulatory climate in which the Company
currently operates and may in the future operate; successful sales of the Company's products; the success of sales and marketing activities;
there will be no significant delays in the development and commercialization of the Company's products, including in relation to supply
chain disruptions; outcomes from R&D activities; ability for the Company to leverage R&D and brand recognition for product sales;
the Company's ability to deal with adverse growing conditions (due to pests, disease, fungus, climate or other factors) in a timely and
cost-effective manner; there will be no significant reduction in the availability of qualified and cost-effective human resources; new
products will continue to be added to the Company's portfolio; demand for the Company's products will grow in the foreseeable future;
there will be no significant barriers to the acceptance of the Company's products in the market, including in international markets; the
Company will be able to maintain compliance with applicable contractual and regulatory obligations and requirements; there will be adequate
liquidity available to the Company to carry out its operations and business plans; the Company will have sufficient capital to pursue
its sales volume, product, channel and international expansion; and products do not develop that would render the Company's current and
future product offerings undesirable and the Company is otherwise able to minimize the impact of competition and keep pace with changing
consumer preferences.
The Company's forward-looking statements
are subject to risks and uncertainties pertaining to, among other things, supply chain, distribution chain, and to the broader market
for the Company's products; revenue fluctuations; nature of government regulations (both domestic and foreign); economic conditions;
loss of key customers; retention and availability of executive talent; competing products; common share price volatility; loss of proprietary
information; product acceptance; internet and system infrastructure functionality; information technology security; available capital
to fund operations and business plans; crop risk; international and political considerations; regulatory changes; and including but not
limited to those risks and uncertainties discussed under the heading "Risk Factors" in the Company’s Annual Report on
Form 10-K for the year ending December 31, 2022 and other risk factors contained in other filings with the Securities and Exchange Commission
available on www.sec.gov and filings with Canadian securities regulatory authorities available
on www.sedarplus.com. The impact of any one risk, uncertainty, or factor on a particular forward-looking
statement is not determinable with certainty as these are interdependent, and the Company's future course of action depends on management's
assessment of all information available at the relevant time.
Except as required by applicable law, the
Company assumes no obligation to publicly update or revise any forward-looking statements made, whether as a result of new information,
future events, or otherwise. All forward-looking statements, whether written or oral, attributable to the Company or persons acting on
the Company's behalf, are expressly qualified in their entirety by these cautionary statements.
(1) The Brightfield Group, August 2023
(2) Accenture: "The Future of Business is Experience:
Accenture Strategy Global Consumer Pulse Research”, and Insider Intelligence
(3) Non-GAAP Measures: The press release contains
non-GAAP measures, including EBITDA and Adjusted EBITDA. Please refer to the section in the tables captioned “Non-GAAP Measures”
below for additional information and a reconciliation to GAAP for all Non-GAAP metrics.
For further information contact:
Jessica Saxton
Chief Financial Officer
(720) 388-6505
Jessica.Saxton@CharlottesWeb.com
Cory Pala
Director of Investor Relations
(720) 484-8930
Cory.Pala@CharlottesWeb.com
CHARLOTTE’S WEB HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(unaudited)
| |
June 30, | |
December 31, |
| |
2023
(unaudited) | |
2022 |
ASSETS | |
| | | |
| | |
Current assets: | |
| | | |
| | |
Cash and cash equivalents | |
$ | 61,728 | | |
$ | 66,963 | |
Accounts receivable, net | |
| 2,479 | | |
| 1,847 | |
Inventories, net | |
| 23,755 | | |
| 26,953 | |
Prepaid expenses and other current assets | |
| 6,900 | | |
| 7,998 | |
Total current assets | |
| 94,862 | | |
| 103,761 | |
Property and equipment, net | |
| 26,608 | | |
| 29,330 | |
License and media rights | |
| 22,968 | | |
| 26,871 | |
Operating lease right-of-use assets, net | |
| 15,543 | | |
| 16,519 | |
Investment in unconsolidated entity | |
| 10,700 | | |
| — | |
SBH purchase option and other derivative assets | |
| 2,893 | | |
| 3,620 | |
Intangible assets, net | |
| 1,500 | | |
| 1,771 | |
Other long-term assets | |
| 1,515 | | |
| 5,770 | |
Total assets | |
$ | 176,589 | | |
$ | 187,642 | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable | |
$ | 3,193 | | |
$ | 4,018 | |
License and media rights payable - current | |
| 8,833 | | |
| 7,759 | |
Accrued and other current liabilities | |
| 8,336 | | |
| 7,344 | |
Lease obligations - current | |
| 2,247 | | |
| 2,306 | |
Total current liabilities | |
| 22,609 | | |
| 21,427 | |
Convertible debenture | |
| 40,307 | | |
| 37,421 | |
Lease obligations | |
| 16,529 | | |
| 17,905 | |
License and media rights payable | |
| 15,869 | | |
| 20,383 | |
Derivatives and other long-term liabilities | |
| 2,914 | | |
| 13,001 | |
Total liabilities | |
| 98,228 | | |
| 110,137 | |
Commitments and contingencies | |
| | | |
| | |
Shareholders’ equity: | |
| | | |
| | |
Common shares, nil par value; unlimited shares authorized as of June 30, 2023 and December 31, 2022, respectively; 152,825,118 and 152,135,026 shares issued and outstanding as of June 30, 2023 and December 31, 2022 | |
| 1 | | |
| 1 | |
Additional paid-in capital | |
| 326,355 | | |
| 325,431 | |
Accumulated deficit | |
| (247,995 | ) | |
| (247,927 | ) |
Total shareholders’ equity | |
| 78,361 | | |
| 77,505 | |
Total liabilities and shareholders’ equity | |
$ | 176,589 | | |
$ | 187,642 | |
CHARLOTTE’S WEB HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(in thousands, except share and per share amounts)
| |
Three Months Ended June 30, (unaudited) | |
Six Months Ended June 30, (unaudited) |
| |
2023 | |
2022 | |
2023 | |
2022 |
| |
| |
| |
| |
|
Revenue | |
$ | 16,006 | | |
$ | 18,877 | | |
$ | 33,016 | | |
$ | 38,234 | |
Cost of goods sold | |
| 7,088 | | |
| 9,556 | | |
| 14,181 | | |
| 17,199 | |
Gross profit | |
| 8,918 | | |
| 9,321 | | |
| 18,835 | | |
| 21,035 | |
| |
| | | |
| | | |
| | | |
| | |
Selling, general and administrative | |
| 19,627 | | |
| 17,259 | | |
| 37,140 | | |
| 37,614 | |
Operating loss | |
| (10,709 | ) | |
| (7,938 | ) | |
| (18,305 | ) | |
| (16,579 | ) |
| |
| | | |
| | | |
| | | |
| | |
Gain on investment in unconsolidated entity | |
| 10,700 | | |
| — | | |
| 10,700 | | |
| — | |
Change in fair value of financial instruments and other | |
| 4,229 | | |
| — | | |
| 9,612 | | |
| 100 | |
Other income (expense), net | |
| (1,376 | ) | |
| 68 | | |
| (2,074 | ) | |
| (17 | ) |
Income (loss) before provision for income taxes | |
| 2,844 | | |
| (7,870 | ) | |
| (67 | ) | |
| (16,496 | ) |
Income tax benefit (expense) | |
| — | | |
| — | | |
| — | | |
| — | |
Net income (loss) | |
$ | 2,844 | | |
$ | (7,870 | ) | |
$ | (67 | ) | |
$ | (16,496 | ) |
| |
| | | |
| | | |
| | | |
| | |
Per common share amounts | |
| | | |
| | | |
| | | |
| | |
Net income (loss) per common share, basic | |
$ | 0.02 | | |
$ | (0.05 | ) | |
$ | — | | |
$ | (0.11 | ) |
Net income (loss) per common share, diluted | |
$ | 0.02 | | |
$ | (0.05 | ) | |
$ | — | | |
$ | (0.11 | ) |
CHARLOTTE’S WEB HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’
EQUITY
(in thousands, except share amounts)
(unaudited)
| |
Common Shares | |
| |
| |
|
| |
Shares | |
Amount | |
Additional Paid-in Capital | |
Accumulated Deficit | |
Total Shareholders’ Equity |
Balance - December 31, 2022 | |
| 152,135,026 | | |
$ | 1 | | |
$ | 325,431 | | |
$ | (247,927 | ) | |
$ | 77,505 | |
Common shares issued upon vesting of restricted share units,
net of withholding | |
| 297,888 | | |
| — | | |
| (69 | ) | |
| — | | |
| (69 | ) |
Share-based compensation | |
| — | | |
| — | | |
| 375 | | |
| — | | |
| 375 | |
Net income (loss) | |
| | | |
| — | | |
| | | |
| (2,912 | ) | |
| (2,912 | ) |
Balance - March 31, 2023 | |
| 152,432,914 | | |
$ | 1 | | |
$ | 325,737 | | |
$ | (250,839 | ) | |
$ | 74,899 | |
Common shares issued upon vesting of restricted share units,
net of withholding | |
| 392,204 | | |
| — | | |
| (6 | ) | |
| — | | |
| (6 | ) |
Share-based compensation | |
| — | | |
| — | | |
| 624 | | |
| — | | |
| 624 | |
Net income (loss) | |
| — | | |
| — | | |
| — | | |
| 2,844 | | |
| 2,844 | |
Balance - June 30, 2023 | |
| 152,825,118 | | |
$ | 1 | | |
$ | 326,355 | | |
$ | (247,995 | ) | |
$ | 78,361 | |
| |
| Common Shares | | |
| | | |
| | | |
| | |
| |
| Shares | | |
| Amount | | |
| Additional
Paid-in Capital | | |
| Accumulated
Deficit | | |
| Total
Shareholders’ Equity | |
Balance - December 31, 2021 | |
| 144,659,964 | | |
$ | 1 | | |
$ | 319,059 | | |
$ | (188,614 | ) | |
$ | 130,446 | |
Common shares issued upon vesting of restricted share units,
net of withholding | |
| 77,193 | | |
| — | | |
| (45 | ) | |
| — | | |
| (45 | ) |
Harmony Hemp contingent equity compensation | |
| 169,045 | | |
| — | | |
| 165 | | |
| — | | |
| 165 | |
ATM program issuance costs | |
| 239,500 | | |
| — | | |
| (2 | ) | |
| — | | |
| (2 | ) |
Share-based compensation | |
| — | | |
| — | | |
| 1,214 | | |
| — | | |
| 1,214 | |
Net income (loss) | |
| — | | |
| — | | |
| — | | |
| (8,626 | ) | |
| (8,626 | ) |
Balance - March 31, 2022 | |
| 145,145,702 | | |
$ | 1 | | |
$ | 320,391 | | |
$ | (197,240 | ) | |
$ | 123,152 | |
Common shares issued upon vesting of restricted share units,
net of withholding | |
| 132,463 | | |
| — | | |
| (13 | ) | |
| — | | |
| (13 | ) |
Share-based compensation | |
| — | | |
| — | | |
| 643 | | |
| — | | |
| 643 | |
Net
income (loss) | |
| — | | |
| — | | |
| — | | |
| (7,870 | ) | |
| (7,870 | ) |
Balance - June 30, 2022 | |
| 145,278,165 | | |
$ | 1 | | |
$ | 321,021 | | |
$ | (205,110 | ) | |
$ | 115,912 | |
CHARLOTTE’S WEB HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| |
Six Months Ended June 30, (unaudited) |
| |
2023 | |
2022 |
| |
| |
|
Cash flows from operating activities: | |
| | | |
| | |
Net loss | |
$ | (67 | ) | |
$ | (16,496 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 7,769 | | |
| 3,940 | |
Change in fair value of financial instruments and other | |
| (9,612 | ) | |
| (100 | ) |
Gain on investment in unconsolidated entity | |
| (10,700 | ) | |
| — | |
Convertible debenture accrued interest | |
| 1,954 | | |
| — | |
Share-based compensation | |
| 999 | | |
| 2,022 | |
Loss on foreign currency translation | |
| 979 | | |
| — | |
Changes in right-of-use assets | |
| 976 | | |
| 1,236 | |
Inventory provision | |
| 320 | | |
| 1,857 | |
Other | |
| 957 | | |
| (434 | ) |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable, net | |
| (1,104 | ) | |
| 2,430 | |
Inventories, net | |
| 2,878 | | |
| (2,411 | ) |
Prepaid expenses and other current assets | |
| 764 | | |
| 3,706 | |
Accounts payable, accrued and other liabilities | |
| 183 | | |
| (2,194 | ) |
Operating lease obligations | |
| (1,436 | ) | |
| (896 | ) |
License and media rights | |
| (4,000 | ) | |
| — | |
Income taxes receivable | |
| 4,261 | | |
| 3,185 | |
Other operating assets and liabilities, net | |
| (130 | ) | |
| (129 | ) |
Net cash used in operating activities | |
| (5,009 | ) | |
| (4,284 | ) |
Cash flows from investing activities: | |
| | | |
| | |
Purchases of property and equipment and intangible assets | |
| (187 | ) | |
| (333 | ) |
Proceeds from sale of assets | |
| 36 | | |
| — | |
Net cash used in investing activities | |
| (151 | ) | |
| (333 | ) |
Cash flows from financing activities: | |
| | | |
| | |
Other financing activities | |
| (75 | ) | |
| (60 | ) |
Net cash used in financing activities | |
| (75 | ) | |
| (60 | ) |
Net decrease in cash and cash equivalents | |
| (5,235 | ) | |
| (4,677 | ) |
Cash and cash equivalents - beginning of period | |
| 66,963 | | |
| 19,494 | |
Cash and cash equivalents - end of period | |
$ | 61,728 | | |
$ | 14,817 | |
Non-cash activities: | |
| | | |
| | |
Non-cash purchase of intangible asset | |
| (163 | ) | |
| — | |
Non-cash issuance of note receivable | |
| (156 | ) | |
| — | |
(3) Non-GAAP Measures - EBITDA and Adjusted EBITDA
Earnings before interest, taxes, depreciation, and
amortization (“EBITDA”) is not a recognized performance measure under U.S. GAAP. The term EBITDA consists of net loss and
excludes interest, taxes, depreciation, and amortization. Adjusted EBITDA also excludes other non-cash items such as changes in fair value
of financial instruments (Mark-to-Market), Share-based compensation, and impairment of assets. These non-GAAP financial measures should
be considered supplemental to, and not a substitute for, our reported financial results prepared in accordance with GAAP. The non-GAAP
financials measures do not have a standardized meaning prescribed under U.S. GAAP and therefore may not be comparable to similar measures
presented by other issuers. The primary purpose of using non-GAAP financial measures is to provide supplemental information that we believe
may be useful to investors and to enable investors to evaluate our results in the same way we do. We also present the non-GAAP financial
measures because we believe they assist investors in comparing our performance across reporting periods on a consistent basis, as well
as comparing our results against the results of other companies, by excluding items that we do not believe are indicative of our core
operating performance. Specifically, we use these non-GAAP measures as measures of operating performance; to prepare our annual operating
budget; to allocate resources to enhance the financial performance of our business; to evaluate the effectiveness of our business strategies;
to provide consistency and comparability with past financial performance; to facilitate a comparison of our results with those of other
companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and in communications with our board
of directors concerning our financial performance. Investors should be aware, however, that not all companies define these non-GAAP measures
consistently.
Adjusted EBITDA for the three and six months
ended June 30, 2023, and 2022 is as follows:
| |
Three Months Ended June 30 (Unaudited) | |
Six Months Ended June 30 (Unaudited) |
U.S. $ Thousands | |
2023 | |
2022 | |
2023 | |
2022 |
| |
| |
| |
| |
|
Net income (loss) | |
$ | 2,844 | | |
$ | (7,870 | ) | |
$ | (67 | ) | |
$ | (16,496 | ) |
| |
| | | |
| | | |
| | | |
| | |
Depreciation of property and equipment and amortization of intangibles | |
| 3,977 | | |
| 1,862 | | |
| 7,769 | | |
| 3,940 | |
| |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| 348 | | |
| 1 | | |
| 1,147 | | |
| 20 | |
| |
| | | |
| | | |
| | | |
| | |
EBITDA | |
| 7,169 | | |
| (6,077 | ) | |
| 8,849 | | |
| (12,536 | ) |
| |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Stock Comp | |
| 624 | | |
| 643 | | |
| 999 | | |
| 2,022 | |
Mark-to-market financial instruments | |
| (4,229 | ) | |
| — | | |
| (9,612 | ) | |
| (100 | ) |
Gain on Investment in DeFloria | |
| (10,700 | ) | |
| — | | |
| (10.700 | ) | |
| — | |
Adjusted EBITDA | |
$ | (7,136 | ) | |
$ | (5,364 | ) | |
$ | (10,464 | ) | |
$ | (10,614 | ) |
| |
| | | |
| | | |
| | | |
| | |
Certain prior year amounts in the table above have
been conformed to the current year presentation in accordance with how the Company is defining the EBITDA and Adjusted EBITDA calculation
on June 30, 2023
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