What changed in this filing

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Item 1A. Risk Factors

2023-03-23 compared with 2022-03-28 · 124 added, 94 removed, 636 unchanged (26% of the section changed)

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This summary does not address all of the risks related to our business.

Additional discussion of the risks summaries may be found under the “ Risk Factors ” section and elsewhere in this Annual Report on Form 10-K, and should be carefully considered before making a decision to invest in our Common Shares.

Additional discussion of the risks summaries may be found under the “

Risk Factors ”

section and elsewhere in this Annual Report on Form 10-K, and should be carefully considered before making a decision to invest in our Common Shares.

These risks include, among others:

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controlled substance laws and regulations could have a material adverse effect on our business.

We may incur significant tax liabilities due to limitations on tax deductions and credits under section 280E of the Internal Revenue Code of 1986, as amended, (the “ Code ”).

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We may incur significant tax liabilities due to limitations on tax deductions and credits under section 280E of the Internal Revenue Code of 1986, as amended, (the “

Code ”).

We may have difficulty accessing the service of banks and processing credit card payments in the future.

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Risks Related to our Business and Operations

The full effect of the COVID-19 pandemic on our operations is unknown at this time, and it may continue to have a significant negative effect on us in the future.

The full effect of the COVID-19 pandemic on our operations is unknown at this time, and it may cause a significant negative effect on us in the future.

We face increasing competition that may materially and adversely affect our business, financial condition and results of operations.

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Unlike in Canada, which has federal legislation uniformly governing the cultivation, distribution, sale and possession of medical cannabis under the Access to Cannabis for Medical Purposes Regulations (Canada) and the Cannabis Act (Canada), in the United States, cannabis is largely regulated at the state level.

To date, a total of 36 states, Washington D.C., and the territories of Guam, Puerto Rico, the U.S.

To date, a total of 39 states, Washington D.C., and the territories of Guam, Puerto Rico, the U.S.

Virgin Islands, and the Northern Mariana Islands, have legalized medical cannabis in some form, and 15 of those states, Washington D.C., and the territories of Guam and the Northern Mariana Islands have legalized recreational cannabis.

If the DOJ policy were to aggressively pursue financiers or equity owners of cannabis-related business, and United States attorneys followed such DOJ policies through pursuing prosecutions, then we could face:

(i) seizure of our cash and other assets used to support or derived from our cannabis subsidiaries; and (ii) the arrest of our employees, directors, officers, managers and investors, who could face charges of ancillary criminal violations of the CSA for aiding and abetting and conspiring to violate the CSA by virtue of providing financial support to state-licensed or permitted cultivators, processors, distributors, and/or retailers of cannabis.

(i) seizure of our cash and other assets used to support or derived from our cannabis subsidiaries;

and (ii) the arrest of our employees, directors, officers, managers and investors, who could face charges of ancillary criminal violations of the CSA for aiding and abetting and conspiring to violate the CSA by virtue of providing financial support to state-licensed or permitted cultivators, processors, distributors, and/or retailers of cannabis.

Additionally, as has recently been affirmed by U.S.

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federal government, through both the U.S.

Drug Enforcement Administration (the “ DEA ”) and the U.S.

Internal Revenue Service (the “ IRS ”), has the right to actively investigate, audit and shut-down cannabis growing facilities and retailers.

Drug Enforcement Administration (the “

DEA ”) and the U.S.

Internal Revenue Service (the “

IRS ”), has the right to actively investigate, audit and shut-down cannabis growing facilities and retailers.

federal government may also attempt to seize our property.

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Because the possession, use, cultivation, and transfer of cannabis and any related drug paraphernalia is illegal under U.S.

federal law, and any such acts are criminal acts under federal law under any and all circumstances under the CSA, an investor’s contribution to and involvement in such activities may result in federal civil and/or criminal prosecution, including forfeiture of his, her or its entire investment.

We may also be deemed to be aiding and abetting illegal activities through the contracts we have entered into and the products that we intend to provide.

As a result, U.S.

law enforcement authorities, in their attempt to regulate the illegal use of cannabis and any related drug paraphernalia, may seek to bring an action or actions against us, including, but not limited to, aiding and abetting another’s criminal activities.

federal aiding and abetting statute provides that anyone who “commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal.” As a result of such an action, we may be forced to cease operations and be restricted from operating in the U.S., and our investors could lose their entire investment.

As a result of such an action, we may be forced to cease operations and be restricted from operating in the U.S., and our investors could lose their entire investment.

Such an action would have a material negative effect on our business and operations.

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Garland was sworn in on March 11, 2021 as the 86th U.S.

Attorney General, and it remains unknown what position he or President Biden’s administration will take regarding federal enforcement actions against the cannabis industry.

With the repeal of the Cole Memorandum by former Attorney General Jeff Sessions, the Department of Justice could allege that we and our Board and, potentially our shareholders, “aided and abetted” violations of federal law by providing finances and services to our portfolio cannabis companies.

Under these circumstances, it is possible that the federal prosecutor would seek to seize our assets and to recover the “illicit profits” previously distributed to shareholders resulting from any of the foregoing financing or services.

Attorney General, and it remains unknown what position he or President Biden’s administration will take regarding federal enforcement actions against the cannabis industry.

violations of federal law by providing finances and services to our portfolio cannabis companies.

Under these circumstances, it is possible that the federal prosecutor would seek to seize our assets and to recover the “illicit profits”

previously distributed to shareholders resulting from any of the foregoing financing or services.

In these circumstances, our operations would cease, shareholders may lose their entire investment and our directors, officers and/or shareholders may be left to defend any criminal charges against them at their own expense and, if convicted, be sent to federal prison.

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Future research and clinical trials may draw opposing conclusions to statements contained in the articles, reports and studies currently favored, or could reach different or negative conclusions regarding the medical benefits, viability, safety, efficacy, dosing or other facts and perceptions related to medical cannabis, which could adversely affect social acceptance of cannabis and the demand for our products and dispensary services.

Accordingly, there is no assurance that the cannabis industry and the market for medicinal and/or adult-use cannabis will continue to exist and grow as currently anticipated or function and evolve in a manner consistent with management’s expectations and assumptions.

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.

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Entry happens at the sole discretion of the U.S.

Customs and Border Protection (“ CBP ”) officers on duty, and these officers have wide latitude to ask questions to determine the admissibility of a foreign national.

Customs and Border Protection (“

CBP ”) officers on duty, and these officers have wide latitude to ask questions to determine the admissibility of a foreign national.

The government of Canada has started warning travelers on its website that previous use of cannabis, or any substance prohibited by United States federal laws, could mean denial of entry to the United States.

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On September 21, 2018, CBP released a statement outlining its current position with respect to enforcement of the laws of the United States.

It stated that Canada’s legalization of cannabis will not change CBP enforcement of United States laws regarding controlled substances, and because cannabis continues to be a controlled substance under United States law, working in or facilitating the proliferation of the legal cannabis industry in U.S.

states where it is deemed legal or Canada may affect admissibility to the United States.

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As described above, on October 9, 2018, CBP released an additional statement regarding the admissibility of Canadian citizens working in the legal cannabis industry.

CBP stated that a Canadian citizen working in or facilitating the proliferation of the legal cannabis industry in Canada coming into the United States for reasons unrelated to the cannabis industry will generally be admissible to the United States; however, if such person is found to be coming into the United States for reasons related to the cannabis industry, such person may be deemed inadmissible.

however, if such person is found to be coming into the United States for reasons related to the cannabis industry, such person may be deemed inadmissible.

Any entry bans against our investors, directors, officers and employees may have a material adverse effect on us.

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It had been reported in Canada that the Canadian Depository for Securities Limited is considering a policy shift that would see its subsidiary, CDS Clearing and Depository Services Inc.

(“ CDS ”), refuse to settle trades for cannabis issuers that have investments in the United States.

CDS is Canada’s central securities depository, clearing and settling trades in the Canadian equity, fixed income and money markets.

On February 8, 2018, following discussions with the Canadian Securities Administrators and recognized Canadian securities exchanges, the TMX Group announced the signing of a Memorandum of Understanding (“ MOU ”) with Aequitas NEO Exchange Inc., the CSE, the Toronto Stock Exchange, and the TSX Venture Exchange.

The MOU outlines the parties’ understanding of Canada’s regulatory framework applicable to the rules, procedures, and regulatory oversight of the exchanges and CDS as it relates to issuers with cannabis-related activities in the United States.

CDS ”), refuse to settle trades for cannabis issuers that have investments in the United States.

CDS is Canada’s central securities depository, clearing and settling trades in the Canadian equity, fixed income and money markets.

MOU ”) with Aequitas NEO Exchange Inc., the CSE, the Toronto Stock Exchange, and the TSX Venture Exchange.

The MOU outlines the parties’

understanding of Canada’s regulatory framework applicable to the rules, procedures, and regulatory oversight of the exchanges and CDS as it relates to issuers with cannabis-related activities in the United States.

The MOU confirms, with respect to the clearing of listed securities, that CDS relies on the exchanges to review the conduct of listed issuers.

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Because the manufacture, distribution, and dispensation of cannabis remains illegal under the CSA, banks and other financial institutions providing services to cannabis-related businesses risk violation of federal anti-money laundering statutes, the unlicensed money-remitter statute and the Bank Secrecy Act.

These statutes can impose criminal liability for engaging in certain financial and monetary transactions with the proceeds of a “specified unlawful activity” such as distributing controlled substances which are illegal under federal law, including cannabis, and for failing to identify or report financial transactions that involve the proceeds of cannabis-related violations of the CSA.

These statutes can impose criminal liability for engaging in certain financial and monetary transactions with the proceeds of a “specified unlawful activity”

such as distributing controlled substances which are illegal under federal law, including cannabis, and for failing to identify or report financial transactions that involve the proceeds of cannabis-related violations of the CSA.

In the event that any of our investments, or any proceeds thereof, any dividends or distributions therefrom, or any profits or revenues accruing from such investments in the United States are found to be in violation of money laundering legislation or otherwise, such transactions may be viewed as proceeds of crime under one or more of the statutes noted above or any other applicable legislation.

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controlled substance laws and regulations could have a material adverse effect on our business.

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 FDA if medical claims are made about our medical cannabis products.

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 FDA if medical claims are made about our medical cannabis products.

As a result of such a re-classification, the manufacture, importation, exportation, domestic distribution, storage, sale and use of such products could become subject to a significant degree of regulation by the DEA.

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Under a number of cases, the United States Supreme Court has held that income means gross income (not gross receipts).

Under this reasoning, the cost of goods sold (“ COGS ”) is permitted as a reduction in determining gross income, notwithstanding Section 280E.

Under this reasoning, the cost of goods sold (“

COGS ”) is permitted as a reduction in determining gross income, notwithstanding Section 280E.

Although proper reductions for COGS are generally allowed to determine gross income, the scope of such items has been the subject of debate, and deductions for significant costs may not be permitted.

While there are currently several pending cases before various administrative and federal courts challenging these restrictions, there is no guarantee that these courts will issue an interpretation of Section 280E favorable to cannabis businesses.

Thus, we, to the extent of our “trafficking” activities, and/or key contract counterparties directly engaged in trafficking in cannabis, have incurred significant tax liabilities from the application of Section 280E.

Thus, we, to the extent of our “trafficking”

activities, and/or key contract counterparties directly engaged in trafficking in cannabis, have incurred significant tax liabilities from the application of Section 280E.

Our income tax obligations under Section 280E of the Code are typically substantially higher as compared to companies to which Section 280E does not apply.

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In addition, under Nevada cannabis laws, any beneficial holder of any of our securities, regardless of the number of shares, may be required to file an application, be investigated, and have his or her suitability as a beneficial holder of the voting securities determined if the CCB has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of Nevada.

State-license applications or state-regulator license award announcements, including state-run license lotteries, may not result in issuance of a license to us, conditional or otherwise.

For example, as of the date of this Annual Report on Form 10-K, IDFPR has not issued us a conditional license in Illinois and there can be no assurance that such a license will be issued.

State-license applications or state-regulator license award announcements, including state-run license lotteries, may not result in issuance of a license to us, conditional or otherwise. 

Additionally, conditional licenses we hold or we may receive may not pass final inspections or requirements imposed by regulators, and would expire.

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It is also possible that the federal government could seek to regulate cannabis under the U.S.

Bureau of Alcohol, Tobacco, Firearms and Explosives (the “ ATF ”).

Bureau of Alcohol, Tobacco, Firearms and Explosives (the “

ATF ”).

The ATF may issue rules and regulations related to the use, transporting, sale and advertising of cannabis or cannabis products, including smokeless cannabis products.

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Our objective is to build out a portion of the Planet 13 Las Vegas Superstore for use as an on-site cannabis consumption lounge as part of its phased expansion plans.

In order to operate a consumption lounge, we are reliant on the CCB passing the required regulations to enable on-site consumption lounges.

There is no guarantee that the CCB will pass the required regulations, and there is no guarantee that if the regulations are passed that we will be awarded the necessary license(s) to operate a consumption lounge.

Should we not be awarded the necessary licenses, we may be unable to position the reserved space at the Planet 13 Las Vegas Superstore to its highest and best intended use.

California is considering a revised statutory framework for agency consolidation and tax simplification in 2022.

We, through our subsidiary Newtonian, hold the California Licenses issued under the MAUCRSA statutory framework in California.

California’s Department of Cannabis Control under the administration of Governor Gavin Newsom (the “ Newsom Administration ”) consolidated the California Licensing Agencies into a single department and approved consolidated emergency regulations which are now in effect.

The regulations create consistent standards for cannabis licenses across all license types, which may impact the processes, procedures, administration, and generally the operations of commercial cannabis licenses in California.

The Newsom Administration is also considering tax simplification in 2022, which would shift the responsibilities of tax collection from the final distributor to the first for cultivation, and for the retail excise tax from the distributor to the retailer.

While we are closely following the Newsom Administration’s budget proposals and revisions and will provide public comment, the enacted form of the uniform licensing protocols and regulatory clean-up as part of a short-term and longer-term strategy are unknown and the regulations and regulatory impact on the licenses and operations therefrom is not currently known.

We are in the process of converting our prospective consumption lounge license to conditional status after which we will be subject to final approval from CCB before becoming operational.

There is no guarantee that the CCB will grant us the final license.

Should we not be awarded the necessary license, we may be unable to position the reserved space at the Planet 13 Las Vegas Superstore to its highest and best intended use.

We could be subject to criminal prosecution or civil liabilities under RICO.

The Racketeer Influenced Corrupt Organizations Act (“ RICO ”) criminalizes the use of any profits from certain defined “racketeering” activities in interstate commerce.

The Racketeer Influenced Corrupt Organizations Act (“

RICO ”) criminalizes the use of any profits from certain defined “racketeering”

activities in interstate commerce.

While intended to provide an additional cause of action against organized crime, due to the fact that cannabis is illegal under U.S.

federal law, the production and sale of cannabis qualifies cannabis related businesses as “racketeering” as defined by RICO.

federal law, the production and sale of cannabis qualifies cannabis related businesses as “racketeering”

as defined by RICO.

As such, all officers, managers and owners in a cannabis related business could be subject to criminal prosecution under RICO, which carries substantial criminal penalties.

RICO can create civil liability as well:

persons harmed in their business or property by actions which would constitute racketeering under RICO often have a civil cause of action against such “racketeers,” and can claim triple their amount of estimated damages in attendant court proceedings.

persons harmed in their business or property by actions which would constitute racketeering under RICO often have a civil cause of action against such “racketeers,”

and can claim triple their amount of estimated damages in attendant court proceedings.

We, as well as our officers, managers and owners, could all be subject to civil claims under RICO.

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

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

If we experience a bankruptcy, there is no guarantee that U.S.

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We are subject to various SEC reporting and other regulatory requirements.

We have incurred and will continue to incur expenses and, to a lesser extent, diversion of our management’s time in our efforts to comply with Section 404 of the Sarbanes-Oxley Act regarding internal controls over financial reporting.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud.

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Risks Related to our Business and Operations

The full effect of the COVID-19 pandemic on our operations is unknown at this time, and it may continue to have a significant negative effect on us in the future.

As reflected in the Management’s Discussion & Analysis, the COVID-19 pandemic has had a negative effect on our business.

While the continued impact of COVID-19 on us remains unknown, continued spread of COVID-19 or its variants may have a material adverse effect on global economic activity, and can result in volatility and disruption to global supply chains, labor productivity, operations, mobility of people as a result of travel restrictions and border closures and the financial markets, which could affect interest rates, credit ratings, credit risk, inflation, business, financial conditions, results of operations and expected timelines and other factors relevant to us.

The current global uncertainty with respect to the spread of COVID-19 or its variants and its effect on the broader global economy may have a significant negative effect on us.

Management is committed to keeping our retail stores open to customers but continues to monitor the situation on a daily basis and is prepared to take necessary actions in response to directives of government and public health authorities, and any actions that are in the best interests of our team members, customers, and other stakeholders.

We have already taken and will continue to take actions to mitigate the effects of COVID-19 on our operations, such as the expansion of our fleet of delivery vehicles, while protecting the health and safety of our team members, customers and other stakeholders.

Uncertain economic conditions resulting from the COVID-19 pandemic may, in the short or long term, adversely impact demand for our products.

We rely on consumers’ demand for the cannabis products we sell in our retail stores.

Consumer spending may decline across cannabis retail.

Such a situation could adversely affect our business, financial condition, liquidity and results of operations.

A limited or general decline in consumption of cannabis products could occur in the future due to a variety of factors related to the COVID-19 pandemic, including:

(i) a continued decline in economic or geopolitical conditions, including increased or prolonged unemployment, resulting in reduced consumer disposable income; (ii) concern about the health consequences of consuming cannabis products given the increased awareness of health concerns during this time; and (iii) a general decline in consumers leaving their homes and favoring online shopping, resulting in less foot traffic in our retail stores.

Many of the third-party statistics or data presented herein predate the COVID-19 pandemic, and forecasts or estimates may be impacted by economic or regulatory changes resulting from the pandemic.

Although we have yet to experience a material decline in consumer spending, the ultimate impact is currently unknown and may become significant as consumers continue to experience financial hardship from prolonged unemployment.

The full effect of the COVID-19 pandemic on our operations is unknown at this time, and it may cause a significant negative effect on us in the future.

We caution that current global uncertainty with respect to the spread of COVID-19 or its variants and its effect on the broader global economy may have a significant negative effect on us.

While the continued impact of COVID-19 on us remains unknown, continued spread of COVID-19 or its variants may have a material adverse effect on global economic activity and can, and in some cases, has resulted in volatility and disruption to global supply chains, operations, mobility of people and the financial markets, which could and may continue to affect interest rates, credit ratings, credit risk, inflation, business, financial conditions, results of operations and other factors relevant to us.

Long-term economic impacts relating to COVID-19 and state and national fiscal policy related to combatting the economic impacts of COVID-19 may have a long-term detrimental impact on customer spending, costs of customer acquisition, and may be a driver for rapid inflation which could negatively affect our customers’

discretionary spending capability or increase our materials and labor costs in future periods.

We face increasing competition that may materially and adversely affect our business, financial condition and results of operations.

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Acceptance of our products depends on several factors, including availability, cost, ease of use, familiarity of use, convenience, effectiveness, consistency of product quality and reliability.

If these customers do not accept our products, or if such products fail to adequately meet customers’ needs and expectations, our ability to continue generating revenues could be reduced.

If these customers do not accept our products, or if such products fail to adequately meet customers’

needs and expectations, our ability to continue generating revenues could be reduced.

We may be adversely impacted by rising or volatile energy costs.

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Threats to our information technology systems and potential cyber-attacks and security breaches could have a material adverse effect on our business, reputation and financial condition .

Our operations depend, in part, on how well we and our suppliers protect networks, equipment, information technology (“ IT ”) systems and software against damage and threats, including, but not limited to, cable cuts, damage to physical plants, natural disasters, intentional damage and destruction, fire, power loss, hacking, computer viruses, vandalism and theft.

Our operations depend, in part, on how well we and our suppliers protect networks, equipment, information technology (“

IT ”) systems and software against damage and threats, including, but not limited to, cable cuts, damage to physical plants, natural disasters, intentional damage and destruction, fire, power loss, hacking, computer viruses, vandalism and theft.

Our operations also depend on the timely maintenance and replacement of network equipment, IT systems and software, as well as pre-emptive expenses to mitigate associated risks.

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

We are subject to laws, rules and regulations in the United States (such as the California Consumer Privacy Act (“ CCPA ”)) and other jurisdictions relating to the collection, processing, storage, transfer and use of personal data.

We are subject to laws, rules and regulations in the United States (such as the California Consumer Privacy Act (“

CCPA ”)) and other jurisdictions relating to the collection, processing, storage, transfer and use of personal data.

Our ability to execute transactions and to possess and use personal information and data in conducting our business subjects us to legislative and regulatory burdens that may require us to notify regulators and customers, employees and other individuals of a data security breach.

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We or our subsidiaries may also be party to litigation or subject to claims from time to time in the ordinary course of business.

Monitoring and defending against legal actions, whether or not meritorious, can be time-consuming, divert management’s attention and resources and cause us to incur significant expenses.

Adverse outcomes in some or all of these actions may result in significant monetary damages or injunctive relief that could result in material liability or adversely affect our ability to conduct our business.

Litigation and other claims are subject to inherent uncertainties and management’s view of these matters may change in the future.

Litigation, complaints, and actions involving either us and/or our subsidiaries, regardless of the outcome, could consume considerable amounts of financial and other corporate resources, adversely impact our reputation and have a material adverse effect on the market price of our Common Shares and our future cash flows, earnings, results of operations and financial condition.

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Any event or circumstance that affects the recreational or medical cannabis industry or market could have a material adverse effect on our business, financial condition and results of operations.

No assurances can be given that this industry and market will continue to exist or grow as currently estimated or anticipated, or function and evolve in a manner consistent with management’s expectations and assumptions.

A failure in the demand for products to materialize as a result of competition, technological change or other factors could have a material adverse effect on our business, results of operations and financial condition.

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Further, adverse publicity reports or other media attention regarding the safety, efficacy and quality of cannabis in general, or our products specifically, or associating the consumption of cannabis with illness or other negative effects or events, could have such a material adverse effect.

Such adverse publicity reports or other media attention could arise even if the adverse effects associated with such products resulted from consumers’ failure to consume such products appropriately or as directed.

Such adverse publicity reports or other media attention could arise even if the adverse effects associated with such products resulted from consumers’

failure to consume such products appropriately or as directed.

Public opinion and support for medical and recreational cannabis has traditionally been inconsistent and varies from jurisdiction to jurisdiction.

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As a public company with securities listed on the CSE, there are costs associated with legal, accounting and other expenses related to regulatory compliance.

Securities legislation and the rules and policies of the CSE require listed companies to, among other things, adopt corporate governance and related practices, and to continuously prepare and disclose material information, all of which add to a company’s legal and financial compliance costs.

We may also elect to devote greater resources than we otherwise would have on communication and other activities typically considered important by publicly traded companies.

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In addition, there can be no assurance that future financing can be obtained without substantial dilution to existing shareholders.

Our inability to raise financing through traditional banking to fund ongoing operations, capital expenditures or acquisitions could limit our growth and may have a material adverse effect on our business, prospects, revenue, results of operation and financial condition.

Our inability to raise financing through traditional banking or other channels to fund ongoing operations, capital expenditures or acquisitions could limit our growth and may have a material adverse effect on our business, prospects, revenue, results of operation and financial condition.

We expect to continue to have access to equity and debt financing from the public and prospectus exempt (private placement) markets in Canada.

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However, we can provide no assurances that access to such sources of capital will be available in the future.

Commercial banks, private equity firms and venture capital firms have approached the cannabis industry cautiously to date.

However, there are increasing numbers of high net worth individuals and family offices that have made meaningful investments in companies and projects similar to our projects.

Although there has been an increase in the amount of private financing available over the last several years, there is neither a broad nor deep pool of institutional capital that is available to cannabis license holders and license applicants.

There can be no assurance that additional financing, if raised privately, will be available to us when needed or on terms that are acceptable, particularly if the U.S.

Commercial banks, private equity firms and venture capital firms have approached the cannabis industry cautiously to date. There can be no assurance that additional financing will be available to us when needed or on terms that are acceptable, particularly if the U.S.

federal authorities change their position toward enforcing the CSA.

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Management has broad discretion in the application of our available funds.

Accordingly, shareholders of the Common Shares will have to rely upon the judgment of management with respect to the use of available funds, with only limited information concerning management’s specific intentions.

Our management may spend a portion or all of the available funds in ways that our shareholders might not desire, that might not yield a favorable return and that might not increase the value of a shareholder’s investment.

The failure by management to apply these funds effectively could harm our business.

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Our actual financial position and results of operations may differ materially from the expectations of management.

Our actual financial position and results of operations may differ materially from management’s expectations.

As a result, our revenue, net income and cash flow may differ materially from our projected revenue, net income and cash flow.

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If integration is not managed successfully by our management, we may experience interruptions in our business activities, deterioration in our employee, customer or other relationships, increased costs of integration and harm to our reputation, all of which could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.

If and when we acquire cannabis businesses, we may obtain the rights to applications for licenses as well as licenses; however, the procurement of such applications for licenses and licenses generally will be subject to governmental and regulatory approval.

If and when we acquire cannabis businesses, we may obtain the rights to applications for licenses as well as licenses;

however, the procurement of such applications for licenses and licenses generally will be subject to governmental and regulatory approval.

There are no guarantees that we will successfully consummate such acquisitions, and even if we consummate such acquisitions, the procurement of applications for licenses may never result in the grant of a license by any state or local governmental or regulatory agency and the transfer of any rights to licenses may never be approved by the applicable state and/or local governmental or regulatory agency.

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We may be forced to litigate to defend our intellectual property rights, or to defend against claims by third parties against us relating to intellectual property rights.

We may be forced to litigate to enforce or defend our intellectual property rights, to protect our trade secrets or to determine the validity and scope of other parties’ proprietary rights.

We may be forced to litigate to enforce or defend our intellectual property rights, to protect our trade secrets or to determine the validity and scope of other parties’

proprietary rights.

Any such litigation could be very costly and could distract management from focusing on operating our business.

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Despite these efforts, any of the following occurrences may reduce the value of any of our intellectual property:

The market for our products and services may depend to a significant extent upon the goodwill associated with our trademarks and trade names, and our ability to register certain of our intellectual property under U.S.

The market for our products and services may depend to a significant extent upon the goodwill associated with our trademarks and trade names, and our ability to register certain of our intellectual property under U.S.

federal and state law is impaired by the illegality of cannabis under U.S.

federal law; 

federal and state law is impaired by the illegality of cannabis under U.S.

Patents in the cannabis industry involve complex legal and scientific questions and patent protection may not be available for some or any products;

Our applications for trademarks and copyrights relating to our business may not be granted and, if granted, may be challenged or invalidated;

Issued patents, trademarks and registered copyrights may not provide us with competitive advantages;

Our efforts to protect our intellectual property rights may not be effective in preventing misappropriation of any of our products or intellectual property;

Our efforts may not prevent the development and design by others of products or marketing strategies similar to or competitive with, or superior to those we develop;

Another party may assert a blocking patent and we would need to either obtain a license or design around the patent in order to continue to offer the contested feature or service in our products; or

federal law;

Patents in the cannabis industry involve complex legal and scientific questions and patent protection may not be available for some or any products;

Our applications for trademarks and copyrights relating to our business may not be granted and, if granted, may be challenged or invalidated;

Issued patents, trademarks and registered copyrights may not provide us with competitive advantages;

Our efforts to protect our intellectual property rights may not be effective in preventing misappropriation of any of our products or intellectual property;

Our efforts may not prevent the development and design by others of products or marketing strategies similar to or competitive with, or superior to those we develop;

Another party may assert a blocking patent and we would need to either obtain a license or design around the patent in order to continue to offer the contested feature or service in our products; or

The expiration of patent or other intellectual property protections for any assets we own could result in significant competition, potentially at any time and without notice, resulting in a significant reduction in sales.

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Risks Related to our Common Shares

Our Co-CEOs are able to exert significant influence over all matters requiring shareholder approval.

Our Co-CEOs are able to exert significant influence over all matters requiring shareholder approval and may have interests that conflict with those of our other shareholders.

Robert Groesbeck and Larry Scheffler, the Co-CEOs, co-Chairmen and each a director of the Company, are promoters of the Company.

As of March 23, 2023:

Groesbeck owns, or controls or directs, directly or indirectly, a total of 38,818,935 Common Shares, and 562,511 restricted share units (“ Restricted Share Units ” or “ RSUs ”), representing in the aggregate approximately 16.92% of the equity of the Company on a fully diluted basis; and (ii) Mr.

Scheffler owns, or controls or directs, directly or indirectly, a total of 39,470,205 Common Shares and 562,511 RSUs, representing in the aggregate approximately 17.20% of the equity of the Company on a fully diluted basis.

Groesbeck owns, or controls or directs, directly or indirectly, a total of 38,818,935 Common Shares, and 562,510 restricted share units (“

Restricted Share Units ”

RSUs ”), representing in the aggregate approximately 17.52% of the equity of the Company on a fully diluted basis;

Scheffler owns, or controls or directs, directly or indirectly, a total of 39,470,205 Common Shares and 562,510 RSUs, representing in the aggregate approximately 17.81% of the equity of the Company on a fully diluted basis.

By virtue of their status as our principal shareholders, and by each being a director and/or our executive officer, each of Messrs.

Groesbeck and Scheffler have the power to exercise significant influence over all matters requiring shareholder approval, including the election of directors, amendments to our articles, mergers, business combinations and the sale of substantially all of our assets.

As a result, we could be prevented from entering into transactions that could be beneficial to us or our other shareholders.

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income tax on our worldwide income, and any dividends paid by us to holders of our shares not domiciled in the U.S.

Holders ”) are generally subject to U.S.

federal income tax withholding at a 30% rate or such lower rate as provided in an applicable treaty.

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In addition, Section 382 of the Code contains rules that limit for U.S.

federal income tax purposes the ability of a corporation that undergoes an “ownership change” to utilize its net operating losses (and certain other tax attributes) existing as of the date of such ownership change.

Under these rules, a corporation generally is treated as having had an “ownership change” if there is more than a 50% increase in stock ownership by one or more “five percent shareholders,” within the meaning of Section 382 of the Code, during a rolling three-year period.

federal income tax purposes the ability of a corporation that undergoes an “ownership change”

to utilize its net operating losses (and certain other tax attributes) existing as of the date of such ownership change.

Under these rules, a corporation generally is treated as having had an “ownership change”

if there is more than a 50% increase in stock ownership by one or more “five percent shareholders,”

within the meaning of Section 382 of the Code, during a rolling three-year period.

We do not have any net operating loss carry forwards or research and development credit carry forwards as of December 31, 2017 that would be subject to Section 382 of the Code.

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withholdings tax .

Dividends received by holders of Common Shares who are residents of Canada for purposes of the Income Tax Act (Canada) (the “ Tax Act ”) will be subject to U.S.

Dividends received by holders of Common Shares who are residents of Canada for purposes of the Income Tax Act (Canada) (the “

Tax Act ”) will be subject to U.S.

withholding tax.

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The market price for the Common Shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond our control, including the following:

(i) actual or anticipated fluctuations in our quarterly results of operations; (ii) recommendations by securities research analysts; (iii) changes in the economic performance or market valuations of companies in the industry in which we operate; (iv) addition or departure of our executive officers and other key personnel; (v) release or expiration of lock-up or other transfer restrictions on outstanding Common Shares; (vi) sales or perceived sales of additional Common Shares; (vii) significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or our competitors; (viii) fluctuations to the costs of vital production materials and services; (ix) changes in global financial markets and global economies and general market conditions, such as interest rates and pharmaceutical product price volatility; (x) operating and share price performance of other companies that investors deem comparable to us or from a lack of market comparable companies; (xi) news reports relating to trends, concerns, technological or competitive developments, regulatory changes and other related issues in our industry or target markets; and (xii) regulatory changes in the industry.

(i) actual or anticipated fluctuations in our quarterly results of operations;

(ii) recommendations by securities research analysts;

(iii) changes in the economic performance or market valuations of companies in the industry in which we operate;

(iv) addition or departure of our executive officers and other key personnel;

(v) release or expiration of lock-up or other transfer restrictions on outstanding Common Shares;

(vi) sales or perceived sales of additional Common Shares;

(vii) significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or our competitors;

(viii) fluctuations to the costs of vital production materials and services;

(ix) changes in global financial markets and global economies and general market conditions, such as interest rates and product price volatility;

(x) operating and share price performance of other companies that investors deem comparable to us or from a lack of market comparable companies;

(xi) news reports relating to trends, concerns, technological or competitive developments, regulatory changes and other related issues in our industry or target markets;

and (xii) regulatory changes in the industry.

Financial markets have at times historically experienced significant price and volume fluctuations that have particularly affected the market prices of equity securities of companies and that have often been unrelated to the operating performance, underlying asset values or prospects of such companies.

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If such increased levels of volatility and market turmoil continue, our operations could be adversely affected and the trading price of the Common Shares might be materially adversely affected.

It may be difficult, if not impossible, for U.S.

It may be difficult for U.S.

holders of the Common Shares to resell them over the CSE or at all.

It has come to management’s attention that all major securities clearing firms in the U.S.

have ceased participating in transactions related to securities of Canadian public companies involved in the medical and adult use cannabis industry in the US.

Major securities clearing firms in the U.S.

have ceased participating or may be unwilling to participate in transactions related to securities of Canadian public companies involved in the medical and adult use cannabis industry in the US.

This appears to be due to the fact that cannabis continues to be listed as a controlled substance under U.S.

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Accordingly, U.S.

residents who acquire the Common Shares as “restricted securities” may find it difficult - if not impossible - to resell such shares over the facilities of any Canadian stock exchange on which the shares may then be listed including the CSE.

residents who acquire the Common Shares as “restricted securities”

may find it difficult to resell such shares over the facilities of any Canadian stock exchange on which the shares may then be listed including the CSE.

It remains unclear what impact, if any, this and any future actions among market participants in the U.S.

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

What changed 10-K

Item 1A. Risk Factors