Charlotte’s Web Holdings, Inc. (the “Company”, “Charlotte’s Web”, “us”, “we” or “our”) may offer, issue and sell, as applicable, from time to time common shares (“Common Shares”), preferred shares (“Preferred Shares”), warrants (“Warrants”) to acquire any of the other securities that are described in this short form base shelf prospectus (the “Prospectus”), subscription receipts (“Subscription Receipts”) convertible into other Securities (as defined below), units (“Units”) comprised of one or more of any of the other Securities that are described in this Prospectus, or any combination of such Securities (all of the foregoing collectively, the “Securities” and individually, a “Security”), for up to an aggregate offering price of C$500,000,000 (or its equivalent in any other currencies), in one or more transactions during the 25-month period that this Prospectus, including any amendments hereto, remains effective.
The issued and outstanding Common Shares are listed on the Canadian Securities Exchange (the “CSE”) under the symbol “CWEB”. On April 5, 2019, the last trading day prior to the date of this Prospectus, the closing price of the Common Shares on the CSE was C$29.30. Unless otherwise specified in the applicable Prospectus Supplement, each series or issue of Securities (other than Common Shares) will not be listed on any securities exchange. Accordingly, there is currently no market through which the Securities (other than Common Shares) may be sold and purchasers may not be able to resell any such Securities purchased under this Prospectus and the Prospectus Supplement relating to such Securities. This may affect the pricing of such Securities in the secondary market, the transparency and availability of trading prices, the liquidity of such Securities and the extent of issuer regulation.
s. The Proportionate Voting Shares are convertible into Common Shares at a ratio of 400 Common Shares for every one Proportionate Voting Share at any time at the option of the holders thereof and automatically in certain other circumstances.
Our authorized share capital consists of an unlimited number of Common Shares of which 25,375,294 were issued and outstanding as of April 1, 2019
Next filings will be interesting.
The Company received an exemption order dated August 23, 2018 from the securities regulatory authorities in each of the Provinces of Canada (except Quebec) which provided an exemption from the provisions of National Instrument 41-101 - General Prospectus Requirements in relation to the qualification of the Common Shares as “restricted securities”. Subject to compliance with certain disclosure requirements, the exemption order applied to the Company’s IPO Prospectus, as well as applies to any other prospectuses that the Company may file under National Instrument 44-102 - Shelf Distributions, including this Prospectus.
Issued and outstanding Proportionate Voting Shares, including fractions thereof, may at any time, subject to the FPI Condition (as defined below), at the option of the holder, be converted into Common Shares at a ratio of 400 Common Shares per Proportionate Voting Share. Further, our Board may determine in the future that it is no longer advisable to maintain the Proportionate Voting Shares as a separate class of shares (a “Conversion Event”) and may cause all of the issued and outstanding Proportionate Voting Shares to be converted into Common Shares at a ratio of 400 Common Shares per Proportionate Voting Share. The Proportionate Voting Shares are not transferrable without approval of our Board, except to Permitted Holders (as defined below) and in compliance with U.S. securities laws
The right to convert the Proportionate Voting Shares into Common Shares is subject to certain conditions in order to maintain the Company’s status as a “foreign private issuer” under U.S. securities laws. Unless otherwise waived by the Company, the right to convert the Proportionate Voting Shares is subject to the condition that the aggregate number of Common Shares and Proportionate Voting Shares (calculated as a single class) held of record, directly or indirectly, by residents of the United States (as determined in accordance with Rules 3b-4 and 12g3-2(a) under the Exchange Act) may not exceed forty percent (40%) of the aggregate number of Common Shares and Proportionate Voting Shares issued and outstanding after giving effect to such conversions (calculated as a single class) (the “FPI Condition”). The FPI Condition may be waived at any time, and in connection with one or more conversion instances, by the Board.
Since December 31, 2018, the date of the Company’s most recently filed financial statements, there have been no material changes to the Company’s share and loan capitalization on a consolidated basis except the following: (a) in January, 2019, the issuance of a total of 425,324 Common Shares on conversion of 1,063.31 Proportionate Voting Shares; (b) in January, 2019, the issuance of a total of 1,555 Common Shares upon exercise of an outstanding broker warrant; (c) in February, 2019, the issuance of a total of 59,728 stock options to purchase Common Shares; (d) in February, 2019, the issuance of a total of 74,003 Common Shares upon exercise of an outstanding broker warrant; (e) in February, 2019, the issuance of a total of 235,376 Common Shares on conversion of 588.44 Proportionate Voting Shares; (f) in March, 2019, the issuance of a total of 2,652,060 Common Shares on conversion of 6,630.15 Proportionate Voting Shares; (g) in March, 2019, the issuance of a total of 5,175 Common Shares upon exercise of an outstanding broker warrant; (h) in April, 2019 thus far, the issuance of a total of 956,000 Common Shares on conversion of 2,390.00 Proportionate Voting Shares; (i) in April, 2019 thus far, the issuance of a total of 7,140 Common Shares upon exercise of an outstanding broker warrant; (j) in April, 2019 thus far, the issuance of a total of 504,922 Common Shares upon exercise of an outstanding option; and (k) in April, 2019, the issuance of a total of 40,565 stock options to purchase Common Shares and 8,530 Common Shares as restricted stock awards
From time to time, share-based compensation may comprise a significant component of the Company’s compensation for key personnel, and if the price of the Common Shares declines, it may be difficult to recruit and retain such individuals.
Subject to compliance with applicable securities laws and the terms of any applicable lock-up arrangements, the Company’s officers, directors, the holders of Proportionate Voting Shares and their affiliates may sell some or all of their Common Shares in the future. No prediction can be made as to the effect, if any, such future sales of Common Shares will have on the market price of the Common Shares prevailing from time to time. However, the future sale of a substantial number of Common Shares by our officers, directors, the holders of Proportionate Voting Shares and their affiliates, or the perception that such sales could occur, could materially adversely affect prevailing market prices for the Common Shares. All of the Common Shares the Company may issue under this Prospectus (including Common Shares issuable upon conversion or exercise of any Securities) and all currently outstanding Common Shares other than those subject to lock-up agreements executed by certain existing shareholders will, subject to applicable securities laws, generally be immediately available for resale in the public markets. Additional Common Shares issuable upon the exercise of stock options or the conversion of Proportionate Voting Shares may also become available for sale in the public market, which may also cause the market price of the 49 Common Shares to fall. Accordingly, if substantial amounts of Common Shares are sold in the public market, the market price could fall.
The Common Shares have not been, and may never be, registered under the U.S. Securities Act.
The Common Shares may bear a legend describing restrictions on transfer to U.S. persons and prohibiting hedging transactions in the Common Shares unless in compliance with the U.S. Securities Act
Working Capital and Future Issuances The Company may issue additional Common Shares in the future which may dilute a shareholder’s holdings in the Company. The Articles permit the issuance of an unlimited number of Common Shares, an unlimited number of Proportionate Voting Shares, and an unlimited number of Preferred Shares issuable in series, and Shareholders have no pre-emptive rights in connection with any further issuances.
Dilution The offering price of Common Shares or other Securities that are convertible or exchangeable into Common Shares may significantly exceed the net tangible book value per share of the Common Shares. Accordingly, a purchaser of Common Shares or other Securities that are convertible or exchangeable into Common Shares may incur immediate and substantial dilution of his, her or its investment. If outstanding options and warrants to purchase Common Shares are exercised or securities convertible into Common Shares are converted, additional dilution will occur. The Company may sell additional Common Shares or other securities that are convertible or exchangeable into Common Shares in subsequent offerings or may issue additional Common Shares or other securities to finance future acquisitions. The Company cannot predict the size or nature of future sales or issuances of securities or the effect, if any, that such future sales and issuances will have on the market price of the Common Shares. Sales or issuances of 52 substantial numbers of Common Shares or other securities that are convertible or exchangeable into Common Shares, or the perception that such sales or issuances could occur, may adversely affect prevailing market prices of the Common Shares. With any additional sale or issuance of Common Shares or other securities that are convertible or exchangeable into Common Shares, investors will suffer dilution to their voting power and economic interest in the Company. Furthermore, to the extent holders of the Company’s stock options or other convertible securities convert or exercise their securities and sell the Common Shares they receive, the trading price of the Common Shares on the CSE may decrease due to the additional amount of Common Shares available in the market.
