What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2024-03-13 compared with 2023-03-23 · 136 added, 157 removed, 603 unchanged (33% of the section changed)

3 unchanged sentences

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 Stock.

These risks include, among others:

4 unchanged sentences

state and local law, are illegal under U.S.

There is uncertainty surrounding the U.S.

federal government and Attorney General Merrick B.

Garland and their influence and policies in opposition to the cannabis industry.

The industry in which we operate is still developing and subject to extensive regulation.

3 unchanged sentences

We expect to incur significant ongoing costs and obligations related to our investment in infrastructure, growth, regulatory compliance and operations.

Our investors, directors, officers and employees may be subject to entry bans into the United States.

Our operations may become the subject of heightened scrutiny, which may lead to the imposition of additional restrictions.

Regulatory scrutiny of the industry in which we operate may negatively impact our ability to raise additional capital.

2 unchanged sentences

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 ”).

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 ”).

State and local governments may heavily regulate brands and forms of cannabis products.

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

Failure to comply with environmental laws, regulations and permitting requirements may result in enforcement actions.

Failure to obtain or maintain the necessary licenses, permits, authorizations or accreditations could have a material adverse effect on our business.

2 unchanged sentences

We may become subject to FDA or ATF regulation that may have an adverse effect on our business, and we may be subject to negative clinical trials.

Some of our planned business activities are contingent upon approval by the State of Nevada.

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

1 unchanged sentence

bankruptcy protections.

We face risks related to the material weaknesses in our internal control over financial reporting.

Risks Related to our Business and Operations

1 unchanged sentence

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

Our reliance on our operations in limited jurisdictions means that adverse changes or developments could have a material adverse effect on our business.

Our probable lack of business diversification could have a material adverse effect on our business.

6 unchanged sentences

We may encounter unknown environmental risks that may delay the development of our businesses.

Threats to our information technology system and potential cyber-attacks and security breaches could have a material adverse effect on our business.

Our business is subject to risks and hazards for which we may not be able to obtain insurance coverage.

Our business faces risks of exposure to product liability claims, regulatory action, complaints, enforcement action and litigation.

We may become party to litigation from time to time in the ordinary course of business.

Product recalls could lead to decreased demand for our products.

1 unchanged sentence

We rely on our executive officers, our key research and development personnel and our key growth and extraction personnel for our future success, and if any such persons were unable to continue in their present positions, we might not be able to replace them.

We could be liable for fraudulent or illegal activity by our employees, contractors and consultants.

In certain circumstances, our reputation could be damaged.

Unfavorable publicity or consumer perception could lead to a material adverse effect on the demand for our products and our business, results of operations, financial condition and cash flows.

Any significant interruption or negative change in the availability or economics of our supply chain could have a materially adverse impact on our business.

We are a holding company and are dependent on the earnings and distributions by our subsidiaries.

The termination of any of our leases may have a material adverse effect on our business, financial condition and prospects.

Competition for the acquisition and leasing of properties suitable for cannabis activities may impede our ability to make acquisitions or increase the cost of these acquisitions.

We face costs of maintaining a public listing and reporting requirements which could adversely affect our business, financial condition and results of operations.

Currency fluctuations could expose us to exchange risk.

6 unchanged sentences

We may not be able to effectively manage our growth and operations, which could materially and adversely affect our business.

The issuance of a significant number of shares of Common Stock in connection with the Pending Transaction with VidaCann LLC could adversely affect the market price of our Common Stock.

We may not consummate the Pending Transactions with VidaCann LLC.

Risks Related to Intellectual Property

1 unchanged sentence

federal trademark and patent protection may not be available for our intellectual property due to the current classification of cannabis as a Schedule I controlled substance.

Risks Related to our Common Shares

Risks Related to our Common Stock

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

2 unchanged sentences

federal income tax purposes and are subject to U.S.

Dividends received by Canadian holders of Common Shares are subject to U.S.

Dividends received by Canadian holders of Common Stock are subject to U.S.

withholdings tax.

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.

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

holders of the Common Shares to resell them over the CSE.

Future sales of the Common Shares by existing shareholders could reduce the market price of the Common Shares.

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

It may be difficult for U.S.

holders of the Common Stock to resell them over the CSE.

Future sales of the Common Stock by existing shareholders could reduce the market price of the Common Stock.

Risks Related to Regulation and our Industry

2 unchanged sentences

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 39 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.

4 unchanged sentences

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.

3 unchanged sentences

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.

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.

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.

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

25 unchanged sentences

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.

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.

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.

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.

Violations of any federal laws and regulations could result in significant fines, penalties, administrative sanctions, convictions or settlements arising from civil proceedings conducted by either the 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 us, including our reputation and ability to conduct business, our holding (directly or indirectly) of cannabis licenses in the United States, the listing of our securities on stock exchanges, our financial position, operating results, profitability or liquidity or the market price of our publicly traded Common Shares.

In addition, it is difficult to estimate the time or resources that would be needed for the investigation of any such matters or its 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.

9 unchanged sentences

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.

5 unchanged sentences

We may fail to successfully address these risks and uncertainties or successfully implement our operating strategies.

If we fail to do so, it could materially harm our business to the point of having to cease operations and could impair the value of the Common Shares to the extent that investors may lose their entire investments.

If we fail to do so, it could materially harm our business to the point of having to cease operations and could impair the value of the Common Stock to the extent that investors may lose their entire investments.

The size of our target market is difficult to quantify and investors will be reliant on their own estimates on the accuracy of market data .

14 unchanged sentences

We may incur significant losses in the future for a number of reasons, and unforeseen expenses, difficulties, complications and delays, and other unknown events.

If we are unable to achieve and sustain profitability, the market price of the Common Shares may significantly decrease .

If we are unable to achieve and sustain profitability, the market price of the Common Stock may significantly decrease .

Achievement of our business objectives is also contingent, in part, upon compliance with regulatory requirements enacted by governmental authorities and obtaining other required regulatory approvals.

7 unchanged sentences

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.

1 unchanged sentence

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.

1 unchanged sentence

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

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.

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.

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

Our operations may become the subject of heightened scrutiny, which may lead to the imposition of additional restrictions on our operations.

Currently, our Common Shares trade on the CSE and are quoted on the OTCQX in the United States.

Currently, our Common Stock trade on the CSE and are quoted on the OTCQX in the United States.

Our business, operations and investments in the United States, and any future business, operations or investments, may become the subject of heightened scrutiny by regulators, stock exchanges and other authorities in Canada and the United States.

2 unchanged sentences

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.

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.

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.

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

1 unchanged sentence

However, there can be no guarantee that this approach to regulation will continue in the future.

If such a ban were to be implemented at a time when the Common Shares are listed on a stock exchange, it would have a material adverse effect on the ability of holders of the Common Shares to make and settle trades.

In particular, the Common Shares would become highly illiquid until an alternative was implemented, investors would have no ability to effect a trade of the Common Shares through the facilities of the applicable stock exchange.

If such a ban were to be implemented at a time when the Common Stock are listed on a stock exchange, it would have a material adverse effect on the ability of holders of the Common Stock to make and settle trades.

In particular, the Common Stock would become highly illiquid until an alternative was implemented, investors would have no ability to effect a trade of the Common Stock through the facilities of the applicable stock exchange.

Regulatory scrutiny of the industry in which we operate may negatively impact our ability to raise additional capital.

9 unchanged sentences

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.

3 unchanged sentences

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.

10 unchanged sentences

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.

35 unchanged sentences

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. 

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

31 unchanged sentences

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.

3 unchanged sentences

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.

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.

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.

2 unchanged sentences

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.

federal bankruptcy protections would be available, which would have a material adverse effect on us.

Our internal controls over financial reporting may not be effective, which could have a significant and adverse effect on our business.

We face risks related to the material weaknesses in our internal control over financial reporting .

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.

2 unchanged sentences

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

We have identified material weaknesses in our internal controls over financial reporting.

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.

While we have undertaken substantial work to maintain effective internal controls and have taken action to remediate the material weaknesses identified in connection with the Restatement, we cannot be certain that we will be successful in our remediation efforts or in maintaining adequate internal controls over our financial reporting.

As a result of the material weaknesses, management determined that our internal control over financial reporting and disclosure controls and procedures were ineffective as of December 31, 2023.

If we fail to maintain an effective system of internal controls over financial reporting and disclosure controls and procedures, we may not be able to accurately determine our financial results or prevent fraud.

Risks Related to our Business and Operations

2 unchanged sentences

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.

43 unchanged sentences

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.

8 unchanged sentences

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.

9 unchanged sentences

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.

21 unchanged sentences

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, complaints, and enforcement 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.

Litigation, complaints, and enforcement 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 Stock and our future cash flows, earnings, results of operations and financial condition.

We may become party to litigation from time to time in the ordinary course of business which could have a material adverse effect on us.

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.

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.

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 Stock and our future cash flows, earnings, results of operations and financial condition.

Product recalls could lead to decreased demand for our products and could have a material adverse effect on our results of operations and financial condition.

16 unchanged sentences

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.

Our success has depended, and continues to depend, upon our ability to attract and retain key management, including our Co-CEOs, Chief Financial Officer, Vice-President of Finance, Vice-President of Operations, Vice-President of Sales and Marketing, General Counsel and technical experts.

Our success has depended, and continues to depend, upon our ability to attract and retain key management, including our Co-CEOs, Chief Financial Officer, Chief Administrative Officer, Vice-President of Operations, General Counsel and technical experts.

We will attempt to enhance our management and technical expertise by continuing to recruit qualified individuals who possess desired skills and experience in certain targeted areas.

25 unchanged sentences

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.

31 unchanged sentences

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.

20 unchanged sentences

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. 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.

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.

5 unchanged sentences

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.

Accordingly, shareholders of the Common Stock 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.

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

12 unchanged sentences

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.

16 unchanged sentences

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.

3 unchanged sentences

We could encounter additional transaction and integration related costs or other factors such as the failure to realize all of the benefits from the acquisition.

All of these factors could cause dilution to our revenue per share or decrease or delay the anticipated accretive effect of the acquisition and cause a decrease in the market price of the Common Shares.

We may not be able to effectively manage our growth and operations, which could materially and adversely affect our business.

2 unchanged sentences

We intend to utilize outsourced resources and hire additional personnel to manage our expected growth and expansion.

Failure to successfully manage our possible growth and development could have a material adverse effect on our business and the value of the Common Shares.

Failure to successfully manage our possible growth and development could have a material adverse effect on our business and the value of the Common Stock.

There is a risk that some or all of the anticipated strategic and financial benefits may fail to materialize, may not continue on their existing terms, or may not occur within the time period anticipated.

1 unchanged sentence

Although we are not aware of any specific liabilities, such liabilities may be unknown and, accordingly, the potential monetary cost of such liability is also unknown.

The issuance of a significant number of our Common Shares in connection with the Arrangement could adversely affect the market price of our Common Shares.

The Arrangement closed on March 2, 2022 and resulted in a significant number of additional Common Shares being issued and available for trading in the public market.

The increase in the number of our Common Shares may lead to sales of such shares or the perception that such sales may occur, either of which may adversely affect the market for, and the market price of, our Common Shares.

The issuance of a significant number of shares of our Common Stock in connection with the Pending Transaction with VidaCann LLC could adversely affect the market price of our Common Stock.

The pending transaction with VidaCann LLC will result in a significant number of additional shares of Common Stock being issued and available for trading in the public market.

The increase in the number of shares of our Common Stock may lead to sales of such shares or the perception that such sales may occur, either of which may adversely affect the market for, and the market price of, our Common Stock.

We may not consummate the Pending Transactions with VidaCann LLC.

There can be no assurances that the pending transactions with VidaCann LLC (the “ Pending Transaction ”) will be consummated on the terms described herein or at all, or that the consummation of the Pending Transactions will not be delayed beyond the expected closing dates.

The completion of the Pending Transaction is subject to a number of closing conditions, some of which are out of our control.

If the Pending Transaction is delayed, not consummated or consummated on terms different from those described herein, the market price of our Common Stock may decline.

Risks Related to Intellectual Property

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.

5 unchanged sentences

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; 

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;

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

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.

4 unchanged sentences

In addition, because the regulatory framework of the cannabis industry is in a constant state of flux, we can provide no assurance that we will ever obtain any protection of our intellectual property, whether on a federal, state or local level.

Risks Related to our Common Shares

Risks Related to our Common Stock

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.

1 unchanged sentence

As of March 13, 2024:

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.

Groesbeck owns, or controls or directs, directly or indirectly, a total of 38,974,609 shares of Common Stock, and 281,255 restricted share units (“ Restricted Share Units ” or “ RSUs ”), representing in the aggregate approximately 17.42% 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 39,625,879 shares of Common Stock and 281,255 RSUs, representing in the aggregate approximately 17.71% 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, and their interests may conflict with those of our other shareholders.

Groesbeck and Scheffler have the power to exercise significant influence over all matters requiring shareholder approval, including the election of directors, amendments to our bylaws, mergers, business combinations and the sale of substantially all of our assets, and their interests may conflict with those of our other shareholders.

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

1 unchanged sentence

Further, sales by either Messrs.

Groesbeck and Scheffler of a substantial number of Common Shares could cause the market price of the Common Shares to decline.

Groesbeck and Scheffler of a substantial number of shares of Common Stock could cause the market price of the Common Stock to decline.

We are a U.S.

6 unchanged sentences

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.

3 unchanged sentences

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.

2 unchanged sentences

and Canadian income tax, which could have a material adverse effect on our financial condition and results of operations.

Because the Common Shares are treated as shares of a U.S.

Because the shares of Common Stock are treated as shares of a U.S.

domestic corporation, the U.S.

gift, estate and generation-skipping transfer tax rules may apply to a Non-U.S.

Holder of Common Shares.

Dividends received by Canadian holders of Common Shares are subject to U.S.

Holder of Common Stock.

Dividends received by Canadian holders of Common Stock are subject to U.S.

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 Stock who are residents of Canada for purposes of the Income Tax Act (Canada) (the “ Tax Act ”) will be subject to U.S.

withholding tax.

1 unchanged sentence

withholding taxes may not be available to such holder.

Dividends received by non-resident holders of Common Shares who are U.S.

Dividends received by non-resident holders of Common Stock who are U.S.

holders will not be subject to U.S.

4 unchanged sentences

source income for purposes of the foreign tax credit rules under the Code.

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.

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 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.

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

The market price for the Common Stock 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 Stock; (vi) sales or perceived sales of additional Common Stock; (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.

Accordingly, the market price of the Common Shares may decline even if our operating results, underlying asset values or prospects have not changed.

Accordingly, the market price of the Common Stock may decline even if our operating results, underlying asset values or prospects have not changed.

Additionally, these factors, as well as other related factors, may cause decreases in asset values that are deemed to be other than temporary, which might result in impairment losses.

There can be no assurance that continuing fluctuations in price and volume will not occur.

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 for U.S.

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

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

It may be difficult for U.S.

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

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.

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.

1 unchanged sentence

Accordingly, U.S.

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.

residents who acquire the Common Stock 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.

will have on the ability of U.S.

residents to resell any of the Common Shares that they may acquire in open market transactions.

residents to resell any of the Common Stock that they may acquire in open market transactions.

Generally, given the heightened risk profile associated with cannabis in the United States, capital markets participants may be unwilling to assist with the settlement of trades for U.S.

2 unchanged sentences

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

Future sales of the Common Shares by existing shareholders could reduce the market price of the Common Shares.

Sales of a substantial number of the Common Shares in the public market could occur at any time.

These sales, or the market perception that the holders of a large number of the Common Shares intend to sell the Common Shares, could reduce the market price of the Common Shares.

Additional Common Shares may be available for sale into the public market, subject to applicable securities laws, which could reduce the market price for the Common Shares.

Holders of our incentive stock options may have an immediate income inclusion for tax purposes when they exercise their options (that is, tax is not deferred until they sell the underlying Common Shares).

As a result, these holders may need to sell the Common Shares purchased on the exercise of options in the same year that they exercise their options.

This might result in a greater number of Common Shares being sold in the public market, and fewer long-term holds of Common Shares by our management and employees.

Unresolved Staff Comments.

Future sales of the Common Stock by existing shareholders could reduce the market price of the Common Stock.

Sales of a substantial number of shares of the Common Stock in the public market could occur at any time.

These sales, or the market perception that the holders of a large number of shares of the Common Stock intend to sell such shares, could reduce the market price of the Common Stock.

Additional shares of Common Stock may be available for sale into the public market, subject to applicable securities laws, which could reduce the market price for the Common Stock.

As a result, these holders may need to sell the Common Stock purchased on the exercise of options in the same year that they exercise their options.

This might result in a greater number of shares of Common Stock being sold in the public market, and fewer long-term holds of Common Stock by our management and employees.

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