If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g),
check the following box. [ ]
The information required on the remainder of this cover page shall not
be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise
subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).
CUSIP No. 16106R109 | SCHEDULE 13D | Page 2 of 24 Pages |
1 |
NAME OF REPORTING PERSON
JOEL STANLEY |
2 |
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP |
(a) ☒
(b) ¨ |
3 |
SEC USE ONLY |
4 |
SOURCE OF FUNDS
OO, PF |
5 |
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) |
¨ |
6 |
CITIZENSHIP OR PLACE OF ORGANIZATION
United States |
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON WITH |
7 |
SOLE VOTING POWER
4,187,831 Shares |
8 |
SHARED VOTING POWER
0 |
9 |
SOLE DISPOSITIVE POWER
4,187,831 Shares |
10 |
SHARED DISPOSITIVE POWER
0 |
11 |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
4,187,831 Shares |
12 |
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES |
¨ |
13 |
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) (see Item 5)
2.7% |
14 |
TYPE OF REPORTING PERSON
IN |
|
|
|
|
|
CUSIP No. 16106R109 | SCHEDULE 13D | Page 3 of 24 Pages |
1 |
NAME OF REPORTING PERSON
JESSE STANLEY |
2 |
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP |
(a) ☒
(b) ¨ |
3 |
SEC USE ONLY |
4 |
SOURCE OF FUNDS
OO, PF |
5 |
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) |
¨ |
6 |
CITIZENSHIP OR PLACE OF ORGANIZATION
United States |
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON WITH |
7 |
SOLE VOTING POWER
6,689,860 Shares |
8 |
SHARED VOTING POWER
0 |
9 |
SOLE DISPOSITIVE POWER
6,689,860 Shares |
10 |
SHARED DISPOSITIVE POWER
0 |
11 |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
6,689,860 Shares |
12 |
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES |
¨ |
13 |
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) (see Item 5)
4.4% |
14 |
TYPE OF REPORTING PERSON
IN |
|
|
|
|
|
CUSIP No. 16106R109 | SCHEDULE 13D | Page 4 of 24 Pages |
1 |
NAME OF REPORTING PERSON
LYNN KEHLER |
2 |
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP |
(a) ☒
(b) ¨ |
3 |
SEC USE ONLY |
4 |
SOURCE OF FUNDS
OO |
5 |
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) |
¨ |
6 |
CITIZENSHIP OR PLACE OF ORGANIZATION
United States |
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON WITH |
7 |
SOLE VOTING POWER
1,554,144 Shares |
8 |
SHARED VOTING POWER
0 |
9 |
SOLE DISPOSITIVE POWER
1,554,144 Shares |
10 |
SHARED DISPOSITIVE POWER
0 |
11 |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
1,554,144 Shares |
12 |
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES |
¨ |
13 |
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) (see Item 5)
1.0% |
14 |
TYPE OF REPORTING PERSON
IN |
|
|
|
|
|
CUSIP No. 16106R109 | SCHEDULE 13D | Page 5 of 24 Pages |
Item 1. |
SECURITY AND ISSUER. |
This statement on Schedule
13D relates to the common shares, no par value, (the “Shares”) of Charlotte’s Web Holdings, Inc., a benefit company
under the Business Corporations Act (British Columbia) (the “Issuer”). The principal executive office of the
Issuer is located at 700 Tech Court, Louisville, CO 80027.
Item 2. |
IDENTITY AND BACKGROUND. |
(a) This statement is filed by Joel Stanley, with respect to Shares held
directly by him and Shares held by estate planning vehicles over which he has voting and investment authority; Jesse Stanley (together
with Joel Stanley, the “Co-Founders”) with respect to Shares held directly by him and Shares held by estate planning
vehicles over which he has voting and investment authority; and Lynn Kehler (together with the Co-Founders, the “Reporting Persons”),
with respect to Shares held indirectly through an entity, of which he is the sole member.
(b) The address of Joel
Stanley is 8022 Southpark Cir. Suite 500, Littleton, CO 80120. The address of Jesse Stanley is 2545 West 8th Avenue, Denver, CO 80203.
The address of Lynn Kehler is 3748 Camelrock View, Colorado Springs, CO 80904.
(c) The principal business
of Joel Stanley is serving as Chief Executive Officer at Ajna BioSciences PBC, a botanical drug development company. The principal business
of Jesse Stanley is serving as Chief Executive Officer of MTHR Health Inc., a dietary supplement company, and as Chief Executive Officer
of Stanley brothers USA, a licensing company focusing on licensing brands in the cannabis space. The principal business of Lynn Kehler
is serving as former CEO of Westone Laboratories, a healthcare company focused on producing hearing assistance products.
(d) None of the Reporting Persons
has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors).
(e) None of the Reporting
Persons has, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.
(f) Each of the Reporting Persons is a citizen
of the United States of America.
Item 3. |
SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. |
Joel Stanley used a total of $24,218.35
to acquire 95,001 of the Shares reported to be beneficially owned by him. The remaining 4,092,830 Shares reported to be beneficially owned
by Joel Stanley were issued as founder shares of the Issuer.
Jesse Stanley used a total of
approximately $74,588.48 to acquire 18,104 of the Shares reported to be beneficially owned by him. The remaining 6,671,756 Shares reported to be
beneficially owned by Jesse Stanley were issued as founder shares of the Issuer.
All of the 1,554,144 Shares
reported to be beneficially owned by Lynn Kehler were issued as founder shares of the Issuer.
CUSIP No. 16106R109 | SCHEDULE 13D | Page 6 of 24 Pages |
Item 4. |
PURPOSE OF TRANSACTION. |
On June 9, 2023, the Co-Founders
sent a letter (the “June 9 Letter”) to the Board of Directors of the Issuer (the “Board”) noting
their concerns with the Issuer’s recent performance under the direction of the Board. In the June 9 Letter, the Co-Founders stated
their view that the Issuer should not re-elect certain members of the current Board (the “Subject Directors”) upon
the expiration of their current terms at the Issuer’s 2023 annual meeting of shareholders (the “Annual Meeting”).
The Co-Founders also proposed that any resulting vacancies be filled by the appointment of each of the Reporting Persons and Angela McElwee
(former CEO of Gaia Herbs) (collectively, the “Proposed Nominees”). To facilitate the replacement of the Subject Directors
with the Proposed Nominees, the Co-Founders proposed to the Issuer that the Subject Directors agree not to stand for election at the Annual
Meeting and that the Board waives the Issuer’s advance notice requirements to allow the Proposed Nominees to stand for election
uncontested at the Annual Meeting. The Co-Founders noted that they had submitted instructions to “withhold” their votes
on the election of the Subject Directors and stated their belief that other unaffiliated shareholders also intended to withhold their
votes on the election of the Subject Directors at the Annual Meeting. Given the Issuer’s majority voting policy, the Co-Founders
also noted in the June 9 Letter their expectation that the Board would respect the will of shareholders by accepting the resignation of
any director who was not elected by at least a majority of the votes cast with respect to his or her election. The summary of the June
9 Letter does not purport to be complete and is qualified in its entirety by reference to the full text of the June 9 Letter, a copy of
which is attached as Exhibit 99.1 and incorporated herein by reference.
Following the failure of
the Board to respond to the June 9 Letter, on June 12, 2023, the Co-Founders issued a press release (the “June 12 Press Release”)
reiterating their concerns regarding the Issuer’s performance, their desire for the Subject Directors to resign, and their request
that the Issuer facilitate the appointment of the Proposed Nominees to the Board, whether at the Annual Meeting or at a special meeting
called in the event the Subject Directors resign after failing to obtain majority support. In the June 12 Press Release, the Co-Founders
again stated their intention to “withhold” their votes on the election of the four Subject Directors should they continue
to stand for election at the Annual Meeting. The summary of the June 12 Press Release does not purport to be complete and is qualified
in its entirety by reference to the full text of the June 12 Press Release, a copy of which is attached as Exhibit 99.2 and incorporated
herein by reference.
On June 13, 2023, the Co-Founders
issued a press release (the “June 13 Press Release”) disclosing the Board’s failure to engage with the Co-Founders
regarding the issues raised in the June 12 Press Release and repeating the Co-Founders’ plans to “withhold” their votes
for the election of the Subject Directors at the Annual Meeting. In the June 13 Press Release, the Co-Founders also called for an
independent chair to preside over the Annual Meeting. The summary of the June 13 Press Release does not purport to be complete and is
qualified in its entirety by reference to the full text of the June 13 Press Release, a copy of which is attached as Exhibit 99.3 and
incorporated herein by reference.
Except as set forth herein,
the Reporting Persons have no present plan or proposal which would relate to or result in any of the matters set forth in subparagraphs
(a) - (j) of Item 4 of Schedule 13D.
The Reporting Persons
will review their investments in the Issuer on a continuing basis. The Reporting Persons may communicate with the Issuer’s
management and Board about a broad range of operational and strategic matters, including among other things, potential changes in,
the Issuer’s operations, management, governance, board composition, organizational documents, capital or corporate structure,
dividend policy, and strategy and plans of the Issuer and communicate with other shareholders or third parties regarding the
foregoing. The Reporting Persons may exchange information with any such persons pursuant to appropriate confidentiality or similar
agreements which may include customary standstill provisions. Subject to applicable law and regulation and depending upon certain
factors, including, without limitation, the financial performance of the Issuer, the availability and price of the Shares or other
securities related to the Issuer, the outcome of any discussions or matters referenced above, overall market condition, other
available investment opportunities and other general market and investment conditions, the Reporting Persons may determine to take
such actions with respect to their investment in the Issuer as they deem appropriate and may, from time to time determine to: (i) to
increase or decrease their position in the Issuer through, among other things, the purchase or sale of Shares and/or other equity,
debt, derivative securities or other instruments that are convertible into Shares, or are based upon or relate to the value of the
Shares or the Issuer (collectively, “Securities”) on the open market or in private transactions, on such terms
and at such times as the Reporting Persons may deem advisable and/or (ii) to enter into transactions that increase or hedge its
economic exposure to the Shares or other Securities without affecting the Reporting Person’s beneficial ownership of the
Shares or other Securities. Such transactions may take place at any time and without prior notice. There can be no assurance,
however, that any Reporting Person will take any such actions.
CUSIP No. 16106R109 | SCHEDULE 13D | Page 7 of 23 Pages |
Item 5. |
INTEREST IN SECURITIES OF THE ISSUER. |
(a) See rows (11) and (13)
of the cover pages to this Schedule 13D for the aggregate number of Shares and percentages of the Shares beneficially owned by each Reporting
Person. The percentage of Shares reported to be beneficially owned by the Reporting Persons is based upon 152,441,144 Shares outstanding
as of May 24, 2023, as reported in the Prospectus filed by the Issuer pursuant to Rule 424(b)(3) with the Securities and Exchange Commission
on May 25, 2023.
By virtue of the
matters described in Item 4 above and in the June 9 Letter, the June 12 Press Release, and the June 13 Press Release, Joel Stanley,
Jesse Stanley, and Lynn Kehler may be deemed to have formed a “group” within the meaning of Section 13(d)(3) of the
Exchange Act and the “group” may be deemed to beneficially own an aggregate of 12,431,835 Shares, representing
approximately 8.2% of the outstanding Shares. Each Reporting Person expressly disclaims beneficial ownership of the Shares
beneficially owned by the other Reporting Person.
(b) See rows (7) through
(10) of the cover pages to this Schedule 13D for the number Shares as to which each Reporting Person has the sole or shared power to vote
or direct the vote and sole or shared power to dispose or to direct the disposition.
(c) Information concerning
transactions in the Shares effected by the Reporting Persons during the past sixty days is set forth in Schedule I hereto and is
incorporated herein by reference. All of the transactions in Shares listed hereto were effected in the open market through various brokerage
entities.
(d) Other than as described
in Item 2(a), no person (other than the Reporting Persons) is known to have the right to receive or the power to direct the receipt of
dividends from, or the proceeds from the sale of, the Shares reported herein.
(e) Not applicable.
CUSIP No. 16106R109 | SCHEDULE 13D | Page 8 of 24 Pages |
Item 6. |
CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. |
Except for the Joint Filing Agreement
attached hereto as Exhibit 99.4, there are no contracts, arrangements, understandings or relationships (legal or otherwise) among any
Reporting Person and between such persons and any person with respect to
any securities of the Issuer, including but not limited to transfer or voting of any other securities, finder’s fees, joint ventures,
loan or option arrangements, puts or calls, guarantees of profits, divisions of profits or loss, or the giving or withholding of proxies,
including any securities pledged or otherwise subject to a contingency the occurrence of which would give another person voting power
or investment power over such securities other than standard default and similar provisions contained in loan agreements.
Item 7. |
MATERIAL TO BE FILED AS EXHIBITS. |
Exhibit 99.1: |
The June 9 Letter |
Exhibit 99.2: |
The June 12 Press Release |
Exhibit 99.3: |
The June 13 Press Release |
Exhibit 99.4: |
Joint Filing Agreement |
CUSIP No. 16106R109 | SCHEDULE 13D | Page 9 of 24 Pages |
SIGNATURES
After reasonable inquiry and to the best of
my knowledge and belief, the undersigned certify that the information set forth in this statement is true, complete and correct.
Dated: June 16, 2023
|
|
|
|
|
|
/s/ Joel Stanley |
|
|
JOEL STANLEY |
|
|
|
|
|
|
|
|
|
/s/ Jesse Stanley |
|
|
JESSE STANLEY |
|
|
|
|
|
|
|
|
|
/s/ Lynn Kehler |
|
|
LYNN KEHLER |
|
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|
CUSIP No. 16106R109 | SCHEDULE 13D | Page 10 of 24 Pages |
Schedule I
Transactions in the Shares of the Issuer by the
Reporting Persons During the Last Sixty (60) Days
The following tables set forth
all transactions in the Shares effected in the past sixty days by the Reporting Persons. Except as noted below, all such transactions
were effected in the open market through brokers and the price per share includes commissions.
Joel Stanley
Trade Date |
Shares Purchased (Sold) |
Price Per Share ($) |
|
|
|
5/18/2023 |
95,001 |
0.25 |
CUSIP No. 16106R109 | SCHEDULE 13D | Page 11 of 24 Pages |
Exhibit 99.1
CONFIDENTIAL
VIA E-MAIL
June 9, 2023
Board of Directors
Charlotte’s
Web Holdings, Inc. (the “Company”)
700
Tech Court
Louisville,
CO
80027
Re: 2023 Annual General Meeting of
Shareholders
Dear Board of Directors
of the Company:
We
are writing to you in our capacity as shareholders and as co-founders of the Company. Since Joel resigned as a member of the board of
directors (the “Board”) of the Company in March 2021, the Company’s share price has fallen 95% and the revenues
have decreased by 22.8% (from approximately US$96 million in 2021 to approximately US$74 million in 2022). We believe the Board bears
responsibility for the Company’s current performance and that general industry decline and/or regulatory headwinds are not an excuse.
We believe that a reconstituted Board is required for the Company’s future growth and success.
Our
Concerns
Our concerns include, but
are not limited to, the following:
| · | The incumbent Board and management’s business
strategy has been to pin their hopes on FDA regulations changing in favour of the business. Rather than innovate within the current framework,
the Company continues to burn money on conventional marketing. |
| · | The Company has spent more than US$270 million and
accrued a loss of over US$186 million between April 1, 2021 and March 31, 2023. Despite this, there has been a steady decline in revenue
across all channels, with little to no product innovation or SKU expansion in the CBD category. |
| · | The Company has the infrastructure to support other
categories and provide fully integrated manufacturing of all products. Yet, manufacturing of the Company's largest revenue category, being
gummies, has been outsourced. |
| · | The Company has cycled through four different CFOs
in the past two years. Additionally, the Board has provided exorbitant compensation to the CEO relative to the Company’s current
size and performance. These practices have led to unacceptable levels of dilution to shareholders. |
CUSIP No. 16106R109 | SCHEDULE 13D | Page 12 of 24 Pages |
| · | Management has not been held accountable by the Board
for chasing acquisitions and distributor and marketing relationships but repeatedly failing to successfully execute on these transactions. |
Our
Solution
The Company is scheduled
to hold its annual general meeting of shareholders on June 15, 2023 (the “Meeting”) at which shareholders will be asked
to, among other items, elect six directors to the Board.
We are of the view
that certain members of the current Board, being John Held, Jacques Tortoroli, Thomas Lardieri and Alicia Morga should not be elected
as directors of the Company (collectively, the “Subject Directors”).
We propose that
any vacancies created would be filled by ourselves, Joel Stanley and Jesse Stanley (co-founders of the Company), Lynn Kehler, the first
Chief Financial Officer of the Company, and Angela McElwee, former Chief Executive Officer of Gaia Herbs, one of North America’s
top herbal supplement brands (collectively, the “Proposed Nominees”). Further information on the Proposed Nominees
can be provided to you upon request.
Under the founders’
direction, with Joel as the first CEO and Executive Chairman, Jesse as an original board member and marketing lead, and Lynn as the first
CFO, the Company grew revenues to nearly US$70 million with less than US$7 million in total investment from 2013 to 2018. Moreover, the
Company had positive EBITDA until a non-founder CEO was put in place, and has not had positive EBITDA since. It is clear that the Company
needs to adopt a founders’ mentality and stop wasting resources on bad deals and bad hires. The Proposed Nominees understand that
the Board and management must bring costs in line with the reality of present-day revenues with a strategic focus on product diversification
and innovation.
We believe that an orderly
transition is in the best interests of the Company. In order to achieve this, we propose that: (1) the Subject Directors agree not to
stand for election at the Meeting; and (2) the Board waives the Company’s advance notice requirements pursuant to Article 29.1(i)
of its articles and allow the Proposed Nominees to stand for election at the Meeting.
Key Considerations
for the Current Board
We collectively beneficially own,
or control or direct, directly or indirectly, 10,964,622 common shares of the Company (“Common Shares”),
representing 7.19% of the Common Shares that were outstanding as of the record date, and have submitted instructions to “withhold”
our votes for the election of the Subject Directors at the Meeting. In addition, other shareholders (the “Supporting Shareholders”),
who collectively beneficially own, or control or direct, directly or indirectly, 26,630,012 Common
Shares, representing 17.47% of the Common Shares that were outstanding as of the record date, have confirmed that they have also submitted
instructions to “withhold” their votes for the election of the Subject Directors at the Meeting. It is also important to note
that the Supporting Shareholders include Major League Baseball, a shareholder with 4.01% ownership and a four-year US$30M sponsorship
agreement with the Company.
CUSIP No. 16106R109 | SCHEDULE 13D | Page 13 of 24 Pages |
We and the Supporting Shareholders
collectively represent 24.66% of the Common Shares that were outstanding as of the record date. Based on voter turnout for the election
of directors at last year’s annual general meeting of shareholders, changes to the Company’s board of directors appear to
be inevitable.
Under the
Company’s majority voting policy, any director that is not elected by at least a majority of the votes cast with respect to his
or her election must immediately tender his or her resignation to the Chair of the Board following the Meeting. The Board is expected
to accept such resignations, absent exceptional circumstances.
***
We request that you
confirm your intention to facilitate an orderly Board transition and make a public announcement of such prior to the Meeting.
We also remind the Board that delaying
the Meeting will not change the outcome and any such action will be perceived by shareholders as evidence of entrenchment. We also urge
the Board to maintain the integrity of electronic corporate records, which may be subject to review by shareholders.
If
we do not receive a response by 5:00 p.m. on June 11th,
2023, our intention is to go public with our concerns and encourage additional support from
shareholders to reconstitute the Board as described above.
We look forward to discussing the
contents of this letter at your earliest opportunity.
Sincerely,
JOEL STANLEY
JESSE STANLEY
CUSIP No. 16106R109 | SCHEDULE 13D | Page 14 of 24 Pages |
Exhibit 99.2
Charlotte’s Web Co-Founders Jesse and Joel Stanley
Seek Changes to the Board to Enhance Shareholder Value
| · | Shareholders collectively holding 24.66%
of the issued and outstanding shares of Charlotte’s Web have submitted instructions to “WITHHOLD” votes for four of
the Company’s director nominees |
| · | Since Joel Stanley left the Board in March
2021, Charlotte’s Web stock price has fallen 95%, revenues have decreased by 22.8% (from approximately US$96 million in 2021
to approximately US$74 million in 2022) and the value of the Company is at its lowest levels since going public |
| · | To effect change, the Concerned Shareholders
encourage fellow shareholders to “WITHHOLD” votes for John Held, Jacques Tortoroli, Thomas Lardieri and Alicia Morga
|
TORONTO, ONTARIO, June 12, 2023 –
Jesse and Joel Stanley (the “Concerned Shareholders”), co-founders of Charlotte’s Web Holdings, Inc. (TSX: CWEB)
(OTCQX: CWBHF) (“Charlotte’s Web” or the “Company”), have submitted instructions to “WITHHOLD”
votes for four of six of the Company’s director nominees – namely, John Held, Jacques Tortoroli, Thomas Lardieri and Alicia
Morga (the “Subject Directors”) – ahead of the annual general meeting of shareholders scheduled to be held on
June 15, 2023 (the “Meeting”). The Concerned Shareholders understand that certain supporting shareholders, including
Major League Baseball (the “Supporting Shareholders”), have also submitted instructions to “WITHHOLD” votes
for the Subject Directors ahead of the Meeting.
The Concerned Shareholders and the Supporting
Shareholders collectively represent 24.66% of the common shares of the Company (“Common Shares”) entitled to vote at
the Meeting. Given the voter turnout for the election of directors at last year’s annual general meeting of shareholders, changes
to the Company’s board of directors (the “Board”) appear to be inevitable.
Under the Company’s majority voting
policy, any director that is not elected by at least a majority of the votes cast with respect to his or her election must immediately
tender his or her resignation to the Chair of the Board following the Meeting. The Board must determine whether or not to accept the resignation
within 90 days following the Meeting. The Board must accept the resignation unless it determines that the applicable director should continue
to serve on the Board. The rules of the Toronto Stock Exchange require that a board will accept the resignation absent exceptional
circumstances that warrant the director continuing to serve on the board. As a result, the Concerned Shareholders expect the Board
to accept any resignations it receives and to cause the Company to call a special meeting of shareholders without delay to fill any vacancies
on the Board.
In light of the above and in order to
avoid additional costs of calling a special meeting of shareholders by the Company, the Concerned Shareholders proposed to the Company
that (i) the Subject Directors not stand for election, and (ii) the Board waive the Company’s advance notice requirements,
which would allow the Concerned Shareholders to nominate Joel Stanley, Jesse Stanley, Lynn Kehler and Angela McElwee for election as directors
of the Company at the Meeting. The Concerned Shareholders reached out to the Board to discuss a smooth transition. Rather than engage
with the Company’s largest shareholders, the Board has unfortunately chosen to remain silent. This has forced the Concerned Shareholders
to make their concerns public.
CUSIP No. 16106R109 | SCHEDULE 13D | Page 15 of 24 Pages |
The Concerned Shareholders are disappointed
in the Board’s refusal to engage. On every relevant metric ranging from revenue growth to future outlook, the Company is facing
an unprecedented negative market sentiment of its own making and irreparable trust-deficit in the incumbent Board. Shareholders urgently
need a reconstituted Board to address the challenges at hand.
Joel Stanley, co-founder of the Company,
said,
“Without urgent action
today, the future of Charlotte’s Web is at risk. We call on the Charlotte’s Web Board and the four incumbent directors, who
will fail to achieve majority support, to put shareholders first and to do the right thing by stepping down and avoid delaying change.
Shareholders have seen the value of their investments collapse and the stock price is trading at an all-time low. The Company is in need
of a refreshed Board and we have the right people to take on the huge challenges that lie ahead, in order to restore shareholder value.”
Jesse Stanley, co-founder of the Company,
said,
“The significant cash burn
rate with decreasing revenues must end immediately. The current leadership blames general industry decline and regulatory headwinds to
avoid taking responsibility for their actions. The truth is that the actions of this Board have clearly contributed to the destruction
of shareholder value.”
THE CASE FOR CHANGE IS CLEAR
| · | Hope is Not a Strategy: The incumbent
Board and management’s business strategy has been to pin their hopes on FDA regulations changing in favor of the business. Rather
than innovate within the current framework, the Company continues to burn money on conventional marketing. |
| · | Uncontrolled Spending Without Consequences:
The Company has spent more than US$270 million and accrued a loss of over US$186 million between April 1, 2021 and March 31, 2023. Despite
this, there has been a steady decline in revenue across all channels, with little to no product innovation or SKU expansion in the CBD
category. |
| · | Failure to Maximize Potential: The Company
has the infrastructure to support other categories and provide fully integrated manufacturing of all products. Yet, manufacturing of the
Company's largest revenue category, gummies, has been outsourced. |
| · | Poor Hiring Practices: The Company has
cycled through four different CFOs in the past two years. Additionally, the Board has provided exorbitant compensation to the CEO and
other senior executives relative to the Company’s current size and performance. These practices have led to unacceptable levels
of dilution to shareholders. |
| · | Lack of Accountability: Management has
not been held accountable by the Board for chasing acquisitions and distributor and marketing relationships but repeatedly failing to
successfully execute on these transactions. |
CUSIP No. 16106R109 | SCHEDULE 13D | Page 16 of 24 Pages |
SHAREHOLDER WARNING: THE BOARD MAY TRY TO
DELAY THE INEVITABLE
The Concerned Shareholders caution fellow shareholders
that the Board may use delay tactics to avoid change. Under the Company’s majority voting policy, the Board is able to deliberate
for 90 days on whether or not to accept resignations from any directors that have failed to obtain majority support at the Meeting and
to develop reasoning as to why such director(s) should remain on the Board despite failing to achieve majority support. However, the broad
and significant shareholder opposition makes it clear that those directors that do not obtain majority support do not have a mandate from
shareholders to serve as directors of the Company and should therefore vacate the Board immediately.
THE CONCERNED SHAREHOLDERS’ PLAN WILL
PUT THE COMPANY ON THE RIGHT TRACK
It is clear that the Company needs to adopt a founders’
mentality and stop wasting resources on bad deals and bad hires. The Concerned Shareholders understand that the Board and management must
bring costs in line with the reality of present-day revenues with a strategic focus on product diversification and innovation. The Company
led by a new Board will return to its roots of deeper engagement with industry and consumers, focus on regulatory action requirements,
and improve cost structures. The Concerned Shareholders believe that innovation of new products and product categories should have been
the Company’s priority over the past four years and that the Company’s existing resources must be deployed with far more calculated
strategies from here forward.
THE CONCERNED SHAREHOLDERS’ REQUEST
FOR BOARD REPRESENTATION
The Concerned Shareholders have requested board representation
and proposed to the Company that the Subject Directors be replaced by Joel Stanley, Jesse Stanley, Lynn Kehler and Angela McElwee, each
of whose biographies have been provided below for reference purposes. The Concerned Shareholders have suggested to the current Board that
this could be facilitated either by (i) the Subject Directors not standing for election at the Meeting and having the Company waive its
advance notice requirements, which would allow the Concerned Shareholders to propose nominees at the Meeting, or (ii) the Company calling
a special meeting of shareholders to fill any vacancies on the Board resulting from the resignations of the Subject Directors if they
fail to obtain majority support at the Meeting. The Concerned Shareholders are prepared to provide further information on each of Joel
Stanley, Jesse Stanley, Lynn Kehler and Angela McElwee in accordance with applicable law, should (i) the Company decide to waive its advance
notice requirements and allow the Concerned Shareholders to nominate Joel Stanley, Jesse Stanley, Lynn Kehler and Angela McElwee for election
as directors of the Company at the Meeting, or (ii) a special meeting of shareholders be called by the Company for purposes of election
of directors to fill any vacancies that result from the resignation of the Subject Directors.
| · | Joel Stanley. Joel Stanley is a co-founder
of Charlotte’s Web and was the Company’s first Chief Executive Officer & Executive Chairman. From incorporation in 2013
to the election of a majority independent board in late 2018, he played an instrumental role in the Company’s growth. Joel planted
the roots that built Charlotte’s Web and has over a decade’s experience in the industry that will be valuable in turning the
Company around. Joel is currently the co-founder and Chief Executive Officer of AJNA Biosciences PBC, a botanical drug development company
focused on full-spectrum cannabinoid and natural psychedelic options for mental health and neurological disorders. He is also a board
member of Stanley Brothers USA Holdings, Inc., a pioneering medical marijuana licensing company with a global presence that has played
a significant role in shaping the industry. |
CUSIP No. 16106R109 | SCHEDULE 13D | Page 17 of 24 Pages |
| · | Jesse Stanley. Jesse Stanley is a co-founder
of Charlotte’s Web and was a member of the Company’s first board of directors. During his role at Charlotte’s Web, Jesse
was the marketing force behind the iconic CBD brand. Jesse has over a decade’s experience in the industry; his expertise and start-up
grit will help align brand building and build product marketing with revenues. Jesse currently serves as the Chief Executive Officer of
Stanley Brothers USA Holdings, Inc. |
| · | Lynn Kehler. Lynn Kehler is a veteran
business and finance executive with almost four decades of experience in executive leadership, corporate finance, and capital markets.
Lynn joined Charlotte’s Web in 2014 when it was pre-revenue and worked closely with its founders to develop the Company’s
business and marketing strategies, leadership team, and raise private investment capital. Lynn served as Chief Financial Officer until
shortly after its initial public offering in August 2018 and during his tenure, the Company remained EBITDA positive. He started his career
with the audit staff of PriceWaterhouseCoopers in Houston and is a retired CPA and CMA. Lynn currently is the Managing Director at Alpine
Advisory Group, a business consulting firm that specializes in strategy development, leadership, and financial management of small to
middle market companies. He also oversees several private investment companies that make venture and private equity investments in real
estate, technology and secondary private equity offerings. |
| · | Angela McElwee. Angela McElwee has worked
within the natural products industry for nearly 30 years and has held leadership positions with wellness-centric consumer packaged goods
organizations for the last 20 years. From April 2008 to January 2021, she was an executive at Gaia Herbs, Inc. (“Gaia”),
a leading herbal supplement brand, including serving on the company’s board of directors from 2013-2021. From 2016 to 2021, she
served as President and Chief Executive Officer of Gaia. Prior to her tenure at Gaia, she led the U.S. sales organization at Nature’s
Way Products, LLC. She holds a B.S. in Biology from Miami University. Angela is currently a Venture Partner at Springdale Ventures, a
venture capital firm, and also holds several board positions including with NASDAQ-listed Cyanotech Corporation. |
THE CONCERNED SHAREHOLDERS ENCOURAGE
FELLOW SHAREHOLDERS TO “WITHHOLD” VOTES FOR JOHN HELD, JACQUES TORTOROLI, THOMAS LARDIERI AND ALICIA MORGA. DOING SO WILL
HELP BRING ABOUT THE POSITIVE CHANGE THAT CHARLOTTE’S WEB NEEDS.
DON’T DELAY! YOU CAN CHANGE YOUR
VOTE! If you are a beneficial shareholder (hold shares through a financial intermediary) or a registered shareholder (hold shares in certificate
form) you may immediately change your vote online by using a 16-digit control number at www.proxyvote.com or by calling 1-800-690-6903.
Your control number can be found with
the proxy materials mailed to you. If you do not have your materials, you can request your control number by email at shareholder@broadridge.com
or by calling 1-800-353-0103.
Need more information or need help voting?
Call Kingsdale Advisors on 1-888-564-7333 or email contactus@kingsdaleadvisors.com.
CUSIP No. 16106R109 | SCHEDULE 13D | Page 18 of 24 Pages |
ADVISORS
Kingsdale Advisors (“Kingsdale”)
is acting as strategic shareholder and communications advisor and Fasken Martineau DuMoulin LLP is acting as legal advisors to the Concerned
Shareholders.
INFORMATION IN SUPPORT OF PUBLIC BROADCAST
SOLICITATION
The following information is provided
in accordance with applicable law. The Concerned Shareholders are relying on the exemption under sections 9.2(4) of National Instrument
51-102 – Continuous Disclosure Obligations to make this public broadcast solicitation.
This news release and any solicitation
made by the Concerned Shareholders in advance of the Meeting is, or will be, as applicable, made by Concerned Shareholders and not by
or on behalf of the management of the Company.
The Concerned Shareholders may solicit
proxies in reliance upon the public broadcast exemption to the solicitation requirements under applicable law, conveyed by way of public
broadcast, including through press releases, speeches or publications, and by any other manner permitted under applicable law. Proxies
may also be solicited by the Concerned Shareholders pursuant to an information circular sent to shareholders after which solicitations
may be made by or on behalf of the Concerned Shareholders by mail, telephone, fax, email or other electronic means as well as by newspaper
or other media advertising, and in person by directors, officers and employees of the Concerned Shareholders, who will not be specifically
remunerated therefor. The Concerned Shareholders may engage the services of one or more agents and authorize other persons to assist in
soliciting proxies on behalf of the Concerned Shareholders.
The Concerned Shareholders have retained
Kingsdale as its strategic advisor and to assist the Concerned Shareholders in the solicitation of proxies. The Concerned Shareholders
will pay Kingsdale fees currently estimated at up to $100,000. Kingsdale’s responsibilities will principally include advising the
Concerned Shareholders on developing and implementing shareholder communication and engagement strategies, and advising with respect to
meeting and proxy protocol.
All costs incurred for any solicitation
will be borne by the Concerned Shareholders, provided that, subject to applicable law, the Concerned Shareholders may seek reimbursement
from the Company of the Concerned Shareholders’ out-of-pocket expenses, including proxy solicitation expenses and legal fees, incurred
in connection therewith.
A registered shareholder of the Company
that gives a proxy may revoke it: (a) by completing and signing a valid proxy bearing a later date than the proxy being revoked and returning
the newly completed and signed proxy in accordance with the instructions contained in the form of proxy; (b) by depositing an instrument
in writing executed by the shareholder or by the shareholder’s attorney authorized in writing, as the case may be: (i) at the registered
office of the Company at any time up to and including the last business day preceding the day of the Meeting at which the proxy is to
be used, or (ii) with the chairman of the Meeting on the day of the Meeting; or (c) in any other manner permitted by law. A non-registered
holder of common shares of the Company will be entitled to revoke a form of proxy or voting instruction form given to an intermediary
at any time by written notice to the intermediary in accordance with the instructions given to the non-registered holder by its intermediary.
CUSIP No. 16106R109 | SCHEDULE 13D | Page 19 of 24 Pages |
To the knowledge of the Concerned Shareholders,
the Company’s mailing address is 700 Tech Court Louisville, CO 80027. A copy of this news release
may be obtained on the Company’s SEDAR profile at www.sedar.com.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
This press release contains forward-looking
information within the meaning of applicable securities laws. In general, forward-looking information refers to disclosure about future
conditions, courses of action, and events. All statements contained in this press release that are not clearly historical in nature or
that necessarily depend on future events are forward-looking, and the use of any of the words “anticipates”, “believes”,
“expects”, “intends”, “plans”, “will”, “would”, and similar expressions are
intended to identify forward-looking statements. These statements are based on current expectations of the Concerned Shareholders and
currently available information.
Forward-looking statements are not guarantees
of future performance, involve certain risks and uncertainties that are difficult to predict, and are based upon assumptions as to future
events that may not prove to be accurate. The Concerned Shareholders undertake no obligation to update publicly or revise any forward-looking
statements, whether as a result of new information, future events, or otherwise, except as required by applicable securities legislation.
CONTACT
Kingsdale Advisors:
Aquin George
Director, Special Situations
Phone: 647-265-4528
Email: ageorge@kingsdaleadvisors.com
CUSIP No. 16106R109 | SCHEDULE 13D | Page 20 of 24 Pages |
Exhibit 99.3
Charlotte’s Web’s Board Refuses to Engage with
its Largest Shareholders
- With 24.66% of common shares already voted to WITHHOLD
on four directors, the entrenched Board refuses to engage with its largest shareholders and co-founders
- Unwillingness to have a constructive conversation not only
unnecessarily delays inevitable change but comes at the expense of shareholders’ time, money and resources
TORONTO, ONTARIO, June 13, 2023 –
Despite strong support for change to the board of directors (the “Board”) of Charlotte’s Web Holdings, Inc. (TSX: CWEB)
(OTCQX: CWBHF) (“Charlotte’s Web” or the “Company”) ahead of the annual general meeting of shareholders
scheduled to be held on June 15, 2023 (the “Meeting”), the Board has refused to engage with Jesse and Joel Stanley (the “Concerned
Shareholders”), co-founders of Charlotte’s Web, instead telling them to talk to the Company’s lawyers.
“One of the number one responsibilities
of a director is to engage with their shareholders, understand their views, and, while those views may differ, engage in a constructive
dialogue for the betterment of all shareholders. On all accounts this Board has failed,” said Jesse Stanley, co-founder of the Company.
“We would like to thank the shareholders who have reached out to us since we made our desire for change public. We share both their
surprise and disappointment that, rather than facilitate a smooth and cost-efficient transition, the Board has been silent. Shareholders
are justifiably concerned about what costly entrenchment tactics the Board may employ in an attempt to delay inevitable change supported
by the founders and largest shareholder group.”
On June 12, 2023, following a weekend
of silence from the Company, the Concerned Shareholders were forced to announce in a press release that they have submitted instructions
to “WITHHOLD” votes for four of six of the Company’s director nominees – namely, John Held, Jacques Tortoroli,
Thomas Lardieri and Alicia Morga (the “Subject Directors”). Certain supporting shareholders (the “Supporting Shareholders”)
have also submitted instructions to “WITHHOLD” votes for the Subject Directors ahead of the Meeting.
The Concerned Shareholders and the Supporting
Shareholders collectively represent 24.66% of the common shares of the Company (“Common Shares”) entitled to vote at the Meeting.
This represents a significant majority of those shareholders expected to be represented at the Meeting given the historical voter turnout
for the election of directors and indicates that change is imminent.
CUSIP No. 16106R109 | SCHEDULE 13D | Page 21 of 24 Pages |
The Concerned Shareholders have proposed
to the Company that Subject Directors not stand for election, and the Board waive the Company’s advance notice requirements, which
would allow the Concerned Shareholders to nominate Joel Stanley, Jesse Stanley, Lynn Kehler and Angela McElwee for election as directors
of the Company at the Meeting.
“We believe that with the right
leadership moving forward, Charlotte’s Web’s best days are yet to come. The Board needs to return to a founder’s mentality,
end wasteful spending and assemble a team that knows what it takes to grow the Company,” said Joel Stanley, co-founder of the Company.
“We support the election of Susan Vogt and Jonathan Atwood and we believe their experience will remain a valuable asset to the newly
constituted Board. We are hopeful that Susan and Jonathan are as committed to putting the interests of shareholders first as we are and
that they will act as a voice of reason to any Board members that may be more focused on keeping their jobs than creating shareholder
value. We remain ready and open to engage and hope they can encourage their director colleagues to do the same.”
The Concerned Shareholders are also calling
for an independent chair to preside over the Meeting as concerns regarding the entrenched nature of the current Board grows. An independent
chair, untethered from board members looking out for their own interests, can impartially oversee the annual meeting and facilitate fair
proceedings. In particular, an independent chair may determine that waiving the advance notice requirements and avoiding the cost and
expense of another shareholders meeting is in the best interests of the Company.
IT’S NOT TOO LATE -- YOU CAN STILL CHANGE YOUR VOTE!
THE CONCERNED SHAREHOLDERS ENCOURAGE
FELLOW SHAREHOLDERS TO “WITHHOLD” VOTES FOR JOHN HELD, JACQUES TORTOROLI, THOMAS LARDIERI AND ALICIA MORGA. DOING SO WILL
HELP BRING ABOUT THE POSITIVE CHANGE THAT CHARLOTTE’S WEB NEEDS.
If you are a beneficial shareholder
(hold shares through a financial intermediary) or a registered shareholder (hold shares in certificate form) you may immediately change
your vote online by using a 16-digit control number at www.proxyvote.com or by calling 1-800-690-6903.
Your control number can be found with
the proxy materials mailed to you. If you do not have your materials, you can request your control number by email at shareholder@broadridge.com
or by calling 1-800-353-0103.
Need more information or need help voting?
Call Kingsdale Advisors on 1-888-564-7333 or email contactus@kingsdaleadvisors.com.
ADVISORS
Kingsdale Advisors (“Kingsdale”)
is acting as strategic shareholder and communications advisor and Fasken Martineau DuMoulin LLP is acting as legal advisors to the Concerned
Shareholders.
INFORMATION IN SUPPORT OF PUBLIC BROADCAST
SOLICITATION
CUSIP No. 16106R109 | SCHEDULE 13D | Page 22 of 24 Pages |
The following information is provided
in accordance with applicable law. The Concerned Shareholders are relying on the exemption under sections 9.2(4) of National Instrument
51-102 – Continuous Disclosure Obligations to make this public broadcast solicitation.
This news release and any solicitation
made by the Concerned Shareholders in advance of the Meeting is, or will be, as applicable, made by Concerned Shareholders and not by
or on behalf of the management of the Company.
The Concerned Shareholders may solicit
proxies in reliance upon the public broadcast exemption to the solicitation requirements under applicable law, conveyed by way of public
broadcast, including through press releases, speeches or publications, and by any other manner permitted under applicable law. Proxies
may also be solicited by the Concerned Shareholders pursuant to an information circular sent to shareholders after which solicitations
may be made by or on behalf of the Concerned Shareholders by mail, telephone, fax, email or other electronic means as well as by newspaper
or other media advertising, and in person by directors, officers and employees of the Concerned Shareholders, who will not be specifically
remunerated therefor. The Concerned Shareholders may engage the services of one or more agents and authorize other persons to assist in
soliciting proxies on behalf of the Concerned Shareholders.
The Concerned Shareholders have retained
Kingsdale as its strategic advisor and to assist the Concerned Shareholders in the solicitation of proxies. The Concerned Shareholders
will pay Kingsdale fees currently estimated at up to $100,000. Kingsdale’s responsibilities will principally include advising the
Concerned Shareholders on developing and implementing shareholder communication and engagement strategies, and advising with respect to
meeting and proxy protocol.
All costs incurred for any solicitation
will be borne by the Concerned Shareholders, provided that, subject to applicable law, the Concerned Shareholders may seek reimbursement
from the Company of the Concerned Shareholders’ out-of-pocket expenses, including proxy solicitation expenses and legal fees, incurred
in connection therewith.
A registered shareholder of the Company
that gives a proxy may revoke it: (a) by completing and signing a valid proxy bearing a later date than the proxy being revoked and returning
the newly completed and signed proxy in accordance with the instructions contained in the form of proxy; (b) by depositing an instrument
in writing executed by the shareholder or by the shareholder’s attorney authorized in writing, as the case may be: (i) at the registered
office of the Company at any time up to and including the last business day preceding the day of the Meeting at which the proxy is to
be used, or (ii) with the chairman of the Meeting on the day of the Meeting; or (c) in any other manner permitted by law. A non-registered
holder of common shares of the Company will be entitled to revoke a form of proxy or voting instruction form given to an intermediary
at any time by written notice to the intermediary in accordance with the instructions given to the non-registered holder by its intermediary.
To the knowledge of the Concerned Shareholders,
the Company’s mailing address is 700 Tech Court Louisville, CO 80027. A copy of this news release
may be obtained on the Company’s SEDAR profile at www.sedar.com.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
CUSIP No. 16106R109 | SCHEDULE 13D | Page 23 of 24 Pages |
This press release contains forward-looking
information within the meaning of applicable securities laws. In general, forward-looking information refers to disclosure about future
conditions, courses of action, and events. All statements contained in this press release that are not clearly historical in nature or
that necessarily depend on future events are forward-looking, and the use of any of the words “anticipates”, “believes”,
“expects”, “intends”, “plans”, “will”, “would”, and similar expressions are
intended to identify forward-looking statements. These statements are based on current expectations of the Concerned Shareholders and
currently available information.
Forward-looking statements are not guarantees
of future performance, involve certain risks and uncertainties that are difficult to predict, and are based upon assumptions as to future
events that may not prove to be accurate. The Concerned Shareholders undertake no obligation to update publicly or revise any forward-looking
statements, whether as a result of new information, future events, or otherwise, except as required by applicable securities legislation.
CONTACT
Kingsdale Advisors:
Aquin George
Director, Special Situations
Phone: 647-265-4528
Email: ageorge@kingsdaleadvisors.com
CUSIP No. 16106R109 | SCHEDULE 13D | Page 24 of 24 Pages |
Exhibit 99.4
JOINT FILING AGREEMENT
PURSUANT TO RULE 13(d)-1(k)
The undersigned acknowledge and agree that the foregoing
statement on Schedule 13D is filed on behalf of each of the undersigned and that all subsequent amendments to this statement on Schedule
13D shall be filed on behalf of each of the undersigned without the necessity of filing additional joint filing agreements. The undersigned
acknowledge that each shall be responsible for the timely filing of such amendments, and for the completeness and accuracy of the information
concerning him or it contained herein and therein, but shall not be responsible for the completeness and accuracy of the information concerning
the others, except to the extent that he or it knows or has reason to believe that such information is inaccurate.
Date: June 16, 2023
|
|
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/s/ Joel Stanley |
|
Joel Stanley |
|
|
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|
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/s/ Jesse Stanley |
|
JESSE STANLEY |
|
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/s/ Lynn Kehler |
|
LYNN KEHLER |