What changed in this filing

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Item 1A. Risk Factors

2022-03-01 compared with 2021-03-30 · 759 added, 1676 removed, 68 unchanged (97% of the section changed)

Our operations and financial

results are subject to various risks and uncertainties including those described below.

You should consider carefully the risks and uncertainties

described below, in addition to other information contained in this Annual Report on Form 10-K, including our consolidated financial

statements and related notes.

Our operations and financial results are subject to various risks and uncertainties including those described below.

You should consider carefully the risks and uncertainties described below, in addition to other information contained in this Annual Report on Form 10-K, including our consolidated financial statements and related notes.

The risks and uncertainties described below are not the only ones we face.

Additional risks and uncertainties

that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business.

If any of the following risks or others not specified below materialize, our business, financial condition and results of operations

could be materially and adversely affected.

Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business.

If any of the following risks or others not specified below materialize, our business, financial condition and results of operations could be materially and adversely affected.

In that case, the trading price of our common stock could decline.

1 unchanged sentence

Our proprietary brand offerings expose us to various risks.

We expect to continue to

grow our portfolio of proprietary brand offerings.

We have invested in development and procurement resources and marketing efforts relating

to these proprietary brand offerings.

Although we believe that our proprietary brand products offer value to our customers at each price

point and provide us with higher gross margins than comparable third-party branded products we sell, the expansion of our proprietary

brand offerings also subjects us to certain specific risks in addition to those discussed elsewhere in this section, such as:

Potential mandatory or voluntary product

Our ability to successfully obtain,

maintain, protect and enforce our intellectual property and proprietary rights (including

defending against counterfeit, knock offs, grey-market, infringing or otherwise unauthorized

Our ability to successfully navigate

and avoid claims related to the proprietary rights of third parties.

An increase in sales of our

proprietary brands may also adversely affect our sales of our vendors’

products, which may, in turn, adversely affect our relationship

with our vendors.

Our failure to adequately address some or all of these risks could have a material adverse effect on our business,

results of operations and financial condition.

Our competitors and potential competitors

may develop products and technologies that are more effective or commercially attractive than our products.

Our products compete against

national and regional products and private label products produced by various suppliers, many of which are established companies that

provide products that perform functions similar to our products.

Our competitors may develop or market products that are more effective

or commercially attractive than our current or future products.

Some of our competitors have substantially greater financial, operational,

marketing and technical resources than we do.

Moreover, some of these competitors may offer a broader array of products and sell their

products at prices lower than ours, and may have greater name recognition.

In addition, if demand for our specialty indoor gardening

supplies and products continues to grow, we may face competition from new entrants into our field.

Due to this competition, there is

no assurance that we will not encounter difficulties in generating or increasing revenues and capturing market share.

In addition, increased

competition may lead to reduced prices and/or margins for products we sell.

We may not have the financial resources, relationships with

key suppliers, technical expertise or marketing, distribution or support capabilities to compete successfully in the future.

We may not successfully develop new products

or improve existing products or maintain our effectiveness in reaching consumers through rapidly evolving communication vehicles.

Our future success depends,

in part, upon our ability to improve our existing products and to develop, manufacture and market new products to meet evolving consumer

We cannot be certain that we will be successful in developing, manufacturing and marketing new products or product innovations

which satisfy consumer needs or achieve market acceptance, or that we will develop, manufacture and market new products or product innovations

in a timely manner.

If we fail to successfully develop, manufacture and market new products or product innovations, or if we fail to

reach existing and potential consumers, our ability to maintain or grow our market share may be adversely affected, which in turn could

materially adversely affect our business, financial condition and results of operations.

In addition, the development and introduction

of new and products and product innovations require substantial research, development and marketing expenditures, which we may be unable

to recoup if such new products or innovations do not achieve market acceptance.

Many of the products we distribute

and market, such as our fertilizers and nutrients, contain ingredients that are subject to regulatory approval or registration with certain

state regulators.

The need to obtain such approval or registration could delay the launch of new products or product innovations

that contain ingredients or otherwise prevent us from developing and manufacturing certain products and product innovations.

Negative economic conditions, specifically

and Canada, could adversely affect our business.

global economic conditions could adversely affect our business.

Negative global economic trends, particularly in the U.S.

such as decreased consumer and business spending, high unemployment levels, reduced rates of home ownership and housing starts, high foreclosure

rates and declining consumer and business confidence, pose challenges to our business and could result in declining revenues, profitability

and cash flow.

Although we continue to devote significant resources to support our brands, unfavorable economic conditions may negatively

affect consumer demand for our products.

Our most price-sensitive customers may trade down to lower priced products during challenging

economic times or if current economic conditions worsen, while other customers may reduce discretionary spending during periods of economic

uncertainty, which could reduce sales volumes of our products in favor of our competitors’

products or result in a shift in our

product mix from higher margin to lower margin products.

The effects of the COVID-19 pandemic are

unpredictable and may materially affect our customers and how we operate our business, and the duration and extent to which the pandemic

continues (including any re-emergence of COVID-19) to threaten our future results of operations and overall financial performance remains

In December 2019, COVID-19

was identified.

We expect to continue to grow our portfolio of proprietary brand offerings.

We have invested in development and procurement resources and marketing efforts relating to these proprietary brand offerings.

Although we believe that our proprietary brand products offer value to our customers at each price point and provide us with higher gross margins than comparable third-party branded products we sell, the expansion of our proprietary brand offerings also subjects us to certain specific risks in addition to those discussed elsewhere in this section, such as:

• Potential mandatory or voluntary product recalls;

• Supply chain disruptions;

• Our ability to successfully obtain, maintain, protect and enforce our intellectual property and proprietary rights (including defending against counterfeit, knock offs, grey-market, infringing or otherwise unauthorized goods);

• Our ability to successfully navigate and avoid claims related to the proprietary rights of third parties.

An increase in sales of our proprietary brands may also adversely affect our sales of our vendors’ products, which may, in turn, adversely affect our relationship with our vendors.

Our failure to adequately address some or all of these risks could have a material adverse effect on our business, results of operations and financial condition.

Our competitors and potential competitors may develop products and technologies that are more effective or commercially attractive than our products.

Our products compete against national and regional products and private label products produced by various suppliers, many of which are established companies that provide products that perform functions similar to our products.

Our competitors may develop or market products that are more effective or commercially attractive than our current or future products.

Some of our competitors have substantially greater financial, operational, marketing and technical resources than we do.

Moreover, some of these competitors may offer a broader array of products and sell their products at prices lower than ours, and may have greater name recognition.

In addition, if demand for our specialty indoor gardening supplies and products continues to grow, we may face competition from new entrants into our field.

Due to this competition, there is no assurance that we will not encounter difficulties in generating or increasing revenues and capturing market share.

In addition, increased competition may lead to reduced prices and/or margins for products we sell.

We may not have the financial resources, relationships with key suppliers, technical expertise or marketing, distribution or support capabilities to compete successfully in the future.

We may not successfully develop new products or improve existing products or maintain our effectiveness in reaching consumers through rapidly evolving communication vehicles.

Our future success depends, in part, upon our ability to improve our existing products and to develop, manufacture and market new products to meet evolving consumer needs.

We cannot be certain that we will be successful in developing, manufacturing and marketing new products or product innovations which satisfy consumer needs or achieve market acceptance, or that we will develop, manufacture and market new products or product innovations in a timely manner.

If we fail to successfully develop, manufacture and market new products or product innovations, or if we fail to reach existing and potential consumers, our ability to maintain or grow our market share may be adversely affected, which in turn could materially adversely affect our business, financial condition and results of operations.

In addition, the development and introduction of new products and product innovations require substantial research, development and marketing expenditures, which we may be unable to recoup if such new products or innovations do not achieve market acceptance.

Many of the products we distribute and market, such as our fertilizers and nutrients, contain ingredients that are subject to regulatory approval or registration with certain U.S.

state and Canadian regulators.

The need to obtain such approval or registration could delay the launch of new products or product innovations that contain ingredients or otherwise prevent us from developing and manufacturing certain products and product innovations.

Failure to properly register and maintain these registrations for these products could result in significant penalties, additional costs, product stop-sales or recalls.

A significant product defect or product recall could materially and adversely affect our brand image, causing a decline in our sales and profitability, and could reduce or deplete our financial resources.

Provided we are successful in developing and selling our products, any product defect could materially harm our brand image and could force us to conduct a product recall.

This could damage our relationships with our customers.

A product recall would be particularly harmful to us because we will likely have limited financial and administrative resources to effectively manage a product recall and it would detract management’s attention from implementing our core business strategies.

As a result, a significant product defect or product recall could cause a decline in our sales and profitability and could reduce or deplete our financial resources.

Negative economic and/or industry conditions, specifically in the United States and Canada, could adversely affect our business.

Uncertain global economic and/or industry conditions could adversely affect our business.

Negative global economic trends, particularly in the United States and Canada, such as decreased consumer and business spending, high unemployment levels, reduced rates of home ownership and housing starts, high foreclosure rates and declining consumer and business confidence, pose challenges to our business and could result in declining revenues, profitability and cash flow.

Although we continue to devote significant resources to support our brands, unfavorable economic and/or industry conditions may negatively affect consumer demand for our products.

Our most price-sensitive customers may trade down to lower priced products during challenging economic times or if current economic conditions worsen, while other customers may reduce discretionary spending during periods of economic uncertainty, each of which could reduce sales volumes of our products in favor of our competitors’ products or result in a shift in our product mix from higher margin to lower margin products.

Increased prices and inflation could negatively impact our margin performance and our financial results.

Increased inflation, including rising prices for raw materials, parts and components, freight, packaging, labor and energy increases, the costs to manufacture and distribute our products, and we may be unable to pass these costs on to our customers.

Additionally, we are exposed to fluctuations in other costs such as packaging, freight, labor and energy prices.

If inflation in these costs increases beyond our ability to control for them through measures such as implementing operating efficiencies, we may not be able to increase prices to sufficiently offset the effect of various cost increases without negatively impacting customer demand, thereby negatively impacting our margin performance and results of operations.

A disruption in the operations of our freight carriers, higher shipping costs or shipping delays could disrupt our supply chain and could negatively impact our margin performance and our financial results.

We are dependent on commercial freight carriers to deliver our products.

If the operations of these carriers are disrupted for any reason, we may be unable to timely deliver our products to our customers who may choose alternative products causing our net revenues and gross margin to decline.

When fuel costs increase, our freight costs generally do so as well.

In addition, we operate abroad and international sales carry higher shipping costs which could negatively impact our gross margin and results of operations.

If freight and energy costs materially increase and we are unable to successfully pass all or significant portions of the increase along to our customers, or we cannot otherwise offset such increases in our cost of net revenues, our gross margin and financial results could be adversely affected.

The effects of the COVID-19 pandemic are unpredictable and may materially affect our customers and how we operate our business, and the duration and extent to which the pandemic continues (including any re-emergence of COVID-19) to threaten our future results of operations and overall financial performance remains uncertain.

In December 2019, COVID-19 was identified.

On March 11, 2020, the World Health Organization characterized COVID-19 as a global pandemic.

The COVID-19 pandemic has

resulted in a widespread health crisis that has adversely affected businesses, economies and financial markets worldwide and has caused

significant volatility in U.S.

Since the emergence of the COVID-19 pandemic, numerous variants of the virus have been identified, some of which are more virulent than the original strain.

The COVID-19 pandemic has resulted in a widespread health crisis that has adversely affected businesses, economies and financial markets worldwide and has caused significant volatility in U.S.

and international debt and equity markets.

While the rollout of vaccines has begun, the timing of vaccinations,

herd immunity, and the lifting of shelter in place and similar restrictions and movement restrictions is unknown.

Examples of how COVID-19 may

impact our business, results of operations and stock price include, but are not limited to:

COVID-19 may cause consumers to decrease

spending, or pause such spending altogether, making it more difficult for us to acquire new

customers, as well as retain and upsell existing customers;

COVID-19 may interfere with our ability,

or the ability of our employees, workers, contractors, suppliers and other business partners

to perform our and their respective responsibilities and obligations relative to the conduct

of our business.

COVID-19 may also cause disruptions from the temporary closure of our facilities,

third-party suppliers and manufacturers, restrictions on the shipment of our products, restrictions

on our employees’

and other service providers’

ability to travel, the decreased

willingness or ability of our customers to travel or to utilize our services and shutdowns

that may be requested or mandated by governmental authorities;

COVID-19 and related government responses

to address the COVID-19 pandemic may cause sudden and extreme changes in our stock price.

Vaccines for COVID-19 continue to be administered in the United States and other countries around the world, but the extent and rate of vaccine adoption, the long-term efficacy of these vaccines and other factors remain uncertain.

Authorities throughout the world have implemented measures to contain or

mitigate the spread of the virus, including physical distancing, travel bans and restrictions, closure of non-essential businesses, quarantines, work-from-home directives, mask requirements, shelter-in-place orders and vaccination programs.

Examples of how COVID-19 may impact our business, results of operations and stock price include, but are not limited to:

• COVID-19 may cause consumers to decrease spending, or pause such spending altogether, making it more difficult for us to acquire new customers, as well as retain and upsell existing customers;

• COVID-19 may interfere with our ability, or the ability of our employees, workers, contractors, suppliers and other business partners to perform our and their respective responsibilities and obligations relative to the conduct of our business.

COVID-19 may also cause disruptions from the temporary closure or suspension of activities related to the relocation of our facilities, third-party suppliers and manufacturers, restrictions on the shipment of our products, restrictions on our employees’ and other service providers’ ability to travel, the decreased willingness or ability of our customers to travel or to utilize our services and shutdowns that may be requested or mandated by governmental authorities;

• COVID-19 and related government responses to address the COVID-19 pandemic may cause sudden and extreme changes in our stock price.

Since COVID-19 was first reported, the volatility of U.S.

equity markets increased to historic

equity markets increased to historic levels.

This may cause extreme fluctuations in the market price of our stock.

We cannot predict

if and when these fluctuations will decrease or increase.

In addition to general market conditions,

the market price of our stock may become volatile or decline due to actual or anticipated

impact of COVID-19 on our financial condition and results of operations or if our results

of operations do not meet the expectations of the investor community or one or more of the

analysts who cover our company change their recommendations regarding our company.

The duration and extent of

the impact on our business from the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time

(e.g., the severity and transmission rate of the virus, the extent and effectiveness of containment measures, and the impact of these

and other factors on our employees, customers, vendors and partners, including their respective productivity).

Furthermore, our limited

operating history combined with the uncertainty created by the COVID-19 pandemic significantly increases the difficulty of forecasting

operating results and of strategic planning.

For example, we have recently incurred high operating costs and experienced unreliable results

in connection with maritime transportation.

If we are unable to effectively predict and manage the impact of the COVID-19 pandemic on

our business, our results of operations and financial condition may be negatively impacted.

Our business has experienced an accelerated

rate of growth which may be due in part to lifestyle changes in the wake of the COVID-19 pandemic;

if so, our recent accelerated rate

of growth may not be sustainable.

Although we cannot precisely

quantify in absolute or relative terms, our accelerated rate of growth in net sales for the year ended December 31, 2020 correlates with

shelter-in-place orders issued in many locations in March 2020 in response to the COVID-19 pandemic.

Our net sales for the year ended

December 31, 2020 were approximately 46% higher as compared to the year ended December 31, 2019.

A portion of our net sales during this

period could be due to pull-through demand for our products due to higher consumption of CEA products from individuals spending more

time at home due to shelter-in-place measures.

Although uncertainty created by the COVID-19 pandemic remains, and various state budgets

remain under economic pressure, creating a greater chance of further cannabis legalization, we cannot assure you that such growth will

Our international operations make us susceptible

to the costs and risks associated with operating internationally.

We operate some of our distribution

centers in Canada and Spain and source products globally.

We cannot predict if and when these fluctuations will decrease or increase.

In addition to general market conditions, the market price of our stock may become volatile or decline due to actual or anticipated impact of COVID-19 on our financial condition and results of operations or if our results of operations do not meet the expectations of the investor community or one or more of the analysts who cover our company change their recommendations regarding our company.

The duration and extent of the impact on our business from the COVID-19 pandemic depends on ongoing developments that cannot be accurately predicted at this time (e.g., the severity and transmission rate of the virus and new variants, the extent and effectiveness of containment and vaccination measures, and the impact of these and other factors on our employees, customers, vendors and partners, including their respective productivity).

Furthermore, our limited operating history combined with the uncertainty created by the COVID-19 pandemic significantly increases the difficulty of forecasting operating results and of strategic planning.

The COVID-19 pandemic has resulted in global supply chain constraints and transportation disruptions that have led to increased costs of goods and higher freight/import costs.

If we are unable to effectively predict and manage the impact of the COVID-19 pandemic on our business, our results of operations and financial condition may be negatively impacted.

Our international operations make us susceptible to the costs and risks associated with operating internationally.

We operate some of our distribution centers in Canada and Spain and source products globally.

We also operate a registered office in China.

Accordingly, we are subject to

risks associated with operating in foreign countries, including:

fluctuations in currency exchange

limitations on the remittance of dividends

and other payments by foreign subsidiaries;

additional costs of compliance with

local regulations;

additional costs associated with fuel

prices and freight expenses;

in certain countries, historically higher rates of inflation than in the U.S.;

changes in the economic conditions

or consumer preferences or demand for our products in these markets;

restrictive actions by multi-national

governing bodies, foreign governments or subdivisions thereof;

changes in foreign labor laws and

regulations affecting our ability to hire and retain employees;

Accordingly, we are subject to risks associated with operating in foreign countries, including:

• fluctuations in currency exchange rates;

• limitations on the remittance of dividends and other payments by foreign subsidiaries;

• additional costs of compliance with local regulations;

• additional costs associated with fuel prices and freight/import expenses;

• in certain countries, historically higher rates of inflation than in the United States;

• changes in the economic conditions or consumer preferences or demand for our products in these markets;

• restrictive actions by multi-national governing bodies, foreign governments or subdivisions thereof;

• changes in foreign labor laws and regulations affecting our ability to hire and retain employees;

• changes in U.S.

and foreign laws regarding

trade and investment;

less robust protection of our intellectual

property and proprietary rights under foreign laws;

difficulty in obtaining distribution

and support for our products.

addition, our operations outside the U.S.

are subject to the risk of new and different legal and regulatory requirements in local

jurisdictions, potential difficulties in staffing and managing local operations and potentially adverse tax consequences.

The costs associated

with operating our continuing international business could adversely affect our results of operations, financial condition and cash flows

in the future.

We have incurred and will continue to incur

increased costs as a result of being a public company.

We became a public company

on December 9, 2020.

As a public company, we have incurred and will continue to incur significant legal, accounting, insurance and other

expenses that we did not incur as a private company.

For example, we have and will incur increased legal and accounting costs as a result

of being subject to the information and reporting requirements of the Exchange Act, and other federal securities laws.

The costs of preparing

and filing periodic and other reports, proxy statements and other information with the SEC and furnishing audited reports to stockholders,

will cause significant increase in our expenses than if we remained privately-held.

The cost of being a public company have and will divert

resources that might otherwise have been used to develop our business, which could have a material adverse effect on our company.

As a privately held company,

we were not required to comply with certain corporate governance and financial reporting practices and policies required of a public reporting

As a public company, we are required to file with the SEC annual and quarterly information and other reports pursuant to the

Exchange Act.

We are also required to ensure that we have the ability to prepare financial statements that are fully compliant with all

SEC reporting requirements on a timely basis.

In addition, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection

Act, the listing requirements of the Nasdaq Global Select Market and other applicable securities rules and regulations impose various

requirements on public companies.

Our management and other personnel have and will devote a substantial amount of time to compliance with

these requirements.

Moreover, these rules and regulations will continue to increase our legal and financial compliance costs and will

make some activities more time-consuming and costly.

We cannot predict or estimate the amount of additional costs we will continue to

incur as a public company or the specific timing of such costs.

As a public company, we have

and will, among other things:

prepare and distribute periodic public

reports and other stockholder communications in compliance;

comply with our obligations under

the federal securities laws and applicable listing rules;

create or expand the roles and duties

of our board of directors and committees of the board of directors;

institute more comprehensive financial

reporting and disclosure compliance functions;

and foreign laws regarding trade and investment;

• less robust protection of our intellectual property and proprietary rights under foreign laws;

• difficulty in obtaining distribution and support for our products.

In addition, our operations outside the United States are subject to the risk of new and different legal and regulatory requirements in local jurisdictions, potential difficulties in staffing and managing local operations and potentially adverse tax consequences.

The costs associated with operating our continuing international business could adversely affect our results of operations, financial condition and cash flows in the future.

As a result of acquisitions, we are exposed to manufacturing risks that could adversely affect our business and results of operations.

In connection with our recent acquisitions, we have acquired several manufacturing facilities.

Expansion into manufacturing exposes us to all of the risks entailed in manufacturing activities generally and there is no assurance that our manufacturing activities will not cause us to incur material unexpected costs or liabilities.

Our manufacturing processes may experience problems including equipment malfunctions, facility contamination, labor problems, raw material shortages or contamination, natural disasters, power outages, terrorist activities, safety and certification issues, or disruptions in the operations of our suppliers which could result in product defects, product recalls, product liability claims and insufficient inventory or supply of product for our customers.

For example, our acquisition of the H&G Entities and their plant nutrient and fertilizer business may expose us to handling potentially hazardous or explosive chemicals.

We cannot eliminate the risk of accidental contamination or injury from such chemicals, and any accident caused by such chemicals could result in cleanup costs, diversion of management attention and potential liability, all of which could affect our reputation, business and results of operations.

Any defects in the products we manufacture may result in delayed shipments to customers or reduced or canceled customer orders.

If these defects or deficiencies are significant, our business reputation may be damaged.

The failure of the products that we manufacture or of our manufacturing processes or facilities may subject us to regulatory enforcement, fines or penalties and, in some cases, require us to shut down, temporarily halt operations or incur considerable expense to correct a manufacturing process or facility.

In addition, these defects may result in liability claims against us, expose us to liability to pay for the recall or remanufacture of a product or adversely affect product sales or our reputation.

The storage, handling, production and disposal of materials in our manufacturing facilities may expose us to liability under environmental laws and regulations.

Potentially significant expenditures could also be required to comply with evolving interpretations of existing environmental, health and safety laws and regulations or any new such laws and regulations (including concerns about global climate change and its impact) that may be adopted in the future.

Costs associated with failure to comply with such laws and regulations could have an adverse effect on our business.

Government laws and regulations, including environmental laws and regulations, could result in material costs or otherwise adversely affect our financial condition and results of operations.

The manufacturing, chemical composition, packaging, storage, distribution and labeling of our products and the manner in which our business operations are conducted must comply with an extensive array of federal, state and foreign laws and regulations.

If we are not successful in complying with the requirements of all such regulations, we could be fined or other actions could be taken against us by the applicable governing body, including the possibility of a required product recall.

Any such regulatory action could adversely affect our financial condition and results of operations.

It is also possible that governments and regulatory agencies will increase regulation, including the adoption of further regulations relating to the transportation, storage or use of certain chemicals, to enhance homeland security or protect the environment and such increased regulation could negatively impact our ability to obtain raw materials, components and/or finished goods or could result in increased costs.

In particular, legislators, consumers, investors and other stakeholders are increasingly focusing on climate change, petroleum usage, waste, recycled material content, and other sustainability concerns pertaining to companies’ ESG policies.

Concern over climate change may result in new or increased legal and regulatory requirements to reduce or mitigate negative impacts to the environment or may result in new reporting and disclosure requirements.

In the event that such regulations result in increased product or administrative costs, we may not be in a position to increase selling prices, and therefore an increase in costs could have a material adverse effect on our business, financial condition and results of operations.

Some of our products have chemical compositions that are controlled by various state, federal and international laws and regulations that are subject to change.

We are required to comply with these laws and regulations and we seek to anticipate regulatory developments that could impact our ability to continue to produce and market our products.

We invest in research and development to maintain product formulations that comply with such laws and regulations.

There can be no assurance that we will not be required to alter the chemical composition of one or more of our products in a way that will have an adverse effect upon the product’s efficacy or marketability.

A delay or other inability of the Company to complete product research and development and successfully reformulate our products in response to any such regulatory requirements could have a material adverse effect on our business, financial condition and results of operations.

We are subject to numerous environmental laws and regulations that impose various environmental controls on our business operations, including, among other things, the discharge of pollutants into the air and water, the handling, use, treatment, storage and clean-up of solid and hazardous wastes and the investigation and remediation of soil and groundwater

affected by hazardous substances.

Such laws and regulations may otherwise relate to various health and safety matters that impose burdens upon our operations.

These laws and regulations also impose strict, retroactive and joint and several liability for the costs of, and damages resulting from, cleaning up current sites, past spills, disposals and other releases of hazardous substances.

We believe that our expenditures related to environmental matters have not had, and are not currently expected to have, a material adverse effect on our financial condition, results of operations or cash flows.

However, the environmental laws under which we operate are complicated, often become increasingly more stringent and may be applied retroactively.

Accordingly, there can be no assurance that we will not be required to incur additional expenditures to remain in or to achieve compliance with environmental laws in the future or that any such additional expenditures will not have a material adverse effect on our business, financial condition or results of operations.

Additional laws and regulations require that we carefully manage our supply chain for the production, distribution and sale of goods.

Our failure to comply with any of these regulations or our inability to adequately predict the manner in which these local regulations are interpreted and applied to our business by the applicable enforcement agencies could have a materially adverse effect on our business, financial condition and results of operations.

Failure to optimize our supply chain or disruption of our supply chain could have an adverse effect on our business, financial condition and results of operations.

Our ability to make, move and sell products in coordination with our suppliers is critical to our success.

Our inability to maintain sufficient internal production capacity or our inability to enter into co-packing arrangements on terms that are beneficial to the Company could have an adverse effect on our business.

Failure to adequately handle increasing production costs and complexity, turnover of personnel, or production capability and efficiency issues could materially impact our ability to cost effectively produce our products and meet customer demand.

Additionally, damage or disruption to our production or distribution capabilities resulting from weather, any potential effects of climate change, natural disaster, disease, crop spoilage, fire or explosion, terrorism, pandemics, strikes, repairs or enhancements at our facilities, or other reasons, could impair our ability to produce or sell our products.

Failure to take adequate steps to mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, could adversely affect our business, financial condition and results of operations, and may require additional resources to restore our supply chain.

Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.

Companies are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their ESG practices and disclosure.

Investor advocacy groups, investment funds and influential investors are also increasingly focused on these practices, especially as they relate to the environment, climate change, health and safety, supply chain management, diversity, labor conditions and human rights, both in our own operations and in our supply chain.

Increased ESG-related compliance costs for the Company as well as among our suppliers, vendors and various other parties within our supply chain could result in material increases to our overall operational costs.

Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners, access to capital, and our stock price.

Climate Change may impact the availability of our facilities and, in addition, we may incur substantial costs to comply with climate change legislation and related regulatory initiatives.

Changing weather patterns and the increase in frequency of weather events such as forest fires, hurricanes and tornadoes could cause disruptions or the complete loss of our facilities.

In addition, climate change concerns, and changes in the regulation of such concerns, including greenhouse gas emissions, could also subject us to additional costs and restrictions, including increased energy and raw materials costs which could negatively impact our financial condition and results of operations.

The effects of climate change can have an adverse effect not only to our operations, but also that of our suppliers and customers, and can lead to increased regulations and changes in consumer preferences, which could adversely affect our business, results of operations, and financial condition.

We are subject to risks related to corporate and social responsibility and reputation.

Many factors influence our reputation including the perception of us held by our customers, suppliers, partners, shareholders, other key stakeholders, and the communities in which we operate.

We face increasing scrutiny related to

environmental, social and governance activities.

We risk damage to our reputation if we fail to act responsibly in a number of areas, such as diversity and inclusion, environmental stewardship, sustainability, supply chain management, climate change, workplace conduct, and human rights.

Any harm to our reputation could impact employee engagement and retention, our corporate culture, and the willingness of customers, suppliers, and partners to do business with us, which could have a material adverse effect on our business, results of operations and cash flows.

Further, despite our policies to the contrary, we may not be able to control the conduct of every individual actor, and our employees and personnel may violate environmental, social or governance standards or engage in other unethical conduct.

These acts, or any accusation of such conduct, even if proven to be false, could adversely impact the reputation of our business.

We have incurred and will continue to incur increased costs as a result of being a public company.

We became a public company on December 9, 2020.

As a public company, we have incurred and will continue to incur significant legal, accounting, Sarbanes-Oxley compliance, insurance and other expenses that we did not incur as a private company.

For example, we have incurred and will continue to incur increased legal and accounting costs as a result of being subject to the information and reporting requirements of the Exchange Act, and other federal securities laws.

The costs of preparing and filing periodic and other reports, proxy statements and other information with the SEC and furnishing audited reports to stockholders, will cause significant increases in our expenses than if we had remained privately-held.

The cost of being a public company diverts resources that might otherwise have been used to develop our business, which could have a material adverse effect on our company.

As a privately held company, we were not required to comply with certain corporate governance and financial reporting practices and policies required of a public reporting company.

As a public company, we are required to file with the SEC annual and quarterly information and other reports pursuant to the Exchange Act.

We are also required to ensure that we have the ability to prepare financial statements that are fully compliant with all SEC reporting requirements on a timely basis.

In addition, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the Nasdaq Global Select Market and other applicable securities rules and regulations impose various requirements on public companies.

Our management and other personnel devote a substantial amount of time to compliance with these requirements.

Moreover, these rules and regulations increase our legal and financial compliance costs and make some activities more time-consuming and costly.

We cannot predict or estimate the amount of additional costs we incur as a public company or the specific timing of such costs.

As a public company, we, among other things:

• prepare and distribute periodic public reports and other stockholder communications in compliance;

• comply with our obligations under the federal securities laws and applicable listing rules;

• create or expand the roles and duties of our board of directors and committees of the board of directors;

• institute more comprehensive financial reporting and disclosure compliance functions;

• enhance our investor relations function;

establish new internal policies, including

those relating to disclosure controls and procedures;

involve and retain to a greater degree

outside counsel and accountants in the activities listed above.

These changes require a significant

commitment of additional resources and many of our competitors already comply with these obligations.

We may not be successful in complying

with these obligations and the significant commitment of resources required for complying with them could have a material adverse effect

on our business, financial condition and results of operations.

These laws and regulations could also make it more difficult or costly

for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced

policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.

These laws and regulations could

also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our committees of our board

of directors or as our executive officers.

In addition, if we fail to

implement the requirements with respect to our internal accounting and audit functions, our ability to report our results of operations

on a timely and accurate basis could be impaired and we could suffer adverse regulatory consequences or violate applicable listing standards.

There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our

financial statements, which could have a material adverse effect on our business, financial condition and results of operations.

The changes necessitated

by becoming a public company require a significant commitment of resources and management supervision that has increased and may continue

to increase our costs and might place a strain on our systems and resources.

As a result, our management’s attention might be diverted

from other business concerns.

If we fail to maintain an effective internal control environment or to comply with the numerous legal and

regulatory requirements imposed on public companies, we could make material errors in, and be required to restate, our financial statements.

Any such restatement could result in a loss of public confidence in the reliability of our financial statements and sanctions imposed

on us by the SEC.

• establish new internal policies, including those relating to disclosure controls and procedures;

• involve and retain to a greater degree outside counsel and accountants in the activities listed above.

These matters require a significant commitment of additional resources and many of our competitors already comply with these obligations.

We may not be successful in complying with these obligations and the significant commitment of resources required for complying with them could have a material adverse effect on our business, financial condition and results of operations.

These laws and regulations also make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.

These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our committees of our board of directors or as our executive officers.

In addition, if we fail to implement the requirements with respect to our internal accounting and audit functions, our ability to report our results of operations on a timely and accurate basis could be impaired and we could suffer adverse regulatory consequences or violate applicable listing standards.

There could also be a negative reaction in the financial markets

due to a loss of investor confidence in us and the reliability of our financial statements, which could have a material adverse effect on our business, financial condition and results of operations.

The changes necessitated by becoming a public company require a significant commitment of resources and management supervision that has increased and may continue to increase our costs and might place a strain on our systems and resources.

As a result, our management’s attention might be diverted from other business concerns.

If we fail to maintain an effective internal control environment or to comply with the numerous legal and regulatory requirements imposed on public companies, we could make material errors in, and be required to restate, our financial statements.

Any such restatement could result in a loss of public confidence in the reliability of our financial statements and sanctions imposed on us by the SEC.

We cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

If we are unable

to satisfy our obligations as a public company, we could be subject to delisting of our common stock, as applicable, fines, sanctions

and other regulatory action and potentially civil litigation.

As a result of being a public company,

we are obligated to develop and maintain proper and effective internal controls over financial reporting, and any failure to maintain

the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our common

We may be required, pursuant

to Section 404 to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting

for the fiscal year ending December 31, 2021.

This assessment will need to include disclosure of any material weaknesses identified by

our management in our internal control over financial reporting.

Following the date we are no longer an “emerging growth company,”

our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial

reporting in our first annual report required to be filed with the SEC.

We have recently commenced the costly and challenging process

of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404, but we may

not be able to complete our evaluation, testing and any required remediation in a timely fashion once initiated.

Our compliance with

Section 404 will require that we incur substantial expenses and expend significant management efforts.

We may need to hire additional

accounting and financial staff, or leverage outside resources, with appropriate public company experience and technical accounting knowledge

and compile the system and process documentation necessary to perform the evaluation needed to comply with Section 404.

During the evaluation and

testing process of our internal controls, if we identify one or more material weaknesses in our internal control over financial reporting,

we will be unable to certify that our internal control over financial reporting is effective.

We cannot assure you that there will not

be material weaknesses or significant deficiencies in our internal control over financial reporting in the future.

Any failure to maintain

internal control over financial reporting could severely inhibit our ability to accurately report our financial condition or results

of operations.

If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered

public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting,

we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could

decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities.

Failure to remedy any material

weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public

companies, could also restrict our future access to the capital markets.

We identified material weaknesses in our

internal control over financial reporting, and if we are unable to achieve and maintain effective internal control over financial reporting,

the accuracy and timing of our financial reporting may be adversely affected.

Prior to our initial public

offering (“IPO”) in December 2020, we were a private company with limited accounting and finance personnel, adequate review

processes and other resources with which to address our internal controls and procedures.

In connection with the audit of our financial

statements for fiscal 2019, we and our independent registered public accounting firm identified control deficiencies in the design and

operation of our internal control over financial reporting that constituted material weaknesses previously disclosed in our registration

statement on Form S-1 which was declared effective on December 9, 2020.

A “material weakness”

is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility

that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Our management

determined that the previously disclosed material weaknesses have not been remediated as of December 31, 2020:

that (i) we did not maintain

a sufficient complement of personnel with an appropriate degree of technical knowledge commensurate with our accounting and reporting

requirements and (ii) our controls related to the preparation, review, and analysis of accounting information and financial statements

were not adequately designed or appropriately implemented to identify material misstatements in our financial reporting on a timely basis

entities and Eddi’s.

These material weaknesses could result in a misstatement of account balances or disclosures that

would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected.

We have taken several

actions towards remediating these material weaknesses.

In particular, we (i) hired and continue to hire, additional qualified accounting

and financial reporting personnel with technical and/or public company experience, (ii) implemented new control procedures over certain

areas previously deemed ineffective related to the preparation, review, and analysis of accounting information and financial statements

and (iii) engaged and continue to engage an external advisor to assist management in completing a Sarbanes-Oxley Act compliant risk assessment,

creating detailed control documentation for in-scope business and information technology processes, identifying further control gaps

and providing assistance on remediation procedures, and designing and implementing a Sarbanes-Oxley Act sub-certification process.

we have taken steps to address the material weaknesses, we are still in the process of completing the remediation and we cannot assure

you that the steps we are taking will be sufficient to remediate our material weaknesses or prevent future material weaknesses or significant

deficiencies from occurring.

We can give no assurance

that additional material weaknesses in our internal control over financial reporting will not be identified in the future.

to implement and maintain effective internal control over financial reporting could result in errors in our financial statements that

could result in a restatement of our financial statements and cause us to fail to meet our reporting obligations.

Acquisitions, other strategic alliances

and investments could result in operating difficulties, dilution, and other harmful consequences that may adversely impact our business

and results of operations.

Acquisitions are an important

element of our overall corporate strategy, and these transactions could entail material investments by us and be material to our financial

condition and results of operations.

If we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, as applicable, fines, sanctions and other regulatory action and potentially civil litigation.

As a result of being a public company, we are obligated to develop and maintain proper and effective internal controls over financial reporting, and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our common stock.

As of December 31, 2021 we were no longer an emerging growth company, and we are now required to comply with Section 404 of the Sarbanes-Oxley Act.

Compliance with these requirements may strain our resources, increase our costs and distract management, and we may, in the future, be unable to comply with these requirements in a timely or cost-effective manner.

For the 2021 fiscal year just completed, management and our independent outside auditor have attested that our internal control environment was operating effectively and in compliance with Section 404 of the Sarbanes-Oxley Act.

However, in the future during the evaluation and testing process of our internal controls, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to certify that our internal control over financial reporting is effective.

We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future.

Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition or results of operations.

If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities.

Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.

We previously identified material weaknesses in our internal control over financial reporting and we may identify additional material weaknesses in the future , and if we are unable to achieve and maintain effective internal control over financial reporting, the accuracy and timing of our financial reporting may be adversely affected.

Prior to our IPO in December 2020, we were a private company with limited accounting and finance personnel, adequate review processes and other resources with which to address our internal controls and procedures.

In connection with the audit of our financial statements for fiscal 2019, we and our independent registered public accounting firm identified control deficiencies in the design and operation of our internal control over financial reporting that constituted material weaknesses previously disclosed in our registration statement on Form S-1 which was declared effective on December 9, 2020.

A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Our management determined that the previously disclosed material weaknesses were not remediated as of December 31, 2020:

that (i) we did not maintain a sufficient complement of personnel with an appropriate degree of technical knowledge commensurate with our accounting and reporting requirements and (ii) our controls related to the preparation, review, and analysis of accounting information and financial statements were not adequately designed or appropriately implemented to identify material misstatements in our financial reporting on a timely basis for our U.S.

entities and Eddi’s Wholesale Garden Supplies, Ltd.

These material weaknesses could result in a misstatement of account balances or disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected.

During 2021, we remediated the identified material weaknesses.

In particular, we (i) hired and continue to hire, additional qualified accounting and financial reporting personnel with technical and/or public company experience, (ii)

implemented new control procedures over certain areas previously deemed ineffective related to the preparation, review, and analysis of accounting information and financial statements and (iii) engaged and continue to engage an external advisor to assist management in completing a Sarbanes-Oxley Act compliant risk assessment, creating detailed control documentation for in-scope business and information technology processes, identifying further control gaps and providing assistance on remediation procedures, and designing and implementing a Sarbanes-Oxley Act sub-certification process.

Although we have remediated previously identified material weaknesses, we cannot assure you that the steps we have taken will prevent future material weaknesses from occurring.

We can give no assurance that additional material weaknesses in our internal control over financial reporting will not be identified in the future.

Our failure to implement and maintain effective internal control over financial reporting could result in errors in our financial statements that could result in a restatement of our financial statements and cause us to fail to meet our reporting obligations.

Acquisitions, other strategic alliances and investments could result in operating difficulties, dilution, and other harmful consequences that may adversely impact our business and results of operations.

Acquisitions are an important element of our overall corporate strategy, and these transactions entail material investments by us and are material to our financial condition and results of operations.

We expect to evaluate and enter into discussions regarding a wide array of potential strategic transactions.

The process of integrating an acquired company, business, or product has created, and will continue to create, unforeseen operating difficulties

and expenditures.

The process of integrating an acquired company, business, or product has created, and will continue to create, unforeseen operating difficulties and expenditures.

The areas where we face risks may include, but are not limited to:

diversion of management’s time

and focus from operating our business to acquisition integration challenges;

failure to successfully further develop

the acquired business or products;

implementation or remediation of controls,

procedures and policies at the acquired company;

integration of the acquired company’s

accounting, human resources and other administrative systems, and coordination of product,

engineering and sales and marketing functions;

transition of operations, users and

customers onto our existing platforms;

reliance on the expertise of our strategic

partners with respect to market development, sales, local regulatory compliance and other

operational matters;

failure to obtain required approvals

on a timely basis, if at all, from governmental authorities, or conditions placed upon approval,

under competition and antitrust laws which could, among other things, delay or prevent us

from completing a transaction, or otherwise restrict our ability to realize the expected

financial or strategic goals of an acquisition;

in the case of foreign acquisitions,

the need to integrate operations across different cultures and languages and to address the

particular economic, currency, political and regulatory risks associated with specific countries;

cultural challenges associated with

integrating employees from the acquired company into our organization, and retention of employees

from the businesses we acquire;

liability for or reputational harm

from activities of the acquired company before the acquisition or from our strategic partners,

including patent and trademark infringement claims, violations of laws, commercial disputes,

tax liabilities and other known and unknown liabilities;

litigation or other claims in connection

with the acquired company, including claims from terminated employees, customers, former

stockholders or other third parties.

Our due diligence may fail

to identify all liabilities associated with acquisitions and we may not assess the relative benefits and detriments of making an acquisition

and may pay acquisition consideration exceeding the value of the acquired business.

Our failure to address these risks or other problems

encountered in connection with our past or future acquisitions and investments or strategic alliances could cause us to fail to realize

the anticipated benefits of such acquisitions, investments or alliances, incur unanticipated liabilities, and harm our business generally.

Our acquisitions could also

result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses, or impairment

of goodwill and purchased long-lived assets, and restructuring charges, any of which could harm our financial condition or results of

operations and cash flows.

Although acquisitions are

an important element of our overall corporate strategy, there can be no assurance that we will be able to identify appropriate acquisition

targets, successfully acquire identified targets or successfully integrate the business of acquired companies to realize the full, anticipated

benefits of such acquisitions.

Damage to our reputation could have an

adverse effect on our business.

Maintaining our strong reputation

is a key component in our success.

Product recalls, our inability to ship, sell or transport our products, governmental investigations

and other matters may harm our reputation and acceptance of our products, which may materially and adversely affect our business operations,

decrease sales and increase costs.

In addition, perceptions

that the products we distribute and market are not safe could adversely affect us and contribute to the risk we will be subjected to

legal action.

• diversion of management’s time and focus from operating our business to acquisition integration challenges;

• failure to successfully further develop the acquired business or products;

• implementation or remediation of controls, procedures and policies at the acquired company;

• integration of the acquired company’s accounting, information technology (IT) systems, human resources and other administrative systems, and coordination of product, engineering and sales and marketing functions;

• transition of operations, users and customers onto our existing platforms;

• reliance on the expertise of our strategic partners with respect to market development, sales, local regulatory compliance and other operational matters;

• failure to obtain required approvals on a timely basis, if at all, from governmental authorities, or conditions placed upon approval, under competition and antitrust laws which could, among other things, delay or prevent us from completing a transaction, or otherwise restrict our ability to realize the expected financial or strategic goals of an acquisition;

• in the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the particular economic, currency, political and regulatory risks associated with specific countries;

• cultural challenges associated with integrating employees from the acquired company into our organization, and retention of employees from the businesses we acquire;

• liability for or reputational harm from activities of the acquired company before the acquisition or from our strategic partners, including patent and trademark infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities;

• litigation or other claims in connection with the acquired company, including claims from terminated employees, customers, former stockholders or other third parties.

Our due diligence may fail to identify all liabilities associated with acquisitions and we may not assess the relative benefits and detriments of making an acquisition and may pay acquisition consideration exceeding the value of the acquired business.

Our failure to address these risks or other problems encountered in connection with our past or future acquisitions and investments or strategic alliances could cause us to fail to realize the anticipated benefits of such acquisitions, investments or alliances, incur unanticipated liabilities, and harm our business generally.

Our acquisitions could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses, or impairment of goodwill and purchased long-lived assets, and restructuring charges, any of which could harm our financial condition or results of operations and cash flows.

Although acquisitions are an important element of our overall corporate strategy, there can be no assurance that we will be able to identify appropriate acquisition targets, successfully acquire identified targets or successfully integrate the business of acquired companies to realize the full, anticipated benefits of such acquisitions.

Damage to our reputation could have an adverse effect on our business.

Maintaining our strong reputation is a key component in our success.

Product recalls, any inability to ship, sell or transport our products, governmental investigations and other matters may harm our reputation and acceptance of our products, which may materially and adversely affect our business operations, decrease sales and increase costs.

In addition, perceptions that the products we distribute and market are not safe could adversely affect us and contribute to the risk we will be subjected to legal action.

We distribute and market a variety of products, such as nutrients, and growing media.

On occasion, allegations or news

reports may be made that some of these products have failed to perform up to expectations or have caused damage or injury to individuals

Public perception that the products we distribute or market are not safe could impair our reputation, involve us in litigation,

damage our brand names and have a material adverse effect on our business.

On occasion, allegations or news reports may be made that some of these products have failed to perform up to expectations or have caused damage or injury to individuals or property.

Public perception that the products we distribute or market are not safe could impair our reputation, involve us in litigation, damage our brand names and have a material adverse effect on our business.

Our marketing activities may not be successful .

We invest substantial resources

in advertising, consumer promotions and other marketing activities to maintain, extend and expand our brand image.

There can be no assurance

that our marketing strategies will be effective or that the amount we invest in advertising activities will result in a corresponding

increase in sales of our products.

If our marketing initiatives are not successful, we will have incurred significant expenses without

the benefit of higher revenues.

Our operations may be impaired if our information

technology systems, or those of our third-party vendors, fail to perform adequately or if we or our third-party vendors are the subject

of a data breach or cyber-attack.

We rely on information technology

systems in order to conduct business, including communicating with employees and our distribution centers, ordering and managing materials

from suppliers, selling and shipping products to retail customers and analyzing and reporting results of operations, as well as for storing

sensitive, personal and other confidential information.

While we have taken steps to ensure the security of our information technology

systems, our security measures or those of our third-party vendors may not be effective and our or our third-party vendors’

may nevertheless be vulnerable to computer viruses, security breaches and other disruptions from unauthorized users.

If our or our third-party

vendors’

information technology systems are damaged or cease to be available or function properly for an extended period of time,

whether as a result of a significant cyber incident or otherwise, our ability to communicate internally as well as with our retail customers

could be significantly impaired, which may adversely impact our business.

Additionally, the techniques

used to obtain unauthorized, improper or illegal access to information technology systems are constantly evolving, may be difficult to

detect quickly and often are not recognized until after they have been launched against a target.

We may be unable to anticipate these

techniques, react in a timely manner or implement adequate preventative or remedial measures.

Any operational failure or breach of security

from these increasingly sophisticated cyber threats could lead to the loss or disclosure of both our and our retail customers’

financial, product, and other confidential information, as well as personally identifiable information about our employees or customers,

result in negative publicity and expensive and time-consuming regulatory or other legal proceedings, damage our relationships with our

customers and have a material adverse effect on our business and reputation.

In addition, we may incur significant costs and operational

consequences in connection with investigating, mitigating, remediating, eliminating and putting in place additional tools and devices

designed to prevent future actual or perceived security incidents, as well as in connection with complying with any notification or other

obligations resulting from any security incidents.

Because we do not control our third-party vendors, or the processing of data by our

third-party vendors, our ability to monitor our third-party vendors’

data security is limited and we cannot ensure the integrity

or security of the measures they take to protect and prevent the loss of our or our consumers’

As a result, we are subject

to the risk that cyber-attacks on, or other security incidents affecting, our third-party vendors may adversely affect our business even

if an attack or breach does not directly impact our systems.

We occupy many of our facilities under

long-term non-cancellable leases, and we may be unable to renew our leases at the end of their terms.

Many of our facilities and

distribution centers are located on leased premises subject to non-cancellable leases.

Typically, our leases have initial terms ranging

from three to ten years, with options to renew for specified periods of time.

We believe that our future leases will likely also be long-term

and non-cancellable and have similar renewal options.

If we close or stop fully utilizing a facility, we will most likely remain obligated

to perform under the applicable lease, which would include, among other things, making the base rent payments, and paying insurance,

taxes and other expenses on the leased property for the remainder of the lease term.

Our future minimum aggregate rental commitments

for leases for our facilities and distribution centers, as of December 31, 2020, is approximately $22.1 million for leases classified

as operating and $408,000 for leases classified as financing.

Our inability to terminate a lease when we stop fully utilizing a facility

or exit a market can have a significant adverse impact on our financial condition, operating results and cash flows.

In addition, at the end of

the lease term and any renewal period for a facility, we may be unable to renew the lease without substantial additional cost, if at

If we are unable to renew our facility leases, we may close or relocate a facility, which could subject us to construction and other

costs and risks, which in turn could have a material adverse effect on our business and operating results.

Further, we may not be able

to secure a replacement facility in a location that is as commercially viable, including access to rail service.

Having to close a facility,

even briefly to relocate, could reduce the sales that such facility would have contributed to our revenues.

The estimates and judgments we make, or

the assumptions on which we rely, in preparing our consolidated financial statements could prove inaccurate.

Our consolidated financial

statements have been prepared in accordance with GAAP.

The preparation of these consolidated financial statements requires us to make

estimates and judgments that affect the reported amounts of our assets, liabilities, revenues and expenses, the amounts of charges accrued

by us and related disclosure of contingent assets and liabilities.

We base our estimates on historical experience and on various other

assumptions that we believe to be reasonable under the circumstances.

We cannot assure, however, that our estimates, or the assumptions

underlying them, will not change over time or otherwise prove inaccurate.

Any potential litigation related to the estimates and judgments

we make, or the assumptions on which we rely, in preparing our consolidated financial statements could have a material adverse effect

on our financial results, harm our business, and cause our share price to decline.

In order to increase our sales and marketing

infrastructure, we will need to grow the size of our organization, and we may experience difficulties in managing this growth.

As we continue to work to

expand our business, we will need to expand the size of our employee base for managerial, operational, sales, marketing, financial and

other resources.

Future growth would impose significant added responsibilities on members of management, including the need to identify,

recruit, maintain, motivate and integrate additional employees.

In addition, our management may have to divert a disproportionate amount

of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities.

future financial performance and our ability to continue to grow our operation and compete in the hydroponics industry effectively will

depend, in part, on our ability to effectively manage any future growth.

Potential tariffs or a global trade war

could increase the cost of our products, which could adversely impact the competitiveness of our products and our financial results.

Since 2018, the U.S.

tariffs on certain imports from China, including on lighting and environmental control equipment manufactured in China.

administration

imposes additional tariffs, or if additional tariffs or trade restrictions are implemented by the U.S.

or other countries the cost of

our products manufactured in China and imported into the U.S.

or other countries could increase, which in turn could adversely affect

the demand for these products and have a material adverse effect on our business and results of operations.

As of the date of this Annual

Report on Form 10-K, tariffs have not adversely affected the purchase price of our products manufactured in China and imported into the

Unanticipated changes in our tax provisions,

the adoption of new tax legislation or exposure to additional tax liabilities could affect our profitability and cash flows.

are subject to income and other taxes in the U.S.

federal jurisdiction and various local, state and foreign jurisdictions.

effective tax rate in the future could be adversely affected by changes to our operating structure, changes in the mix of earnings in

countries with differing statutory tax rates, changes in the valuation of deferred tax assets (such as net operating losses and tax credits)

and liabilities, changes in tax laws and the discovery of new information in the course of our tax return preparation process.

In particular,

the carrying value of deferred tax assets, which are predominantly related to our operations in the U.S., is dependent on our ability

to generate future taxable income of the appropriate character in the relevant jurisdiction.

From time to time, tax proposals

are introduced or considered by the U.S.

Congress or the legislative bodies in local, state and foreign jurisdictions that could also

affect our tax rate, the carrying value of our deferred tax assets, or our tax liabilities.

Our tax liabilities are also affected by

the amounts we charge for inventory, services, licenses and funding.

We invest substantial resources in advertising, consumer promotions and other marketing activities to maintain, extend and expand our brand image.

There can be no assurance that our marketing strategies will be effective or that the amount we invest in advertising activities will result in a corresponding increase in sales of our products.

If our marketing initiatives are not successful, we will have incurred significant expenses without the benefit of higher revenues.

Our operations may be impaired if our information technology systems, or those of our third-party vendors, fail to perform adequately or if we or our third-party vendors are the subject of a data breach or cyber-attack.

We rely on information technology systems in order to conduct business, including communicating with employees and our distribution centers, ordering and managing materials from suppliers, selling and shipping products to retail customers and analyzing and reporting results of operations, as well as for storing sensitive, personal and other confidential information.

While we have taken steps to ensure the security of our information technology systems, our security measures or those of our third-party vendors may not be effective and our or our third-party vendors’ systems may nevertheless be vulnerable to computer viruses, security breaches and other disruptions from unauthorized users.

If our or our third-party vendors’ information technology systems are damaged or cease to be available or function properly for an extended period of time, whether as a result of a significant cyber incident or otherwise, our ability to communicate internally as well as with our retail customers could be significantly impaired, which may adversely impact our business.

Our acquisition strategy may also result in exposure to certain technology risks during integration of systems of acquired companies to our existing platform.

For example on January 31, 2022, certain of our computer systems related to the “Aurora” acquisition that had not yet been integrated into our main systems were the victim of a cybersecurity attack.

We immediately took steps to isolate those systems and implemented measures to prevent the spread of the attack, including taking systems offline in an abundance of caution.

Based on our investigation, we do not believe that there was any compromise to our main operating systems or controls over financial reporting.

Together with an outside cybersecurity forensics firm, we are continuing to investigate the attack to determine its nature, scope, duration, and impacts, as well as our vulnerability to another such attack and whether there was any exfiltration or misappropriation of data.

At this point in the investigation, we have no evidence that the attack extended beyond the Aurora acquisition’s systems, We are assessing whether remedial measures will be required beyond integrating the acquisition’s systems with our main systems.

At the time, we are unable to estimate the expenses we will incur in connection with the investigation and remediation efforts.

Additionally, the techniques used to obtain unauthorized, improper or illegal access to information technology systems are constantly evolving, may be difficult to detect quickly and often are not recognized until after they have been launched against a target.

We may be unable to anticipate these techniques, react in a timely manner or implement adequate preventative or remedial measures.

Any operational failure or breach of security from these increasingly sophisticated cyber threats could lead to the loss or disclosure of both our and our retail customers’ financial, product, and other confidential information, as well as personally identifiable information about our employees or customers, result in negative publicity and expensive and time-

consuming regulatory or other legal proceedings, damage our relationships with our customers and have a material adverse effect on our business and reputation.

In addition, we may incur significant costs and operational consequences in connection with investigating, mitigating, remediating, eliminating and putting in place additional tools and devices designed to prevent future actual or perceived security incidents, as well as in connection with complying with any notification or other obligations resulting from any security incidents.

Because we do not control our third-party vendors, or the processing of data by our third-party vendors, our ability to monitor our third-party vendors’ data security is limited and we cannot ensure the integrity or security of the measures they take to protect and prevent the loss of our or our consumers’ data.

As a result, we are subject to the risk that cyber-attacks on, or other security incidents affecting, our third-party vendors may adversely affect our business even if an attack or breach does not directly impact our systems.

While the Company maintains cyber risk insurance, this insurance may not be sufficient to cover all losses from any breaches of the Company’s systems and does not extend to reputational damage or costs incurred to improve or strengthen systems against future threats or activity.

Cyber risk insurance has also become more difficult and expensive to obtain, and we cannot be certain that our current level of insurance or the breadth of its terms and conditions will continue to be available on economically reasonable terms.

We occupy many of our facilities under long-term non-cancellable leases, and we may be unable to renew our leases at the end of their terms.

Many of our manufacturing facilities and distribution centers are located on leased premises subject to non-cancellable leases.

Typically, our leases have initial terms ranging from two to twelve years, with options to renew for specified periods of time.

We believe that our future leases will likely also be long-term and non-cancellable and have similar renewal options.

If we close or stop fully utilizing a facility, we will most likely remain obligated to perform under the applicable lease, which would include, among other things, making the base rent payments and paying insurance, taxes and other expenses on the leased property for the remainder of the lease term.

Our inability to terminate a lease when we stop fully utilizing a facility or exit a market can have a significant adverse impact on our financial condition, operating results and cash flows.

In addition, at the end of the lease term and any renewal period for a facility, we may be unable to renew the lease without substantial additional cost, if at all.

If we are unable to renew our facility leases, we may close or relocate a facility, which could subject us to construction and other costs and risks, which in turn could have a material adverse effect on our business and operating results.

Further, we may not be able to secure a replacement facility in a location that is as commercially viable, including access to rail service.

Having to close a facility, even briefly to relocate, could reduce the sales that such facility would have contributed to our revenues.

We have experienced delays in relocating certain of our facilities as a result of issues impacting the availability of transportation and the provision of other services necessary to open the new location.

The estimates and judgments we make, or the assumptions on which we rely, in preparing our consolidated financial statements could prove inaccurate.

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues and expenses, the amounts of charges accrued by us and related disclosure of contingent assets and liabilities.

We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.

We cannot assure, however, that our estimates, or the assumptions underlying them, will not change over time or otherwise prove inaccurate.

Any potential litigation related to the estimates and judgments we make, or the assumptions on which we rely, in preparing our consolidated financial statements could have a material adverse effect on our financial results, harm our business, and cause our share price to decline.

In order to manage our future expected growth, we may need to continue to grow the size of our organization, and we may experience difficulties in managing this growth.

Future growth would impose significant added responsibilities on members of management, including the need to identify, recruit, maintain, motivate and integrate additional employees.

In addition, our management may have to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities.

Our future financial performance and our ability to continue to grow our operation and compete effectively will depend, in part, on our ability to effectively manage any future growth.

Potential tariffs or a global trade war could increase the cost of our products, which could adversely impact the competitiveness of our products and our financial results.

Since 2018, the United States has imposed tariffs on certain imports from China, including on lighting and environmental control equipment manufactured in China.

administration imposes additional tariffs, or if additional tariffs or trade restrictions are implemented by the United States or other countries the cost of our products manufactured in China and imported into the United States or other countries could increase, which in turn could adversely affect the demand for these products and have a material adverse effect on our business and results of operations.

Unanticipated changes in our tax provisions, the adoption of new tax legislation or exposure to additional tax liabilities could affect our profitability and cash flows.

We are subject to income and other taxes in the United States federal jurisdiction and various local, state and foreign jurisdictions.

Our effective tax rate in the future could be adversely affected by changes to our operating structure, changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets (such as net operating losses and tax credits) and liabilities, changes in tax laws and the discovery of new information in the course of our tax return preparation process.

In particular, the carrying value of deferred tax assets, which are predominantly related to our operations in the United States, is dependent on our ability to generate future taxable income of the appropriate character in the relevant jurisdiction.

From time to time, tax proposals are introduced or considered by the U.S.

Congress or the legislative bodies in local, state and foreign jurisdictions that could also affect our tax rate, the carrying value of our deferred tax assets, or our tax liabilities.

Our tax liabilities are also affected by the amounts we charge for inventory, services, licenses and funding.

We are subject to ongoing tax audits in various jurisdictions.

connection with these audits (or future audits), tax authorities may disagree with our determinations and assess additional taxes.

regularly assess the likely outcomes of our audits in order to determine the appropriateness of our tax provision.

As a result, the ultimate

resolution of our tax audits, changes in tax laws or tax rates, and the ability to utilize our deferred tax assets could materially affect

our tax provision, net income and cash flows in future periods.

We may be limited in our ability to utilize,

or may not be able to utilize, net operating loss carryforwards to reduce our future tax liability.

As of December 31, 2020,

federal net operating loss (“NOL”) carryforwards of approximately $62.5 million, the utilization of which may

be limited annually due to certain change in ownership provisions of Section 382 of the Internal Revenue Code of 1986, as amended (the

“Code”).

In connection with these audits (or future audits), tax authorities may disagree with our determinations and assess additional taxes.

We regularly assess the likely outcomes of our audits in order to determine the appropriateness of our tax provision.

As a result, the ultimate resolution of our tax audits, changes in tax laws or tax rates, and the ability to utilize our deferred tax assets could materially affect our tax provision, net income and cash flows in future periods.

We may be limited in our ability to utilize, or may not be able to utilize, net operating loss carryforwards to reduce our future tax liability.

As of December 31, 2021, we had U.S.

federal net operating loss (“NOL”) carryforwards of approximately $74.9 million, the utilization of which may be limited annually due to certain change in ownership provisions of Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”).

Our NOL carryforwards will begin to expire in 2037.

Please refer to Note 12, Income Taxes , in our consolidated

financial statements included elsewhere in this Annual Report on Form 10-K for a further discussion of the carryforward of our NOLs.

See Note 13 - Income Taxes, in the notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a further discussion of the carryforward of our NOLs.

As of December 31, 2021, we maintained a valuation allowance of approximately $14.9 million on the majority of our net deferred tax assets.

An “ownership change”

(generally defined as greater than 50-percentage-point cumulative changes in the equity ownership of certain stockholders over a rolling

three-year period) under Section 382 of the Code may limit our ability to utilize fully our pre-change NOL carryforwards to reduce our

taxable income in periods following the ownership change.

In general, an ownership change would limit our ability to utilize NOL carryforwards

to an amount equal to the aggregate value of our equity at the time of the ownership change multiplied by a specified tax-exempt interest

rate, subject to increase by certain built-in gains.

An “ownership change” (generally defined as greater than 50-percentage-point cumulative changes in the equity ownership of certain stockholders over a rolling three-year period) under Section 382 of the Code may limit our ability to utilize fully our pre-change NOL carryforwards to reduce our taxable income in periods following the ownership change.

In general, an ownership change would limit our ability to utilize NOL carryforwards to an amount equal to the aggregate value of our equity at the time of the ownership change multiplied by a specified tax-exempt interest rate, subject to increase by certain built-in gains.

Similar provisions of state tax law may also apply to our state NOL carryforwards.

As a result of the IPO, the aggregate ownership change exceeded the 50% threshold.

The annual limitation resulting from this ownership

change is not expected to result in the expiration of the NOL carryforwards before utilization.

In addition, future changes in our stock

ownership, some of which may be beyond our control, could result in additional ownership changes under Section 382 of the Code.

If we need additional capital to fund our

operations, we may not be able to obtain sufficient capital and may be forced to limit the scope of our operations.

In connection with our growth

strategies, we may experience increased capital needs and accordingly, we may not have sufficient capital to fund our future operations

without additional capital investments.

In addition, future changes in our stock ownership, some of which may be beyond our control, could result in additional ownership changes under Section 382 of the Code.

If we need additional capital to fund our operations, we may not be able to obtain sufficient capital and may be forced to limit the scope of our operations.

In connection with our growth strategies, we may experience increased capital needs and accordingly, we may not have sufficient capital to fund our future operations without additional capital investments.

There can be no assurance that additional capital will be available to us.

If we cannot obtain

sufficient capital to fund our operations, we may be forced to limit the scope of our expansion.

If product liability lawsuits are brought

against us, we may incur substantial liabilities.

We face a potential risk

of product liability as a result of any of the products that we offer for sale.

For example, we may be sued if any product we sell allegedly

causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale.

Any such product liability

claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product,

negligence, strict liability and a breach of warranties.

If we cannot obtain sufficient capital to fund our operations, we may be forced to limit the scope of our expansion.

If product liability lawsuits are brought against us, we may incur substantial liabilities.

We face a potential risk of product liability as a result of any of the products that we offer for sale.

For example, we may be sued if any product we sell allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale.

Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties.

Claims could also be asserted under state consumer protection acts.

successfully defend ourselves against product liability claims, we may incur substantial liabilities.

Even successful defense would require

significant financial and management resources.

If we cannot successfully defend ourselves against product

liability claims, we may incur substantial liabilities.

Even successful defense would require significant financial and management resources.

Regardless of the merits or eventual outcome, liability claims may result in:

(i) decreased

demand for products that we may offer for sale;

(i) decreased demand for products that we may offer for sale;

(ii) injury to our reputation;

(iii) costs to defend the related litigation;

(iv) a diversion

of management’s time and our resources;

(iv) a diversion of management’s time and our resources;

(v) substantial monetary awards to trial participants or patients;

(vi) product recalls,

withdrawals or labeling, marketing or promotional restrictions;

(vi) product recalls, withdrawals or labeling, marketing or promotional restrictions;

(vii) a decline in our stock price.

Our inability to obtain and retain

sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit

the commercialization of products we develop.

Our inability to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products we develop.

We do not maintain any product liability insurance.

Even if we obtain product liability

insurance in the future, we may have to pay amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations

or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.

Even if we obtain product liability insurance in the future, we may have to pay amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.

Risks Relating to Our Indebtedness

The JPMorgan Credit Facility has restrictions

on our ability to sell our products directly to the cannabis industry.

We and our subsidiaries

entered into a credit agreement with JPMorgan Chase Bank, N.A.

(“JPMorgan”) on March 29, 2021 (the “JPMorgan Credit

Facility”).

The JPMorgan Credit Facility refinanced the Encina Credit Facility and is an asset based loan that contains

customary covenants, restrictions and defaults.

The JPMorgan Credit Facility prohibits the Subsidiary Obligors from selling our

products to the cannabis industry.

As a result, the Subsidiary Obligors do not sell our products directly to the cannabis industry.

We are in compliance with the terms set forth by the JPMorgan Credit Facility and maintain policies and procedures that are

designed to promote and achieve continued compliance with these requirements.

These compliance requirements

may require that we be more selective than our competitors when selecting to whom we sell our products, and in certain situations, may

afford our competitors a competitive advantage compared to us if we are not able to sell our products to a certain customer, and may

negatively impact our marketing efforts, sales and reputation in the market.

Moreover, any breach of these compliance requirements, could

result in the occurrence of an event of default under the JPMorgan Credit Facility, which would entitle JPMorgan to accelerate the

payment of all obligations then outstanding, without any action by them or notice of any kind.

The foregoing events would have a material

adverse effect on our business, results of operations and financial condition.

Substantially all of the Subsidiary Obligors’

assets are pledged to secure obligations under the Subsidiary Obligors outstanding indebtedness.

Subsidiary Obligors have granted a continuing security interest in substantially all of their assets to JPMorgan, as security for the

Subsidiary Obligors’

obligations under JPMorgan Credit Facility.

If the Subsidiary Obligors default on any of their obligations

under these agreements and JPMorgan will be entitled to exercise remedies available it them resulting from such default, including increasing

the applicable interest rate on all amounts outstanding, declaring all amounts due thereunder immediately due and payable, assuming possession

of the secured assets, and exercising rights and remedies of a secured party under the Uniform Commercial Code, as applicable then in

the U.S., or the Personal Property Security Act, as applicable then in Canada.

Our ability to conduct our business may be materially

harmed as a result of the exercise of any remedies, in the event that such remedies are exercisable, by JPMorgan.

The Subsidiary Obligors existing debt agreements

contain, and our or our subsidiaries’

future debt agreements may contain, restrictions that may limit our flexibility in operating

our business.

The Subsidiary Obligors’

existing debt agreements contain, and any documents governing our or our subsidiaries’

future indebtedness may contain, numerous

financial and operating covenants that limit the discretion of management with respect to certain business matters.

Such restrictive

covenants include restrictions on, among others, our or our subsidiaries’

The JPMorgan credit facilities have restrictions on our ability to sell our products directly to the cannabis industry.

On March 29, 2021, we and our subsidiaries (the “Subsidiary Obligors”) entered into a $50 million senior secured revolving loan facility with JPMorgan Chase Bank, N.A.

(“JPMorgan”), as administrative agent for the lenders, which was amended on October 25, 2021 to increase such revolving loan facility to $100 million (as amended, the “JPMorgan Revolving Loan Facility”).

On October 25, 2021, we and the Subsidiary Obligors entered into a $125 million senior secured term loan facility with JPMorgan, as administrative agent for the lenders (the “JPMorgan Term Loan Facility”).

The JPMorgan Revolving Loan Facility and the JPMorgan Term Loan Facility each contain customary covenants, restrictions and defaults.

The JPMorgan Revolving Loan Facility prohibits us and the Subsidiary Obligors from selling our products, inventory or services directly to cannabis growers or to retailers that sell only to the cannabis industry.

The JPMorgan Term Loan Facility prohibits us and the Subsidiary Obligors from selling our products, inventory or services directly to cannabis growers operating in any country that prohibits the sale and use of cannabis products other than in accordance with the applicable laws of such country.

We are in compliance with the terms set forth in the JPMorgan Revolving Loan Facility and the JPMorgan Term Loan Facility and maintain policies and procedures that are designed to promote and achieve continued compliance with such requirements.

These compliance requirements may require that we be more selective than our competitors when selecting to whom we sell our products, and in certain situations, may afford our competitors a competitive advantage if we are not able to sell our products to a certain customer, and may negatively impact our marketing efforts, sales and reputation in the market.

Moreover, the breach of any of these compliance requirements may result in the occurrence of an event of default under each of the JPMorgan Revolving Loan Facility and the JPMorgan Term Loan Facility, which would entitle JPMorgan to terminate the commitments thereunder and declare all loans then outstanding to be due and payable.

The foregoing events would have a material adverse effect on our business, results of operations and financial condition.

Substantially all of our and our Subsidiary Obligors’ assets are pledged to secure obligations under the JPMorgan credit facilities.

We and our Subsidiary Obligors have granted a continuing security interest in substantially all of our assets to JPMorgan, as administrative agent on behalf of the lenders party to such agreements.

If we or the Subsidiary Obligors default on any of our obligations under such agreements, JPMorgan will be entitled to exercise remedies available to them resulting from such default, including increasing the applicable interest rate on all amounts outstanding, declaring all amounts due thereunder immediately due and payable, assuming possession of the secured assets, and exercising rights and remedies of a secured party under the Uniform Commercial Code, as applicable then in the United States, or the Personal Property Security Act, as applicable then in Canada.

Our ability to conduct our business may be materially harmed as a result of the exercise of any remedies, in the event that such remedies are exercisable, by JPMorgan.

The JPMorgan credit facilities contain, and future debt facilities may contain, restrictions that limit our flexibility in operating our business.

The existing JPMorgan credit facilities contain, and any documents governing our or our subsidiaries’ future indebtedness may contain, numerous financial and operating covenants that limit the discretion of management with respect to certain business matters.

Such restrictive covenants include restrictions on, among others, our or our subsidiaries’ ability to:

(1) incur additional indebtedness;

or suffer to exist any liens upon any of our or our subsidiaries’

(3) pay dividends and other distributions or enter

into agreements restricting our subsidiaries’

ability to pay dividends;

(4) make any restricted investment;

(2) create or suffer to exist any liens upon any of our or our subsidiaries’ property;

(3) pay dividends and other distributions or enter into agreements restricting our subsidiaries’ ability to pay dividends;

(4) make investments;

(5) make certain loans;

make certain dispositions of assets;

(6) dispose of assets;

(7) merge, amalgamate, combine or consolidate;

(7) engage in certain transactions with stockholders

or affiliates;

(8) amend or otherwise alter the terms of our or our subsidiaries’

indebtedness;

or (9) alter the business that

The Subsidiary Obligors’

existing debt agreements also require, and any documents governing our or our subsidiaries’

future indebtedness may require, us to meet certain financial ratios and tests.

Noncompliance with the applicable financial ratios and

tests are specified defaults under the JPMorgan Credit Facility.

The Subsidiary Obligors’

ability to comply with these and other provisions of their existing debt agreements is dependent on our future performance, which will

be subject to many factors, some of which are beyond our control.

The breach of any of these covenants or noncompliance with any of these

financial ratios and tests could result in an event of default under the existing debt agreements, which, if not cured or waived, could

result in acceleration of the related debt and the acceleration of debt under other instruments evidencing indebtedness that may also

contain cross-acceleration or cross-default provisions.

Variable rate indebtedness subjects the Subsidiary Obligors to the risk of higher

interest rates, which could cause our future debt service obligations to increase significantly.

Uncertainty relating to the London interbank

offered rate (“LIBOR”) and the potential discontinuation of LIBOR in the future may adversely affect our interest expense.

LIBOR is widely used as a reference for setting

the interest rate on loans globally.

The JPMorgan Credit Facility provides that loans denominated in US dollars bear interest at the Eurodollar

Rate plus 1.95% and those denominated in Canadian dollars bear interest at the CDOR rate plus 1.95%.

Both rates are ultimately based on

LIBOR and there is a floor of 0.0% for each rate.

LIBOR is the subject of recent national, international and other regulatory guidance

and proposals for reform or discontinuation.

(8) engage in certain transactions with stockholders or affiliates;

(9) amend or otherwise alter the terms of our or our subsidiaries’ indebtedness;

and (10) alter the business that we conduct.

The existing JPMorgan credit facilities also require, and any documents governing our or our subsidiaries’ future indebtedness may require, us to meet certain financial ratios and tests.

Noncompliance with the applicable financial ratios and tests are specified defaults under the JPMorgan Revolving Loan Facility.

We and our Subsidiary Obligors’ ability to comply with these and other provisions of the existing JPMorgan credit facilities is dependent on our future performance, which will be subject to many factors, some of which are beyond our control.

The breach of any of these covenants or noncompliance with any of these financial ratios and tests could result in an event of default under the existing debt agreements, which, if not cured or waived, could result in acceleration of the related debt and the acceleration of debt under other instruments evidencing indebtedness that may also contain cross-acceleration or cross-default provisions.

Variable rate indebtedness subjects us and the Subsidiary Obligors to the risk of higher interest rates, which could cause our future debt service obligations to increase significantly.

Uncertainty relating to the London interbank offered rate (“LIBOR”) and the potential discontinuation of LIBOR in the future may adversely affect our interest expense.

LIBOR has historically been widely used as a reference for setting the interest rate on loans globally.

LIBOR is the subject of recent national, international and other regulatory guidance and proposals for reform or discontinuation.

In particular, on July 27, 2017, the Chief Executive of the U.K.

Financial Conduct Authority,

which regulates LIBOR, announced that it will no longer persuade or compel banks to submit rates for the calculation of LIBOR after 2021.

Financial Conduct Authority, which regulates LIBOR, announced that it will no longer persuade or compel banks to submit rates for the calculation of LIBOR after 2021.

Subsequently, the ICE Benchmark Administration announced its plan to extend the date most U.S.

dollar LIBOR values would cease

being computed to June 30, 2023.

The JPMorgan Credit Facility contains benchmark

replacement terms pursuant to which the LIBOR-based rates will convert to Secured Overnight Funding Rate (SOFR) based rates or other alternative

rates upon the occurrence of certain events.

The floor of 0.0% would continue to apply to any alternative rate.

SOFR (and other

potential alternative rates) are overnight rates, while LIBOR has seven varying rates on terms of one day to one year.

Credit Facility utilizes one-month LIBOR.

The agreement attempts to provide mechanisms whereby the tenor (one month) of the LIBOR

based rates would remain the same even though SOFR is an overnight rate.

In addition, LIBOR incorporates built in credit risk component

because it is based on the aggregate cost of borrowing by a bank and SOFR does not have this component since it is based on overnight

transactions in the Treasury repurchase market.

Accordingly, there are inherent difficulties in matching these two rates and it is possible

that the use of SOFR may result in a higher rate.

In the event that one of the alternative rates are not available, the JPMorgan Credit

Facility provides that the US loans would convert to the CB Floating Rate plus 1.95% and the Canadian loans would convert to the Canadian

There is no guarantee that

an alternate interest rate will be established for the JPMorgan Credit Facility, and even if an alternative interest rate is established,

such alternate interest rate may be higher than a corresponding interest rate benchmarked to LIBOR, especially given uncertainty as to

the effectiveness of alternative rate-setting methodologies prior to their utilization in practice.

Uncertainty as to the nature of any

potential modification to or discontinuation of LIBOR, the decline in usefulness of LIBOR as an interest rate reference prior to its discontinuation,

the establishment of alternative interest rates or the implementation of any other potential changes may materially and adversely affect

our interest expense.

dollar LIBOR values would cease being computed to June 30, 2023.

Following the end of 2021, LIBOR ceased being a widely used benchmark interest rate.

The JPMorgan Revolving Loan Facility and the JPMorgan Term Loan Facility each contains benchmark replacement terms pursuant to which the LIBOR-based rates will convert to Secured Overnight Funding Rate (SOFR) based rates or other alternative rates upon the occurrence of certain events.

The floor of 0.0% or 1.0%, as applicable, would continue to apply to any alternative rate.

SOFR (and other potential alternative rates) are overnight rates, while LIBOR has seven varying rates on terms of one day to one year.

The JPMorgan Revolving Loan Facility utilizes one-month, two-month, or three-month interest periods while the JPMorgan Term Loan Facility utilizes one-month, three-month or six-month interest periods.

The agreement attempts to provide mechanisms whereby the tenor (one month, two months, three months or six months, as applicable) of the LIBOR based rates would remain the same even though SOFR is an overnight rate.

In addition, LIBOR incorporates built in credit risk component because it is based on the aggregate cost of borrowing by a bank and SOFR does not have this component since it is based on overnight transactions in the Treasury repurchase market.

Accordingly, there are inherent difficulties in matching these two rates and it is possible that the use of SOFR may result in a higher rate.

There is no guarantee that an alternate interest rate will be established for the JPMorgan Revolving Loan Facility or JPMorgan Term Loan Facility, and even if an alternative interest rate is established, such alternate interest rate may be higher than a corresponding interest rate benchmarked to LIBOR, especially given uncertainty as to the effectiveness of alternative rate-setting methodologies prior to their utilization in practice.

Uncertainty as to the nature of any potential modification to or discontinuation of LIBOR, the decline in usefulness of LIBOR as an interest rate reference prior to its discontinuation, the establishment of alternative interest rates or the implementation of any other potential changes may materially and adversely affect our interest expense.

Risks Relating to Third Parties

Our reliance on a limited base of suppliers

for certain products, such as light ballasts, may result in disruptions to our business and adversely affect our financial results.

Although we continue to implement

risk-mitigation strategies for single-source suppliers, we rely on a limited number of suppliers for certain of our light ballasts, used

in manufacturing our lighting systems.

A portion of our key suppliers experienced significant volume demands in 2020, which impacted

supplier performance.

If we are unable to maintain supplier arrangements and relationships, if we are unable to contract with suppliers

at the quantity and quality levels needed for our business, or if any of our key suppliers becomes insolvent or experience other financial

distress, we could experience disruptions in production, which could have a material adverse effect on our financial condition, results

of operations and cash flows.

A significant interruption in the operation

of our or our suppliers’

facilities could impact our capacity to produce products and service our customers, which could adversely

affect revenues and earnings.

Operations at our and our

suppliers’

facilities are subject to disruption for a variety of reasons, including fire, flooding or other natural disasters,

disease outbreaks or pandemics, acts of war, terrorism, government shut-downs and work stoppages.

Some of our key suppliers experienced

significant demand and increased volume for the year 2020.

A significant interruption in the operation of our or our suppliers’

facilities, especially for those products manufactured at a limited number of facilities, such as fertilizer and liquid products, could

significantly impact our capacity to sell products and service our customers in a timely manner, which could have a material adverse

effect on our customer relationships, revenues, earnings and financial position.

If our suppliers are unable to source raw

materials in sufficient quantities, on a timely basis, and at acceptable costs, our ability to sell our products may be harmed.

The manufacture of some of

our products is complex and requires precise high quality manufacturing that is difficult to achieve.

We have in the past, and may in

the future, experience difficulties in manufacturing our products on a timely basis and in sufficient quantities.

These difficulties

have primarily related to difficulties associated with ramping up production of newly introduced products and may result in increased

delivery lead-times and increased costs of manufacturing these products.

Our failure to achieve and maintain the required high manufacturing

standards could result in further delays or failures in product testing or delivery, cost overruns, product recalls or withdrawals, increased

warranty costs or other problems that could harm our business and prospects.

In determining the required

quantities of our products and the manufacturing schedule, we must make significant judgments and estimates based on historical experience,

inventory levels, current market trends and other related factors.

Because of the inherent nature of estimates, there could be significant

differences between our estimates and the actual amounts of products we require, which could harm our business and results of operations.

Disruptions in availability or increases

in the prices of raw materials sourced by suppliers could adversely affect our results of operations.

We source many of our product

components from outside of the U.S.

The general availability and price of those components can be affected by numerous forces beyond our

control, including political instability, trade restrictions and other government regulations, duties and tariffs, price controls, changes

in currency exchange rates and weather.

A significant disruption

in the availability of any of our key product components could negatively impact our business.

In addition, increases in the prices of

key commodities and other raw materials could adversely affect our ability to manage our cost structure.

Market conditions may limit

our ability to raise selling prices to offset increases in our raw material costs.

Our proprietary technologies can limit our ability

to locate or utilize alternative inputs for certain products.

For certain inputs, new sources of supply may have to be qualified under

regulatory standards, which can require additional investment and delay bringing a product to market.

If our suppliers that currently, or in

the future, sell directly to the retail market in which we conduct our current or future business, enhance these efforts and cease or

decrease their sales through us, our ability to sell certain products could be harmed.

distribution and sales and marketing capabilities provide significant value to our suppliers.

Distributed brand suppliers sell through

us in order to access thousands of retail and commercial customers across the U.S.

and Canada with short order lead times, no minimum

order quantity on individual items, free or minimal freight expense and trade credit terms.

Based on our knowledge and communication with

our suppliers, we believe some of our suppliers sell directly to the retail market.

If these suppliers were to cease working with us,

or proceed to enhance their direct-to-customer efforts, our product offerings, reputation, operation and business could be materially

adversely effected.

Our reliance on a limited base of suppliers for certain products, such as light ballasts, may result in disruptions to our business and adversely affect our financial results.

Although we continue to implement risk-mitigation strategies for single-source suppliers, we rely on a limited number of suppliers for certain of our light ballasts, used in manufacturing our lighting systems.

A portion of our key suppliers experienced significant volume demands in 2021, which impacted supplier performance.

If we are unable to maintain supplier arrangements and relationships, if we are unable to contract with suppliers at the quantity and quality levels needed for our business, or if any of our key suppliers becomes insolvent or experience other financial distress, we could experience disruptions in production, which could have a material adverse effect on our financial condition, results of operations and cash flows.

Disruption in our global supply chain has impacted and may continue to negatively impact our businesses.

The products we sell are sourced from a wide variety of domestic and international vendors, and any disruption in our supply chain or inability to find qualified vendors and access products that meet requisite quality and safety standards in a timely and efficient manner could adversely impact our businesses.

The loss or disruption of such supply arrangements for any reason, including for issues such as COVID-19 or other health epidemics or pandemics, labor disputes, loss or impairment of key manufacturing sites, inability to procure sufficient raw materials, quality control issues, ethical sourcing issues, a supplier’s financial distress, natural disasters, looting, vandalism or acts of war or terrorism, trade sanctions or other external factors over

which we have no control, could interrupt product supply and, if not effectively managed and remedied, have a material adverse impact on our business operations, financial condition and results of operations.

Also, as a result of the current geopolitical tensions and conflict between Russia and Ukraine, and the recent recognition by Russia of the independence of the self-proclaimed republics of Donetsk and Luhansk, in the Donbas region of Ukraine, the governments of the United States, the European Union, Japan and other jurisdictions have recently announced the imposition of sanctions on certain industry sectors and parties in Russia and the regions of Donetsk and Luhansk, as well as enhanced export controls on certain products and industries.

These and any additional sanctions and export controls, as well as any counter responses by the governments of Russia or other jurisdictions, could adversely affect, directly or indirectly, the global supply chain, with negative implications on the availability and prices of raw materials, energy prices, and our customers, as well as the global financial markets and financial services industry.

A significant interruption in the operation of our or our suppliers’ facilities could impact our capacity to produce products and service our customers, which could adversely affect revenues and earnings.

Operations at our and our suppliers’ facilities are subject to disruption for a variety of reasons, including fire, flooding or other natural disasters, disease outbreaks or pandemics, acts of war, terrorism, government shut-downs and work stoppages.

Some of our key suppliers experienced significant demand and increased volume for the year 2021.

A significant interruption in the operation of our or our suppliers’ facilities, especially for those products manufactured at a limited number of facilities, such as fertilizer and liquid products, could significantly impact our capacity to sell products and service our customers in a timely manner, which could have a material adverse effect on our customer relationships, revenues, earnings and financial position.

If our suppliers are unable to source raw materials in sufficient quantities, on a timely basis, and at acceptable costs, our ability to sell our products may be harmed.

The manufacture of some of our products is complex and requires precise high quality manufacturing that is difficult to achieve.

We have in the past experienced, and may in the future experience, difficulties in manufacturing our products on a timely basis and in sufficient quantities.

These difficulties in the past have primarily related to difficulties associated with ramping up production of newly introduced products and may result in increased delivery lead-times and increased costs of manufacturing these products.

Our failure to achieve and maintain the required high manufacturing standards could result in further delays or failures in product testing or delivery, cost overruns, product recalls or withdrawals, increased warranty costs or other problems that could harm our business and prospects.

In determining the required quantities of our products and the manufacturing schedule, we must make significant judgments and estimates based on historical experience, inventory levels, current market trends and other related factors.

Because of the inherent nature of estimates, there could be significant differences between our estimates and the actual amounts of products we require, which could harm our business and results of operations.

Disruptions in availability or increases in the prices of raw materials sourced by suppliers could adversely affect our results of operations.

We source many of our product components from outside of the United States.

The general availability and price of those components can be affected by numerous forces beyond our control, including political instability, trade restrictions and other government regulations, duties and tariffs, price controls, the availability of shipping and transportation services, changes in currency exchange rates and weather.

A significant disruption in the availability of any of our key product components could negatively impact our business.

In addition, increases in the prices of key commodities and other raw materials could adversely affect our ability to manage our cost structure.

Market conditions may limit our ability to raise selling prices to offset increases in our raw material costs.

Our proprietary technologies can limit our ability to locate or utilize alternative inputs for certain products.

For certain inputs, new sources of supply may have to be qualified under regulatory standards, which can require additional investment and delay bringing a product to market.

If our suppliers that currently, or will in the future, sell directly to the retail market in which we conduct our current or future business, enhance these efforts and cease or decrease their sales through us, our ability to sell certain products could be harmed.

Our distribution and sales and marketing capabilities provide significant value to our suppliers.

Distributed brand suppliers sell through us in order to access thousands of retail and commercial customers across the United States and Canada

with short order lead times, no minimum order quantity on individual items, free or minimal freight expense and trade credit terms.

Based on our knowledge and communication with our suppliers, we believe some of our suppliers sell directly to the retail market.

If these suppliers were to cease working with us, or proceed to enhance their direct-to-customer efforts, our product offerings, reputation, operation and business could be materially adversely affected.

Risks Relating to the Cannabis Industry

We sell our products through

third-party retailers and resellers which do not exclusively sell to the cannabis industry.

It is evident to us that the movement towards

the legalization of cannabis in the U.S.

and its legalization in Canada has ultimately had a significant, positive impact on our industry.

In the United States, we sell our products through third-party retailers and resellers which do not exclusively sell to the cannabis industry.

It is evident to us that the movement towards the legalization of cannabis in the United States and its legalization in Canada has ultimately had a significant, positive impact on our industry.

Accordingly, the risks referred to below, to the extent they relate to our customers could impact us indirectly.

In addition, if our

business is deemed to transact with companies involved in the cannabis business, these risks could apply directly to us.

“Cannabis

Industry Participants”

means the potential customers and end-users of our products who are engaged in the cannabis industry.

We are subject to a number of risks, directly

and indirectly through Cannabis Industry Participants, because cannabis is illegal under federal law.

Cannabis is illegal under

Federal law and enforcement may adversely affect the implementation of medical cannabis and/or adult-use cannabis laws,

and may negatively impact our revenues and profits.

Under the CSA, the U.S.

lists cannabis as a Schedule I controlled substance (i.e., deemed to have no medical value), and accordingly the manufacturing (cultivation),

sale, or possession of cannabis is federally illegal.

It is also federally illegal to advertise the sale of cannabis or to sell paraphernalia

designed or intended primarily for use with cannabis, unless the paraphernalia is authorized by federal, state, or local law.

States Supreme Court has ruled in United States v.

Oakland Cannabis Buyers’

and Gonzales v.

In addition, if our business is deemed to transact with companies in the United States involved in the cannabis business, these risks could apply directly to us.

“Cannabis Industry Participants” means the potential customers and end-users of our products who are engaged in the cannabis industry.

We are subject to a number of risks, directly and indirectly through Cannabis Industry Participants, because cannabis is illegal under federal law.

Cannabis is illegal under United States federal law.

Federal law and enforcement may adversely affect the implementation of medical cannabis and/or adult-use cannabis laws, and may negatively impact our revenues and profits.

Under the Controlled Substances Act, the U.S.

Government lists cannabis as a Schedule I controlled substance (i.e., deemed to have no medical value), and accordingly the manufacturing (cultivation), sale, or possession of cannabis is federally illegal.

It is also federally illegal in the United States to advertise the sale of cannabis or to sell paraphernalia designed or intended primarily for use with cannabis, unless the paraphernalia is authorized by federal, state, or local law.

The United States Supreme Court has ruled in United States v.

Oakland Cannabis Buyers’ Cooperative and Gonzales v.

Raich, 532 U.S.

483 (2001), that

the federal government has the right to regulate and criminalize cannabis, even for medical purposes.

The illegality of cannabis under

federal law preempts state laws that legalize its use.

Therefore, strict enforcement of federal law regarding cannabis would likely adversely

affect our revenues and results of operations.

Other laws that directly

impact the cannabis growers that are end users of certain of our products include:

Businesses trafficking in cannabis

may not take tax deductions for costs beyond costs of goods sold under Code Section 280E.

There is no way to predict how the federal government may treat cannabis business from a

taxation standpoint in the future and no assurance can be given to what extent Code Section

280E, or other tax-related laws and regulations, may be applied to cannabis businesses in

Because the manufacturing (cultivation),

sale, possession and use of cannabis is illegal under federal law, cannabis businesses may

have restricted intellectual property and proprietary rights, particularly with respect to

obtaining and enforcing patents and trademarks.

In addition, cannabis businesses may face

court action by third parties under the Racketeer Influenced and Corrupt Organizations Act

(“RICO”).

Intellectual property and proprietary rights could be impaired as a

result of cannabis business, and cannabis businesses could be named as a defendant in an

action asserting a RICO violation.

Federal bankruptcy courts cannot provide

relief for parties who engage in cannabis or cannabis businesses.

Recent bankruptcy rulings

have denied bankruptcies for cannabis dispensaries upon the justification that businesses

cannot violate federal law and then claim the benefits of federal bankruptcy for the same

activity and upon the justification that courts cannot ask a bankruptcy trustee to take possession

of, and distribute cannabis assets as such action would violate the CSA.

Therefore, cannabis

businesses may not be able to seek the protection of the bankruptcy courts and this could

materially affect their financial performance and/or their ability to obtain or maintain

Since cannabis is illegal under federal

law, there is a strong argument that banks cannot accept for deposit funds from businesses

involved in the cannabis industry.

Consequently, businesses involved in the cannabis industry

often have difficulty finding a bank willing to accept their business.

Any such inability

to open or maintain bank accounts may make it difficult for cannabis businesses to operate.

Under the Bank Secrecy Act (“BSA”), banks must report to the federal government

any suspected illegal activity, which includes any transaction associated with a cannabis

These reports must be filed even though the business is operating legitimately

under state law.

Insurance that is otherwise readily

available, such as general liability and directors and officer’s insurance, may be

more difficult to find, and more expensive.

The former administration,

or any new administration or attorney general, could change federal enforcement policy or execution and decide to enforce the federal

cannabis laws more strongly.

483 (2001), that the United States federal government has the right to regulate and criminalize cannabis, even for medical purposes.

The illegality of cannabis under United States federal law preempts state laws that legalize its use.

Therefore, strict enforcement of United States federal law regarding cannabis would likely adversely affect our revenues and results of operations.

Other laws that directly impact the cannabis growers that are end users of certain of our products include:

• Businesses trafficking in cannabis may not take tax deductions for costs beyond costs of goods sold under Code Section 280E.

There is no way to predict how the federal government may treat cannabis business from a taxation standpoint in the future and no assurance can be given to what extent Code Section 280E, or other tax-related laws and regulations, may be applied to cannabis businesses in the future.

• Because the manufacturing (cultivation), sale, possession and use of cannabis is illegal under federal law, cannabis businesses may have restricted intellectual property and proprietary rights, particularly with respect to obtaining and enforcing patents and trademarks.

In addition, cannabis businesses may face court action by third parties under the Racketeer Influenced and Corrupt Organizations Act (“RICO”).

Intellectual property and proprietary rights could be impaired as a result of cannabis business, and cannabis businesses could be named as a defendant in an action asserting a RICO violation.

• Federal bankruptcy courts cannot provide relief for parties who engage in cannabis or cannabis businesses.

Recent bankruptcy rulings have denied bankruptcies for cannabis dispensaries upon the justification that businesses cannot violate federal law and then claim the benefits of federal bankruptcy for the same activity and upon the justification that courts cannot ask a bankruptcy trustee to take possession of, and distribute cannabis assets as such action would violate the CSA.

Therefore, cannabis businesses may not be able to seek the protection of the bankruptcy courts and this could materially affect their financial performance and/or their ability to obtain or maintain credit.

• Since cannabis is illegal under federal law, there is a strong argument that banks cannot accept for deposit funds from businesses involved in the cannabis industry.

Consequently, businesses involved in the cannabis industry often have difficulty finding a bank willing to accept their business.

Any such inability to open or maintain bank accounts may make it difficult for cannabis businesses to operate.

Under the Bank Secrecy Act (“BSA”), banks must report to the federal government any suspected illegal activity, which includes any transaction associated with a cannabis business.

These reports must be filed even though the business is operating legitimately under state law.

• Insurance that is otherwise readily available, such as general liability and directors and officer’s insurance, may be more difficult to find, and more expensive.

The former administration, or any new administration or attorney general, could change federal enforcement policy or execution and decide to enforce the federal cannabis laws more strongly.

On January 4, 2018, former U.S.

Attorney General Jeff Sessions issued a memorandum rescinding previous guidance

(directing U.S.

Attorney General Jeff Sessions issued a memorandum rescinding previous guidance (directing U.S.

Department of Justice and the U.S.

Attorneys’

offices to focus their cannabis enforcement efforts under federal

law only in identified priority areas, such as sale to minors, criminal enterprises, and interstate sales).

Under the Sessions memorandum,

Attorneys’

offices retain discretion regarding the prosecution of cannabis activity authorized under state laws and regulations.

Attorneys’ offices to focus their cannabis enforcement efforts under federal law only in identified priority areas, such as sale to minors, criminal enterprises, and interstate sales).

Under the Sessions memorandum, local U.S.

Attorneys’ offices retain discretion regarding the prosecution of cannabis activity authorized under state laws and regulations.

While former U.S.

Attorney General William Barr expressed support for the National Organization to Reform Marijuana Laws (“NORML”)

during his Senate testimony on April 10, 2019, further change in the federal approach towards enforcement could negatively affect the

industry, potentially ending it entirely.

Any such change in the federal government’s enforcement of current federal laws could

cause significant financial damage to us.

The legal uncertainty and possible future changes in law could negatively affect our growth,

revenues, results of operations and success generally.

Federal authorities may decide

to change their current posture and begin to enforce current federal cannabis law and, if they decide to ignore the principles in the

Cole Memorandum issued in 2013 (the “Cole Memorandum”) and begin to aggressively enforce such laws, it is possible that they

could allege that we violated federal laws by selling products used in the cannabis industry.

As a result, active enforcement of the

current federal regulatory position on cannabis may thus directly or indirectly adversely affect our revenues and profits.

Attorney General William Barr expressed support for the National Organization to Reform Marijuana Laws (“NORML”) during his Senate testimony on April 10, 2019, further change in the federal approach towards enforcement could negatively affect the industry, potentially ending it entirely.

Any such change in the federal government’s enforcement of current federal laws could cause significant financial damage to us.

The legal uncertainty and possible future changes in law could negatively affect our growth, revenues, results of operations and success generally.

Federal authorities may decide to change their current posture and begin to enforce current federal cannabis law and, if they decide to ignore the principles in the Cole Memorandum issued in 2013 (the “Cole Memorandum”) and begin to aggressively enforce such laws, it is possible that they could allege that we violated federal laws by selling products used in the cannabis industry.

As a result, active enforcement of the current federal regulatory position on cannabis may thus directly or indirectly adversely affect our revenues and profits.

Violations of any U.S.

laws and regulations could result in significant fines, penalties, administrative sanctions, convictions or settlements arising from

civil proceedings conducted by either the U.S.

federal government or private citizens, or criminal charges, including, but not limited

to, disgorgement of profits, cessation of business activities or divestiture.

This could have a material adverse effect on our business,

including our reputation and ability to conduct business, the listing of our securities on any stock exchanges, the settlement of trades

of our securities, our ability to obtain banking services, our financial position, operating results, profitability or liquidity or the

market price of our publicly traded shares.

In addition, it is difficult for us to estimate the time or resources that would be needed

for the investigation of any such matters or their final resolution because, in part, the time and resources that may be needed are dependent

on the nature and extent of any information requested by the applicable authorities involved, and such time or resources could be substantial.

Cannabis Industry Participants are subject

to federal and state controlled substance laws and regulations .

As a result, we are indirectly subject to a number of risks

related to controlled substances.

We sell our products through

third-party retailers and resellers which do not exclusively sell to the cannabis industry.

Some of our products are sold to Cannabis

Industry Participants and used in connection with cannabis businesses that are subject to federal and state controlled substance laws

and regulations.

Companies that transact directly or indirectly with cannabis businesses are subject to a number of risks related to

controlled substances, which risks could reduce demand for our products by Cannabis Industry Participants.

Such risks include, but are

not limited to, the following:

Cannabis is a Schedule I drug under

the CSA and regulated by the Drug Enforcement Administration (the “DEA”) as an

illegal substance.

The Food and Drug Administration (“FDA”), in conjunction with

the DEA, licenses cannabis research and drugs containing active ingredients derived from

If cannabis were to become legal under federal law, its sale and use could become

regulated by the FDA or another federal agency.

If cannabis were to become regulated

by the FDA or another federal agency, extensive regulations may be imposed on the sale or

use of cannabis.

Such regulations could result in a decrease in cannabis sales and have a

material adverse impact on the demand for our products.

If we or our Cannabis Industry Participants

are unable to comply with any applicable regulations and/or registration prescribed by the

FDA, we may be unable to continue to transact with retailers and resellers who sell products

to cannabis businesses and/or our financial condition may be adversely impacted.

Controlled substance legislation differs

between states and legislation in certain states may restrict or limit Cannabis Industry

Participants from buying our products.

Cannabis Industry Participants may be required to

obtain separate state registrations, permits or licenses in order to be able to obtain, handle

and/or distribute controlled substances in a state.

Such state regulatory requirements may

be costly and, the failure of such Cannabis Industry Participants to meet such regulatory

requirements could lead to enforcement and sanctions by the states in addition to any from

the DEA or otherwise arising under federal law.

We could be implicated in such enforcement

or sanctions because of the purchase of our products by such Cannabis Industry Participants.

The failure of our Cannabis Industry

Participants to comply with applicable controlled substance laws and regulations, or the

cost of compliance with these laws and regulations, may adversely affect the demand for our

products and, as a result, the financial results of our business operations and our financial

Furthermore, the JPMorgan

Credit Facility restricts our ability to sell our products directly to the cannabis industry.

As a result, the Subsidiary Obligors do

not sell our products directly to the cannabis industry.

federal laws and regulations could result in significant fines, penalties, administrative sanctions, convictions or settlements arising from civil proceedings conducted by either the U.S.

federal government or private citizens, or criminal charges, including, but not limited to, disgorgement of profits, cessation of business activities or divestiture.

This could have a material adverse effect on our business, including our reputation and ability to conduct business, the listing of our securities on any stock exchanges, the settlement of trades of our securities, our ability to obtain banking services, our financial position, operating results, profitability or liquidity or the market price of our publicly traded shares.

In addition, it is difficult for us to estimate the time or resources that would be needed for the investigation of any such matters or their final resolution because, in part, the time and resources that may be needed are dependent on the nature and extent of any information requested by the applicable authorities involved, and such time or resources could be substantial.

Cannabis Industry Participants are subject to federal and state controlled substance laws and regulations.

As a result, we are indirectly subject to a number of risks related to controlled substances.

We sell our products through third-party retailers and resellers which do not exclusively sell to the cannabis industry.

Some of our products are sold to Cannabis Industry Participants and used in connection with cannabis businesses that are subject to federal and state controlled substance laws and regulations.

Companies that transact directly or indirectly with cannabis businesses are subject to a number of risks related to controlled substances, which risks could reduce demand for our products by Cannabis Industry Participants.

Such risks include, but are not limited to, the following:

• Cannabis is a Schedule I drug under the CSA and regulated by the Drug Enforcement Administration (the “DEA”) as an illegal substance.

The Food and Drug Administration (“FDA”), in conjunction with the DEA, licenses cannabis research and drugs containing active ingredients derived from cannabis.

If cannabis were to become legal under federal law, its sale and use could become regulated by the FDA or another federal agency.

• If cannabis were to become regulated by the FDA or another federal agency, extensive regulations may be imposed on the sale or use of cannabis.

Such regulations could result in a decrease in cannabis sales and have a material adverse impact on the demand for our products.

If we or our Cannabis Industry Participants are unable to comply with any applicable regulations and/or registration prescribed by the FDA, we may be unable to continue to transact with retailers and resellers who sell products to cannabis businesses and/or our financial condition may be adversely impacted.

• Controlled substance legislation differs between states and legislation in certain states may restrict or limit Cannabis Industry Participants from buying our products.

Cannabis Industry Participants may be required to obtain separate state registrations, permits or licenses in order to be able to obtain, handle and/or distribute controlled substances in a state.

Such state regulatory requirements may be costly and, the failure of such Cannabis Industry Participants to meet such regulatory requirements could lead to enforcement and sanctions by the states in addition to any from the DEA or otherwise arising under federal law.

We could be implicated in such enforcement or sanctions because of the purchase of our products by such Cannabis Industry Participants.

• The failure of our Cannabis Industry Participants to comply with applicable controlled substance laws and regulations, or the cost of compliance with these laws and regulations, may adversely affect the demand for our products and, as a result, the financial results of our business operations and our financial condition.

Furthermore, the JPMorgan Credit Facility restricts our ability and the ability of the Subsidiary Obligors to sell our products directly to U.S.

cannabis growers or to retailers that sell only to the U.S.

cannabis industry.

Our growth is highly dependent on the U.S.

cannabis market.

New California regulations caused licensing shortages and future regulations may create other limitations

that decrease the demand for our products .

In the past, California regulations caused licensing shortages and future regulations may create other limitations that decrease the demand for our products.

State level regulations adopted in the future may adversely impact our business.

The base of cannabis growers

has grown over the past 20 years since the legalization of cannabis for medical uses in states such as California, Colorado,

Michigan, Nevada, Oregon and Washington, with a large number of those growers depending on products similar to those we distribute.

cannabis market is still in its infancy and early adopter states such as California, Colorado and Washington represent a large portion

of historical industry revenues.

cannabis cultivation market does not grow as expected, our business, financial condition

and results of operations could be adversely impacted.

Cannabis remains illegal

Supply and demand and prevailing prices for cannabis may also adversely impact our business.

The base of cannabis growers in the United States has grown over the past 20 years since the legalization of cannabis for medical uses in states such as California, Colorado, Michigan, Nevada, Oregon and Washington, with a large number of those growers depending on products similar to those we distribute.

cannabis market is still in its infancy and early adopter states such as California, Colorado and Washington represent a large portion of historical industry revenues.

cannabis cultivation market does not grow as expected, our business, financial condition and results of operations could be adversely impacted.

Cannabis remains illegal under U.S.

federal law, with cannabis listed as a Schedule I substance under the CSA.

Notwithstanding laws in various states permitting

certain cannabis activities, all cannabis activities, including possession, distribution, processing and manufacturing of cannabis and

investment in, and financial services or transactions involving proceeds of, or promoting such activities remain illegal under various

federal criminal and civil laws and regulations, including the CSA, as well as laws and regulations of several states that have

not legalized some or any cannabis activities to date.

Compliance with applicable state laws regarding cannabis activities does not protect

us from federal prosecution or other enforcement action, such as seizure or forfeiture remedies, nor does it provide any defense to such

prosecution or action.

Cannabis activities conducted in or related to conduct in multiple states may potentially face a higher level

of scrutiny from federal authorities.

Penalties for violating federal drug, conspiracy, aiding, abetting, bank fraud and/or money laundering

laws may include prison, fines, and seizure/forfeiture of property used in connection with cannabis activities, including proceeds derived

from such activities.

We sell our products through

third-party retailers and resellers which do not exclusively sell to the cannabis industry, however, it is evident to us that the movement

towards the legalization of cannabis in the U.S.

and its legalization in Canada has ultimately had a significant, positive impact on

our industry.

Notwithstanding laws in various states permitting certain cannabis activities, all cannabis activities, including possession, distribution, processing and manufacturing of cannabis and investment in, and financial services or transactions involving proceeds of, or promoting such activities remain illegal under various U.S.

federal criminal and civil laws and regulations, including the CSA, as well as laws and regulations of several states that have not legalized some or any cannabis activities to date.

Compliance with applicable state laws regarding cannabis activities does not protect us from federal prosecution or other enforcement action, such as seizure or forfeiture remedies, nor does it provide any defense to such prosecution or action.

Cannabis activities conducted in or related to conduct in multiple states may potentially face a higher level of scrutiny from federal authorities.

Penalties for violating federal drug, conspiracy, aiding, abetting, bank fraud and/or money laundering laws may include prison, fines, and seizure/forfeiture of property used in connection with cannabis activities, including proceeds derived from such activities.

We sell our products through third-party retailers and resellers which do not exclusively sell to the cannabis industry, however, it is evident to us that the movement towards the legalization of cannabis in the U.S.

and its legalization in Canada has ultimately had a significant, positive impact on our industry.

We are not currently subject directly to any state laws or regulations controlling participants in the legal cannabis industry.

However, regulation of the cannabis industry does impact those that we believe represent many end-users for our products and, accordingly,

there can be no assurance that changes in regulation of the industry and more rigorous enforcement by federal authorities will not have

a material adverse effect on us.

and regulations pertaining to the use and cultivation of cannabis are enacted on both the state and federal government level within the

However, regulation of the cannabis industry does impact those that we believe represent many end-users for our products and, accordingly, there can be no assurance that changes in regulation of the industry and more rigorous enforcement by federal authorities will not have a material adverse effect on us.

Legislation and regulations pertaining to the use and cultivation of cannabis are enacted on both the state and federal government level within the United States.

As a result, the laws governing the cultivation and use of cannabis may be subject to change.

new laws and regulations limiting the use or cultivation of cannabis and any enforcement actions by state and federal governments could

indirectly reduce demand for our products, and may impact our current and planned future operations.

Individual state laws regarding

the cultivation and possession of cannabis for adult and medical uses conflict with federal laws prohibiting the cultivation, possession

and use of cannabis for any purpose.

A number of states have passed legislation legalizing or decriminalizing cannabis for adult-use,

other states have enacted legislation specifically permitting the cultivation and use of cannabis for medicinal purposes, and several

states have enacted legislation permitting cannabis cultivation and use for both adult and medicinal purposes.

Variations exist among

those states’

cannabis laws.

Evolving federal and state laws and regulations pertaining to the use or cultivation of cannabis,

as well active enforcement by federal or state authorities of the laws and regulations governing the use and cultivation of cannabis

may indirectly and adversely affect our business, our revenues and our profits.

The JPMorgan Credit Facility

prohibits the Subsidiary Obligors from selling our products to the cannabis industry.

As a result, the Subsidiary Obligors do not sell

our products directly to the cannabis industry.

See “—

Risks Relating to Our Indebtedness.

Certain of our products may be purchased

for use in new and emerging industries and/or be subject to varying, inconsistent, and rapidly changing laws, regulations, administrative

practices, enforcement approaches, judicial interpretations, future scientific research and public perception.

We sell products, including

hydroponic gardening products, through third-party retailers and resellers.

End users may purchase these products for use in new and

emerging industries, including the growing of cannabis that may not achieve market acceptance in a manner that we can predict.

for these products is dependent on the growth of these industries, which is uncertain, as well as the laws governing the growth, possession,

and use of cannabis by adults for both adult and medical use.

Laws and regulations affecting

cannabis industry are continually changing, which could detrimentally affect our growth, revenues, results of operations and

success generally.

Local, state and federal cannabis laws and regulations are broad in scope and subject to evolving interpretations,

which could require the end users of certain of our products or us to incur substantial costs associated with compliance or to alter

our respective business plans.

In addition, violations of these laws, or allegations of such violations, could disrupt our business and

result in a material adverse effect on our results of operation and financial condition.

Scientific research related

to the benefits of cannabis remains in its early stages, is subject to a number of important assumptions, and may prove to be inaccurate.

Future research studies and clinical trials may reach negative conclusions regarding the viability, safety, efficacy, dosing, social

acceptance or other facts and perceptions related to medical cannabis, which could materially impact the demand for our products for

use in the cannabis industry.

public’s perception of cannabis may significantly impact the cannabis industry’s success.

Both the medical and adult-use of

cannabis are controversial topics, and there is no guarantee that future scientific research, publicity, regulations, medical opinion,

and public opinion relating to cannabis will be favorable.

The cannabis industry is an early-stage business that is constantly evolving

with no guarantee of viability.

The market for medical and adult-use of cannabis is uncertain, and any adverse or negative publicity,

scientific research, limiting regulations, medical opinion and public opinion (whether or not accurate or with merit) relating to the

consumption of cannabis, whether in the U.S.

or internationally, may have a material adverse effect on our operational results,

consumer base, and financial results.

Among other things, such a shift in public opinion could cause state jurisdictions to abandon initiatives

or proposals to legalize medical or adult cannabis or adopt new laws or regulations restricting or prohibiting the medical or adult-use

of cannabis where it is now legal, thereby limiting the Cannabis Industry Participants.

Demand for our products may

be negatively impacted depending on how laws, regulations, administrative practices, enforcement approaches, judicial interpretations,

and consumer perceptions develop.

We cannot predict the nature of such developments or the effect, if any, that such developments could

have on our business.

Our indirect involvement in the cannabis

industry could affect the public’s perception of us and be detrimental to our reputation.

Damage to our reputation

can be the result of the actual or perceived occurrence of any number of events, and could include any negative publicity, whether true

Cannabis has often been associated with various other narcotics, violence and criminal activities, the risk of which is that

our retailers and resellers that transact with cannabis businesses might attract negative publicity.

There is also risk that the action(s)

of other participants, companies and service providers in the cannabis industry may negatively affect the reputation of the industry

as a whole and thereby negatively impact our reputation.

The increased use of social media and other web-based tools used to generate,

publish and discuss user-generated content and to connect with other users has made it increasingly easier for individuals and groups

to communicate and share opinions and views with regard to cannabis companies and their activities, whether true or not and the cannabis

industry in general, whether true or not.

Any new laws and regulations limiting the use or cultivation of cannabis and any enforcement actions by state and federal governments could indirectly reduce demand for our products, and may impact our current and planned future operations.

Individual state laws regarding the cultivation and possession of cannabis for adult and medical uses conflict with federal laws prohibiting the cultivation, possession and use of cannabis for any purpose.

A number of states have passed legislation legalizing or decriminalizing cannabis for adult-use, other states have enacted legislation specifically permitting the cultivation and use of cannabis for medicinal purposes, and several states have enacted legislation permitting cannabis cultivation and use for both adult and medicinal purposes.

Variations exist among those states’ cannabis laws.

Evolving federal and state laws and regulations pertaining to the use or cultivation of cannabis, as well active enforcement by federal or state authorities of the laws and regulations governing the use and cultivation of cannabis may indirectly and adversely affect our business, our revenues and our profits.

Furthermore, the JPMorgan Credit Facility restricts our ability and the ability of the Subsidiary Obligors to sell our products directly to cannabis growers or to retailers that sell only to the cannabis industry.

See “— Risks Relating to Our Indebtedness.”

Certain of our products may be purchased for use in new and emerging industries and/or be subject to varying, inconsistent, and rapidly changing laws, regulations, administrative practices, enforcement approaches, judicial interpretations, future scientific research and public perception.

We sell products, including hydroponic gardening products, through third-party retailers and resellers.

End users may purchase these products for use in new and emerging industries, including the growing of cannabis that may not achieve market

acceptance in a manner that we can predict.

The demand for these products is dependent on the growth of these industries, which is uncertain, as well as the laws governing the growth, possession, and use of cannabis by adults for both adult and medical-use.

Laws and regulations affecting the U.S.

cannabis industry are continually changing, which could detrimentally affect our growth, revenues, results of operations and success generally.

Local, state and federal cannabis laws and regulations are broad in scope and subject to evolving interpretations, which could require the end users of certain of our products or us to incur substantial costs associated with compliance or to alter our respective business plans.

In addition, violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our results of operation and financial condition.

Scientific research related to the benefits of cannabis remains in its early stages, is subject to a number of important assumptions, and may prove to be inaccurate.

Future research studies and clinical trials may reach negative conclusions regarding the viability, safety, efficacy, dosing, social acceptance or other facts and perceptions related to medical cannabis, which could materially impact the demand for our products for use in the cannabis industry.

The public’s perception of cannabis may significantly impact the cannabis industry’s success.

Both the medical and adult-use of cannabis are controversial topics, and there is no guarantee that future scientific research, publicity, regulations, medical opinion, and public opinion relating to cannabis will be favorable.

The cannabis industry is an early-stage business that is constantly evolving with no guarantee of viability.

The market for medical and adult-use of cannabis is uncertain, and any adverse or negative publicity, scientific research, limiting regulations, medical opinion and public opinion (whether or not accurate or with merit) relating to the consumption of cannabis, whether in the United States or internationally, may have a material adverse effect on our operational results, consumer base, and financial results.

Among other things, such a shift in public opinion could cause state jurisdictions to abandon initiatives or proposals to legalize medical or adult-use cannabis or adopt new laws or regulations restricting or prohibiting the medical or adult-use of cannabis where it is now legal, thereby limiting the Cannabis Industry Participants.

Demand for our products may be negatively impacted depending on how laws, regulations, administrative practices, enforcement approaches, judicial interpretations, and consumer perceptions develop.

We cannot predict the nature of such developments or the effect, if any, that such developments could have on our business.

Our indirect involvement in the cannabis industry could affect the public’s perception of us and be detrimental to our reputation.

Damage to our reputation can be the result of the actual or perceived occurrence of any number of events, and could include any negative publicity, whether true or not.

Cannabis has often been associated with various other narcotics, violence and criminal activities, the risk of which is that our retailers and resellers that transact with cannabis businesses might attract negative publicity.

There is also risk that the action(s) of other participants, companies and service providers in the cannabis industry may negatively affect the reputation of the industry as a whole and thereby negatively impact our reputation.

The increased use of social media and other web-based tools used to generate, publish and discuss user-generated content and to connect with other users has made it increasingly easier for individuals and groups to communicate and share opinions and views with regard to cannabis companies and their activities, whether true or not and the cannabis industry in general, whether true or not.

We do not ultimately have direct control over how the cannabis industry is perceived by others.

Reputation loss may result in decreased investor confidence, increased challenges in developing and maintaining community relations and

an impediment to our overall ability to advance our business strategy and realize our growth prospects, thereby having a material adverse

impact on our business.

In addition, third parties

with whom we may do business could perceive that they are exposed to reputational risk as a result of our retailers’

and resellers’

involvement with cannabis businesses.

Failure to establish or maintain business relationships due to reputational risk arising in connection

with the nature of our business could have a material adverse effect on our business, financial condition and results of operations.

Businesses involved in the cannabis industry,

and investments in such businesses, are subject to a variety of laws and regulations related to money laundering, financial recordkeeping

and proceeds of crimes.

sell our products through third-party retailers and resellers which do not exclusively sell to the cannabis industry.

Investments in the

cannabis industry are subject to a variety of laws and regulations that involve money laundering, financial recordkeeping and proceeds

of crime, including the BSA, as amended by the U.S.

PATRIOT Act, other anti-money laundering laws, and any related or similar rules, regulations

or guidelines, issued, administered or enforced by governmental authorities in the U.S..

In February 2014, the Financial Crimes

Enforcement Network of the Treasury Department (“FinCEN”) issued a memorandum (the “FinCEN Memo”) providing guidance

to banks seeking to provide services to cannabis businesses.

The FinCEN Memo outlines circumstances under which banks may provide services

to cannabis businesses without risking prosecution for violation of U.S.

Reputation loss may result in decreased investor confidence, increased challenges in developing and maintaining community relations and an impediment to our overall ability to advance our business strategy and realize our growth prospects, thereby having a material adverse impact on our business.

In addition, third parties with whom we may do business could perceive that they are exposed to reputational risk as a result of our retailers’ and resellers’ involvement with cannabis businesses.

Failure to establish or maintain business relationships due to reputational risk arising in connection with the nature of our business could have a material adverse effect on our business, financial condition and results of operations.

Businesses involved in the cannabis industry, and investments in such businesses, are subject to a variety of laws and regulations related to money laundering, financial recordkeeping and proceeds of crimes.

We sell our products through third-party retailers and resellers which do not exclusively sell to the cannabis industry.

Investments in the U.S.

cannabis industry are subject to a variety of laws and regulations that involve money laundering, financial recordkeeping and proceeds of crime, including the BSA, as amended by the USA PATRIOT Act, other anti-money laundering laws, and any related or similar rules, regulations or guidelines, issued, administered or enforced by governmental authorities in the United States.

In February 2014, the Financial Crimes Enforcement Network of the Treasury Department

(“FinCEN”) issued a memorandum (the “FinCEN Memo”) providing guidance to banks seeking to provide services to cannabis businesses.

The FinCEN Memo outlines circumstances under which banks may provide services to cannabis businesses without risking federal prosecution for violation of U.S.

federal money laundering laws.

It refers to supplementary guidance

that Deputy Attorney General Cole issued to U.S.

It refers to supplementary guidance that Deputy Attorney General Cole issued to U.S.

federal prosecutors relating to the prosecution of U.S.

money laundering offenses predicated

on cannabis violations of the CSA and outlines extensive due diligence and reporting requirements, which most banks have viewed as onerous.

On June 29, 2020, FinCEN issued additional guidance for financial institutions conducting due diligence and filing suspicious activity

reports in connection with hemp-related business customers.

While these guidelines clarify that financial institutions are not required

to file suspicious activity reports solely based on a customer’s hemp-related business operations, which must be operating lawfully

under applicable state law and regulations, these requirements can still present challenges for certain end users of our products to establish

and maintain banking connections, and restrictions on cannabis-related banking activities remain.

In September 2019, the United States

House of Representatives passed the SAFE Banking Act, which would permit commercial banks to offer services to cannabis companies that

are in compliance with state law, but the Senate has not taken up the SAFE Banking Act or other similar legislation.

money laundering offenses predicated on cannabis violations of the CSA and outlines extensive due diligence and reporting requirements.

On June 29, 2020, FinCEN issued additional guidance for financial institutions conducting due diligence and filing suspicious activity reports in connection with hemp-related business customers.

While these guidelines clarify that financial institutions are not required to file suspicious activity reports solely based on a customer’s hemp-related business operations that comply with applicable state law and regulations, these requirements can still present challenges for certain end users of our products in establishing and maintaining banking relationships, and restrictions on cannabis-related banking activities remain.

In September 2019, the United States House of Representatives passed the SAFE Banking Act, which would permit commercial banks to offer services to cannabis companies that are in compliance with state law, but the Senate has not taken up the SAFE Banking Act or other similar legislation.

Compliance with applicable state laws regarding cannabis activities does not protect from federal prosecution or other enforcement action, such as seizure or forfeiture remedies, nor does it provide any defense to such prosecution or action.

Cannabis-related activities conducted in or related to conduct in multiple states may potentially face a higher level of scrutiny from federal authorities.

Changes to current Justice Department or Treasury Department policies or current state laws or regulations might adversely affect the legal risks under federal anti-money laundering laws posed by the acceptance directly by our distributors or indirectly by us of proceeds of our end users’ cannabis growing activities.

Risks Relating to Other Regulations

Certain state and other regulations pertaining

to the use of certain ingredients in growing media and plant nutrients could adversely impact us by restricting our ability to sell such

One of our leading product

lines is growing media and nutrients products.

This product line includes certain products, such as organic soils and nutrients that

contain ingredients that require the companies that provide us with these products to register the product with certain regulators.

use and disposal of these products in some jurisdictions are subject to regulation by various agencies.

A decision by a regulatory agency

to significantly restrict the use of such products that have traditionally been used in the cultivation of our leading products could

have an adverse impact on those companies providing us with such regulated products, and as a result, limit our ability to sell these

We are currently subject to, and may in

the future become subject to additional, U.S., state and foreign laws and regulations imposing obligations on how we collect, store and

process personal information .

Certain state and other regulations pertaining to the use of certain ingredients in growing media and plant nutrients could adversely impact us by restricting our ability to sell such products.

One of our leading product lines is growing media and nutrients products.

This product line includes certain products, such as organic soils and nutrients that contain ingredients that require the companies that provide us with these products to register the product with certain regulators.

The use and disposal of these products in some jurisdictions are subject to regulation by various agencies.

A decision by a regulatory agency to significantly restrict the use of such products that have traditionally been used in the cultivation of our leading products could have an adverse impact on those companies providing us with such regulated products, and as a result, limit our ability to sell these products.

Our products and operations may be subject to increased regulatory and environmental scrutiny in jurisdictions in which we do business.

For example, we are subject to regulations relating to our harvesting of peat moss in Canada, which has come under increasing regulatory and environmental scrutiny at the federal, provincial and territorial levels.

We are currently subject to, and may in the future become subject to additional, U.S., state and foreign laws and regulations imposing obligations on how we collect, store and process personal information.

Our actual or perceived failure to comply with such obligations could harm our business.

We are, and may increasingly

become, subject to various laws and regulations, as well as contractual obligations, relating to data privacy and security in the jurisdictions

in which we operate.

The regulatory environment related to data privacy and security is increasingly rigorous, with new and constantly

changing requirements applicable to our business, and enforcement practices are likely to remain uncertain for the foreseeable future.

These laws and regulations may be interpreted and applied differently over time and from jurisdiction to jurisdiction, and it is possible

that they will be interpreted and applied in ways that may have a material adverse effect on our business, financial condition, results

of operations and prospects.

the U.S., various federal and state regulators, including governmental agencies like the Consumer Financial Protection Bureau and

the Federal Trade Commission, have adopted, or are considering adopting, laws and regulations concerning personal information and data

Certain state laws may be more stringent or broader in scope, or offer greater individual rights, with respect to personal information

than federal, international or other state laws, and such laws may differ from each other, all of which may complicate compliance efforts.

For example, the California Consumer Privacy Act (“CCPA”), which increases privacy rights for California residents and imposes

obligations on companies that process their personal information, came into effect on January 1, 2020.

Among other things, the CCPA requires

covered companies to provide new disclosures to California consumers and provide such consumers new data protection and privacy rights,

including the ability to opt-out of certain sales of personal information.

The CCPA provides for civil penalties for violations, as well

as a private right of action for certain data breaches that result in the loss of personal information.

This private right of action may

increase the likelihood of, and risks associated with, data breach litigation.

In addition, on November 3, 2020, California voters approved

a new privacy law, the California Privacy Rights Act (“CPRA”).

The CPRA comes into effect on January 1, 2023, and will significantly

modify the CCPA, including by expanding consumers’

rights with respect to certain personal information and creating a new state

agency to oversee implementation and enforcement efforts.

We are, and may increasingly become, subject to various laws and regulations, as well as contractual obligations, relating to data privacy and security in the jurisdictions in which we operate.

The regulatory environment related to data privacy and security is increasingly rigorous, with new and constantly changing requirements applicable to our business, and enforcement practices are likely to remain uncertain for the foreseeable future.

These laws and regulations may be interpreted and applied differently over time and from jurisdiction to jurisdiction, and it is possible that they will be interpreted and applied in ways that may have a material adverse effect on our business, financial condition, results of operations and prospects.

In the United States, various federal and state regulators, including governmental agencies like the Consumer Financial Protection Bureau and the Federal Trade Commission, have adopted, or are considering adopting, laws and regulations concerning personal information and data security.

Certain state laws may be more stringent or broader in scope, or offer greater individual rights, with respect to personal information than federal, international or other state laws, and such laws may differ from each other, all of which may complicate compliance efforts.

For example, the California Consumer Privacy Act (“CCPA”), which increases privacy rights for California residents and imposes obligations on companies that process their personal information, came into effect on January 1, 2020.

Among other things, the CCPA requires covered companies to provide new disclosures to California consumers and provide such consumers new data protection and privacy rights, including the ability to opt-out of certain sales of personal information.

The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches that result in the loss of personal information.

This private right of action may increase the likelihood of, and risks associated with, data breach litigation.

In addition, on November 3, 2020, California voters approved a new privacy law, the California Privacy Rights Act (“CPRA”).

The CPRA comes into effect on January 1, 2023, and will significantly modify the CCPA, including by expanding consumers’ rights with respect to certain personal information

and creating a new state agency to oversee implementation and enforcement efforts.

Virginia and Colorado also enacted comprehensive data privacy laws similar to the CCPA, both of which will be effective in 2023.

In addition, laws in all 50 U.S.

states require businesses to provide notice

to consumers whose personal information has been disclosed as a result of a data breach.

State laws are changing rapidly and there is

discussion in the U.S.

states require businesses to provide notice to consumers whose personal information has been disclosed as a result of a data breach.

State laws are changing rapidly and there is discussion in the U.S.

Congress of a new comprehensive federal data privacy law to which we would become subject if it is enacted.

Internationally, laws, regulations

and standards in many jurisdictions apply broadly to the collection, use, retention, security, disclosure, transfer and other processing

of personal information.

Internationally, laws, regulations and standards in many jurisdictions apply broadly to the collection, use, retention, security, disclosure, transfer and other processing of personal information.

For example, the E.U.

General Data Protection Regulation (“GDPR”), which became effective in May

2018, greatly increased the European Commission’s jurisdictional reach of its laws and adds a broad array of requirements for handling

personal data.

EU member states are tasked under the GDPR to enact, and have enacted, certain implementing legislation that adds to and/or

further interprets the GDPR requirements and potentially extends our obligations and potential liability for failing to meet such obligations.

The GDPR, together with national legislation, regulations and guidelines of the EU member states and the United Kingdom governing the

processing of personal data, impose strict obligations and restrictions on the ability to collect, use, retain, protect, disclose, transfer

and otherwise process personal data.

In particular, the GDPR includes obligations and restrictions concerning the consent and rights

of individuals to whom the personal data relates, the transfer of personal data out of the European Economic Area or the United Kingdom,

security breach notifications and the security and confidentiality of personal data.

The GDPR authorizes fines for certain violations

of up to 4% of global annual revenue or €20 million, whichever is greater.

All of these evolving compliance

and operational requirements impose significant costs, such as costs related to organizational changes, implementing additional protection

technologies, training employees and engaging consultants, which are likely to increase over time.

In addition, such requirements may

require us to modify our data processing practices and policies, distract management or divert resources from other initiatives and projects,

all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

or perceived failure by us to comply with any applicable federal, state or similar foreign laws and regulations relating to data privacy

and security could result in damage to our reputation, as well as proceedings or litigation by government agencies or other third parties,

including class action privacy litigation in certain jurisdictions, which would subject us to significant fines, sanctions, awards, penalties

or judgements, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Compliance with, or violation of, environmental,

health and safety laws and regulations, including laws pertaining to the use of pesticides, could result in significant costs that adversely

impact our reputation, businesses, financial position, results of operations and cash flows.

International, federal, state,

provincial and local laws and regulations relating to environmental, health and safety matters affect us in several ways in light of the

ingredients that are used in products included in our growing media and nutrients product line.

In the U.S., products containing pesticides

generally must be registered with the Environmental Protection Agency (the “EPA”), and similar state agencies before they

can be sold or applied.

The failure by one of our partners to obtain or the cancellation of any such registration, or the withdrawal from

the marketplace of such pesticides, could have an adverse effect on our businesses, the severity of which would depend on the products

involved, whether other products could be substituted and whether our competitors were similarly affected.

The pesticides we use are either

granted a license by the EPA or exempt from such a license and may be evaluated by the EPA as part of its ongoing exposure risk assessment.

The EPA may decide that a pesticide we distribute will be limited or will not be re-registered for use in the U.S.

We cannot predict the

outcome or the severity of the effect on our business of any future evaluations, if any, conducted by the EPA.

In addition, the use of certain

pesticide products is regulated by various international, federal, state, provincial and local environmental and public health agencies.

Although we strive to comply with such laws and regulations and have processes in place designed to achieve compliance, we may be unable

to prevent violations of these or other laws and regulations from occurring.

Even if we are able to comply with all such laws and regulations

and obtain all necessary registrations and licenses, the pesticides or other products we apply or use, or the manner in which we apply

or use them, could be alleged to cause injury to the environment, to people or to animals, or such products could be banned in certain

circumstances.

The costs of compliance, noncompliance, investigation, remediation, combating reputational harm or defending civil or

criminal proceedings, products liability, personal injury or other lawsuits could have a material adverse impact on our reputation, businesses,

financial position, results of operations and cash flows.

General Data Protection Regulation (“GDPR”), which became effective in May 2018, greatly increased the European Commission’s jurisdictional reach of its laws and adds a broad array of requirements for handling personal data.

EU member states are tasked under the GDPR to enact, and have enacted, certain implementing legislation that adds to and/or further interprets the GDPR requirements and potentially extends our obligations and potential liability for failing to meet such obligations.

The GDPR, together with national legislation, regulations and guidelines of the EU member states and the United Kingdom governing the processing of personal data, impose strict obligations and restrictions on the ability to collect, use, retain, protect, disclose, transfer and otherwise process personal data.

In particular, the GDPR includes obligations and restrictions concerning the consent and rights of individuals to whom the personal data relates, the transfer of personal data out of the European Economic Area or the United Kingdom, security breach notifications and the security and confidentiality of personal data.

The GDPR authorizes fines for certain violations of up to 4% of global annual revenue or €20 million, whichever is greater.

All of these evolving compliance and operational requirements impose significant costs, such as costs related to organizational changes, implementing additional protection technologies, training employees and engaging consultants, which are likely to increase over time.

In addition, such requirements may require us to modify our data processing practices and policies, distract management or divert resources from other initiatives and projects, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Any failure or perceived failure by us to comply with any applicable federal, state or similar foreign laws and regulations relating to data privacy and security could result in damage to our reputation, as well as proceedings or litigation by government agencies or other third parties, including class action privacy litigation in certain jurisdictions, which would subject us to significant fines, sanctions, awards, penalties or judgements, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Compliance with, or violation of, environmental, health and safety laws and regulations, including laws pertaining to the use of pesticides, could result in significant costs that adversely impact our reputation, businesses, financial position, results of operations and cash flows.

International, federal, state, provincial and local laws and regulations relating to environmental, health and safety matters affect us in several ways in light of the ingredients that are used in products included in our growing media and nutrients product line.

In the United States, products containing pesticides generally must be registered with the Environmental Protection Agency (the “EPA”), and similar state agencies before they can be sold or applied.

The failure by one of our partners to obtain or the cancellation of any such registration, or the withdrawal from the marketplace of such pesticides, could have an adverse effect on our businesses, the severity of which would depend on the products involved, whether other products could be substituted and whether our competitors were similarly affected.

The pesticides we use are either granted a license by the EPA or exempt from such a license and may be evaluated by the EPA as part of its ongoing exposure risk assessment.

The EPA may decide that a pesticide we distribute will be limited or will not be re-registered for use in the United States.

We cannot predict the outcome or the severity of the effect on our business of any future evaluations, if any, conducted by the EPA.

In addition, the use of certain pesticide products is regulated by various international, federal, state, provincial and local environmental and public health agencies.

Although we strive to comply with such laws and regulations and have processes in place designed to achieve compliance, we may be unable to prevent violations of these or other laws and regulations from occurring.

Even if we are able to comply with all such laws and regulations and obtain all necessary registrations and licenses, the pesticides or other products we apply or use, or the manner in which we apply or use them, could be alleged to cause injury to the environment, to people or to animals, or such products could be banned in certain circumstances.

The costs of compliance, noncompliance, investigation, remediation, combating reputational harm or defending civil or criminal proceedings, products liability, personal injury or other lawsuits could have a material adverse impact on our reputation, businesses, financial position, results of operations and cash flows.

Risks Relating to Our Intellectual Property

Recent laws make it difficult to predict

how patents will be issued or enforced in our industry.

in either the patent laws or interpretation of the patent laws in the U.S.

and other countries may have a significant impact on

our ability to protect our technology and enforce our intellectual property and proprietary rights.

There have been numerous changes to

the patent laws and to the rules of the United States Patent and Trademark Office (the “USPTO”), which may have a significant

impact on our ability to protect our technology and enforce our intellectual property and proprietary rights.

For example, the Leahy-Smith

America Invents Act, which was signed into law in 2011, includes a transition from a “first-to-invent”

system to a “first-to-file”

system, and changes the way issued patents can be challenged.

Certain changes, such as the institution of inter partes review and post-grant

and derivation proceedings, came into effect in 2012.

Substantive changes to patent law associated with the Leahy-Smith America Invents

Act may affect our ability to obtain patents, and, if obtained, to enforce or defend them in litigation or inter partes review, or post-grant

or derivation proceedings, all of which could harm our business.

We may not be able to adequately obtain,

maintain, protect or enforce our intellectual property and other proprietary rights that are material to our business.

ability to compete effectively depends in part on our rights to trademarks, patents and other intellectual property rights we own or license.

We have not sought to register every one of our trademarks either in the U.S.

or in every country in which such mark is used.

because of the differences in foreign trademark, patent and other intellectual property or proprietary rights laws, we may not receive

the same protection in other countries as we would in the U.S.

with respect to the registered brand names and issued patents we hold.

If we are unable to obtain, maintain, protect and enforce our intellectual property and proprietary rights, including our information

and/or brand names, we could suffer a material adverse effect on our business, financial condition and results of operations.

The steps we take to obtain,

maintain, protect and enforce our intellectual property and proprietary rights may be inadequate and despite our efforts to protect these

rights, unauthorized third parties, including our competitors, may duplicate, reverse engineer, access, obtain, use or copy the proprietary

aspects of our technology, processes, products or services without our permission.

In addition, we cannot guarantee that we have entered

into confidentiality agreements with each party that has or may have had access to our proprietary information, know-how and trade secrets.

Moreover, our contractual arrangements may be breached or otherwise not effectively prevent disclosure of, or control access to, our

intellectual property and confidential and proprietary information or provide an adequate remedy in the event of an unauthorized disclosure.

If we are unable to obtain, maintain, protect or enforce our intellectual property and proprietary rights, including our proprietary

information and/or brand names, we could suffer a material adverse effect on our business, financial condition and results of operations.

Litigation may be necessary

to enforce our owned or in-licensed intellectual property rights and proprietary rights and protect our proprietary information against

claims by third parties that our products or services infringe, misappropriate or otherwise violate their intellectual property rights

or proprietary rights.

Any litigation or claims brought by us could result in substantial costs and diversion of our resources and may

not be successful, even when our rights have been infringed, misappropriated or otherwise violated.

Our efforts to enforce our intellectual

property and proprietary rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of

our intellectual property and proprietary rights, and if such defenses, counterclaims or countersuits are successful, we could lose valuable

intellectual property and proprietary rights.

Additionally, the mechanisms for enforcement of intellectual property and proprietary rights

in foreign jurisdictions may be inadequate.

Obtaining and maintaining our patent protection

depends on compliance with various procedural, document submissions, fee payment and other requirements imposed by governmental patent

agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.

maintenance or annuity fees on any issued patents are due to be paid to the USPTO, and foreign patent agencies in several stages over

the lifetime of the patent.

The USPTO and various foreign governmental patent agencies require compliance with a number of procedural,

documentary, fee payments and other similar provisions during the patent application process.

While an inadvertent or unintentional lapse

can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in

which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent

rights in the relevant jurisdiction.

Noncompliance events that could result in abandonment or lapse of a patent or patent application

include, but are not limited to, failure to respond to official actions within prescribed time limits, nonpayment of fees and failure

to properly legalize and submit formal documents.

If we or our licensors fail to maintain the patents and patent applications covering

our products, our competitors might be able to enter the market, which would have a material adverse effect on our business.

Additionally,

patents have a limited lifespan.

In the U.S., even if all maintenance fees are timely paid, the natural expiration of a patent

is generally 20 years from its earliest U.S.

non-provisional filing date and the natural expiration of a design patent is generally 14

years after its issue date, unless the filing date occurred on or after May 13, 2015, in which case the natural expiration of a design

patent is generally 15 years after its issue date.

Even if patents covering our products or services are obtained, once the patent life

has expired, we may be open to competition from competitive products or services.

If one of our products requires extended development,

testing and/or regulatory review, patents protecting such products might expire before or shortly after such products are commercialized.

As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or

identical to ours.

From time to time, we may need to rely on licenses to proprietary

technologies, which may be difficult or expensive to obtain or we may lose certain licenses which may be difficult to replace, harming

our competitive position.

We may need to obtain licenses

to patents and other intellectual property and proprietary rights held by third parties to develop, manufacture and market our products,

if, for example, we sought to develop our products, in conjunction with any patented technology.

If we are unable to timely obtain these

licenses on commercially reasonable terms (or at all) and maintain these licenses, our ability to commercially market our products, may

be inhibited or prevented, which could have a material adverse effect on our business, results of operations, financial condition and

In spite of our best efforts,

our licensors might conclude that we have materially breached our license agreements and might therefore terminate the license agreements,

thereby removing our ability to develop and commercialize products, services and technology covered by these license agreements.

in-licenses are terminated, or if the underlying patents fail to provide the intended exclusivity, competitors may have the freedom to

market products identical to ours and we may be required to cease using or commercializing our products, services and technology covered

by such patents.

Third parties may initiate legal proceedings

alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material

adverse effect on the success of our business.

success depends upon our ability to develop, manufacture, market and sell our products, and to use our proprietary technologies without

infringing, misappropriating or otherwise violating the intellectual property or proprietary rights of third parties.

We may become party

to, or threatened with, future adversarial proceedings or litigation regarding intellectual property or proprietary rights with respect

to our products and technology, including interference or derivation proceedings and various other post-grant proceedings before the USPTO

and/or non- U.S.

opposition proceedings.

Third parties may assert infringement claims against us based on existing patents or patents

that may be granted in the future.

A successful claim of trademark, patent or other intellectual property or proprietary right infringement,

misappropriation or other violation against us, or any other successful challenge to the use of our intellectual property and proprietary

rights, could subject us to damages or prevent us from providing certain products or services, or using certain of our recognized brand

names, which could have a material adverse effect on our business, financial condition and results of operations.

As a result of any such

infringement claims, or other intellectual property claims, regardless of merit, or to avoid potential claims, we may choose or be compelled

to seek intellectual property licenses from third parties.

Recent laws make it difficult to predict how patents will be issued or enforced in our industry.

Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may have a significant impact on our ability to protect our technology and enforce our intellectual property and proprietary rights.

There have been numerous changes to the patent laws and to the rules of the United States Patent and Trademark Office (the “USPTO”), which may have a significant impact on our ability to protect our technology and enforce our intellectual property and proprietary rights.

For example, the Leahy-Smith America Invents Act, which was signed into law in 2011, includes a transition from a “first-to-invent” system to a “first-to-file” system, and changes the way issued patents can be challenged.

Certain changes, such as the institution of inter partes review and post-grant and derivation proceedings, came into effect in 2012.

Substantive changes to patent law associated with the Leahy-Smith America Invents Act may affect our ability to obtain patents, and, if obtained, to enforce or defend them in litigation or inter partes review, or post-grant or derivation proceedings, all of which could harm our business.

We may not be able to adequately obtain, maintain, protect or enforce our intellectual property and other proprietary rights that are material to our business.

Our ability to compete effectively depends in part on our rights to trademarks, patents and other intellectual property rights we own or license.

We have not sought to register every one of our trademarks either in the United States or in every country in which such mark is used.

Furthermore, because of the differences in foreign trademark, patent and other intellectual property or proprietary rights laws, we may not receive the same protection in other countries as we would in the United States with respect to the registered brand names and issued patents we hold.

If we are unable to obtain, maintain, protect and enforce our intellectual property and proprietary rights, including our information and/or brand names, we could suffer a material adverse effect on our business, financial condition and results of operations.

The steps we take to obtain, maintain, protect and enforce our intellectual property and proprietary rights may be inadequate and despite our efforts to protect these rights, unauthorized third parties, including our competitors, may duplicate, reverse engineer, access, obtain, use or copy the proprietary aspects of our technology, processes, products or services without our permission.

In addition, we cannot guarantee that we have entered into confidentiality agreements with each party that has or may have had access to our proprietary information, know-how and trade secrets.

Moreover, our contractual arrangements may be breached or otherwise not effectively prevent disclosure of, or control access to, our intellectual property and confidential and proprietary information or provide an adequate remedy in the event of an unauthorized disclosure.

If we are unable to obtain, maintain, protect or enforce our intellectual property and proprietary rights, including our proprietary information and/or brand names, we could suffer a material adverse effect on our business, financial condition and results of operations.

Litigation may be necessary to enforce our owned or in-licensed intellectual property rights and proprietary rights and protect our proprietary information against claims by third parties that our products or services infringe, misappropriate or otherwise violate their intellectual property rights or proprietary rights.

Any litigation or claims brought by us could result in substantial costs and diversion of our resources and may not be successful, even when our rights have been infringed, misappropriated or otherwise violated.

Our efforts to enforce our intellectual property and proprietary rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property and proprietary rights, and if such defenses, counterclaims or countersuits are successful, we could lose valuable intellectual property and proprietary rights.

Additionally, the mechanisms for enforcement of intellectual property and proprietary rights in foreign jurisdictions may be inadequate.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submissions, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.

Periodic maintenance or annuity fees on any issued patents are due to be paid to the USPTO, and foreign patent agencies in several stages over the lifetime of the patent.

The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payments and other similar provisions during the patent application process.

While an inadvertent or unintentional lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction.

Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, nonpayment of fees and failure to properly legalize and submit formal documents.

If we or our licensors fail to maintain the patents and patent applications covering our products, our competitors might be able to enter the market, which would have a material adverse effect on our business.

Additionally, patents have a limited lifespan.

In the United States, even if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S.

non-provisional filing date and the natural expiration of a design patent is generally 14 years after its issue date, unless the filing date occurred on or after May 13, 2015, in which case the natural expiration of a design patent is

generally 15 years after its issue date.

Even if patents covering our products or services are obtained, once the patent life has expired, we may be open to competition from competitive products or services.

If one of our products requires extended development, testing and/or regulatory review, patents protecting such products might expire before or shortly after such products are commercialized.

As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

From time to time, we may need to rely on licenses to proprietary technologies, which may be difficult or expensive to obtain or we may lose certain licenses which may be difficult to replace, harming our competitive position.

We may need to obtain licenses to patents and other intellectual property and proprietary rights held by third parties to develop, manufacture and market our products, if, for example, we sought to develop our products, in conjunction with any patented technology.

If we are unable to timely obtain these licenses on commercially reasonable terms (or at all) and maintain these licenses, our ability to commercially market our products, may be inhibited or prevented, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

In spite of our best efforts, our licensors might conclude that we have materially breached our license agreements and might therefore terminate the license agreements, thereby removing our ability to develop and commercialize products, services and technology covered by these license agreements.

If these in-licenses are terminated, or if the underlying patents fail to provide the intended exclusivity, competitors may have the freedom to market products identical to ours and we may be required to cease using or commercializing our products, services and technology covered by such patents.

Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

Our success depends upon our ability to develop, manufacture, market and sell our products, and to use our proprietary technologies without infringing, misappropriating or otherwise violating the intellectual property or proprietary rights of third parties.

We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property or proprietary rights with respect to our products and technology, including interference or derivation proceedings and various other post-grant proceedings before the USPTO and/or non-United States opposition proceedings.

Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future.

A successful claim of trademark, patent or other intellectual property or proprietary right infringement, misappropriation or other violation against us, or any other successful challenge to the use of our intellectual property and proprietary rights, could subject us to damages or prevent us from providing certain products or services, or using certain of our recognized brand names, which could have a material adverse effect on our business, financial condition and results of operations.

As a result of any such infringement claims, or other intellectual property claims, regardless of merit, or to avoid potential claims, we may choose or be compelled to seek intellectual property licenses from third parties.

These licenses may not be available on acceptable terms, or at all.

we are able to obtain a license, the license would likely obligate us to pay license fees, royalties, minimum royalties and/or milestone

payments and the rights granted to us could be nonexclusive, which would mean that our competitors may be able to obtain licenses to the

same intellectual property.

Ultimately, we could be prevented from commercializing a product and/or technology or be forced to cease some

aspect of our business operations if, as a result of actual or threatened infringement or other intellectual property claims, we are unable

to enter into licenses of the relevant intellectual property on acceptable terms.

Further, if we attempt to modify a product and/or technology

or to develop alternative methods or products in response to infringement or other intellectual property claims or to avoid potential

claims, we could incur substantial costs, encounter delays in product introductions or interruptions in sales.

We may be subject to claims that our employees

have wrongfully used or disclosed alleged trade secrets of their former employers.

Although we try to ensure

that our employees do not use the intellectual property and proprietary rights, including proprietary information or know-how, of others

in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property or proprietary

rights, including trade secrets or other proprietary information, of any such employee’s former employer.

We are not aware of any

threatened or pending claims related to these matters or concerning agreements with our employees, but in the future litigation may be

necessary to defend against such claims.

If we fail in defending any such claims, in addition to paying monetary damages, we may lose

valuable intellectual property or proprietary rights or personnel.

Even if we are successful in defending against such claims, litigation

could result in substantial costs and be a distraction to management.

Intellectual property disputes could cause

us to spend substantial resources and distract our personnel from their normal responsibilities.

Even if resolved in our favor,

litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could

distract our personnel from their normal responsibilities.

In addition, there could be public announcements of the results of hearings,

motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative,

it could have a substantial adverse effect on the value of our common stock.

Such litigation or proceedings could substantially increase

our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities.

Even if we are able to obtain a license, the license would likely obligate us to pay license fees, royalties, minimum royalties and/or milestone payments and the rights granted to us could be nonexclusive, which would mean that our competitors may be able to obtain licenses to the same intellectual property.

Ultimately, we could be prevented from commercializing a product and/or technology or be forced to cease some aspect of our business operations if, as a result of actual or threatened infringement or other intellectual property claims, we are unable to enter into licenses of the relevant intellectual property on acceptable terms.

Further, if we attempt to modify a product and/or technology or to develop alternative methods or products in response to infringement or other intellectual property claims or to avoid potential claims, we could incur substantial costs, encounter delays in product introductions or interruptions in sales.

We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

Although we try to ensure that our employees do not use the intellectual property and proprietary rights, including proprietary information or know-how, of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property or proprietary rights, including trade secrets or other proprietary information, of any such employee’s former employer.

We are not aware of any threatened or pending claims related to these matters or concerning agreements with our employees, but in the future litigation may be necessary to defend against such claims.

If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property or proprietary rights or personnel.

Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

Intellectual property disputes could cause us to spend substantial resources and distract our personnel from their normal responsibilities.

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could distract our personnel from their normal responsibilities.

In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the value of our common stock.

Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities.

We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings.

Some of our competitors

may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources.

Uncertainties resulting from the initiation and continuation of patent and other intellectual property litigation or other proceedings

could have a material adverse effect on our ability to compete in the marketplace.

If our owned or in-licensed trademarks

and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business

may be adversely affected.

We regard our owned and in-licensed

trademarks, trade names and service marks as having significant value and as an important factor in the success of our business.

registered or unregistered trademarks, trade names and service marks that we own or in-license from third parties may be challenged,

infringed, circumvented, declared generic or determined to be infringing on or dilutive of other marks.

Additionally, at times, competitors

may adopt trademarks, trade names or service marks similar to the ones we own or in-license, thereby impeding our ability to build brand

identity and possibly leading to market confusion.

In addition, there could be potential trademark, trade name or service mark infringement

claims brought against us or our licensors by owners of other trademarks, trade names and service marks.

Over the long term, if we are

unable to establish name recognition based on our owned and in-licensed trademarks and trade names, then we may not be able to compete

effectively and our business may be adversely affected.

We may also license our trademarks, trade names and service marks out to third

parties, such as our distributors.

Though these license agreements may provide guidelines for how our trademarks, trade names and service

marks may be used, a breach of these agreements or misuse of our trademarks, trade names and service marks by our licensees may jeopardize

our rights in or diminish the goodwill associated with our trademarks and trade names.

Our efforts to enforce or protect our intellectual

property and proprietary rights related to trademarks, trade names and service marks may be ineffective and could result in substantial

costs and diversion of resources and could adversely affect our business, financial condition, results of operations and prospects.

Intellectual property and proprietary rights

do not necessarily address all potential threats to our competitive advantage.

The degree of future protection

afforded by our intellectual property and proprietary rights is uncertain because intellectual property and proprietary rights have limitations,

and may not adequately protect our business, or permit us to maintain our competitive advantage.

Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources.

Uncertainties resulting from the initiation and continuation of patent and other intellectual property litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

If our owned or in-licensed trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.

We regard our owned and in-licensed trademarks, trade names and service marks as having significant value and as an important factor in the success of our business.

The registered or unregistered trademarks, trade names and service marks that we own or in-license from third parties may be challenged, infringed, circumvented, declared generic or determined to be infringing on or dilutive of other marks.

Additionally, at times, competitors may adopt trademarks, trade names or service marks similar to the ones we own or in-license, thereby impeding our ability to build brand identity and possibly leading to market confusion.

In addition, there could be potential trademark, trade name or service mark infringement claims brought against us or our licensors by owners of other trademarks, trade names and service marks.

Over the long term, if we are unable to establish name recognition based on our owned and in-licensed trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected.

We may also license our trademarks, trade names and service marks out to third parties, such as our distributors.

Though these license agreements may provide guidelines for how our trademarks, trade names and service marks may be used, a breach of these agreements or misuse of our trademarks, trade names and service marks by our licensees may jeopardize our rights in or diminish the goodwill associated with our trademarks and trade names.

Our efforts to enforce or protect our intellectual property and proprietary rights related to trademarks, trade names and service marks may be ineffective and could result in substantial costs and diversion of resources and could adversely affect our business, financial condition, results of operations and prospects.

Intellectual property and proprietary rights do not necessarily address all potential threats to our competitive advantage.

The degree of future protection afforded by our intellectual property and proprietary rights is uncertain because intellectual property and proprietary rights have limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage.

The following examples are illustrative.

Others may be able to construct products

that are similar to our products but that are not covered by the claims of the patents that

we own or have exclusively licensed;

We or our licensors or strategic collaborators,

if any, might not have been the first to make the inventions covered by the issued patent

or pending patent application that we own or have exclusively licensed;

We or our licensors or strategic collaborators,

if any, might not have been the first to file patent applications covering certain of our

Others may independently develop similar

or alternative technologies or duplicate any of our technologies without infringing, misappropriating

or otherwise violating our intellectual property and proprietary rights;

It is possible that

our current and future pending patent applications will not lead to issued patents;

is possible that our current and future pending trademark or service mark applications will

not lead to registrations;

may fail to identify patentable aspects of our research and development output before it

is too late to obtain patent protection;

patents and other intellectual property and proprietary rights that we own or have exclusively

licensed may not provide us with any competitive advantages, may not be sufficiently broad

in scope or may be held invalid or unenforceable, as a result of legal challenges by third

parties, including our competitors;

competitors might conduct research and development activities in countries where we do not

have patent rights and then use the information learned from such activities to develop competitive

products for sale in our major commercial markets;

may not develop additional proprietary technologies that are patentable;

patents of others may have an adverse effect on our business.

Should any of these events

occur, they could significantly harm our business, results of operations and prospects.

• Others may be able to construct products that are similar to our products but that are not covered by the claims of the patents that we own or have exclusively licensed;

• We or our licensors or strategic collaborators, if any, might not have been the first to make the inventions covered by the issued patent or pending patent application that we own or have exclusively licensed;

• We or our licensors or strategic collaborators, if any, might not have been the first to file patent applications covering certain of our inventions;

• Others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing, misappropriating or otherwise violating our intellectual property and proprietary rights;

• It is possible that our current and future pending patent applications will not lead to issued patents;

• It is possible that our current and future pending trademark or service mark applications will not lead to registrations;

• We may fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection;

• Issued patents and other intellectual property and proprietary rights that we own or have exclusively licensed may not provide us with any competitive advantages, may not be sufficiently broad in scope or may be held invalid or unenforceable, as a result of legal challenges by third parties, including our competitors;

• Our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;

• We may not develop additional proprietary technologies that are patentable;

• The patents of others may have an adverse effect on our business.

Should any of these events occur, they could significantly harm our business, results of operations and prospects.

Risks Relating to Our Capital Stock

We may incur indebtedness or issue capital

stock that ranks senior or equally to our common stock as to liquidation preference and other rights and which may dilute our stockholders’

ownership interest.

Shares of our common stock

are common equity interests in us and, as such, will rank junior to all of our existing and future indebtedness and other liabilities.

Additionally, our amended and restated certificate of incorporation (the “Certificate of Incorporation”) does not prohibit

us from issuing any series of preferred stock that would rank senior or equally to our common stock as to dividend payments and liquidation

Our Certificate of Incorporation allows for our board of directors to create new series of preferred stock without further

approval by our stockholders, which could adversely affect the rights of the holders of our common stock.

We have the authority to issue

up to 50,000,000 shares of our preferred stock without further stockholder approval.

The issuances of any series of preferred stock could

have the effect of reducing the amounts available to our holders of common stock in the event of our liquidation.

In addition, if we

issue preferred stock with voting rights that dilute the voting power of our common stock, the market price of our common stock could

Additional issuances and sales of preferred stock, or the perception that such issuances and sales could occur, may cause prevailing

market prices for our common stock to decline and may adversely affect our ability to raise additional capital in the financial markets

at times and prices favorable to us.

In addition, any additional capital raised through the sale of equity or equity-backed securities

may dilute our stockholders’

ownership percentages and could also result in a decrease in the market value of our common stock.

Provisions in our corporate charter documents

and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult and may

prevent attempts by our stockholders to replace or remove our current management.

These provisions might discourage,

delay or prevent a change in control of our company or a change in our management.

The existence of these provisions could adversely

affect the voting power of holders of common stock and limit the price that investors might be willing to pay in the future for shares

of our common stock.

Furthermore, we have the authority to issue up to 50,000,000 shares of our preferred stock without further stockholder

approval, the rights of which will be determined at the discretion of the board of directors and that, if issued, could operate as a

“poison pill”

to dilute the stock ownership of a potential hostile acquirer to prevent an acquisition that our board of directors

does not approve.

In addition, our Certificate of Incorporation and amended and restated bylaws (the “Bylaws”) contain provisions

that may make the acquisition of our company more difficult, including the following:

our authorized but unissued and unreserved

common stock and preferred stock could make more difficult or discourage an attempt to obtain

control of us by means of a proxy contest, tender offer, merger or otherwise;

our board of directors is classified

into three classes of directors with staggered three-year terms and directors are only able

to be removed from office for cause;

our stockholders will only be able

to take action at a meeting of stockholders and will not be able to take action by written

consent for any matter, except in certain circumstances;

a special meeting of our stockholders

may only be called by the chairperson of our board of directors or a majority of our board

of directors;

advance notice procedures apply for

stockholders to nominate candidates for election as directors or to bring matters before

an annual meeting of stockholders;

certain amendments to our Certificate

of Incorporation and any amendments to our Bylaws by our stockholders will require the approval

of at least two-thirds of our then-outstanding voting power entitled to vote generally in

an election of directors, voting together as a single class.

Various provisions of our lending agreements

with JPMorgan, in addition to our Certificate of Incorporation, Bylaws and other corporate documents, could delay or prevent a change

The JPMorgan Credit Facility

prohibits us from undergoing a change of control.

Any takeover attempt could be delayed, or prevented, if an amendment or waiver is not

provided by the respective lenders.

See “—

Risks Relating to Our Indebtedness.

Moreover, certain provisions

of our Certificate of Incorporation and Bylaws and provisions of Delaware General Corporation Law could delay or prevent a change of control

or may impede the ability of the holders of our common stock to change our management.

In particular, our Certificate of Incorporation

and Bylaws, among other things will regulate how stockholders may present proposals or nominate directors for election at stockholders’

meetings and authorize our board of directors to issue preferred stock in one or more series, without stockholder approval.

of Capital Stock —

Anti-Takeover Provisions.

We are a holding company and rely on dividends

and other payments, advances and transfers of funds from our subsidiaries to meet our obligations and pay dividends, if any, and we may

never pay any dividends to the holders of our common stock and capital appreciation, if any, of our common stock may be your sole source

of gain on your investment.

We have no direct operations

and no significant assets other than the ownership of capital stock and equity interests of our subsidiaries.

Because we conduct our

operations through our subsidiaries, we depend on those entities for dividends and other payments to generate the funds necessary to

meet our financial obligations.

Legal and contractual restrictions in the JPMorgan Credit Facility and other agreements which may govern

future indebtedness of our subsidiaries, as well as the financial condition and operating requirements of our subsidiaries, may limit

our ability to obtain cash from our subsidiaries.

The earnings from, or other available assets of, our subsidiaries might not be sufficient

to pay dividends or make distributions or loans to enable us to pay any dividends on our common stock or other obligations.

foregoing could materially and adversely affect our business, financial condition, results of operations and cash flows.

our ability to pay dividends is restricted by the terms of the JPMorgan Credit Facility and, in addition, future debt financing, if

any, may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our securities.

We currently intend to retain

any future earnings for use in the operation and expansion of our business.

Accordingly, we do not expect to pay any dividends to holders

of our common stock in the foreseeable future, but will review this policy as circumstances dictate.

The declaration and payment of all

future dividends to holders of our common stock, if any, will be at the sole discretion of our board of directors, which retains the right

to change our dividend policy at any time.

In addition, our ability to pay dividends is restricted by the terms of the JPMorgan Credit

Facility and, in addition, future debt financing, if any, may contain terms prohibiting or limiting the amount of dividends that may be

declared or paid on our securities.

Consequently, capital appreciation, if any, of our common stock may be your sole source of gain on

your investment for the foreseeable future.

Our largest stockholders will exercise

significant influence over our company for the foreseeable future, including the outcome of matters requiring stockholder approval.

As of March 16, 2021, our

former directors and their affiliates collectively own 13,051,042 shares of our common stock, or approximately 39% of our outstanding

shares of common stock.

Accordingly, if these stockholders were to choose to act together, they could have a significant influence over

all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such

as a merger or other sale of our company or all or a significant percentage of our assets.

This concentration of ownership could limit

your ability to influence corporate matters and may have the effect of delaying or preventing a third party from acquiring control over

We cannot assure you that

the interests of our former directors and affiliated persons will coincide with the interests of the investors.

So long as our former

directors and affiliated persons collectively controls a significant portion of our common stock, these individuals and/or entities controlled

by them, will continue to collectively be able to strongly influence or effectively control our decisions.

Therefore, you should not

invest in reliance on your ability to have any control over our company.

Principal Stockholders ,”

Relationships and Related Party Transactions ”

Description of Capital Stock.

The market price of our common stock could

be negatively affected by future sales of our common stock.

If our existing stockholders,

our directors, their affiliates, or our executive officers, sell a substantial number of shares of our common stock in the public market,

the market price of our common stock could decrease significantly.

The perception in the public market that these stockholders might

sell our common stock could also depress the market price of our common stock and could impair our future ability to obtain capital,

especially through an offering of equity securities.

We, along with our directors

and executive officers and holders of substantially all of our capital stock and securities convertible into our capital stock are subject

to lock-up agreements or market stand-off provisions that expire in June 2021 and, accordingly, approximately 23,552,486 shares of our

common stock will become eligible for sale upon such expiration.

Such lock-up expirations could adversely affect the market for our common

We have also agreed to file

a registration statement for the resale of certain shares of our common stock held by certain of our stockholders.

All of our common

stock sold pursuant to an offering covered by such registration statement will be freely transferable.

Our common stock has only recently become

publicly traded, and the market price of our common stock may be volatile.

The market price of our common

stock may fluctuate substantially depending on a number of factors, many of which are beyond our control and may not be related to our

operating performance.

These fluctuations could cause you to lose all or part of your investment in our common stock since you might

be unable to sell your shares at or above the price you paid.

Factors that could cause fluctuations in the trading price of our common

stock include the following:

price and volume fluctuations in the

overall stock market from time to time;

volatility in the trading prices and

trading volumes of stocks in our industry;

changes in operating performance and

stock market valuations of other companies generally, or those in our industry in particular;

sales of shares of our common stock

by us or our stockholders;

failure of securities analysts to

maintain coverage of us, changes in financial estimates by securities analysts who follow

our company or our failure to meet these estimates or the expectations of investors;

the financial projections we may provide

to the public, any changes in those projections or our failure to meet those projections;

announcements by us or our competitors

of new offerings or platform features;

the public’s reaction to our

press releases, other public announcements and filings with the SEC;

rumors and market speculation involving

us or other companies in our industry;

actual or anticipated changes in our

results of operations or fluctuations in our results of operations;

actual or anticipated developments

in our business, our competitors’

businesses or the competitive landscape generally;

litigation involving us, our industry

or both, or investigations by regulators into our operations or those of our competitors;

developments or disputes concerning

our intellectual property or other proprietary rights;

announced or completed acquisitions

of businesses, services or technologies by us or our competitors;

new laws or regulations or new interpretations

of existing laws or regulations applicable to our business;

changes in accounting standards, policies,

guidelines, interpretations or principles;

We may incur indebtedness or issue capital stock that ranks senior or equally to our common stock as to liquidation preference and other rights and which may dilute our stockholders’ ownership interest.

Shares of our common stock are common equity interests in us and, as such, will rank junior to all of our existing and future indebtedness and other liabilities.

Additionally, our amended and restated certificate of incorporation (the “Certificate of Incorporation”) does not prohibit us from issuing any series of preferred stock that would rank senior or equally to our common stock as to dividend payments and liquidation preference.

Our Certificate of Incorporation allows for our board of directors to create new series of preferred stock without further approval by our stockholders, which could adversely affect the rights of the holders of our common stock.

We have the authority to issue up to 50,000,000 shares of our preferred stock without further stockholder approval.

The issuances of any series of preferred stock could have the effect of reducing the amounts available to our holders of common stock in the event of our liquidation.

In addition, if we issue preferred stock with voting rights that dilute the voting power of our common stock, the market price of our common stock could decrease.

Additional issuances and sales of preferred stock, or the perception that such issuances and sales could occur, may cause prevailing market prices for our common stock to decline and may adversely affect our ability to raise additional capital in the financial markets at times and prices favorable to us.

In addition, any additional capital raised through the sale of equity or equity-backed securities may dilute our stockholders’ ownership percentages and could also result in a decrease in the market value of our common stock.

Provisions in our corporate charter documents and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

These provisions might discourage, delay or prevent a change in control of our company or a change in our management.

The existence of these provisions could adversely affect the voting power of holders of common stock and limit the price that investors might be willing to pay in the future for shares of our common stock.

Furthermore, we have the authority to issue up to 50,000,000 shares of our preferred stock without further stockholder approval, the rights of which will be determined at the discretion of the board of directors and that, if issued, could operate as a “poison pill” to dilute the stock ownership of a potential hostile acquirer to prevent an acquisition that our board of directors does not approve.

In addition, our Certificate of Incorporation and amended and restated bylaws (the “Bylaws”) contain provisions that may make the acquisition of our company more difficult, including the following:

• our authorized but unissued and unreserved common stock and preferred stock could make more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise;

• our board of directors is classified into three classes of directors with staggered three-year terms and directors are only able to be removed from office for cause;

• stockholders will only be able to take action at a meeting of stockholders and will not be able to take action by written consent for any matter, except in certain circumstances;

• a special meeting of our stockholders may only be called by the chairperson of our board of directors or a majority of our board of directors;

• advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders;

• certain amendments to our Certificate of Incorporation and any amendments to our Bylaws by our stockholders will require the approval of at least two-thirds of our then-outstanding voting power entitled to vote generally in an election of directors, voting together as a single class.

Various provisions of our lending agreements with JPMorgan, in addition to our Certificate of Incorporation, Bylaws and other corporate documents, could delay or prevent a change of control.

The JPMorgan Credit Facility prohibits us from undergoing a change of control.

Any takeover attempt could be delayed, or prevented, if an amendment or waiver is not provided by the respective lenders.

See “— Risks Relating to Our Indebtedness”.

Moreover, certain provisions of our Certificate of Incorporation and Bylaws and provisions of Delaware General Corporation Law could delay or prevent a change of control or may impede the ability of the holders of our common stock to change our management.

In particular, our Certificate of Incorporation and Bylaws, among other things will regulate how stockholders may present proposals or nominate directors for election at stockholders’ meetings and authorize our board of directors to issue preferred stock in one or more series, without stockholder approval.

See “Description of Capital Stock — Anti-Takeover Provisions.”

We are a holding company and rely on dividends and other payments, advances and transfers of funds from our subsidiaries to meet our obligations and pay dividends, if any, and we may never pay any dividends to the holders of our common stock and capital appreciation, if any, of our common stock may be your sole source of gain on your investment.

We have no direct operations and no significant assets other than the ownership of capital stock and equity interests of our subsidiaries.

Because we conduct our operations through our subsidiaries, we depend on those entities for dividends and other payments to generate the funds necessary to meet our financial obligations.

Legal and contractual restrictions in the JPMorgan Credit Facility and other agreements which may govern future indebtedness of our subsidiaries, as well as the financial condition and operating requirements of our subsidiaries, may limit our ability to obtain cash from our subsidiaries.

The earnings from, or other available assets of, our subsidiaries might not be sufficient to pay dividends or make distributions or loans to enable us to pay any dividends on our common stock or other obligations.

Any of the foregoing could materially and adversely affect our business, financial condition, results of operations and cash flows.

In addition, our ability to pay dividends is restricted by the terms of the JPMorgan Credit Facility and, in addition, future debt financing, if any, may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our securities.

We currently intend to retain any future earnings for use in the operation and expansion of our business.

Accordingly, we do not expect to pay any dividends to holders of our common stock in the foreseeable future, but will review this policy as circumstances dictate.

The declaration and payment of all future dividends to holders of our common stock, if any, will be at the sole discretion of our board of directors, which retains the right to change our dividend policy at any time.

Consequently, capital appreciation, if any, of our common stock may be your sole source of gain on your investment for the foreseeable future.

Our largest stockholders will exercise significant influence over our company for the foreseeable future, including the outcome of matters requiring stockholder approval.

If our former directors and their affiliates were to choose to act together, they could have a significant influence over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our company or all or a significant percentage of our assets.

This concentration of ownership could limit your ability to influence corporate matters and may have the effect of delaying or preventing a third party from acquiring control over us.

We cannot assure you that the interests of our former directors and affiliated persons will coincide with the interests of the investors.

So long as our former directors and affiliated persons collectively controls a significant portion of our common stock, these individuals and/or entities controlled by them, will continue to collectively be able to strongly influence or effectively control our decisions.

Therefore, you should not invest in reliance on your ability to have any control over our company.

See “Principal Stockholders,” “Certain Relationships and Related Party Transactions” and “Description of Capital Stock.”

The market price of our common stock could be negatively affected by future sales of our common stock.

If our existing stockholders, our directors, their affiliates, or our executive officers, sell a substantial number of shares of our common stock in the public market, the market price of our common stock could decrease significantly.

The perception

in the public market that these stockholders might sell our common stock could also depress the market price of our common stock and could impair our future ability to obtain capital, especially through an offering of equity securities.

Our common stock has only recently become publicly traded, and the market price of our common stock has been volatile.

The market price of our common stock has fluctuated substantially due to a number of factors, many of which are beyond our control and may not be related to our operating performance.

These fluctuations could cause you to lose all or part of your investment in our common stock since you might be unable to sell your shares at or above the price you paid.

Factors that could cause fluctuations in the trading price of our common stock include the following:

• price and volume fluctuations in the overall stock market from time to time;

• volatility in the trading prices and trading volumes of stocks in our industry;

• changes in operating performance and stock market valuations of other companies generally, or those in our industry in particular;

• sales of shares of our common stock by us or our stockholders;

• failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company or our failure to meet these estimates or the expectations of investors;

• the financial projections we may provide to the public, any changes in those projections or our failure to meet those projections;

• announcements by us or our competitors of new offerings or platform features;

• the public’s reaction to our press releases, other public announcements and filings with the SEC;

• rumors and market speculation involving us or other companies in our industry;

• actual or anticipated changes in our results of operations or fluctuations in our results of operations;

• actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally;

• litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors;

• developments or disputes concerning our intellectual property or other proprietary rights;

• announced or completed acquisitions of businesses, services or technologies by us or our competitors;

• new laws or regulations or new interpretations of existing laws or regulations applicable to our business;

• changes in accounting standards, policies, guidelines, interpretations or principles;

• any significant change in our management;

general economic conditions and slow

or negative growth of our markets.

In addition, in the past,

following periods of volatility in the overall market and the market price of a particular company’s securities, securities class

action litigation has often been instituted against these companies.

This litigation, if instituted against us, could result in substantial

costs and a diversion of our management’s attention and resources.

We are an emerging growth company, and

we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive

to investors.

As an emerging growth company,

as defined in the JOBS Act, we may take advantage of certain exemptions from various reporting requirements that are applicable to other

public companies that are not emerging growth companies including, but not limited to, not being required to obtain an assessment of

the effectiveness of our internal controls over financial reporting from our independent registered public accounting firm pursuant to

Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy

statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval

of any golden parachute payments not previously approved.

To the extent we avail ourselves of these exemptions, our financial statements

may not be comparable to companies that comply with such new or revised accounting standards.

We cannot predict if investors will find

our common stock less attractive because we will rely on these.

Our Certificate of Incorporation provides

that the doctrine of “corporate opportunity”

will not apply with respect to any director or stockholder who is not employed

by us or our affiliates.

The doctrine of corporate

opportunity generally provides that a corporate fiduciary may not develop an opportunity using corporate resources, acquire an interest

adverse to that of the corporation or acquire property that is reasonably incident to the present or prospective business of the corporation

or in which the corporation has a present or expectancy interest, unless that opportunity is first presented to the corporation and the

corporation chooses not to pursue that opportunity.

The doctrine of corporate opportunity is intended to preclude officers or directors

or other fiduciaries from personally benefiting from opportunities that belong to the corporation.

Our Certificate of Incorporation provides

that the doctrine of “corporate opportunity”

does not apply with respect to any director or stockholder who is not employed

by us or our affiliates.

Any director or stockholder who is not employed by us or our affiliates will therefore have no duty to communicate

or present corporate opportunities to us, and will have the right to either hold any corporate opportunity for their (and their affiliates’)

own account and benefit or to recommend, assign or otherwise transfer such corporate opportunity to persons other than us, including

to any director or stockholder who is not employed by us or our affiliates.

As a result, certain of our

stockholders, directors and their respective affiliates will not be prohibited from operating or investing in competing businesses.

therefore may find ourselves in competition with certain of our stockholders, directors or their respective affiliates, and we may not

have knowledge of, or be able to pursue, transactions that could potentially be beneficial to us.

Accordingly, we may lose a corporate

opportunity or suffer competitive harm, which could negatively impact our business or prospects.

If securities or industry analysts do not

publish research or reports about our business, or they publish negative reports about our business, our share price and trading volume

could decline.

The trading market for our

common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business, our

market and our competitors.

• the continued threat of terrorism and the impact of military and other action, including military actions

involving Russia and Ukraine;

• general economic conditions and slow or negative growth of our markets.

In addition, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies.

This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

Our Certificate of Incorporation provides that the doctrine of “corporate opportunity” will not apply with respect to any director or stockholder who is not employed by us or our affiliates.

The doctrine of corporate opportunity generally provides that a corporate fiduciary may not develop an opportunity using corporate resources, acquire an interest adverse to that of the corporation or acquire property that is reasonably incident to the present or prospective business of the corporation or in which the corporation has a present or expectancy interest, unless that opportunity is first presented to the corporation and the corporation chooses not to pursue that opportunity.

The doctrine of corporate opportunity is intended to preclude officers or directors or other fiduciaries from personally benefiting from opportunities that belong to the corporation.

Our Certificate of Incorporation provides that the doctrine of “corporate opportunity” does not apply with respect to any director or stockholder who is not employed by us or our affiliates.

Any director or stockholder who is not employed by us or our affiliates will therefore have no duty to communicate or present corporate opportunities to us, and will have the right to either hold any corporate opportunity for their (and their affiliates’) own account and benefit or to recommend, assign or otherwise transfer such corporate opportunity to persons other than us, including to any director or stockholder who is not employed by us or our affiliates.

As a result, certain of our stockholders, directors and their respective affiliates will not be prohibited from operating or investing in competing businesses.

We therefore may find ourselves in competition with certain of our stockholders, directors or their respective affiliates, and we may not have knowledge of, or be able to pursue, transactions that could potentially be beneficial to us.

Accordingly, we may lose a corporate opportunity or suffer competitive harm, which could negatively impact our business or prospects.

If securities or industry analysts do not publish research or reports about our business, or they publish negative reports about our business, our share price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business, our market and our competitors.

We do not have any control over these analysts.

If one or more of the analysts who cover us downgrade our

shares or change their opinion of our shares, our share price would likely decline.

If one or more of these analysts cease coverage of

our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share

price or trading volume to decline.

Our Certificate of Incorporation and our

Bylaws provide that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between

us and our stockholders, which could limit our stockholders’

ability to obtain a favorable judicial forum for disputes with us

or our directors, officers or employees.

Our Certificate of Incorporation

and our Bylaws provide that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding

brought on our behalf;

If one or more of the analysts who cover us downgrade our shares or change their opinion of our shares, our share price would likely decline.

If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

Our Certificate of Incorporation and our Bylaws provide that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our Certificate of Incorporation and our Bylaws provide that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf;

any action asserting a breach of fiduciary duty;

any action asserting a claim against us arising pursuant to the

Delaware General Corporation Law, our Certificate of Incorporation or our Bylaws;

or any action asserting a claim against us that is

governed by the internal affairs doctrine.

Notwithstanding the foregoing, the exclusive forum provision does not apply to suits brought

to enforce any liability or duty created by the Exchange Act, the Securities Act or any other claim for which the federal courts have

exclusive jurisdiction.

Unless we consent in writing to the selection of an alternative forum, the federal district courts of the United

States of America shall, to the fullest extent permitted by applicable law, be the sole and exclusive forum for the resolution of any

complaint asserting a cause of action arising under the Securities Act.

The choice of forum provision may limit a stockholder’s

ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees,

which may discourage such lawsuits against us and our directors, officers and other employees.

Alternatively, if a court were to find

the choice of forum provision contained in our Certificate of Incorporation and our Bylaws to be inapplicable or unenforceable in an

action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially and adversely

affect our business, financial condition, and results of operation.

any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our Certificate of Incorporation or our Bylaws;

or any action asserting a claim against us that is governed by the internal affairs doctrine.

Notwithstanding the foregoing, the exclusive forum provision does not apply to suits brought to enforce any liability or duty created by the Exchange Act, the Securities Act or any other claim for which the federal courts have exclusive jurisdiction.

Unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by applicable law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.

The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees.

Alternatively, if a court were to find the choice of forum provision contained in our Certificate of Incorporation and our Bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially and adversely affect our business, financial condition, and results of operation.

General Risk Factors

If we are unable to hire and retain key

personnel, we may not be able to implement our business plan and our business may fail.

Our future success depends

to a large extent on our ability to attract, hire, train and retain qualified managerial, operational and other personnel.

We face significant

competition for qualified and experienced employees in our industry and from other industries and, as a result, we may be unable to attract

and retain the personnel needed to successfully conduct and grow our operations.

Additionally, key personnel, including members of management,

may leave and compete against us.

At present, we believe we

have the necessary key personnel to carry out our business plans but there can be no assurance that our beliefs will not prove unfounded.

If we are unable to hire and retain key personnel, we may not be able to implement our business plan and our business may fail.

Our future success depends to a large extent on our ability to attract, hire, train and retain qualified managerial, operational and other personnel.

We face significant competition for qualified and experienced employees in our industry and from other industries and, as a result, we may be unable to attract and retain the personnel needed to successfully conduct and grow our operations.

Additionally, key personnel, including members of management, may leave and compete against us.

At present, we believe we have the necessary key personnel to carry out our business plans but there can be no assurance that our beliefs will not prove unfounded.

If we are unable to hire and retain key personnel, our business will be materially adversely affected.

Litigation may adversely affect our business,

financial condition and results of operations.

From time to time in the

normal course of our business operations, we may become subject to litigation that may result in liability material to our financial

statements as a whole or may negatively affect our operating results if changes to our business operation are required.

The cost to defend

such litigation may be significant and may require a diversion of our resources.

There also may be adverse publicity associated with

litigation that could negatively affect customer perception of our business, regardless of whether the allegations are valid or whether

we are ultimately found liable.

Litigation may adversely affect our business, financial condition and results of operations.

From time to time in the normal course of our business operations, we may become subject to litigation that may result in liability material to our financial statements as a whole or may negatively affect our operating results if changes to our business operation are required.

The cost to defend such litigation may be significant and may require a diversion of our resources.

There also may be adverse publicity associated with litigation that could negatively affect customer perception of our business, regardless of whether the allegations are valid or whether we are ultimately found liable.

As a result, litigation may adversely affect our business, financial condition and results of operations.

Exercise of options or warrants or conversion

of convertible securities may have a dilutive effect on your percentage ownership and may result in a dilution of your voting power and

an increase in the number of shares of common stock eligible for future resale in the public market, which may negatively impact the

trading price of our shares of common stock.

The exercise or conversion

of some or all of our outstanding options, warrants, or convertible securities could result in significant dilution in the percentage

ownership interest of existing investors and in the percentage ownership interest of our existing common stockholders and in a significant

dilution of voting rights and earnings per share.

As of March 16, 2021, we have outstanding warrants to purchase up to 3,569,833 shares

of our common stock at a weighted exercise price of $16.42 per share and we have outstanding options for the issuance of up to 890,728

shares of common stock at a weighted exercise price of $8.82 per share.

The exercise of such existing outstanding stock options will

further dilute our stockholders’

voting interests.

To the extent options and/or warrants and/or conversion rights are exercised,

additional shares of common stock will be issued, and such issuance will dilute stockholders.

In addition to the dilutive effects described

above, the exercise of those securities would lead to an increase in the number of shares of common stock eligible for resale in the

public market.

Sales of substantial numbers of such shares of common stock in the public market could adversely affect the market price

of our shares of common stock.

Substantial dilution and/or a substantial increase in the number of shares of common stock available for

future resale may negatively impact the trading price of our shares of common stock.

Our security holders may be diluted by

future issuances of securities by us.

In the future, we may issue

our authorized but previously unissued equity securities, including additional shares of capital stock or securities convertible into

or exchangeable for our capital stock.

Such issuance of additional securities would dilute the ownership stake in us held by our existing

stockholders and could adversely affect the value of our securities.

We may also issue additional

shares of our common stock, warrants or other securities that are convertible into or exercisable for the purchase of shares of our common

stock in connection with hiring and/or retaining employees or consultants, future acquisitions, future sales of our securities for capital

raising purposes, or for other business purposes.

The future issuance of any such additional shares of our common stock or other securities,

for any reason including those stated above, may have a negative impact on the market price of our common stock.

There can be no assurance

that the issuance of any additional shares of common stock, warrants or other convertible securities may not be at a price (or exercise

prices) below the price of the common stock offered hereby.

Failure to comply with the United States

Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences.

a Delaware corporation, we are subject to the United States Foreign Corrupt Practices Act, which generally prohibits U.S.

from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business.

companies, including some that may compete with us, may not be subject to these prohibitions.

Corruption, extortion, bribery, pay-offs,

theft and other fraudulent practices may occur from time-to-time in countries in which we conduct our business.

However, our employees

or other agents may engage in conduct for which we might be held responsible.

If our employees or other agents are found to have engaged

in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial

condition and results of operations.

Delaware law contains anti-takeover provisions

that could deter takeover attempts that could be beneficial to our stockholders.

Provisions of Delaware law

could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders.

Section 203 of

the Delaware General Corporation Law may make the acquisition of our company and the removal of incumbent officers and directors more

difficult by prohibiting stockholders holding 15% or more of our outstanding voting stock from acquiring us, without the consent of our

board of directors, for at least three years from the date they first hold 15% or more of the voting stock.

Exercise of options may have a dilutive effect on your percentage ownership and may result in a dilution of your voting power and an increase in the number of shares of common stock eligible for future resale in the public market, which may negatively impact the trading price of our shares of common stock.

The exercise of some or all of our outstanding options could result in significant dilution in the percentage ownership interest of existing investors and in the percentage ownership interest of our existing common stockholders and in a significant dilution of voting rights and earnings per share.

As of December 31, 2021, we have outstanding options, held primarily by current and former employees of the Company, for the issuance of up to 720,549 shares of common stock at a weighted exercise price of $9.57 per share.

The exercise of such existing outstanding stock options will further dilute our stockholders’ voting interests.

To the extent options are exercised, additional shares of common stock will be issued, and such issuance will dilute stockholders.

In addition to the dilutive effects described above, the exercise of those securities would lead to an increase in the number of shares of common stock eligible for resale in the public market.

Sales of substantial numbers of such shares of common stock in the public market could adversely affect the market price of our shares of common stock.

Substantial dilution and/or a substantial increase in the number of shares of common stock available for future resale may negatively impact the trading price of our shares of common stock.

Our security holders may be diluted by future issuances of securities by us.

In the future, we may issue our authorized but previously unissued equity securities, including additional shares of capital stock or securities convertible into or exchangeable for our capital stock.

Such issuance of additional securities would dilute the ownership stake in us held by our existing stockholders and could adversely affect the value of our securities.

We may also issue additional shares of our common stock, warrants or other securities that are convertible into or exercisable for the purchase of shares of our common stock in connection with hiring and/or retaining employees or consultants, future acquisitions, future sales of our securities for capital raising purposes, or for other business purposes.

The future issuance of any such additional shares of our common stock or other securities, for any reason including those stated above, may have a negative impact on the market price of our common stock.

There can be no assurance that the issuance of any additional shares of common stock, warrants or other convertible securities may not be at a price (or exercise prices) below the price of the common stock offered hereby.

Failure to comply with the United States Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences.

As a Delaware corporation, we are subject to the United States Foreign Corrupt Practices Act, which generally prohibits United States companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business.

Some foreign companies, including some that may compete with us, may not be subject to these prohibitions.

Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices may occur from time-to-time in countries in which we conduct our business.

However, our employees or other agents may engage in conduct for which we might be held responsible.

If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.

Delaware law contains anti-takeover provisions that could deter takeover attempts that could be beneficial to our stockholders.

Provisions of Delaware law could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders.

Section 203 of the Delaware General Corporation Law may make the acquisition of our company and the removal of incumbent officers and directors more difficult by prohibiting stockholders holding 15% or more of our outstanding voting stock from acquiring us, without the consent of our board of directors, for at least three years from the date they first hold 15% or more of the voting stock.

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