What changed in this filing

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Item 1A. Risk Factors

2024-03-21 compared with 2023-03-23 · 83 added, 92 removed, 813 unchanged (18% of the section changed)

8 unchanged sentences

As of the date hereof, the USDA has approved over 90 state and tribal Hemp production plans submitted after the USDA FR became effective.

If a state does not elect to devise a Hemp regulatory program, the USDA’s program will govern licensees in such states.

If a state does not elect to devise a Hemp regulatory program, the

USDA’s program will govern licensees in such states.

Continued development of the Hemp industry will depend on continued legislative authorization of Hemp at the state level, and further amendment or supplementation of legislation at the federal level.

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• enforcement activities by state and/or local law enforcement and regulatory authorities under the auspice of individual state law, regardless of any potential conflict thereby with federal law.

Company may be subject to penalties, including, without limitation, civil and criminal penalties, damages, fines, the curtailment or restructuring of the Company’s operations or asset seizures, any of which could adversely affect the Company’s business and financial results.

If the Company’s operations are found to be in violation of any of such laws or any other governmental regulations, or if applicable laws or regulations change or the enforcement of applicable laws or regulations changes, the Company may be subject to penalties, including, without limitation, civil and criminal penalties, damages, fines, the curtailment or restructuring of the Company’s operations or asset seizures, any of which could adversely affect the Company’s business and financial results.

The future of Hemp regulation at the Federal level is unclear.

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The Company’s advertising is subject to regulation by the Federal Trade Commission ("FTC") under the Federal Trade Commission Act ("FTC Act") as well as subject to regulation by the FDA under the DSHEA.

In recent years, the FTC has initiated numerous investigations of dietary and nutritional supplement products and companies based on allegedly deceptive or misleading claims, and also released new guidance aimed at strengthening its substantiation requirements for health-related claims.

In recent years, the FTC has initiated numerous investigations of dietary and nutritional supplement products and companies based on allegedly deceptive or misleading

claims, and also released new guidance aimed at strengthening its substantiation requirements for health-related claims.

At any point, enforcement strategies of a given agency can change as a result of other litigation in the space or changes in political landscapes, and could result in increased enforcement efforts, which could materially impact the Company’s business.

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Such laws, regulations and other constraints may exist at the federal, state, provincial or local levels.

There is currently no uniform regulation applicable to natural health products worldwide.

There is currently no uniform regulation applicable to natural health products nationally or worldwide.

There can be no assurance that the Company is in compliance with all of these laws, regulations and other constraints, and changes to such laws, regulations and other constraints may have a material adverse effect on the Company’s operations.

Through December 31, 2023, several states, including, but not limited to Alaska, Florida, Maryland, Minnesota, New York, Utah and Virginia, have adopted new regulations that may impact the Company's ability to sell certain of its products as currently formulated or packaged in these states.

There is substantial uncertainty and different interpretations among federal, state and local regulatory agencies, legislators, academics and businesses as to the importation of derivatives from exempted portions of the Cannabis plant and the emerging regulation of cannabinoids.

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The uncertainties cannot be resolved without further federal, and potentially state-level, legislation, regulation or a definitive judicial interpretation of existing legislation and rules.

If these uncertainties continue, they may have an adverse effect upon the introduction of the Company's products in different markets.

If these uncertainties continue, they may have an adverse effect upon Company's business, financial condition, operating results, cash flows or growth prospects, and the introduction of the Company's products in different markets.

The Company is subject to regulations that could impact its ability to sell its product internationally.

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Entry into international markets diverts management attention and requires financial resources that could be spent elsewhere and poses increased costs due to numerous banking, compliance, financial, legal, market, and reputational issues.

The Company’s entry into new international markets requires management attention and financial resources that would otherwise be spent on other parts of its business.

The Company’s entry

into new international markets requires management attention and financial resources that would otherwise be spent on other parts of its business.

The Company’s international sales could expose it to risks and expenses inherent in operating or selling products in foreign jurisdictions, and developing and emerging markets in particular where the risks may be heightened.

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• laws and business practices favoring local companies;

• political, social or economic unrest or instability, including, without limitation, disruptions due to armed conflicts, such as the conflict between Ukraine and Russia;

• political, social or economic unrest or instability, including, without limitation, disruptions due to armed conflicts, such as the conflict between Ukraine and Russia or Israel and Hamas;

• greater risk on credit terms, longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain foreign legal systems;

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Furthermore, its experience with selling products in its current international markets may not be relevant or may not necessarily translate into favorable results if the Company sells in other international markets.

If and when the Company enters into new markets in the future, it may experience different competitive conditions, less familiarity with the Company’s brands

and/or different consumer tastes and discretionary spending patterns.

If and when the Company enters into new markets in the future, it may experience different competitive conditions, less familiarity with the Company’s brands and/or different consumer tastes and discretionary spending patterns.

As a result, the Company may be less successful than expected in expanding its sales in its current and targeted international markets.

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These, or one or more of the factors listed above, may harm the Company’s business, results of operations or financial condition.

Any material decrease in the Company’s international sales or profitability could also adversely impact the Company’s business, results of operations or financial condition.

Any material decrease in

the Company’s international sales or profitability could also adversely impact the Company’s business, results of operations or financial condition.

Additionally, the Company may expand its product offerings and/or expand into new international markets, each of which will require management attention and financial resources that would otherwise be spent on other parts of its business.

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While this is broad and may not be applicable in all instances, it nevertheless could materially and adversely impact the Company’s business and financial condition.

Further, the FDA has recently stated that it will continue to police the market and enforce against CBD products, and on March 22, 2021, the agency issued warning letters to two companies for selling OTC products labeled as containing CBD, alleging the products were illegally marketed unapproved drugs and misbranded due to prominent featuring of CBD on the labeling, followed by additional warning letters issued in 2021 and 2022.

followed by additional warning letters issued in 2021 and 2022.

The FDA’s enforcement against the unlawful sale and marketing of CBD products has to date been limited to the issuance of warning letters, but other enforcement means are available to the FDA, including civil and criminal penalties.

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FTC entered into settlement agreements with these companies, which required, among other things, that the companies stop making such unsupported health claims and pay a monetary judgment to the FTC.

The FTC’s enforcement was publicized by the agency as part of its ongoing effort to protect consumers from false, deceptive, and misleading health claims made in advertisements on

websites and through social media companies such as Twitter.

The FTC’s enforcement was publicized by the agency as part of its ongoing effort to protect consumers from false, deceptive, and misleading health claims made in advertisements on websites and through social media companies such as Twitter.

An additional enforcement action against a CBD company was announced in May 2021.

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For example, the Company’s products and the raw materials used in its production processes are subject to numerous environmental laws and regulations.

The Company may be required to obtain environmental permits from governmental authorities for certain of its current or proposed operations.

The Company may be required to

obtain environmental permits from governmental authorities for certain of its current or proposed operations.

The Company may not have been, nor may it be able to be at all times, in full compliance with such laws, regulations and permits.

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In addition, the Company may discover new facts or conditions that may change its expectations or be faced with changes in environmental laws or their enforcement that would increase its liabilities.

environmental and employee health and safety laws, may have a material adverse effect on the Company’s business, financial condition and results of operations.

The Company’s costs of complying with current and future environmental and health and safety laws, liabilities arising from past or future releases of, or exposure to, regulated materials, or more vigorous enforcement of environmental and employee health and safety laws, may have a material adverse effect on the Company’s business, financial condition and results of operations.

Regulatory uncertainty with respect to anti-money laundering laws and regulations impact on the CBD and marijuana-related businesses, if revised or resolved unfavorably to the Company’s interests, may have an adverse effect on the Company’s business.

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Foreign Corrupt Practices Act ("FCPA") and other similar laws which generally prohibit companies and employees from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business.

In addition, we are or will be subject to the anti-bribery laws of any other countries in which we conduct business now

or in the future.

we are or will be subject to the anti-bribery laws of any other countries in which we conduct business now or in the future.

Our employees or other agents may, without our knowledge and despite our efforts, engage in conduct prohibited under our policies and procedures and under anti-bribery laws, for which we may be held responsible.

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It is not always possible for the Company to identify and deter misconduct by its employees and other third parties, and the precautions taken by the Company to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting the Company from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations.

damages, reputational harm, diminished profits and future earnings, the curtailment of the Company’s operations or asset seizures, any of which could have a material adverse effect on the Company’s business, financial condition and results of operations.

If any such actions are instituted against the Company, and it is not successful in defending itself or asserting its rights, those actions could have a significant impact on its business, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, contractual damages, reputational harm, diminished profits and future earnings, the curtailment of the Company’s operations or asset seizures, any of which could have a material adverse effect on the Company’s business, financial condition and results of operations.

Risks Relating to the Company’s Business and Industry

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In particular, would-be criminals may confuse the Company’s products for marijuana, a controlled substance with an underground market, or take interest in the expensive equipment or technology used by the Company or its contract manufacturers.

Accordingly, the Company’s operations may raise its profile and increase the probability of break-ins, thefts, or vandalism, and there can be no assurance that the measures employed by the Company to prevent theft, vandalism, attacks, or other criminal behavior will be successful.

Accordingly, the Company’s operations may raise

its profile and increase the probability of break-ins, thefts, or vandalism, and there can be no assurance that the measures employed by the Company to prevent theft, vandalism, attacks, or other criminal behavior will be successful.

The Company may not be able to secure insurance coverage for losses incurred in connection with such activities on commercially reasonable terms, or at all.

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If the Company is unable to achieve targeted operating performance or are unable to access existing debt financing or raise additional capital or debt financing on favorable terms, if at all, the Company may be forced to decelerate or curtail certain of our operations until such time as additional debt or capital financing becomes available.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity

and Capital Resources” for additional discussion regarding its liquidity position.

See " Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" for additional discussion regarding its liquidity position.

The Company’s products have a limited shelf life and product inventory may reach its expiration prior to sale.

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Although the Company strives to ensure that all of its service providers have implemented and adhere to high caliber quality control systems, any significant failure or deterioration of such quality control systems could have a material adverse effect on the Company’s business and operating results.

Reliance on the Stanley Brothers brand could have negative consequences.

The Company’s brands, particularly Charlotte’s Web, is closely associated with the Stanley Brothers.

Any act, omission or occurrence which negatively effects the reputation of or goodwill associated with the Stanley Brothers may have a commensurate impact on the Company.

The Company has limited influence upon the Stanley Brothers and may lack effective means of mitigating such risks.

In addition, and pursuant to the Name and Likeness Agreement, as amended, the Stanley Brothers may cause the Company to cease using the Stanley Brothers brand and certain design marks, in certain circumstances.

Moreover, the license pursuant to which Charlotte's Web is permitted to use the Stanley Brothers name and associated logos expires on June 30, 2023.

The Company depends on various third parties for the supply, manufacture, and testing of the Company’s products.

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The Company may be unable to make satisfactory production arrangements with another manufacturer on a timely basis or at all.

If operations at Aidance’s manufacturing plant were to be disrupted as a result of equipment failures, natural disasters, fires, accidents, work stoppages, power outages or other reasons, the Company’s business, financial condition and/or results of operations could be materially adversely affected.

If operations at Aidance’s manufacturing plant were to be disrupted as a result of equipment failures, natural disasters, fires,

accidents, work stoppages, power outages or other reasons, the Company’s business, financial condition and/or results of operations could be materially adversely affected.

In addition, the Company depends on third parties to obtain certain raw materials, including CBD necessary to develop and produce its products.

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Any significant increase in the price of raw materials that cannot be passed on to the Company’s customers could have a material adverse effect on the Company’s results of operations or financial condition.

While potential alternative suppliers of raw materials may be identified, they must first pass intensive

validation tests to ensure their compliance with product specifications.

While potential alternative suppliers of raw materials may be identified, they must first pass intensive validation tests to ensure their compliance with product specifications.

No assurance can be given regarding the successful outcomes of such tests or the Company’s ability to secure alternate sources of supply at competitive pricing and upon fair and reasonable contractual terms and conditions.

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In addition, severe weather, including drought, fire, hail and freezing temperatures, can destroy a crop, which could result in the Company having no or limited Hemp to process.

If the Company is unable to harvest Hemp through its proprietary

operations or contract farming arrangements, its ability to meet customer demand, generate sales, and maintain operations could be impacted.

If the Company is unable to harvest Hemp through its proprietary operations or contract farming arrangements, its ability to meet customer demand, generate sales, and maintain operations could be impacted.

Given the proprietary nature of the Company’s crops, it may not be practicable for the Company to source adequate, or any, replacement Hemp to produce its downstream products.

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Climate change may increase the frequency or intensity of extreme weather such as storms, floods, heat waves, droughts and other events that could affect the quality, volume and cost of seed produced for sale as well as demand and product mix.

Climate change may also affect the availability and suitability of arable land and contribute to unpredictable shifts in the average growing season and types of crops produced.

Climate change may also affect the availability and

suitability of arable land and contribute to unpredictable shifts in the average growing season and types of crops produced.

The Company may also encounter difficulties with the importation of agro-inputs and securing a supply of spares and maintenance items.

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Farm consolidation in the United States and other developed markets has been ongoing for decades and is expected to continue as grower demographics shift and advancements in innovative technology and equipment enables farmers to manage larger operations to create economies of scale in a lower-margin, more capital-intensive environment.

Increased consolidation in the crop nutrient industry has resulted in greater resources dedicated to expansion, R&D opportunities, leading to increased

competition in advanced product offerings and innovative technologies.

Increased consolidation in the crop nutrient industry has resulted in greater resources dedicated to expansion, R&D opportunities, leading to increased competition in advanced product offerings and innovative technologies.

Some of these competitors have greater total resources or are state-supported, which make them less vulnerable to industry downturns and better positioned to pursue new expansion and development opportunities.

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A number of governments or governmental bodies have introduced or are introducing regulatory changes in response to concerns about the potential impact of climate change.

The Company faces the risk that its operations could be subject to government initiatives aimed at countering climate change, which could impose constraints on the Company’s operations, for example due to increased costs for fossil fuels, electricity and transportation and costs associated with monitoring and reporting.

The Company faces the risk that its operations could be subject to government initiatives aimed at

countering climate change, which could impose constraints on the Company’s operations, for example due to increased costs for fossil fuels, electricity and transportation and costs associated with monitoring and reporting.

Hemp is subject to specific agricultural risks, which could negatively impact the Company’s cultivation efforts.

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Increased international competition might lower the demand for the Company’s products on a global scale.

The business interests of the Stanley Brothers may conflict with that of the Company.

The Stanley Brothers and certain affiliates and parties associated with the Stanley Brothers currently, and may in the future, conduct business which conflicts with the business of the Company.

The mechanisms available to the Company to effectively deal with such conflicts (which may include competition) may be limited.

The Company relies on the name, likeness and assistance of the Stanley Brothers.

Should the Stanley Brothers take action which separates or otherwise distances their name, likeness or brand from, or association with, the Company, it could result in marketplace confusion, loss of goodwill and/or similar negative consequences.

Should any of such scenarios arise, it could have a material adverse impact on the Company’s business and financial condition.

Changing consumer preferences could impact the Company’s ability to attract and retain customers.

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The Company’s sales depend, in part, on retailers effectively displaying its products, including providing attractive space in their stores, including online e-commerce platforms, and, in certain channels, having knowledgeable employees that can explain the Company’s products and their benefits.

If the Company loses any of its key retailers, or if any key

retailer reduces their purchases of the Company’s existing or new products, reduces their number of stores or operations, promotes products of competitors over the Company, or suffers financial difficulty or insolvency, the Company may experience reduced sales of its products, resulting in lower revenue and gross profit margin, which would harm the Company’s profitability and financial condition.

If the Company loses any of its key retailers, or if any key retailer reduces their purchases of the Company’s existing or new products, reduces their number of stores or operations, promotes products of competitors over the Company, or suffers financial difficulty or insolvency, the Company may experience reduced sales of its products, resulting in lower revenue and gross profit margin, which would harm the Company’s profitability and financial condition.

The Company depends on the popularity and acceptance of its brand portfolio.

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If the Company is unable to secure materials at a reasonable price, it may have to alter or discontinue selling some of its products or attempt to pass along the cost to its customers, any of which could adversely affect its results of operations and financial condition.

In recent months, lingering impacts of the COVID- 19 pandemic have plagued markets and caused global supply chain disruptions, shortages of raw goods, and a reduced workforce available to keep supply chains moving, causing disruptions in many industries and sectors.

Additionally, any significant interruption in, or increasing costs of, labor, freight and energy could increase the Company’s and its suppliers’ cost of goods and have a material impact on the Company’s financial condition and results from operations.

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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.

In addition, COVID-19 poses a risk to all of the Company’s activities, including the potential that a member of management may contract the virus and the Company’s ability to continue to rely on its key personnel throughout the pandemic.

The Company is diligently monitoring developments relating to COVID-19 and its impact on the Company’s personnel, and make operational adjustments as necessary.

Any of the foregoing risks or actions could disrupt the Company’s operations and have a materials adverse effect on the Company’s results from operations and financial condition.

The Company has experienced significant changes in its management team in 2022, particularly in Finance.

Executive and other management transitions can be inherently difficult to manage, may cause significant and costly disruption to our business, might lead to additional departures of existing personnel, and could have a material adverse effect on our business, operating results, financial condition and internal controls over financial reporting.

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Any such unknown or undisclosed risks or liabilities could materially and adversely affect the Company’s financial performance and results of operations.

The Company could encounter additional transaction and integration related costs or experience an impact to its operations or results of operation as a result of the failure to realize all of the anticipated benefits from such acquisitions or partnerships, or an inability to successfully integrate an acquisition as anticipated.

Company could encounter additional transaction and integration related costs or experience an impact to its operations or results of operation as a result of the failure to realize all of the anticipated benefits from such acquisitions or partnerships, or an inability to successfully integrate an acquisition as anticipated.

All of these factors could cause dilution to the Company’s earnings per Common Share or decrease or delay the anticipated accretive effect of the acquisition or partnership and cause a decrease in the market price of the Company’s securities, or have a material adverse effect on the Company’s operations or results from operations.

The Company may not be able to successfully integrate and combine the operations, personnel and technology infrastructure of any such acquired company with its existing operations.

As a result of integration efforts, the Company may experience interruptions in its business activities, deterioration in its employee and customer relationships, increased costs of integration and

harm to its reputation, all of which could have a material adverse effect on the Company’s business, financial condition and results of operations.

As a result of integration efforts, the Company may experience interruptions in its business activities, deterioration in its employee and customer relationships, increased costs of integration and harm to its reputation, all of which could have a material adverse effect on the Company’s business, financial condition and results of operations.

The Company may experience difficulties in combining corporate cultures, maintaining employee morale and retaining key employees.

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For example, the complexity and uncertainty of European patent laws have also increased in recent years.

In Europe, a new unitary patent system will likely be introduced by the end of 2023, which would significantly impact European patents, including those granted before the introduction of such a system.

In Europe, a new unitary patent system will likely be introduced by the end of 2023, which would

significantly impact European patents, including those granted before the introduction of such a system.

Under the unitary patent system, European applications will soon have the option, upon grant of a patent, of becoming a Unitary Patent which will be subject to the jurisdiction of the Unitary Patent Court (UPC).

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We cannot predict with certainty the long-term effects of any potential changes.

Further, under certain circumstances, patent term covering our products or product candidates may be extended for time spent during the pendency of the patent application in the U.S.

PTO (referred to as PTA, or Patent Term Adjustment).

The laws and regulations underlying how the PTO calculates the PTA is subject to change and any such PTA could be challenged by a third-party.

If we do not prevail under such a challenge, the PTA may be reduced or eliminated, resulting in a shorter patent term, which may negatively impact our ability to exclude competitors.

Recently, the U.S.

Court of Appeals for the Federal Circuit handed down a decision in the In re Cellect case that introduces particular uncertainty around PTA calculations.

In that case, the court determined that patents with a term that exceeded the term of other patents in the same family—due to PTA extension—were invalid for obvious-type double patenting.

If that decision is not overturned, or reversed by Congress, then any PTA in a patent that we have or obtain in the future could be vulnerable to similar invalidity challenges based on other earlier-expiring patents.

While the In re Cellect case focused on such challenges from patents in the same family, the court did not address challenges to PTA from patents in other families that we or others may own, and this creates additional uncertainty with respect to PTA calculations.

Because PTA added to the term of patents covering biological or pharmaceutical products, and methods of their use has particular value, our business may be adversely affected if the PTA is successfully challenged by a third party and our ability to exclude competitors is reduced or eliminated.

In addition, for issued patents where we have PTA we may determine that it is prudent not to file additional applications in that family to preserve that PTA.

Such a decision would negatively impact our ability to obtain patents with different scope from the same patent family even though we could be otherwise entitled to such patent protection.

If we do not obtain patents on all the subject matter in our patent applications that we are entitled to, our ability to exclude competitors may be harmed.

In addition to changes in patents laws, geopolitical dynamics, including Russia’s recent incursion into Ukraine, may also impact our ability to obtain and enforce patents in particular jurisdictions.

If we are unable to obtain and enforce patents as needed in particular markets, our ability to exclude competitors in those markets may be reduced.

Companies in the retail and wholesale consumer packaged goods industries frequently own trademarks and trade secrets and often enter into litigation based on allegations of infringement or other violations of intangible property rights.

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Any of these results could harm the Company’s brand and prevent it from generating sufficient revenue or achieving profitability.

The Company is involved in litigation, including a class action litigation matters, and there may be additional litigation in the future in which it will be involved.

The Company is involved in litigation, including class action litigation matters, and there may be additional litigation in the future in which it will be involved.

The Company is currently involved in litigation.

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Should any litigation in which the Company becomes involved be determined against it, such a decision could materially adversely affect the Company’s ability to continue operating and the market price for the Common Shares and could use significant resources.

Furthermore, as a manufacturer, processor and distributor of products designed to be ingested by humans, the Company faces an inherent risk of exposure to product liability claims, regulatory action and litigation if its products are alleged to have caused significant loss or injury.

In addition, the manufacture and sale of the Company’s products involves the risk of injury to consumers due to tampering by unauthorized third parties or product contamination.

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In addition to being a benefit company, the Company has been certified by B Lab as a "Certified B Corp.", which refers to companies that are certified as meeting certain levels of social and environmental performance, accountability and transparency.

The standards for Certified B Corporation certification are set by B Lab, and may change over time, and the Company’s continued certification is at the sole discretion of B Lab.

The standards for

Certified B Corporation certification are set by B Lab, and may change over time, and the Company’s continued certification is at the sole discretion of B Lab.

To maintain certification, the Company is required to update its assessment and verify its updated score with B Lab every three years.

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There is no guarantee that the Company will be recertified.

The Company’s reputation could be harmed if it loses its status as a Certified B Corp, whether by its choice or by its

failure to continue to meet the certification requirements.

The Company’s reputation could be harmed if it loses its status as a Certified B Corp, whether by its choice or by its failure to continue to meet the certification requirements.

Likewise, the Company’s reputation could be harmed if its publicly reported Certified B Corp score declines.

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As a new class of corporate entity, there is uncertainty over how British Columbia courts would view a board’s balancing of interests as little jurisprudence exists to offer insights or guidance.

Therefore, the Company may be subject to the possibility of increased legal proceedings, which would require the attention of management and, as a result, may adversely impact management’s ability to effectively execute the Company’s strategy.

Therefore, the Company may be subject to the possibility of increased legal proceedings, which would

require the attention of management and, as a result, may adversely impact management’s ability to effectively execute the Company’s strategy.

Any such derivative litigation may be costly and have an adverse impact on the Company’s financial condition and results of operations.

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The Company has required, and in the future may require additional financing to operate its business and it may face difficulties acquiring additional financing on terms acceptable to the Company or at all.

Given its lack of profitability, the Company has required, and in the future may require, additional capital to continue operations at its cultivation and production facilities, expansion of its product lines, development of its intellectual property base, increasing production capabilities and expanding its operations in states where it currently operates and states where it currently does not have operations.

lines, development of its intellectual property base, increasing production capabilities and expanding its operations in states where it currently operates and states where it currently does not have operations.

The Company may not be able to obtain additional financing on terms acceptable to it, or at all.

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Generally, when the Company issues securities, management of the Company will have broad discretion with respect to the application of net proceeds received by the Company from the sale of the securities and may spend such proceeds in ways that do not improve the Company’s results of operations or enhance the value of the securities issued and outstanding from time to time.

Any failure by management to apply these funds effectively

could result in financial losses that could have a material adverse effect on the Company’s business or cause the price of the securities of the Company issued and outstanding from time to time to decline.

Any failure by management to apply these funds effectively could result in financial losses that could have a material adverse effect on the Company’s business or cause the price of the securities of the Company issued and outstanding from time to time to decline.

There is a limited market for the Company’s Common Shares and warrants.

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The market price of the Company’s Common Shares and other listed securities may be volatile.

The market price of the Common Shares, 2019 Warrants, Replacement Warrants and 2020 Warrants may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond the Company’s control.

This volatility may affect the ability of holders of the Common Shares, 2019 Warrants, Replacement Warrants and 2020 Warrants to sell their securities at an advantageous price.

The market price of the Common Shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond the Company’s control.

This volatility may affect the ability of holders of the Common Shares to sell their securities at an advantageous price.

Such volatility could be subject to significant fluctuations in response to numerous factors including:

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A small number of Shareholders may exercise significant influence on matters submitted to Shareholders for approval.

The Company has a small number of Shareholders who own, in the aggregate, approximately a 2.3% equity interest in the Company.

In addition, a portion of the consideration under the MLB promotional rights agreement, the Company issued 4% of its fully diluted outstanding Common Shares.

As a result, although such Shareholders may not have an agreement to act in concert, such Shareholders have the ability to exercise significant influence over matters submitted to Shareholders for approval, whether subject to approval by a majority of the Shareholders or special resolution.

The Company has a small number of Shareholders who, to the knowledge of the Company, own, in the aggregate, in excess of 5.0% equity interest in the Company.

Although such Shareholders may not have an agreement to act in concert, such Shareholders may have the ability to exercise significant influence over matters submitted to Shareholders for approval, whether subject to approval by a majority of the Shareholders or special resolution.

On June 16, 2023, a group of three shareholders filed a statement on Schedule 13D with the SEC indicating that they, collectively, held over 5% interest in the Company and had taken certain steps with the objective of replacing certain members of the Company’s Board of Directors.

The Company may issue an unlimited number of shares, and additional issuances could dilute a Shareholder’s holdings.

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, and an unlimited number of Preferred Shares issuable in series, and Shareholders have no pre-emptive rights in connection with any further issuances.

The Articles permit the issuance of an unlimited number of Common Shares, and an unlimited number of Preferred Shares issuable in series, and Shareholders have no preemptive rights in connection with any further issuances.

The directors of the Company have the discretion to determine the provisions attaching to the Common Shares and the price and the terms of issue of further Common Shares.

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Debt financing may be convertible into other securities of the Company which may result in immediate or resulting dilution.

In either case, additional financing

may not be available to the Company on acceptable terms or at all.

In either case, additional financing may not be available to the Company on acceptable terms or at all.

If the Company is unable to raise additional funds as needed, the scope of its operations or growth may be reduced and, as a result, the Company may be unable to fulfil its long-term goals.

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These provisions may limit the Company’s shareholders’ ability to bring a claim in a judicial forum they find favorable for disputes with the Company or its directors, officers, or other employees, which may discourage lawsuits against the Company and its directors, officers, and other employees.

See “ Description of Registrant’s Securities to be Registered – Forum Selection ”.

The Company is subject to U.S.

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There can be no assurance that advertising and promotional expenditures will result in revenues in the future or will generate awareness of the Company’s technologies, products or services.

Specifically, ineffective marketing could reduce e-commerce traffic, which will reduce new consumer acquisition place overreliance on existing consumers.

Specifically, ineffective marketing could reduce

e-commerce traffic, which will reduce new consumer acquisition place overreliance on existing consumers.

In addition, no assurance can be given that the Company will be able to manage its advertising and promotional expenditures on a cost-effective basis.

1 unchanged sentence

Any changes to these algorithms or in how these algorithms are applied, and therefore search engine results pages, could reduce visibility of, and traffic on, the Company’s e-commerce website and negatively impact the Company’s financial position and results of operations.

Additionally, the significant and continuing impact of COVID-19 in dominating news cycles in North America may have caused or could cause a reduction in search traffic for CBD or the Company’s website or products.

Any impact or reduction on ultimate traffic to the Company’s e-commerce website could have a material adverse effect on the Company’s direct-to-consumer sales, the Company's business, financial condition and results of operations.

The use of customer information and other personal and confidential information creates compliance risks.

14 unchanged sentences

The Company’s operations depend, in part, on how well it and its third-party service providers protect networks, equipment, information technology ("IT") systems and software against damage from a number of threats, including, but not limited to, cable cuts, natural disasters, intentional damage and destruction, fire, power loss, hacking, computer viruses, vandalism and theft.

The Company’s operations also depend on the timely maintenance, upgrade and replacement of networks, equipment, IT systems and software, as well as pre-emptive expenses to mitigate the risks of failures.

The Company’s operations also depend on the timely maintenance, upgrade and replacement of networks, equipment, IT systems and software, as well as preemptive expenses to mitigate the risks of failures.

Any of these and other events could result in information system failures, delays and/or increase in capital expenses.

5 unchanged sentences

The Company’s information technology systems and on-line activities, including its e-commerce websites, also may be subject to denial of service, malware or other forms of cyber-attacks.

While the Company has taken measures to protect against those types of attacks, those measures may not adequately protect its on-line activities from such attacks.

While the Company has taken measures to protect against those types of attacks, those

measures may not adequately protect its on-line activities from such attacks.

If a denial-of-service attack or other cyber event were to affect the Company’s e-commerce sites or other information technology systems, its business could be disrupted, it may lose sales or valuable data, and its reputation may be adversely affected.

8 unchanged sentences

If current levels of market disruption and volatility continue, the Company might experience reductions in business activity, increased funding costs and funding pressures, as applicable, a decrease in the market price of the Common Shares, a decrease in asset values, additional write-downs and impairment charges and lower profitability.

In addition, the outbreak of COVID-19 has resulted in governments worldwide enacting measures to combat the spread of the virus, including in the U.S.

These measures, which include the implementation of travel restriction, self-isolation measures, physical distancing and in some instances, the suspension of non-essential business, have caused material disruption to businesses globally, resulting in an economic slowdown.

The duration and impact of the COVID- 19 outbreak is unknown at this time, as is the efficacy of the response measures.

It is impossible to forecast the duration and full scope of the economic impact of COVID-19 and other consequential changes it will have on the Company’s business, operations and prospects, both in the short term and in the long term.

Future crises may be precipitated by any number of causes, including natural disasters, public health crises, geopolitical instability, or sovereign defaults.

1 unchanged sentence

Increased levels of volatility and market turmoil can adversely impact the Company’s operations and share price.

The costs of being a public company are high and may strain the Company’s resources.

The Company incurs significant legal, accounting, insurance and other expenses as a result of being a public company, which may negatively impact its performance and could cause its results of operations and financial condition to suffer.

The costs of being a public company in both Canada and the United States are high and may strain the Company’s resources.

The Company incurs significant legal, accounting, insurance and other expenses as a result of being a public company in both Canada and the United States, which may negatively impact its performance and could cause its results of operations and financial condition to suffer.

Compliance with applicable securities laws in Canada and the United States and the rules of the TSX and the U.S.

Securities and Exchange Commission ("SEC") constitutes a significant expense, including legal and accounting costs, and makes some activities more time-consuming and costly.

Reporting obligations as a public company and the Company’s anticipated growth may place a strain on the Company’s financial and management systems, processes and controls, as well as on personnel.

The Company’s internal controls over financial reporting may not be effective, and the Company’s independent auditors may may be unwilling or unable to provide us, when required, with an attestation report on the effectiveness of internal controls over financial reporting as required by Section 404 of the Sarbanes-Oxley Act.

The Company is subject to reporting and other obligations under applicable Canadian securities laws and rules of any stock exchange on which the Common Shares are listed, including National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings of the Canadian Securities Administrators, and upon effectiveness of this Registration Statement, will be subject to U.S.

Securities and Exchange Commission ("SEC") (including, but not limited to, preparation and delivery of prescribed continuous disclosure forms, payment of listing fees, potential costs associated with shareholder actions or dissenting shareholder activity, costs associated with regulatory reviews and costs associated with changes in laws or regulations) constitutes a significant expense, including legal and accounting costs, and makes some activities more time-consuming and costly.

Reporting and other obligations as a public company may place a strain on the Company’s financial and management systems, processes and controls, as well as on personnel.

The Company’s internal controls over financial reporting may not be effective, and the Company’s independent auditors may be unwilling or unable to provide us, when required, with an attestation report on the effectiveness of internal controls over financial reporting as required by Section 404 of the Sarbanes-Oxley Act.

securities reporting and regulatory requirements.

9 unchanged sentences

The Company may have to amend prior financial reporting.

The Company's auditors (former and current) are subject to standard review by the Canadian Public Accountability Board, the Public Company Accounting Oversight Board and similar oversight bodies and regulatory authorities.

Such reviews could result in the Company being required to amend prior financial reporting, which could divert Company resources to such process.

10 unchanged sentences

Recent macroeconomic trends, including inflation, a recession or slowed economic growth, may adversely affect our business, financial condition and results of operations.

During 2002, inflation in the United States has accelerated and is currently expected to continue at an elevated level for the near-term.

Rising inflation could have an adverse impact on expenses, as these costs could increase at a higher rate than revenues.

6 unchanged sentences

Softer consumer demand for cannabis products could reduce our profitability and could negatively affect our overall financial performance.

Unresolved Staff Comments

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