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Item 1A. Risk Factors

2026-03-31 compared with 2025-03-27 · 49 added, 17 removed, 113 unchanged (37% of the section changed)

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Other risks and uncertainties that we do not presently consider material, or of which we are not presently aware, may become important factors that affect our future financial condition and results of operations.

Some of these risks include but are not limited to the developing situation globally surrounding COVID-19 and its impacts on the overall global economy.

If any of the risks discussed below actually occur, our business, financial condition, results of operations and prospects could be materially affected.

Risks Related to Our Cannabis Business and the Cannabis Industry in the United States

Our proposed business is dependent on laws pertaining to the marijuana industry

Continued development of the marijuana industry is dependent upon continued legislative authorization and/or voter-approved referenda at the state level.

Any number of factors could slow or halt progress in this area.

In addition, progress for the industry, while encouraging, is not assured.

While there may be ample public support for legislative action, numerous factors impact the legislative process, any one of which could slow or halt the use of marijuana, which could negatively impact our business.

As of the date of this report, the Company and its subsidiaries do not have any operations, employees or corporate offices based in United States.

Our business is dependent on state laws pertaining to the marijuana industry, which are uncertain and subject to change

Our business depends on the continued legalization and regulation of marijuana at the state level through legislation, rulemaking and voter-approved ballot measures.

The marijuana industry is subject to evolving laws, regulations and enforcement priorities, and there can be no assurance that current state-law protections and regulatory regimes will remain in place.

Any repeal, amendment, delay in implementation, adverse regulatory development or change in enforcement priorities could restrict or eliminate our ability to conduct business in one or more jurisdictions, reduce demand for our products, increase compliance costs and materially adversely affect our business, financial condition and results of operations.

Cannabis remains illegal under U.S.

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Many of our current and potential competitors have longer operational histories, significantly greater financial, marketing and other resources and larger client bases than us and there can be no assurances that we will be able to successfully compete against these or other companies.

Rescheduling Uncertainty

On May 21, 2024, DOJ published a proposed rule to reschedule marijuana from Schedule I to Schedule III.

On December 18, 2025, President Trump signed an Executive Order directing the U.S.

Department of Justice (“DOJ”) to expedite the rescheduling of cannabis from Schedule I to Schedule III under the CSA.

The rescheduling process, which requires formal rulemaking under the Administrative Procedure Act (“APA”), is expected to include a public comment period and may be subject to legal challenge.

There can be no assurance as to the timing or outcome of the rulemaking.

If finalized, rescheduling to Schedule III would not constitute federal legalization of cannabis, nor would it resolve the fundamental conflict between federal and state cannabis laws.

The continued classification of cannabis as a controlled substance—even under Schedule III—means that cannabis operations in the United States remain subject to federal enforcement risk.

Rescheduling could lower barriers to entry for well-capitalized institutional competitors in both the United States and in Canada, including pharmaceutical and consumer-goods companies that have historically been unable or unwilling to participate in the cannabis industry due to its Schedule I status.

Increased competition from such entrants could adversely affect our market share, pricing, and profitability in Canada, or in any future operations in the United States.

Hemp More Narrowly Defined

Impactful to licensees in the United States, on November 12, 2025, President Trump signed H.R.

5371, the Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026, into law.

Section 781, effective 365 days after enactment, amends Section 297A of the Agricultural Marketing Act of 1946 and narrows the federal definition of “hemp.” As amended, “hemp” is defined using a total tetrahydrocannabinols standard, including tetrahydrocannabinolic acid (“THCA”), rather than the prior delta-9 THC-only standard.

In addition, the amended law excludes certain intermediate and final hemp-derived cannabinoid products from the definition of hemp, including final hemp-derived cannabinoid products containing more than 0.4 milligrams combined total per container of total tetrahydrocannabinols (including THCA) and other cannabinoids that have similar effects, or are marketed to have similar effects, as tetrahydrocannabinol, as determined by the Secretary of Health and Human Services.

Risks Related to Our Cannabis Business and the Cannabis Industry in Canada

The effects of the legalization of recreational cannabis in Canada are unknown at this time.

The Government of Canada approved the Cannabis Act (Bill C-45) which went into effect on October 17, 2018.

The Cannabis Act allows for regulated and restricted access to cannabis for recreational adult use in Canada.

Under the Cannabis Act, there are significant restrictions on the marketing, branding, product formats and distribution channels allowed under the law.

Additional restrictions may be imposed at the provincial level.

Any failure by us to comply with the applicable regulatory requirements at the federal and provincial level could require changes to our proposed operations;

result in regulatory or agency proceedings or investigations, increase compliance costs, fines, penalties or restrictions on our operations or revocation of our licenses and other permits.

The recreational adult-use cannabis market in Canada may become oversupplied following the implementation of the Cannabis Act.

As a result, in the surge of demand for cannabis as a result of the implementation of the Cannabis Act, we and other cannabis producers in Canada may produce more cannabis that is needed to satisfy the market and we may not be able to export that oversupply into other markets where cannabis use is fully legal under all federal, state and provincial laws thus the available supply of cannabis could exceed demand, resulting in a decline in the market price for cannabis.

If this were to occur, there is no assurance that we would be able to generate sufficient revenue to result in profitability.

The Canadian cannabis market is subject to an evolving and complex regulatory framework that may adversely affect our business, results of operations, and financial condition.

The Cannabis Act (S.C.

16) has governed the legal production, distribution, and sale of cannabis for recreational adult use in Canada since October 17, 2018, and was amended effective October 17, 2019 to permit the sale of cannabis edibles, extracts, and topicals.

Since legalization, the Canadian cannabis industry has experienced significant market maturation, including persistent oversupply conditions, sustained wholesale and retail price compression, consolidation among licensed producers, and ongoing competition from the illicit market, which continues to capture a material share of total cannabis sales in Canada.

The Cannabis Act imposes significant restrictions on the marketing, branding, packaging, product formats, potency, and distribution channels for cannabis products.

Health Canada administers the federal regulatory framework and retains broad authority to modify the conditions of cultivation, processing, and sale licenses, impose additional compliance requirements, or amend the regulations under the Cannabis Act.

Licensees are subject to ongoing inspection, audit, and compliance monitoring by Health Canada, which has enhanced its inspection capacity and enforcement focus as the industry has matured.

Individual provinces and territories maintain separate regulatory frameworks governing retail distribution, pricing, and market access, resulting in a fragmented national market with varying competitive dynamics across jurisdictions.

The Government of Canada has completed the legislative review required under the Cannabis Act, and any resulting amendments to the Cannabis Act, its regulations, or other applicable laws and policies could adversely affect our business.

The Canadian federal excise duty framework, which imposes the greater of a flat-rate duty or an ad valorem duty on cannabis products, has been a persistent source of margin pressure for licensed producers.

Industry participants have advocated for reform of the excise duty structure, and the federal government has announced plans to explore a transition to a single national excise stamp to reduce administrative burden.

However, no excise duty relief has been enacted for cannabis products.

Additionally, we are subject to the risk that our Canadian licenses may not be renewed on acceptable terms, that Health Canada may impose additional conditions on our licenses, or that regulatory enforcement actions may result in fines, penalties, suspension, or revocation of our licenses.

Compliance with the evolving Canadian regulatory framework requires significant ongoing investment in regulatory affairs, quality assurance, and operational processes, and any failure to maintain compliance could have a material adverse effect on our business, financial condition, and results of operations.

The recreational adult-use cannabis market in Canada may experience periods of oversupply, which could adversely affect pricing, sales and profitability

The Canadian adult-use cannabis market is highly competitive and may, at times, experience excess production relative to consumer demand.

If licensed producers cultivate or manufacture more cannabis than the market can absorb, and we are unable to redirect that supply to export or other permissible channels, the available supply of cannabis may exceed demand.

Any such imbalance could result in lower market prices, increased price competition, inventory write-downs, higher storage or disposal costs, and reduced margins.

In addition, our ability to export excess inventory is limited by applicable laws and regulations in Canada and in foreign jurisdictions, and there can be no assurance that export opportunities will be available on commercially reasonable terms, or at all.

If oversupply occurs and persists, our revenues, results of operations and ability to achieve or maintain profitability could be materially adversely affected.

We are required to comply with federal, state or provincial and local laws in each jurisdiction where we conduct our business

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A failure by an individual in a key operational position to maintain or renew a security clearance could result in a reduction or complete suspension of our operations.

Industry Consolidation and Counterparty Risk

In recent years, a number of companies across the Canadian cannabis supply chain have sought creditor protection or other insolvency relief under the Companies’ Creditors Arrangement Act (R.S.C.

C-36) (“CCAA”) or the Bankruptcy and Insolvency Act (R.S.C.

B-3) (“BIA”).

This trend reflects persistent structural challenges in the industry, including oversupply, wholesale price compression, elevated excise duty burdens, limited access to capital, and a timeline to profitability that has exceeded the expectations of many market participants.

We are exposed to counterparty credit risk through our third-party relationships in the industry, some or all of which may be experiencing financial distress or may file for creditor protection.

In the event that a material customer, distribution partner, or supplier becomes insolvent, we may experience losses on accounts receivable, disruption to our supply chain or distribution channels, or inability to recover prepayments or deposits.

In addition, continued industry consolidation and court-supervised sale processes may enable existing or new competitors to acquire assets, licenses, or production capacity on attractive terms, which could increase competitive pressure in our markets.

There can be no assurance that market conditions will not deteriorate further or that the failure of one or more significant counterparties will not have a material adverse effect on our business, results of operations, and financial condition.

As of December 31, 2025, we had 40 employees which include Anthony Zarcone, Chief Executive Officer.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors