What changed in this filing

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Item 1A. Risk Factors

2024-03-07 compared with 2023-03-03 · 96 added, 75 removed, 207 unchanged (45% of the section changed)

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Certain important factors may have a material adverse effect on our business prospects, financial condition and results of operations, and they should be carefully considered.

Accordingly, in evaluating our business, we encourage you to consider the following discussion of risk factors in its entirety in addition to other information contained in or incorporated by reference into this Annual Report on Form 10-K and our other public filings with the U.S.

Securities and Exchange Commission (“SEC”).

Accordingly, in evaluating our business, and a potential investment in our shares, we encourage you to consider the following discussion of risk factors in its entirety in addition to other information contained in or incorporated by reference into this Annual Report on Form 10-K and our other public filings with the United States Securities and Exchange Commission (“SEC”).

Other events that we do not currently anticipate or that we currently deem immaterial may also affect our business, prospects, financial condition and results of operations.

Risks Related to the Industry in Which We Operate

Cannabis remains illegal under U.S.

Cannabis remains illegal under United States federal law.

In the United States, cannabis is largely regulated at the state level.

Each state in which we operate or that we are currently proposing to operate authorizes, as applicable, medical and/or adult use cannabis production and distribution by licensed or registered entities.

Many other states have legalized cannabis in some form.

However, under U.S.

federal law, the possession, use, cultivation, and transfer of cannabis and any related drug paraphernalia are illegal, and any such acts are criminalized under the Controlled Substances Act, as amended, which we refer to as the “CSA.” Cannabis remains illegal under U.S.

federal law and is considered a Schedule I controlled substance under the CSA.

More than 40 states have legalized cannabis in some form.

However, under United States federal law, the possession, use, cultivation, and transfer of cannabis and any related drug paraphernalia are illegal, and any such acts are criminalized under the Controlled Substances Act, as amended, which we refer to as the “CSA.” Cannabis remains illegal under United States federal law and is considered a Schedule I controlled substance under the CSA.

As a result, cannabis is deemed to have a high potential for abuse and is not approved or accepted for medical use.

The concepts of “medical cannabis,” “retail cannabis” and “adult-use cannabis” do not exist under U.S.

The concepts of “medical cannabis,” “retail cannabis” and “adult-use cannabis” do not exist under United States federal law.

While we believe that our business activities are compliant with applicable state and local laws, strict compliance with state and local cannabis laws would not provide a defense to any federal proceeding that may be brought against us.

The enforcement of applicable U.S.

federal laws poses a significant risk to us.

Violations of any U.S.

federal laws and regulations could result in significant fines, penalties, administrative sanctions, or settlements arising from civil proceedings conducted either by the U.S.

federal government or private citizens.

The enforcement of applicable United States federal laws poses a significant risk to us.

Violations of any United States federal laws and regulations could result in significant fines, penalties, administrative sanctions, or settlements arising from civil proceedings conducted either by the United States federal government or private citizens.

We may also be subject to criminal charges under the CSA and, if convicted, could face a variety of penalties including, but not limited to, disgorgement of profits, cessation of business activities, or divestiture.

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Any event or circumstance that adversely affects the cannabis industry, such as the imposition of further restrictions on sales and marketing or further restrictions on sales in certain areas and markets, could have a material adverse effect on our business, financial condition, and results of operations.

Regulation of cannabis in the United States is uncertain.

Our activities are subject to regulation by various state and local government authorities.

Our business objectives are contingent upon, in part, compliance with regulatory requirements enacted by these governmental authorities and obtaining all regulatory approvals necessary for operation of our production and dispensary facilities and the sale of our products in the jurisdictions in which we operate.

Any delays in obtaining or failure to obtain necessary regulatory approvals would significantly delay our development of markets and products, which could have a material adverse effect on our business, results of operations, and financial condition.

Furthermore, while we believe that our operations are currently carried out in accordance with all applicable state and local rules and regulations, new rules and regulations could be enacted or existing rules and regulations may be applied in a manner that could limit or curtail our ability to distribute or produce cannabis and cannabis products.

Amendments to current laws and regulations governing the importation, distribution transportation and/or production of cannabis and cannabis products, or more stringent implementation thereof could have an adverse impact on us.

The re-classification of cannabis or changes in U.S.

controlled substance laws and regulations could have a material adverse effect on our business, financial condition, and results of operations.

We operate in a highly regulated sector and may not always succeed in complying fully with applicable regulatory requirements in all jurisdictions where we carry on business.

Our business and activities are heavily regulated in all jurisdictions where we conduct business.

Our operations are subject to various laws, regulations and guidelines by state and local governmental authorities relating to the manufacture, marketing, management, transportation, storage, sale, pricing and disposal of cannabis and cannabis oil, and also including laws and regulations relating to health and safety, insurance coverage, the conduct of operations and the protection of the environment.

Laws and regulations, applied generally, grant government agencies and self-regulatory bodies broad administrative discretion over our activities, including the power to limit or restrict business activities as well as impose additional disclosure requirements on our products and services.

Achievement of our business objectives is contingent, in part, upon compliance with regulatory requirements enacted by these governmental authorities and obtaining all necessary

regulatory approvals for the manufacture, production, storage, transportation, sale, import and export, as applicable, of our products.

The commercial cannabis industry is still a new industry at the state and local level.

The effect of relevant governmental authorities’ administration, application and enforcement of their respective regulatory regimes and delays in obtaining, or failure to obtain, applicable regulatory approvals which may be required may significantly delay or impact the development of markets, products and sales initiatives and could have a material adverse effect on our business, prospects, revenue, results of operation and financial condition.

Any failure to comply with the regulatory requirements applicable to our operations may lead to possible sanctions including the revocation or imposition of additional conditions on licenses to operate our business;

the suspension or expulsion from a particular market or jurisdiction or of our key personnel;

the imposition of additional or more stringent inspection, testing and reporting requirements;

and the imposition of fines and censures.

In addition, changes in regulations, more vigorous enforcement thereof or other unanticipated events could require extensive changes to our operations, increase compliance costs or give rise to material liabilities and/or revocation of our licenses and other permits, which could have a material adverse effect on our business, results of operations and financial condition.

Furthermore, governmental authorities may change their administration, application or enforcement procedures at any time, which may adversely impact our ongoing costs relating to regulatory compliance.

Maintaining compliance with complex and ever-changing regulations, including sometimes unclear regulations and laws, can be a difficult task, and a materially compliant business can be found in violation of one or more laws, rules or regulations while remaining materially or substantially compliant with applicable state cannabis laws.

The re-classification of cannabis or changes in United States controlled substance laws and regulations could have a material adverse effect on our business, financial condition, and results of operations.

If cannabis is re-classified as a Schedule II or lower controlled substance under the CSA, the ability to conduct research on the medical benefits of cannabis would most likely be more accessible.

However, if cannabis is re-categorized as a Schedule II or lower controlled substance, the resulting re-classification would result in the need for approval by the U.S.

Food and Drug Administration, or “FDA,” if medical claims are made about our medical cannabis products.

Drug Enforcement Administration, or the “DEA.” If so, we may be required to be registered to perform these activities and have the security, control, recordkeeping, reporting, and inventory mechanisms required by the DEA to prevent drug loss and diversion.

However, if cannabis is re-categorized as a Schedule II or lower controlled substance, the resulting re-classification would result in the need for approval by the United States Food and Drug Administration, or “FDA,” if medical claims are made about our medical cannabis products.

Moreover, any such reclassification could result in a significant degree of regulation relating to the manufacture, importation, exportation, domestic distribution, storage, sale, and use of such products by the United States Drug Enforcement Administration, or the “DEA.” If so, we may be required to be registered to perform these activities and have the security, control, recordkeeping, reporting, and inventory mechanisms required by the DEA to prevent drug loss and diversion.

Obtaining the necessary registrations may result in the delay in the manufacturing or distribution of our products.

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In certain circumstances, violations could lead to criminal proceedings.

Potential regulation by the DEA could have a material adverse effect on our business, financial condition, and results of operations.

federal government legalizes cannabis, it is possible that the FDA would seek to regulate it under the Food, Drug and Cosmetics Act of 1938.

Potential regulation by the FDA could have a material adverse effect on our business, financial condition, and results of operations.

If the United States federal government legalizes cannabis, it is possible that the FDA would seek to regulate it under the Food, Drug and Cosmetics Act of 1938.

Moreover, the FDA may issue rules and regulations, including good manufacturing practices related to the growth, cultivation, harvesting, and processing of medical cannabis.

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As a cannabis business, we are subject to certain tax provisions that have a material adverse effect on our business, financial condition, and results of operations.

Under Section 280E of the U.S.

Internal Revenue Code of 1986, or the “IRC,” “no deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities that comprise such trade or business) consists of trafficking in controlled substances within the meaning of Schedule I and II of the Controlled Substances Act, which is prohibited by federal law or the law of any state in which such trade or business is conducted,” This provision has been applied by the U.S.

Internal Revenue Service, or the “IRS,” to

cannabis operations, prohibiting them from deducting expenses directly associated with cannabis businesses.

Section 280E may have a lesser impact on cannabis cultivation and manufacturing operations than on sales operations.

Under Section 280E of the United States Internal Revenue Code of 1986, or the “IRC,” “no deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities that comprise such trade or business) consists of trafficking in controlled substances within the meaning of Schedule I and II of the Controlled Substances Act, which is prohibited by federal law or the law of any state in which such trade or business is conducted,” This provision has been applied by the United States Internal Revenue Service, or the “IRS,” to cannabis operations, prohibiting them from deducting expenses directly associated with cannabis businesses.

Section 280E may have a lesser impact on cannabis cultivation and manufacturing operations than on sales

Section 280E and related IRS enforcement activity has had a significant impact on the operations of cannabis companies.

Accordingly, an otherwise profitable business may, in fact, operate at a loss, after taking into account its U.S.

income tax expenses.

Accordingly, an otherwise profitable business may, in fact, operate at a loss, after taking into account its United States income tax expenses.

As a cannabis business, we may lack access to United States bankruptcy protections.

Many courts have denied cannabis businesses bankruptcy protections because the use of cannabis is illegal under federal law.

In the event of a bankruptcy, it would be very difficult for lenders to recoup their investments in the cannabis industry.

If the Company were to experience a bankruptcy, there is no guarantee that United States federal bankruptcy protections would be available to us, which would have a material adverse effect on us.

Cannabis businesses may be subject to civil asset forfeiture.

Any property owned by participants in the cannabis industry used in the course of conducting such business, or that is the proceeds of such business, could be subject to seizure by law enforcement and subsequent civil asset forfeiture because of the illegality of the cannabis industry under federal law.

Even if the owner of the property is never charged with a crime, the property in question could still be seized and subject to an administrative proceeding by which, with minimal due process, it could be subject to forfeiture.

Risks Related to Our Current Operations and Our Expansion Plan

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We are likely to continue to face increasing and intense competition from these companies.

Moreover, acquisitions and other consolidating transactions could harm us in a number of way, including losing customers, revenue and market share, or forcing us to expend greater resources to meet new or additional competitive threats all of which could harm our operating results.

Moreover, acquisitions and other consolidating transactions could harm us in a number of ways, including losing customers, revenue and market share, or forcing us to expend greater resources to meet new or additional competitive threats all of which could harm our operating results.

Increased competition by larger and better financed competitors could materially and adversely impact our business, financial condition and results of operations.

Such competition could also intensify and place downward pressure on retail prices of our products and services, which could negatively impact our profitability.

If the number of users of adult-use and medical marijuana in the U.S.

increases, the demand for products will increase.

If the number of users of adult-use and medical marijuana in the United States increases, the demand for products will increase.

As a result, we believe that competition could become more intense as current and future competitors begin to offer an increasing number of diversified products to respond to such increased demand.

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We may have difficulty accessing the service of banks, which may make it difficult for us to operate in certain markets.

As discussed above, the use of cannabis is illegal under U.S.

As discussed above, the use of cannabis is illegal under United States federal law.

Therefore, there are banks that will not accept for deposit funds from the sale of cannabis and may choose not to do business with the us.

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Marketing, advertising, packaging, and labeling regulations also vary from state to state, potentially limiting the consistency and scale of consumer branding communication and product education efforts.

The regulatory environment in the U.S.

limits our ability to compete for market share in a manner similar to other industries.

The regulatory environment in the United States limits our ability to compete for market share in a manner similar to other industries.

If we are unable to effectively market our products and compete for market share, or if the costs of compliance with government legislation and regulation cannot be absorbed through increased pricing of our products, our sales and operating results could be adversely affected.

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The failure to successfully develop, manage, and market new products could seriously harm our business, prospects, revenue, results of operation and financial condition.

We may be unable to obtain adequate insurance coverage.

We have insurance coverage with respect to workers’ compensation, general liability, directors’ and officers’ liability, fire and other similar policies customarily obtained for businesses to the extent commercially appropriate.

Nevertheless, since we are engaged in and operate within the cannabis industry, there are exclusions and additional difficulties and complexities associated with our insurance coverage that could cause us to suffer uninsured losses, which would then adversely affect our business, results of operations, and profitability.

There is no assurance that we will be able to obtain insurance coverage at a reasonable cost or fully utilize such insurance coverage, if necessary.

Our insurance coverage may be inadequate to cover all significant risk exposures.

We are exposed to liabilities that are unique to the products and services we provide.

While we intend to maintain insurance for certain risks, the amount of our insurance coverage may not be adequate to cover all claims or liabilities, and we may be forced to bear substantial costs resulting from risks and uncertainties in our business.

It is also not possible to obtain insurance to protect against all operational risks and liabilities.

Due to the nature of our business, we may have difficulty obtaining insurance because, compared to non-cannabis industries, (i) there are only a limited number of insurers willing to insure companies involved in the cannabis industry, (ii) there are fewer insurance products available to companies involved in the cannabis industry, (iii) insurance coverage generally is more expensive for companies involved in the cannabis industry, and (iv) available insurers, insurance products, and cost of coverage fluctuates frequently.

Failure to obtain adequate insurance coverage on terms favorable to us, or at all, could have a material adverse effect on our prospects, business, financial condition and results of operations.

We do not maintain business interruption insurance for most of our properties and operations.

Any business disruption or natural disaster could result in substantial costs and diversion of resources.

It may be difficult to evaluate us based on our past performance because we are transitioning our business into that of an owner of cannabis licenses and an operator of cannabis operations.

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In addition, the components of our revenue and costs are changing as we continue to move away from a fee-based-only business to a multi-state seed to sale operation.

We are subject to, and must be successful in addressing, the risks typically encountered by companies operating in the rapidly

evolving cannabis marketplace, including those risks relating to:

We are subject to, and must be successful in addressing, the risks typically encountered by companies operating in the rapidly evolving cannabis marketplace, including those risks relating to:

• the failure to develop brand name recognition and reputation;

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In the event we require additional financing and access to capital, the covenants and restrictions in our existing debt agreement may limit our options.

Our ability to raise additional capital and finance our expansion plan will be subject to contractual restrictions in instruments governing our indebtedness, including the Loan and Security Agreement between us, our subsidiaries, lenders from time-to-time party thereto, and Chicago Atlantic Admin, LLC, dated January 24, 2023.

Our ability to raise additional capital and finance our expansion plan will be subject to contractual restrictions in instruments governing our indebtedness, including our Needham Bank credit facility.

The contractual restrictions in the instrument governing such loan include restrictive covenants that limit our discretion with respect to certain business matters.

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If we are unable to satisfy our debt obligations due to insufficient cash flow or if we cannot refinance our indebtedness on commercially reasonable terms or at all, then our business, results of operations, and financial condition could be materially adversely affected.

Anti-Money Laundering Laws in the U.S.

may limit access to funds from banks and other financial institutions.

In February 2014, the Financial Crimes Enforcement Network, or “FinCEN,” bureau of the U.S.

Treasury Department issued guidance, which is not law, with respect to financial institutions providing banking services to cannabis businesses, including burdensome due diligence expectations and reporting requirements.

While the guidance advised prosecutors not to focus their enforcement efforts on banks or other financial institutions that serve marijuana-related businesses, so long as they meet certain conditions, this guidance does not provide any safe harbors or legal defenses from examination or regulatory or criminal enforcement actions by the U.S.

Department of Justice, or the “DOJ,” FinCEN, or other federal regulators.

Anti-Money Laundering Laws in the United States may limit access to funds from banks and other financial institutions.

In February 2014, the Financial Crimes Enforcement Network, or “FinCEN,” bureau of the United States Treasury Department issued guidance, which is not law, with respect to financial institutions providing banking services to cannabis businesses, including burdensome due diligence expectations and reporting requirements.

examination or regulatory or criminal enforcement actions by the United States Department of Justice, or the “DOJ,” FinCEN, or other federal regulators.

As a result of this guidance and the fact that such guidance may be amended or revoked at any time, most banks and other financial institutions have not been willing to provide banking services to cannabis-related businesses.

Additionally, banks may refuse to process debit card payments and credit card companies generally refuse to process credit card payments for cannabis-related businesses.

Accordingly, we may have only limited access to banking or other financial services in the U.S.

and may have to rely solely upon state-chartered banks.

Accordingly, we may have only limited access to banking or other financial services in the United States and may have to rely solely upon state-chartered banks.

If we are unable or limited in our ability to open or maintain bank accounts, obtain other banking services, or accept credit card and debit card payments, it may be difficult for us to operate and conduct our business as planned.

federal tax reporting, we may not be able to meet all applicable requirements.

While we are actively pursuing alternatives that ensure our operations will continue to be compliant with the FinCEN guidance, including requirements related to disclosures about cash management and United States federal tax reporting, we may not be able to meet all applicable requirements.

We are highly dependent upon certain key personnel.

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Qualified individuals within the cannabis industry are in high demand and we may incur significant costs to attract and retain qualified managerial personnel, or be unable to attract or retain personnel necessary to operate or expand our business.

The loss of the services of existing personnel or our failure to recruit additional key managerial personnel in a timely manner, or at all, could have a material adverse effect on our business and our ability to manage day-to-day operations, attract collaboration partners, attract and retain other employees, and generate revenues.

Any inability to attract and retain qualified management and other key personnel could have a material adverse effect on the Company’s ability to grow its business and operations.

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Future acquisitions could also result in the incurrence of debt, contingent liabilities, amortization expenses, or the impairment of goodwill, any of which could harm our financial condition.

Cybersecurity Risks

We employ information including operational technology systems to support our business and to collect, store, and/or use proprietary and confidential information.

Security and data breaches, cyberattacks, and other cybersecurity incidents involving our information technology systems, networks and infrastructure could disrupt or interfere with our operations;

result in the compromise and misappropriation of proprietary and confidential information belonging to us, our customers, suppliers, or employees;

and expose us to numerous expenses, liabilities, and other negative consequences, any or all of which could adversely impact our business, reputation, and results of operations.

In the ordinary course of business, we rely on centralized and local information technology networks and systems, some of which are provided, hosted, or managed by vendors and other third parties, to process, transmit, and store electronic information, and to manage or support various aspects of our business.

Additionally, we collect and store certain data, including proprietary business information, and has access to confidential or personal information in certain of our businesses that is subject to privacy and cybersecurity laws, regulations, and other controls.

Third parties and threat actors, including organized criminals, nation-state entities, and/or nation-state supported actors, regularly attempt to gain unauthorized access to information and operational technology networks and infrastructure, data, and other information, and many such attempts are becoming increasingly sophisticated.

Despite our cybersecurity counter measures (including employee and third-party training, monitoring of networks and systems, patching, maintenance, and backup of systems and data), our information and operational technology systems, networks and infrastructure are still potentially susceptible to cyber-attack, insider threat, compromise, damage, disruption, or shutdown, including as a result of the exploitation of known or unknown hardware or software vulnerabilities, or zero day attacks, in our systems or the systems of our vendors and third-party service providers, the introduction of computer viruses, malware or ransomware, service or cloud provider disruptions or security breaches, phishing attempts, employee error or malfeasance, power outages, telecommunication or utility failures, systems failures, natural disasters, or other catastrophic events.

Despite our cybersecurity counter measures, it is possible for security vulnerabilities or a cyberattack to remain undetected for an extended time period, up to and including several months, and the prioritization of decisions with respect to security measures and remediation of known vulnerabilities that we and the vendors and other third parties upon which we rely make may prove inadequate to protect against these attacks.

Any cybersecurity incident or information or operational technology network disruption could result in numerous negative consequences, including the risk of legal claims or proceedings, investigations or enforcement actions by regulators;

liabilities or penalties under applicable laws and regulations, including privacy laws and regulations in the United States interference with the our operations;

the incurrence of remediation costs;

loss of intellectual property protection;

the loss of customer, supplier, or employee relationships;

and damage to our reputation, any of which could adversely affect the our business.

The occurrence of cybersecurity incidents, or a deficiency in our cybersecurity or in those of any of our third-party service providers, could negatively impact our business by causing a financial loss, significant disruption to our operations, a compromise or corruption of our confidential information or damage to our business relationships or reputation, all of which could negatively impact our business, financial condition and results of operations.

In September 2023, we experienced a cybersecurity incident resulting from a fraudulent email sent to our finance department which resulted in our initiating a $0.7 million electronic payment to a fraudulent bank account.

As a result of this incident, we immediately launched an internal investigation, and engaged a cybersecurity consultant to fully assess the incident and recommend remediation measures, which have been implemented.

As cybersecurity threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any security vulnerabilities.

While we have implemented the remediation measures recommended by our cybersecurity consultant, such measures may not prevent all such events in the future.

We will continually assess cybersecurity threats and make investments to increase internal protection, detection, and response capabilities to address this risk.

To date, we have not experienced any material impact to the business or operations resulting from cybersecurity attacks, including the incident mentioned above.

However, because of the frequently changing attack techniques, along with the increasing volume and sophistication of the attacks, there is the potential for us to be adversely impacted.

This impact could result in reputational, competitive, operational or other business harm as well as financial losses and costs, all of which could negatively impact our business, financial condition and results of operations.

Although we maintain insurance coverage for certain cybersecurity risks, there can be no guarantee that all costs, damages, expenses or losses incurred will be fully insured.

While we maintain insurance policies that may cover certain liabilities in connection with a cybersecurity incident, we cannot be certain that our insurance coverage will be adequate for cyber security related liabilities actually incurred, that insurance will be available to us on commercially reasonable terms, or at all, or that any insurer will not deny coverage as to any present or future cyber claim.

The incurrence of material damages as a result of a cyber incident or the successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, results of operations and reputation.

Risks Related to Our Common Stock

The market for our common stock may be limited for holders of our securities who live in the U.S.

Given the heightened risk profile associated with cannabis in the U.S., capital market participants may be unwilling to assist with the settlement of trades for U.S.

resident securityholders of companies with operations in the U.S.

cannabis industry, which may prohibit or significantly impair the ability of securityholders in the U.S.

to trade our securities.

In the event residents of the U.S.

are unable to settle trades of our securities, this may affect the pricing of such securities in the market, the transparency and availability of trading prices and the liquidity of these securities.

The market for our common stock may be limited for holders of our securities who live in the United States.

Given the heightened risk profile associated with cannabis in the United States, capital market participants may be unwilling to assist with the settlement of trades for United States resident securityholders of companies with operations in the United States cannabis industry, which may prohibit or significantly impair the ability of securityholders in the United States to trade our securities.

In the event residents of the United States are unable to settle trades of our securities, this may affect the pricing of such securities in the market, the transparency and availability of trading prices and the liquidity of these securities.

Possible issuances of our capital stock would cause dilution to our existing stockholders.

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Therefore, we are still authorized to issue a substantial number of additional shares of common stock without obtaining shareholder approval.

In addition, we currently have outstanding 4.9 million shares of Series B preferred stock (which convert on a one-for-one basis into shares of our common stock) and 6.2 million shares of Series C preferred stock (which convert on a five-for-one basis into shares of our common stock).

In addition, we currently have outstanding 4,908,333 shares of Series B preferred stock (which convert on a one-for-one basis into shares of our common stock) and 1,155,274 shares of Series C preferred stock (which convert on a five-for-one basis into shares of our common stock).

Our Board of Directors is authorized to issue up to a total of 50 million shares of preferred stock (including the previously issued shares) with terms it designates without any further shareholder approval.

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shares of Series B preferred stock convertible into 4,908,333 shares of common stock;

shares of Series C preferred

stock convertible into 31,081,080 shares of common stock;

shares of Series C preferred stock convertible into 1,155,274 shares of common stock;

and restricted stock units convertible into 5,825,538 shares of common stock.

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• variations in our quarterly results of operations or cash flows or those of other comparable companies;

• revenues and operating results failing to meet the expectations of securities analysts or investors in a particular period;

• revenue and operating results failing to meet the expectations of securities analysts or investors in a particular period;

• changes in our pricing policies or the pricing policies of our competitors;

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We are an “emerging growth company” and will be able to take advantage of reduced disclosure requirements applicable to emerging growth companies, which could make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act and, for as long as we continue to be an emerging growth company, we intend to take advantage of certain exemptions from various reporting requirements applicable to other public companies, but not to emerging growth companies, including but not limited to, not being required to comply with the auditor attestation requirements of 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.

We could be an emerging growth company for up to five years, or until the earliest of (a) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion;

(b) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that are held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter;

or (c) the date on which we have issued more than $1 billion in non-convertible debt during the preceding fiscal year period.

We will remain an emerging growth company until the earliest of (a) December 31, 2026, (b) the last day of the first fiscal year in which our annual gross revenue is $1.235 billion or more;

(c) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that are held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter;

or (d) the date on which we have issued more than $1 billion in non-convertible debt during the preceding fiscal year period.

We expect to take advantage of these reporting exemptions described above until we are no longer an emerging growth company.

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Inferior internal controls could cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common 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