What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2021-06-29 compared with 2020-08-24 · 251 added, 494 removed, 249 unchanged (75% of the section changed)

The following risk factors should be read carefully in connection with evaluating our business and the forward-looking statements contained in this Annual Report on Form 10-K.

The following risk factors should be read carefully in connection with evaluating our business and the forward-looking statements contained in this Annual Report.

Any of the following risks could materially adversely affect our business, our operating results, our financial condition, and the actual outcome of matters as to which forward-looking statements are made in this Annual Report.

We may from time to time make written or oral forward-looking statements, including statements contained in filings with the SEC, in reports to stockholders and in press releases and investor calls and webcasts.

You can identify these forward-looking statements by use of words such as “strategy,” “expects,” “continues,” “plans,” “anticipates,” “believes,” “will,” “estimates,” “intends,” “projects,” “goals,” “targets” and other words of similar meaning.

You can also identify them by the fact that they do not relate strictly to historical or current facts.

We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions.

Achievement of future results is subject to risks, uncertainties and inaccurate assumptions.

Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated, or projected.

Investors should bear this in mind as they consider forward-looking statements and whether to invest in or remain invested in Pyxus International, Inc.

securities or in the securities of New Pyxus following the effectiveness of the Plan, as it, though its subsidiaries, will continue to operate the businesses we operate immediately prior to the effectiveness of the Plan.

In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we are identifying important risk factors that, individually or in the aggregate, could cause actual results and outcomes to differ materially from those contained in any forward-looking statements made by us;

any such statement is qualified by reference to the following cautionary statements.

We elaborate on these and other risks we face throughout this document.

It is not possible to predict or identify all risk factors.

Consequently, the following should not be considered a complete discussion of all potential risks or uncertainties.

We do not undertake to update any forward-looking statement that we may make from time to time.

Risks Related to the Chapter 11 Cases

As a result of the Chapter 11 Cases, our historical financial information may not be indicative of our future performance, which may be volatile.

During the Chapter 11 Cases, we expect our financial results to be volatile as restructuring activities and expenses, contract terminations and rejections, and claims assessments significantly impact our consolidated financial statements.

As a result, our historical financial performance is likely not indicative of our financial performance after the date of the filing of the Chapter 11 Cases.

Certain information contained in our historical financial statements will not be comparable to the information contained in our financial statements after the application of fresh start accounting.

If the Company meets the criteria set forth in Accounting Standards Codification Topic 852 – Reorganizations (“ASC 852”), New Pyxus will adopt the fresh start accounting rules upon emergence from Chapter 11, in which case its assets and liabilities will be recorded at fair value as of the fresh start reporting date, which may differ materially from the recorded values of assets and liabilities on our consolidated balance sheets.

The accompanying consolidated financial statements do not reflect the adoption of fresh start accounting.

The Chapter 11 Cases may have a material adverse impact on our business, financial condition, results of operations, and cash flows.

The Chapter 11 Cases could have a material adverse effect on our business, financial condition, results of operations and liquidity.

In the months prior to and during the pendency of the Chapter 11 Cases, our management was required to spend a significant amount of time and effort dealing with the restructuring instead of focusing on our business operations.

In addition, as a result of the Chapter 11 Cases, our customers, farmers and other suppliers might lose confidence in us and may seek to establish alternative commercial relationships, which may cause, among other things, our suppliers, farmers, vendors, counterparties and service providers to renegotiate the terms of our agreements, attempt to terminate their relationship with us or require financial assurances from us.

Many of our suppliers, farmers, vendors and other providers may require stricter terms and conditions, and we may not find these terms and conditions acceptable.

Any failure to timely obtain suitable inventory at competitive prices could materially adversely affect our businesses, financial condition, liquidity and results of operations.

We have typically financed our non-U.S.

local leaf tobacco operations with short-term operating credit lines at the local level.

These operating lines are typically seasonal in nature, normally extending for a term of 180 to 270 days corresponding to the tobacco crop cycle in that location.

Certain of these facilities are uncommitted in that the lenders have the right to cease making loans or demand payment of outstanding loans at any time.

As a result of the Chapter 11 Cases, these local lenders may lose confidence in us and, with respect to uncommitted facilities, may cease making loans or demand payment of outstanding loans or, with respect to committed facilities, decline to renew or extend existing facilities, or require stricter terms and conditions with respect to future facilities, and we may not find these terms and conditions acceptable or they may overly restrict our ability to conduct our businesses successfully.

An inability to maintain adequate financing to fund our non-U.S.

local leaf tobacco operations in any significant location could result in a significant decline in our revenues, profitability and cash flow.

Even if the Plan is consummated and becomes effective, we may not be able to achieve our stated goals and we cannot assure you of our ability to continue as a going concern.

Even if the Plan is consummated and becomes effective, we may continue to face a number of risks, such as changes in economic conditions, continued impacts of the COVID-19 pandemic, changes in the leaf tobacco market and the markets for our other products, other changes in demand for our products and increasing expenses.

Some of these risks may become more acute because of our involvement in the Chapter 11 Cases.

As a result of these risks and others, we cannot guarantee that the Plan will achieve our stated goals.

Furthermore, even though certain of our debts will be discharged through the Plan, we may need to raise additional funds through public or private debt or equity financing or other various means to fund our business after the completion of the Chapter 11 Cases, including short-term operating credit lines to fund the needs of our non-U.S.

Risks Related to Our Liquidity

We may not be able to achieve our stated goals, which may adversely affect our liquidity.

Even though the Plan has been consummated, we continue to face a number of risks, such as changes in economic conditions, continued impacts of the COVID-19 pandemic, changes in the leaf tobacco market and the markets for our other products, other changes in demand for our products and increasing expenses.

We may need to raise additional funds through public or private debt or equity financing or other various means to fund our business, including short-term operating credit lines to fund the needs of our non-U.S.

local leaf tobacco operations.

1 unchanged sentence

Therefore, adequate funds may not be available when needed or may not be available on favorable terms, or at all.

As a result, we cannot assure you of our ability to continue as a going concern following the consummation and effectiveness of the Plan.

Risks Relating to Our Tobacco Operations

Developments with respect to our liquidity needs and sources of liquidity could result in a deficiency in liquidity.

Our liquidity requirements are affected by various factors from our core tobacco leaf business, including crop seasonality, foreign currency and interest rates, green tobacco prices, customer mix and shipping requirements, crop size, and quality.

Our leaf tobacco business is seasonal, and purchasing, processing, and selling activities have several associated peaks where cash on-hand and outstanding indebtedness may vary significantly during the fiscal year.

We anticipate periods in the next twelve months during which our liquidity needs will approach the levels of our anticipated available cash and permitted borrowings under our credit facilities.

Developments affecting our liquidity needs, including with respect to the foregoing factors, and sources of liquidity, including impacts affecting our cash flows from operations (including as a result of delays with respect to the anticipated timing of shipments of leaf tobacco, whether due to the impact of COVID-19 or customer preferences) and the availability of capital resources (including an inability to renew or refinance seasonal lines of credit), may result in a deficiency in liquidity.

To address a potential liquidity deficiency, we may continue to undertake plans to minimize cash outflows, which could include exiting operations that do not generate positive cash flow.

It is possible that, depending on the occurrence of events affecting our liquidity needs and sources of liquidity, such plans may not be sufficient to adequately or timely address a liquidity deficiency.

We may be unable to continue to access short-term operating credit lines to fund local operations on terms that are acceptable or at all.

We have historically financed our non-U.S.

local leaf tobacco operations with short-term operating credit lines at the local level.

These operating lines are typically seasonal in nature, corresponding to the tobacco crop cycle in that location.

Certain of these facilities are uncommitted in that the lenders have the right to cease making loans or demand payment of outstanding loans at any time.

Moreover, as these facilities mature, local lenders may not renew them or otherwise offer replacement financing facilities.

Since the commencement of the Chapter 11 Cases, the terms and conditions on which certain local lenders have agreed to offer short-term operating credit lines have become more restrictive.

If local lenders lose confidence in us, they may cease making loans or demand payment of outstanding loans with respect to uncommitted facilities or, with respect to committed facilities, decline to renew or extend existing facilities, or require stricter terms and conditions with respect to future facilities.

We may not find these terms and conditions acceptable or they may overly restrict our ability to conduct our

businesses successfully.

An inability to maintain adequate financing to fund our non-U.S.

local leaf tobacco operations in any significant location could result in a significant decline in our revenues, profitability and cash flow and may require us to exit operations in that jurisdiction.

Risks Related to our Indebtedness

We have substantial debt which may adversely affect us by limiting future sources of financing, interfering with our ability to pay interest, and principal on our indebtedness and subjecting us to additional risks.

We have a significant amount of indebtedness and d ebt service obligations.

As of March 31, 2021, we had approximately $925.5 million in aggregate principal amount of indebtedness.

This indebtedness included (i) approximately $67.5 million of outstanding borrowings pursuant to an Exit ABL Credit Agreement (the “ABL Credit Agreement”), dated as of August 24, 2020 by and among, amongst others, our Pyxus Holdings, Inc.

subsidiary (“Pyxus Holdings”), certain lenders party thereto and Wells Fargo Bank, National Association, as administrative agent and collateral agent which governs an asset-based revolving credit facility (the “ABL Credit Facility”) which permits borrowings in an initial maximum principal amount of $75.0 million, subject to certain limitations, and matures on February 24, 2023, (ii) approximately $215.6 million in aggregate principal amount of term loans (the “Term Loans”) under an Exit Term Loan Credit Agreement, dated as of August 24, 2020 (the “Term Loan Credit Agreement”), by and among, amongst others, Pyxus Holdings, certain lenders party thereto and Alter Domus (US) LLC, as administrative agent and collateral agent, which Term Loans mature on February 24, 2025, (iii) approximately $267.4 million in aggregate principal amount of 10.00% Senior Secured First Lien Notes due 2024 (the “Notes”) of Pyxus Holdings pursuant to an Indenture (the “Indenture”) dated as of August 24, 2020 among Pyxus Holdings, the initial guarantors party thereto (including Pyxus International, Inc.), and Wilmington Trust, National Association, as trustee, and collateral agent, which Notes mature on August 24, 2024, and (iv) approximately $116.4 million in aggregate outstanding borrowings under a Second Amendment and Restatement Agreement (the “TDB Facility Agreement”) among Alliance One International Holdings, Ltd., a subsidiary of Pyxus and the Company’s subsidiaries in Kenya, Malawi, Tanzania, Uganda and Zambia and Eastern and Southern African Trade and Development Bank (“TDB”), which TDB Facility Agreement terminates on June 30, 2021 for Kenya and Uganda and on June 30, 2022 for Malawi, Tanzania, and Zambia and may be renewed at TDB’s discretion.

Such indebtedness does not include borrowings under a $120.0 million delayed-draw term loan lending facility (the “DDTL Facility”) established under a term loan credit agreement (the “DDTL Facility Credit Agreement”) dated April 23, 2021 among Intabex Netherlands B.V.

(“Intabex”), our indirect wholly owned subsidiary, as the borrower, the Company, Pyxus Holdings, Pyxus Parent, Inc., Alliance One International, LLC and Alliance One International Holdings, Ltd as guarantors, and certain funds managed by Glendon Capital Management LP and Monarch Alternative Capital LP, as lenders, which borrowings were $120.0 million at Ju ne 29, 20 21.

Our substantial debt could have important consequences, including:

• making it more difficult for us to satisfy our obligations with respect to the ABL Credit Facility, the Term Loans, the Notes, the DDTL Facility and our other obligations;

• limiting our ability to obtain additional financing on satisfactory terms and to otherwise fund working capital, capital expenditures, debt refinancing, acquisitions, and other general corporate requirements;

• hampering our ability to adjust to changing market conditions;

• increasing our vulnerability to general adverse economic and industry conditions;

• placing us at a competitive disadvantage compared to our competitors that have less debt or are less leveraged;

• limiting our flexibility in planning for, or reacting to, changes in our business, and the industries in which we operate;

• restricting us from making strategic acquisitions or exploiting business opportunities.

We require a significant amount of cash to service our indebtedness.

Our ability to generate cash depends on many factors beyond our control.

We require a significant amount of cash to service our indebtedness, and a substantial portion of our cash flow is required to fund the interest payments on our indebtedness.

Our ability to service our indebtedness and to fund planned capital expenditures depends on our ability to generate cash.

This is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control, including the continuing impact of the COVID-19 pandemic.

Also, a substantial portion of our debt, including any borrowings under the ABL Credit Facility, bears interest at variable rates.

If market interest rates increase, variable-rate debt will create higher debt-service requirements, which would adversely affect our cash flow.

We cannot assure you that our businesses will generate sufficient cash flow from operations or that future borrowings will be available to us under in an amount sufficient to enable us to service our indebtedness or to fund our other liquidity needs.

We may not be able to refinance or renew our indebtedness, including the ABL Credit Facility, the Term Loans, the Notes, the DDTL Facility, or indebtedness under the TDB Facility Agreement, other seasonal credit lines, or other credit facilities, which may have a material adverse effect on our financial condition.

We may not be able to renew or refinance our indebtedness, including the ABL Credit Facility, the Term Loans, the Notes, the DDTL Facility or indebtedness under the TDB Facility Agreement, other seasonal credit lines, or other credit facilities, on substantially similar terms, or at all.

Our ability to access short-term and long-term lending and capital markets to obtain, and the availability of acceptable terms and conditions of, financing are impacted by many factors, including:

(i) our credit ratings;

(ii) the liquidity and volatility of the overall lending and capital markets;

and (iii) the current state of the economy, including the tobacco industry.

There can be no assurances that we will be able to access the lending and capital markets to refinance our indebtedness.

We may have to pay additional fees and expenses that we might not have to pay under normal circumstances, and we may have to agree to terms that could increase the cost of our debt structure.

If we are unable to renew or refinance our indebtedness on terms that are not materially less favorable than the terms currently available to us or obtain alternative or additional financing arrangements, we may not be able to timely repay certain of our indebtedness, which may result in a default under other indebtedness.

Failure to refinance or renew any material indebtedness would have a material adverse effect on our financial condition.

We may not be able to satisfy the covenants included in our financing arrangements, which could result in the default of our outstanding debt obligations.

The agreement governing the ABL Credit Facility includes certain restrictive covenants and a springing covenant requiring that our fixed charge coverage ratio be no less than 1.00 to 1.00 during any cash dominion period under the ABL Credit Agreement.

Certain agreements governing our seasonal credit facilities, including the TDB Agreement, include financial and restrictive covenants applicable to the subsidiaries that borrow thereunder and in certain cases with respect to Pyxus.

The agreements governing our other indebtedness, including the Term Loan Credit Agreement, the Indenture and the DDTL Facility Credit Agreement, also include restrictive covenants.

These covenants limit our ability to, among other things:

• incur additional indebtedness or issue disqualified stock or preferred stock;

• make investments;

• pay dividends and make other restricted payments;

• sell certain assets;

• create liens;

• consolidate, merge, sell or otherwise dispose of all or substantially all of their assets;

• enter into transactions with affiliates;

• designate subsidiaries as Unrestricted Subsidiaries (as defined in the ABL Credit Agreement, the Indenture and the Term Loan Credit Agreement).

Complying with these covenants may cause us to take actions that we otherwise would not take or not take actions that we otherwise would take.

Our failure to comply with certain of these covenants could result in an event of default which, if not cured or waived, could result in the acceleration of a substantial portion of our indebtedness, much of which is cross-defaulted to other indebtedness.

In the past, we sought and obtained waivers and amendments under our then-existing financing arrangements to avoid future non-compliance with financial covenants and cure past defaults under restrictive covenants, including recent waivers with respect to financial covenants included in the TDB Facility Agreement and waivers under the Indenture, ABL Credit Facility and the Term Loan Credit Agreement with respect to the commencement of the CCAA Proceeding and the contemplated disposition of the Canadian Cannabis Subsidiaries.

We also paid significant fees to obtain certain of these waivers and consents.

You should consider this in evaluating our ability to comply with financial and restrictive covenants in our debt instruments and the financial costs of our ability to do so.

We cannot assure you that we will be able to maintain compliance with, or obtain waivers and amendments related to, financial or restrictive covenants in the future.

Despite current indebtedness levels, we may still be able to incur substantially more debt.

This could exacerbate further the risks associated with our significant leverage.

We may be able to incur substantial additional indebtedness in the future to the extent permitted under the ABL Credit Agreement, the Term Loan Credit Agreement, the Indenture and the DDTL Facility Credit Agreement.

As of March 31, 2021 , $352.6 million was available for borrowing under our short and long-term credit facilities.

If new debt is added to our current debt levels, the risks discussed above could intensify.

Risks Related to the COVID-19 Pandemic

We have been and will likely continue to be negatively impacted by the COVID-19 global pandemic and its related impacts to our employees, operations, customers and suppliers .

The COVID-19 pandemic has adversely affected, and is likely to continue to adversely affect, our businesses, and we have experienced and expect to continue to experience delays in shipments of leaf tobacco and other disruptions to our operations.

we have been, and may in the future be, required to suspend operations at certain facilities as a result of similar governmental orders.

We cannot predict whether our operations classified as “essential” will continue to be so classified or, even if so classified, whether site-specific health and safety concerns related to COVID-19 might otherwise require operations at any of our facilities to be halted for some period of time.

Other operational disruptions may result from restrictions on the ability of employees and others in the supply chain to travel and work, such as caused by quarantine or individual illness, or which may result from border closures imposed by governments to deter the spread of COVID-19, or determinations by us or shippers to temporarily suspend operations in affected areas, or other actions which restrict the ability to ship our products or which may otherwise negatively impact our ability to ship our products.

Ports or channels of entry may be closed, operate at only a portion of capacity or require quarantining of vessels, or transportation of products within a region or country may be limited, if workers are unable to report to work due to travel restrictions or personal illness.

These factors have also impacted certain of our suppliers and we have been and will likely continue to be impacted by disruptions in the supply of certain materials used in our operations.

The COVID-19 pandemic may further damage our business due to negative consumer purchasing behavior with respect to the products of our leaf tobacco customers and our other products.

Public health officials around the world have recommended, and local, state, and national governments have mandated, precautions to mitigate the spread of COVID-19, including prohibitions on congregating in groups, shelter-in-place orders or similar measures.

Consumer purchasing behavior may be impacted by reduced consumption by consumers who may not be able to leave home or otherwise shop in a normal manner as a result of these restrictions.

In addition, in view of uncertainties with respect to the spread of COVID-19 and the duration and terms of related governmental orders restricting activities, we cannot predict whether demand for our products will persist at current levels or decrease on a global or regional basis.

Due to the scope of our operations, including emerging markets, and our sale to customers around the world, the impact of the COVID-19 pandemic on our operations and the demand for our products may not coincide with impacts experienced in the United States in the event that the impacts in the United States improve over time due to increased vaccinations or improved medical treatments.

Accordingly, to the extent that the impact of the COVID-19 pandemic in the United States may improve over time, results of operations may continue to be adversely affected by COVID-19 impacts in other areas of the world.

Risks Related to Our Business Strategy

Our Board of Directors was reconstituted in connection with and following the effectiveness of the Plan in the Chapter 11 Cases and may implement changes in our business strategy that could affect the scope of our operations, including the countries in which we continue to operate and the business lines that we continue to pursue, and may result in the recognition of restructuring or asset impairment charges.

Our corporate business strategy is subject to continued development and evaluation by our management and Board of Directors.

In connection with the effectiveness of the Plan in the Chapter 11 Cases, the Company’s Board of Directors was reconstituted, with six of the seven members of the Board of Directors having joined the Board of Directors on or after the August 24, 2020 effective date of the Plan.

The new directors have different backgrounds, experiences and perspectives from those individuals who previously served on the Board of Directors of Old Pyxus at the time of the commencement of the Chapter 11 Cases and, thus, may have different views on the issues that will determine our future, including our strategic plans.

The Board of Directors, as reconstituted, has determined to change our business strategy and exit our industrial hemp and Canadian cannabis businesses.

The Board of Directors may further determine, from time to time, to implement additional changes in our business strategy, which could affect the scope of our operations, including the countries in which we continue to operate and the business lines that we continue to pursue.

Such changes could result in our incurring restructuring charges or the impairment of assets that could materially adversely impact our results of operations.

Risks Relating to Our Leaf Tobacco Operations

Our reliance on a small number of significant customers may adversely affect our financial statements.

The customers of our leaf tobacco business are manufacturers of cigarette and other tobacco products.

Several of these customers individually account for a significant portion of our sales in a normal year.

For the year ended March 31, 2020, each of Philip Morris International, Inc.

and China Tobacco International Inc., including their respective affiliates, accounted for more than 10% of our revenues from continuing operations.

In addition, tobacco product manufacturers have experienced consolidation and further consolidation among our customers could decrease such

customers’ demand for our leaf tobacco or processing services.

Several of these customers individually may account for a significant portion of our sales in a normal year.

For the year ended March 31, 2021, Philip Morris International Inc.

accounted for more than 10% of our revenues from continuing operations.

In addition, tobacco product manufacturers have experienced consolidation and further consolidation among our customers could decrease such customers’ demand for our leaf tobacco or processing services.

The loss of any one or more of our significant customers could have a material adverse effect on our financial statements.

4 unchanged sentences

In addition, Philip Morris International Inc.

acquired supplier contracts and related assets in Brazil in order to procure leaf directly.

acquired supplier contracts and related assets in Brazil in order to procure

leaf directly.

In general, our results of operations have been adversely affected by vertical integration initiatives.

5 unchanged sentences

Additional shifts in sourcing may occur as a result of currency fluctuations, including changes in currency exchange rates against the United States Dollar ("USD"), the imposition of tariffs and other changes in international trade policies.

A shift in sourcing origins in Europe has been influenced by modifications to the tobacco price support system in the European Union ("EU").

A shift in sourcing origins in Europe has been influenced by modifications to the tobacco price support system in the European Union.

Customer requirements have changed due to these variations in production, which could influence our ability to plan effectively for the longer term in the United States and Europe.

2 unchanged sentences

Adjusting our capacity and adjusting to shifts in sourcing may have an adverse impact on our ability to manage our costs and could have an adverse effect on our financial performance.

We may not have access to available capital to finance our local leaf tobacco operations in non-U.S.

jurisdictions.

We have typically financed our non-U.S.

local leaf tobacco operations with uncommitted short-term operating credit lines at the local level.

These operating lines are typically seasonal in nature, normally extending for a term of 180 to 270 days corresponding to the tobacco crop cycle in that location.

These facilities are typically uncommitted in that the lenders have the right to cease making loans or demand payment of outstanding loans at any time.

In addition, each of these operating lines must be renewed with each tobacco crop season in that jurisdiction.

Although our foreign subsidiaries are the borrowers under these lines, many of them are guaranteed by us.

As of March 31, 2020, we had approximately $540.2 million outstanding on the short-term foreign seasonal lines with maximum capacity of $745.5 million, subject to limitations under our asset-based revolving credit facility (the "ABL Facility").

Additionally, against these lines there was $12.8 million available in unused letter of credit capacity with $7.0 million issued but unfunded.

Because the lenders under these operating lines typically have the right to cancel the loan at any time and each line must be renewed with each crop season, we cannot assure you that this capital will be available to our subsidiaries.

If a number of these lenders cease lending to our subsidiaries or dramatically decrease such lending, it could have a material adverse effect on our liquidity.

Further, there is additional risk that certain banks that are lenders under seasonal lines could be unable to meet contractually obligated borrowing requests in the future if their financial condition were to deteriorate.

Our financial results will vary according to growing conditions, customer indications and other factors, which reduces your ability to gauge our quarterly and annual financial performance.

Our financial results will vary according to growing conditions, customer indications, and other factors, which significantly impacts our ability to forecast our quarterly and annual financial performance.

Our financial results, particularly the quarterly financial results, may be significantly affected by fluctuations in tobacco growing seasons and crop sizes which affect the supply of tobacco.

10 unchanged sentences

These fluctuations result in varying volumes and sales in given periods, which also reduces your ability to compare our financial results in different periods or in the same periods in different years.

Loss of confidence in us by our customers, farmers and other suppliers, as a result of the Chapter 11 Cases, may have a material adverse impact on our business, financial condition, results of operations, and cash flows.

If our customers, farmers and other suppliers lose confidence in us as a result of the Chapter 11 Cases or for other reasons, they may seek to establish alternative commercial relationship.

In addition, in such circumstances, our suppliers, farmers, vendors, counterparties and service providers to renegotiate the terms of our agreements, attempt to terminate their relationship with us or require financial assurances from us.

If our suppliers, farmers, vendors and other providers require stricter terms and conditions, we may not find these terms and conditions acceptable.

Any failure to timely obtain suitable inventory at competitive prices could materially adversely affect our businesses, financial condition, liquidity and results of operations.

Suppliers who have historically grown tobacco and from whom we have purchased tobacco may elect to grow other crops instead of tobacco, which affects the world supply of tobacco and may impact our quarterly and annual financial performance.

28 unchanged sentences

The Company utilizes the Zimbabwe RTGS system for local transactions.

RTGS is a local currency equivalent that is exchanged at a government specified rate with the USD.

RTGS is a local currency equivalent that is exchanged at a government specified rate with USD.

In order to convert these units to USD, the Company must obtain foreign currency resources from the Reserve Bank of Zimbabwe, which are subject to the monetary and exchange control policy in Zimbabwe.

10 unchanged sentences

Banks in certain foreign jurisdictions may be subject to a higher rate of failure or may not honor withdrawals of deposited funds.

In addition, the countries in which these local banks operate may lack sufficient regulatory oversight or suffer from structural weaknesses in the local banking system.

In addition, the countries in which these local banks operate may lack sufficient regulatory oversight or suffer from

structural weaknesses in the local banking system.

Due to uncertainties and risks relating to the political stability of certain foreign governments, these local banks also may be subject to exchange controls and therefore unable to perform transfers of certain currencies.

10 unchanged sentences

The settlements resulted in the disgorgement in profits and fines totaling $19.5 million, which have been paid.

Both settlements also required us to retain an independent compliance monitor for a three-year term that was completed September 30, 2013.

Both settlements also required us to retain an independent compliance monitor for a three-year term that was completed on September 30, 2013.

Our exposure to foreign tax regimes, and changes in U.S.

16 unchanged sentences

countries using local currency.

As a result, local country operating costs, including the purchasing and processing costs for tobaccos, are subject to the effects of

exchange fluctuations of the local currency against the USD.

As a result, local country operating costs, including the purchasing and processing costs for tobaccos, are subject to the effects of exchange fluctuations of the local currency against the USD.

When the USD weakens against foreign currencies, our costs for purchasing and processing tobacco in such currencies increases.

8 unchanged sentences

The loss or substantial reduction of any large or significant customer could reduce our earnings.

In addition to the two primary global independent publicly held leaf tobacco merchants, the cigarette manufacturers increasingly buy tobacco directly from suppliers.

We also face increasing competition from new local and regional independent leaf merchants with low fixed costs and overhead and good local customer connections, where the new entrants have been able to capitalize in the global transition to those markets.

In addition to the two primary global independent publicly held leaf tobacco merchants, the cigarette manufacturers increasingly buy tobacco directly from local and regional suppliers.

We also face increasing competition from new local and

regional independent leaf merchants with low fixed costs and overhead and good local customer connections, where the new entrants have been able to capitalize in the global transition to those markets.

Any of these sources of new competition may result in less tobacco available for us to purchase and process in the applicable markets.

Risks Related to the COVID-19 Pandemic

We have been and will likely continue to be negatively impacted by the COVID-19 global pandemic and its related impacts to our employees, operations, customers and suppliers .

The pandemic arising from the disease caused by the novel coronavirus ("COVID-19") has adversely affected, and is likely to continue to adversely affect, our businesses, and we have experienced and expect to continue to experience delays in shipments of leaf tobacco and other disruptions to our operations.

Although, in many jurisdictions, our operations have been classified as “essential” under various governmental orders restricting business activities implemented in response to the COVID-19 outbreak, that classification has not been universal and we have been, and may in the future be, required to suspend operations at certain facilities as a result of similar governmental orders.

These factors have also impacted certain of our suppliers and we have been and will likely continue to be impacted by disruptions in the supply of certain materials used in our operations.

The COVID-19 pandemic may further damage our business due to negative consumer purchasing behavior with respect to the products of our leaf tobacco customers and our other products.

Consumer purchasing behavior may be impacted by reduced consumption by consumers who may not be able to leave home or otherwise shop in a normal manner as a result of these restrictions.

Due to the scope of our operations, including in emerging markets, and our sale to customers around the world, the impact of the COVID-19 pandemic on our operations and the demand for our products may not coincide with impacts experienced in the United States.

Our operations in jurisdictions only recently experiencing COVID-19 outbreaks, such as portions of Africa and South America, may continue to be subject to governmental orders restricting activities after such governmental orders are lifted in the United States.

Risks Related to New Business Lines

Our investments in new business lines as part of our expanded business strategy have been in companies with limited histories that are operating in newly developing markets and are subject to numerous risks and uncertainties.

Our investments, including indirect investments, in Figr East, Figr Norfolk, Criticality, Purilum, Nicotine River, and Humble Juice (collectively, the "new business lines") and the operation of these businesses, involve a high degree of risk.

These investments are in businesses with limited operating histories and are dependent upon receipt of requisite licenses and approvals.

We cannot assure you that as these operations further develop they will be profitable or otherwise sustainable.

While certain of these businesses involve the cultivation and/or processing of agricultural products, similar in certain ways to leaf tobacco, and accordingly share commonality with our agronomy, traceability and agricultural product processing expertise, they are subject to commercial and regulatory challenges different from our leaf tobacco business and with respect to which we do not have the same level of experience.

In addition, these businesses are subject to numerous additional risks and uncertainties, including those specified in the risk factors below.

The results of operations and financial position of the new business lines may differ materially from the expectations of

the Company's management.

Due to numerous uncertainties, the results of operations, and financial position of the new business lines may differ materially from the expectations of the Company's management.

The process for estimating the revenue, net income, and cash flow of the new business lines requires the use of judgment in determining the appropriate assumptions and estimates.

Risks Related to Our E-liquids Businesses

The results of operations and financial position of our e-liquids businesses may differ materially from the expectations of the Company's management.

Due to numerous uncertainties, the results of operations and financial position of our e-liquids businesses may differ materially from the expectations of the Company’s management.

The process for estimating the revenue, net income, and cash flow of these businesses requires the use of judgment in determining the appropriate assumptions and estimates.

These estimates and assumptions may be revised as additional information becomes available and as additional analyses are performed.

In addition, the assumptions used in planning may not prove to be accurate, and other factors may affect the financial condition or results of operations of the new business lines.

Given the rapid changes affecting global, national, and regional economies generally, including for example the economic decline associated with the COVID-19 pandemic, the success of the new business lines will depend on the ability to respond to, among other things, changes in the economy, regulatory conditions, market conditions, and competitive pressures.

Any failure to anticipate or respond adequately to such changes could have a material adverse effect on its financial condition, operating results, liquidity, cash flow, and operational performance.

The Company expects to incur significant ongoing costs and obligations related to its investment in infrastructure, growth, regulatory compliance, and operations of the new business lines.

The Company expects to incur significant ongoing costs and obligations related to its investment in infrastructure and growth and for regulatory compliance with respect to the new business lines, which could have a material adverse impact on the Company's results of operations, financial condition, and cash flows.

In addition, future changes in regulations, changes in the enforcement thereof or other unanticipated events could require extensive changes to the Company's operations, increased compliance costs or give rise to material liabilities, which could have a material adverse effect on the business, results of operations and financial condition of the Company.

Efforts to grow the business of the new business lines may be costlier than the Company expects, and the Company may not be able to increase its revenue enough to offset higher operating expenses.

The new business lines may incur significant losses in the future for a number of reasons, including the other risks described in this Form 10-K, and unforeseen expenses, difficulties, complications, and delays, and other unknown events.

The technologies, processes, and formulations used by the new business lines may face competition or become obsolete.

Rapidly changing markets, technology, emerging industry standards, and frequent introduction of new products characterize the new business lines.

The introduction of new products embodying new technologies, including new manufacturing processes or formulations, and the emergence of new industry standards may render the new business lines’ products obsolete, less competitive or less marketable.

The process of developing the new business lines' products is complex and requires significant continuing costs, development efforts, and third-party commitments.

The failure to develop new technologies and products and the obsolescence of existing technologies or processes could adversely affect the Company's business, financial condition, and results of operations.

The new business lines may be unable to anticipate changes in their respective potential customers' preferences that could make their existing technologies, processes or formulations obsolete.

The success of the new business lines will depend in part on their ability to continue to enhance their existing technologies, develop new technologies that address the increasing sophistication and varied news of the market, and respond to technological advances and emerging industry standards and practices on a timely and cost-effective basis.

The development of the new business lines' proprietary technologies, processes and formulations entails significant technical and business risks.

The new business lines may not be successful in using new technologies, exploiting niche markets effectively or adapting their respective businesses to evolving customer or medical requirements or preference or emerging industry standards.

As the markets in which the new business lines compete continue to develop, competition from market participants may have a negative impact on their business and prospects.

The markets in which the new business lines compete are competitive and are expected to become increasingly competitive.

Certain of these competitors have significantly greater financial, production, marketing, research & development, technical, and

human resources than the Company does.

The commercial opportunity for the new business lines could be reduced or eliminated if their competitors produce and commercialize products that, among other things, are safer, more effective, more convenient or less expensive, have greater sales, marketing, and distribution support, enjoy enhanced timing of market introduction and perceived advantages of better effectiveness and receive more favorable publicity.

In addition, the assumptions used in planning may not prove to be accurate, and other factors may affect the financial condition or results of operations of these businesses.

As the markets in which our e-liquids businesses compete continue to develop, competition from market participants may have a negative impact on their business and prospects.

The markets in which our e-liquids businesses compete are competitive and are expected to become increasingly competitive.

Certain of these competitors have significantly greater financial, production, marketing, research and development, technical, and human resources than we do.

The commercial opportunity for these businesses could be reduced or eliminated if their competitors produce and commercialize products that, among other things, are safer, more effective, more convenient or less expensive, have greater sales, marketing, and distribution support, enjoy enhanced timing of market introduction and perceived advantages of better quality and receive more favorable publicity.

As a result, these competitors may be more successful in gaining market penetration and market share.

If the new business lines do not achieve an adequate level of acceptance in their respective markets, the new business lines may not generate sufficient revenue from their products, and their businesses may not become profitable.

The industries that the new business lines operate in are undergoing rapid growth and substantial change, which has resulted in an increase in competitors, consolidation and formation of strategic relationships, particularly with respect to legal adult-use cannabis products in Canada.

Such acquisitions or other consolidating transactions could harm the Company in a number of ways, including by losing strategic partners if the partners are acquired by or enter into relationships with a competitor, losing customers, revenue and market share, or forcing the Company to expend greater resources to meet new or additional competitive threats, all of which could harm the operating results of the new business lines.

As competitors enter the market and become increasingly sophisticated, this may intensify and place downward pressure on retail prices, which could negatively impact the profitability of the new business lines.

To remain competitive while complying with regulatory requirements, the new business lines will require continued significant investment in research and development, marketing, sales, and customer support.

The new business lines may not have sufficient resources to maintain research and development, marketing, sales and customer support efforts on a competitive basis, which could materially and adversely affect the business, financial condition and results of operations of the Company.

Figr also faces competition from license holders authorized to produce cannabis under the Cannabis Act who may not fully comply with applicable regulations.

Such producers may have lower operating costs, make impermissible claims and utilize other competitive advantages based on circumvention of regulatory requirements.

Furthermore, Figr also faces competition from the illicit cannabis market.

Illegal dispensaries and illicit operations and participants, despite not having a valid license under the Canadian Cannabis Regulations Act, may be able to:

(i) offer products with higher concentrations of active ingredients than Figr is authorized to produce and sell;

(ii) brand products more explicitly;

(iii) sell products at lower prices;

and (iv) market products in ways not permissible by law.

As these illicit market participants do not comply with applicable regulations, their operations may also have significantly lower costs.

As the Canadian adult-use cannabis market continues to mature, consumers who once solely relied on the medical cannabis market may shift some, or all, of their consumption away from medical cannabis and towards adult-use cannabis, resulting in increased levels of competition in the adult-use cannabis market.

The Cannabis Act allows individuals in Canada to cultivate, propagate, harvest and distribute up to four cannabis plants per household provided that each plant meets certain requirements.

If Figr is unable to effectively compete with other suppliers to the adult-use cannabis market, or a significant number of individuals take advantage of the ability to cultivate and use their own cannabis, the success of Figr may be limited and may not fulfill the expectations of management.

The number of competitors in the hemp and CBD markets is expected to increase, both in the United States and internationally, which could negatively impact Criticality’s market share and demand for its products.

Additionally, the introduction of an adult-use model for non-hemp cannabis production and distribution in various jurisdictions may cause producers in those jurisdictions to expand beyond the medical cannabis market and compete with Criticality’s hemp and CBD products.

The impact of this potential development may be negative for Criticality and could result in increased levels of competition in its existing market and/or the entry of new competitors in the hemp market in which Criticality operates.

Any failure by the new business lines to anticipate or respond adequately to such changes could have a material adverse effect on their respective financial condition, operation results, liquidity, cash flow, and operational performance.

The new business lines may be unable to obtain additional financial resources on favorable terms or at all.

If the new business lines are not able to reach or sustain profitability or if any requires additional capital to fund growth or other initiatives, they may require additional equity or debt financing.

We cannot assure you that any new business line will be able to obtain additional financial resources on favorable commercial terms or at all.

Failure to obtain such financial resources could affect the Company's plan for growth or result in the Company being unable to satisfy its obligations as they become due, either of which could have a material adverse effect on the business, financial condition and results of operations of the Company.

If our e-liquids businesses do not achieve an adequate level of acceptance in their respective markets, they may not generate sufficient revenue from their products, and their businesses may not be profitable.

To remain competitive while complying with regulatory requirements, our e-liquids businesses will require continued significant investment in regulatory compliance, research and development, marketing, sales, and customer support.

These businesses may not have sufficient resources to maintain research and development, marketing, sales and customer support efforts on a competitive basis, which could materially and adversely affect the business, financial condition and results of operations of the Company.

Changing consumer preferences may adversely affect consumer retention and results of operations.

As a result of changing consumer preferences, many novel products, dietary supplements, and other innovative products attain financial success for a limited period of time.

Even if the products of the new business lines find retail success, we cannot assure you that any of these products will continue to see extended financial success.

The success of the new business lines will be significantly dependent upon their ability to develop new and improved product lines and to adapt to consumer preferences.

Even if the new business lines are successful in introducing new products or developing current products, a failure to gain

consumer acceptance or to update products with compelling content could cause a decline in popularity of these products that could reduce revenues and harm the Company's brands, business, financial condition, and results of operations.

Consumer perception and reputational risk may negatively affect the new business lines.

The respective markets for the products of the new business lines are highly dependent upon consumer perception regarding the safety, efficacy and quality of their products.

As a result of changing consumer preferences, many novel products attain financial success for a limited period of time.

Even if certain of our e-liquids products find retail success, we cannot assure you that any of these products will continue to see extended financial success.

The success of our e-liquids businesses will be significantly dependent upon their ability to develop new and improved product lines and to adapt to consumer preferences.

Even if we are successful in introducing new products or developing current products, a failure to gain consumer acceptance or to update products with compelling content could cause a decline in popularity of these products that could reduce revenues and harm the Company's e-liquids brands, business, financial condition, and results of operations.

Consumer perception and reputational risk may negatively affect our e-liquids businesses.

The respective markets for the products of our e-liquids businesses are highly dependent upon consumer perception regarding the safety, efficacy and quality of their products.

Consumer perception can be significantly influenced by scientific research or findings, regulatory proceedings, litigation, media attention and other publicity regarding the consumption of these products.

We cannot assure you that future scientific research, findings, regulatory proceedings, litigation, media attention or other research findings or publicity will be favorable to the these markets or any particular product, or consistent with currently held views.

Future research reports, findings, regulatory proceedings, litigation, media attention or other publicity that are perceived as less favorable than, or that question, earlier research reports, findings or publicity could have a material adverse effect on the respective industries and demand for the products of the new business lines, which could affect their businesses, results of operations and cash flows.

This dependence upon consumer perception means that adverse scientific research reports, findings, regulatory proceedings, litigation, media attention or other publicity, whether or not accurate or with merit, could have a material adverse effect on the new business lines and their respective business, financial condition, results of operations and cash flows.

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

Future research reports, findings, regulatory proceedings, litigation, media attention or other publicity that are perceived as less favorable than, or that question, earlier research reports, findings or publicity could have a material adverse effect on the respective industries and demand for the products of our e-liquids businesses, which could affect their businesses, results of operations and cash flows.

This dependence upon consumer perception means that adverse scientific research reports, findings, regulatory proceedings, litigation, media attention or other publicity, whether or not accurate or with merit, could have a material adverse effect on our e-liquids businesses and their respective business, financial condition, results of operations and cash flows.

Further, adverse publicity, reports or other media attention regarding the safety, efficacy and quality of the vaping industry's products in general, or associating the consumption of these types of products with illness or other negative effects or events, could have 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 legally, appropriately, or as directed.

Any litigation that might affect consumer perception regarding the new business lines' products could take the form of class proceedings or individual proceedings.

Any litigation that might affect consumer perception regarding the products of our e-liquids businesses could take the form of class proceedings or individual proceedings.

There have been a number of highly publicized cases involving lung and other illness and deaths that appear to be related to vaporizer devices or products used in such devices.

For example, in February 2020, the U.S.

Centers for Disease Control (the “CDC”) reported that federal and state agencies were investigating an outbreak of over 2,807 lung injury cases involving patients from all 50 states and one U.S.

Centers for Disease Control reported that federal and state agencies were investigating an outbreak of over 2,807 lung injury cases involving patients from all 50 states and one U.S.

territory, including 68 confirmed deaths.

As a result of the outbreak or future developments related to potential health risks associated with vaping, governments and private sector parties initiated actions aimed at reducing the incidence of vaping and/or seeking to hold manufacturers of nicotine e-liquids, THC or CBD vapable oils, and other vaping products, responsible for the adverse health effects associated with the use of vaping products.

As a result of the outbreak or future developments related to potential health risks associated with vaping, governments and private sector parties initiated actions aimed at reducing the incidence of vaping and/or seeking to hold manufacturers of nicotine e-liquids, and other vaping products, responsible for the adverse health effects associated with the use of vaping products.

As there has been a limited period of time to study the long-term effects of vaporizer use, there is limited data on the safety and health effects.

If scientific or medical research ultimately determines that use of vaporizer devices poses a significant risk to health or safety, the demand for vaporizer products may decrease, and regulation of these products could become significantly more restricted.

The composition of Canadian cannabis vaporizer products is already stringently regulated.

For example, the federal government in Canada has limited the permissible ingredients in a cannabis vape product to (i) carrier substances, (ii) flavoring agents;

and (iii) substances necessary to maintain the quality or stability of the product.

Additionally, certain states and local governments have already implemented regulations that prohibit the sale of vaporizers, the sale of flavored products (including nicotine, non-nicotine, THC and CBD e-liquid, e-cigarette and other vaping products) or have implemented additional restrictions on the composition of the product.

Certain states and local governments have already implemented regulations that prohibit the sale of vaporizers, the sale of flavored products (including nicotine, non-nicotine, e-liquid, e-cigarette and other vaping products) or have implemented additional restrictions on the composition of the product (e.g., maximum nicotine content restrictions).

Additional states and localities may implement similar restrictions and the regulations may become more restrictive at the federal level.

Additional or more restrictive regulatory changes may have a material adverse effect on the Company's business, financial condition and results of operations.

Actions by the FDA and other federal, state, or local governments or agencies may impact consumers’ acceptance of or access to nicotine e-liquids, THC or CBD vapable oils and other vaping products (for example, through product standards related to flavored products promulgated by the FDA), limit consumers’ choices, delay or prevent the launch of new or modified products or products with claims of reduced risk, require the recall or other removal of products from the marketplace (for example, as a result of product contamination or regulations that ban certain flavors or ingredients), restrict communications to consumers, restrict the ability to differentiate products, create a competitive advantage or disadvantage for certain companies, impose additional manufacturing, labeling, or packaging requirements, interrupt manufacturing or otherwise significantly increase the cost of doing business, or restrict or prevent the use of specified products in certain locations or the sale of products by certain retail establishments.

Actions by the U.S.

Food and Drug Administration (the “FDA”) and other federal, state, or local governments or agencies may impact consumers’ acceptance of or access to nicotine e-liquids, and other vaping products (for example, through product standards related to flavored products promulgated by the FDA), limit consumers’ choices, delay or prevent the launch of new or modified products or products with claims of reduced risk, require the recall or other removal of products from the marketplace (for example, as a result of product contamination or regulations that ban certain flavors or ingredients), restrict communications to consumers, restrict the ability to differentiate products, create a competitive advantage or disadvantage for certain companies, impose additional manufacturing, labeling, or packaging requirements, interrupt manufacturing or otherwise significantly increase the cost of doing business, or restrict or prevent the use of specified products in certain locations or the sale of products by certain retail establishments.

Any one or more of these actions may have a material adverse impact on the Company's business, financial condition, and results of operations.

Entities with which the Company does business may cease to provide services to the Company or the new business lines.

Parties outside of the cannabis industry in Canada with which the Company does business may perceive that they are exposed to reputational risk as a result of Figr's cannabis business activities.

For example, the Company could receive a notification from a financial institution advising it that the financial institution would no longer maintain banking relationships with those in the cannabis industry, even though the Company’s involvement is through indirect, separately managed foreign subsidiaries.

It is possible that the Company may in the future have difficulty establishing or maintaining bank accounts or other business relationships that it needs to operate its business.

Failure to establish or maintain such business relationships could have a material adverse effect on the Company.

The Company and its U.S.

subsidiaries are subject to laws and regulations related to money laundering, financial record keeping, and proceeds of crime and may be unable to receive any funds generated by Figr and such funds may not be used to fund the payment of obligations of our U.S.

based operations.

The Company is subject to a variety of laws and regulations that involve money laundering, financial recordkeeping and proceeds of crime, including the U.S.

Currency and Foreign Transactions Reporting Act of 1970 (commonly known as the Bank Secrecy Act), as amended by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada), the Criminal Code (Canada), as amended, and the rules and regulations thereunder, and any related or similar rules, regulations or guidelines, issued, administered or enforced by governmental authorities in the United States and Canada.

For example, under U.S.

federal law, it is unlawful to engage in financial transactions involving the proceeds of unlawful activity, including the sale of controlled substances, which in the United States includes marijuana (i.e., cannabis plants, plant parts, or derivatives that do not qualify as either hemp, the mature stalks of non-hemp plants, the sterilized seeds of non-hemp plants, or derivatives or such mature stalks or seeds).

Also under U.S.

federal law, banks or other financial institutions that provide a marijuana-related business with a checking account, debit or credit card, small business loan, or any other service could be found guilty of money laundering, aiding and abetting a violation of federal law (e.g., the Controlled Substances Act), or conspiracy (e.g., to violate the Controlled Substances Act).

The Company does not believe any of its activities implicate any applicable money laundering, conspiracy, or related statutes.

However, if any of the Company's investments, or any proceeds thereof, any dividends or distributions therefrom, or any profits or revenues accruing from such investments in the United States or Canada were 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 and any persons found to be aiding and abetting or conspiring to commit such violations could be subject to liability.

This could restrict or otherwise jeopardize the ability of Figr to declare or pay dividends, effect other distributions or otherwise repatriate funds to Pyxus or any Pyxus subsidiary in the United States.

Accordingly, funds generated by Figr’s operations, or in certain circumstances the potential future sale of either or both of Figr East and Figr Norfolk subsidiaries, may not be available to fund the payment of obligations of the Company’s U.S.

based operations, including the debt obligations of Pyxus.

The adult-use cannabis market in Canada has experienced, and may in the future experience, supply, and demand fluctuations.

There have been fluctuations in the supply and demand in the Canadian adult-use cannabis market since legalization in October 2018.

If the inventory levels of Figr in the future become greater than consumer demand, they may have to engage in sale of excess inventory at discounted prices, which could significantly impair their brand image and reduce their net income, if any, or result in net losses.

Conversely, if they underestimate demand for their products, they may experience inventory shortages, which might delay shipments to customers, reduce revenue, negatively impact customer relationships and diminish brand loyalty.

In addition, demand for cannabis and cannabis products is dependent on a number of social, political and economic factors that are beyond their control, including the novelty of legalization, which may diminish over time.

Market demand for cannabis may not continue to be sufficient to support the current or future production levels of Figr, and each may not be able to generate sufficient revenue to be profitable.

Due to these fluctuations and uncertainties, the current market conditions in the cannabis industry generally, the ability to access financing due to both the market and the more recent economic downturn due to the COVID-19 pandemic, any expansion of Figr facilities is subject to significant risks and uncertainties.

These risks and uncertainties are more pronounced in the cannabis industry, as not only must the license holder make significant capital investments in the plans and construction, any expansion plans must be applied for and approved by Health Canada.

To date, Health Canada has been significantly delayed in both processing applications and approving license amendments required for expansions to facilities.

Further, any contemplated facilities expansions may not be completed on schedule due to delays in construction, including delays in securing necessary funding, and may not receive necessary licenses and permits to permit operations to commence once construction is completed.

In addition, Figr may not be able to attract and retain sufficiently qualified personnel to adequately staff the expanded facilities.

It is also possible that any expansion plans may cost more than anticipated and need to be curtailed, or the timeframes for completion extended.

Accordingly, Figr may not be successful in executing its strategy to expand production capacity at its facilities.

There are limited long-term data with respect to the efficacy and side effects of the new business lines’ products, and future studies may lead to conclusions that dispute or conflict with the Company's understanding and belief regarding the benefits, viability, safety, efficacy, dosing and social acceptance of such products.

If the products of the new business lines are not perceived to have the effects intended by the end user, the Company's business may suffer.

With the exception of nicotine, which is highly addictive, there are limited long-term data with respect to efficacy, unknown side effects and/or interaction of the substances contained in the products of the new business lines with human or

animal biochemistry.

As a result, these products could have unexpected side effects, the discovery of which could materially and adversely affect the Company's, business, financial condition, and results of operations.

In particular, the rapid development of nicotine e-liquids, THC or CBD vapable oils, and other vaping products has not provided sufficient time for the medical profession to study the long-term health effects of using such products.

Therefore, it is uncertain as to whether or not nicotine e-liquids, THC or CBD vapable oils, and other vaping products are safe for their intended use.

If the medical profession were to determine that using nicotine e-liquids, THC or CBD vapable oils, and other vaping products posed a significant threat to long-term human health, consumption could decline rapidly and the new business lines may be forced to modify certain or all of their respective, e-liquids, vapable oils, and other vaping products.

Such an outcome may have a material adverse effect on the Company's financial condition, and results of operations

Research in Canada, the United States, and internationally regarding the benefits, viability, safety, efficacy, dosing and social acceptance of cannabis or isolated cannabinoids, such as CBD and THC, remains in early stages.

There have been relatively few studies conducted to determine the benefits, safety, and side effects of cannabis or isolated cannabinoids (such as CBD and THC).

Although the Company believes that the articles, reports, and studies support its beliefs regarding the benefits, viability, safety, efficacy, dosing, and social acceptance of hemp and cannabis, future research and clinical trials may prove such articles, reports, and studies to be incorrect, or could raise concerns regarding cannabis, and perceptions relating to cannabis.

Given these risks, uncertainties, and assumptions, undue reliance should not be placed on such articles and reports.

Future research studies and clinical trials may draw opposing conclusions, or reach negative conclusions, regarding the benefits, viability, safety, efficacy, dosing, social acceptance, or other facts and perceptions related to cannabis and hemp use, which could have a material adverse effect on the demand for products containing THC or CBD with the potential to lead to a material adverse effect on the Company’s business, financial condition, results of operations, and prospects.

The Company believes the hemp and CBD industries in the United States are highly dependent upon positive consumer perception regarding the safety, efficacy, and quality of hemp-derived products, as well as consumer views concerning regulatory compliance and perceived similarities or differences between hemp and marijuana.

Consumers, vendors, landlords/lessors, industry partners, or third-party service providers may incorrectly perceive hemp products as marijuana thereby confusing them for having the high THC content of marijuana or for being controlled substances under U.S.

The new business lines are subject to risks related to the retail distribution of their respective products.

Retail chains typically procure products in defined cycles depending on their internal procurement needs.

If the new business lines (with the exception of Figr, as discussed below) are successful in obtaining retail distribution for their products, they will be subject to the cyclical nature of the procurement strategies of their respective retail partners.

While the Canadian federal government regulates the cultivation and production of cannabis and authorizes distribution of cannabis, each province and territory regulates the wholesale and retail distribution of cannabis within their province or territory.

In many provinces and territories, the provincial or territorial government has a monopoly over adult-use sales and thus Figr derives a significant portion of its revenue from supply agreements with provincial governments.

In the context of brick and mortar retail, most provinces and territories allow private parties to apply for retail licenses, however, these private sector retailers are required to purchase products from the applicable provincial or territorial government and thus Figr can sell its products only to the provincial or territorial government.

A small number of provinces do allow for direct sales by federally licensed producers to retailers.

In all cases, in order for Figr to be able to sell its products it must apply to the applicable provincial or territorial government and complete the onboarding process which varies from one provincial or territorial government to the next and, in some cases, is quite onerous and more akin to licensing.

In addition, and once approved, Figr must abide by the applicable rules, policies and regulations of the applicable provincial or territorial government, which are subject to change any time.

Currently, Figr Norfolk does not have any supply agreements with provincial or territorial governments.

Figr East has secured supply agreements or arrangements with the provinces of Ontario, British Columbia, New Brunswick, Prince Edward Island, Nova Scotia, and New Brunswick and has initiated the process of securing supply agreements with Alberta, Quebec and Manitoba.

We cannot assure you that Figr East will obtain supply agreements or arrangements with the provinces of Alberta, Quebec, and Manitoba, or any other province or territory.

While Figr East is authorized to sell product in Saskatchewan, it has yet to sell any product in this province.

Generally, provincial supply agreements or other supply arrangements do not contain purchase commitments or otherwise obligate provincial distributors to buy a minimum or fixed volume of products.

As a result, the amount of cannabis that these provincial distributors may purchase under supply agreements or other arrangements, or its price, may deviate significantly from the Company's desires or expectations.

In addition, revenues could fluctuate materially in the future and could be materially and disproportionately impacted by the purchasing decisions of existing government purchasers and any other future government purchasers.

If any of the existing purchasers decides to purchase lower volumes of products than expected, insist on a price that is lower than expected, alter its purchasing patterns at any time with limited notice,

decide not to continue or begin to purchase the Figr East cannabis products at all or do not enter into or renew supply agreement with Figr East on similar terms or other terms acceptable to them, Figr East's revenues could be materially adversely affected.

The Company’s new business lines may be unable to maintain or promote the reputation of their respective brands or may incur excessive expense in doing so.

Management believes that maintaining and promoting the respective brands of the new business lines is critical to expanding their respective customer bases.

Maintaining and promoting such brands will depend largely on the ability of new business lines to continue to provide quality, reliable and innovative products, which they may not do successfully.

In addition, any introduction of new products or services that their respective customers do not like, which may negatively affect their respective brand and reputation.

Maintaining and enhancing these brands may require substantial investments, and these investments may not achieve the desired goals.

Further, the restriction on the use of logos and brand names on cannabis products could have a material adverse impact on the business, financial condition, and results of operations of Figr, as it may be difficult to establish brand loyalty.

The future growth and profitability of the new business lines will depend on the effectiveness and efficiency of advertising and promotional expenditures with respect to their products, including the ability to:

(i) create greater awareness of the products;

(ii) determine the appropriate creative message and media mix for future advertising expenditures;

and (iii) effectively manage advertising and promotional costs in order to maintain acceptable operating margins.

We cannot assure you that advertising and promotional expenditures will result in revenues in the future or will generate awareness of these products or services.

In addition, the plain packaging requirements and restrictions or promotion of the Canadian cannabis regulatory regime combined with the oversight of Criticality’s and Purilum's operations in the United States by the FTC and FDA may limit the ability to effectively advertise and promote these products.

We cannot assure you that the new business lines will be able to manage their respective advertising and promotional expenditures on a cost-effective basis.

The new business lines are heavily dependent on their respective intellectual property and trade secrets.

If they are unable to effectively defend their respective intellectual property and trade secrets, their respective image, brand or competitive position may be harmed.

The success of the new business lines is heavily dependent upon their respective intangible property and technology.

The new business lines rely upon copyrights, patents, trademarks, trade secrets, unpatented proprietary know-how and continuing innovation to protect important intangible property, technology and information.

The Company relies on various methods to protect its proprietary rights, including confidentiality agreements with consultants, service providers and management that contain terms and conditions prohibiting unauthorized use and disclosure of confidential information.

However, despite efforts to protect intangible property rights, unauthorized parties may attempt to copy or replicate intangible property, technology or processes.

We cannot assure you that the steps taken by the new business lines to protect their intangible property, technology and information will be adequate to prevent misappropriation or independent third-party development of the new business lines' intangible property, technology or processes.

Other companies may also be able to materially duplicate Figr's proprietary plant strains.

With respect to any intangible property rights claim against a new business line, the Company may have to pay damages or the new business line may be forced to stop using intangible property found to be in violation of a third party's rights.

Such new business line may have to seek a license for the intangible property, which may not be available on reasonable terms and may significantly increase operating expenses.

The technology also may not be available for license at all.

As a result, the new business line may also be required to pursue alternative options, which could require significant effort and expense.

If the new business line cannot license or obtain an alternative for the infringing aspects of its business, it may be forced to limit product offerings and may be unable to compete effectively.

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

To the extent that any of the above occur, revenue could be negatively affected, and in the future, the Company may have to litigate to enforce its intangible property rights, which could result in substantial costs and divert management's attention and other resources.

Each of the new business lines' ability to successfully implement its business plan depends in part on its ability to obtain, maintain and build brand recognition using its trademarks, service marks, trade dress, domain names and other intellectual property rights.

If their efforts to protect their intellectual property are unsuccessful or inadequate, or if any third-party misappropriates or infringes on their intellectual property, the value of their brands may be harmed, which could have a material adverse effect on their business and might prevent their brands from achieving or maintaining market acceptance.

The industries in which the new business lines operate are highly regulated and the Company may not always succeed in complying fully with applicable regulatory requirements in all jurisdictions where the Company carries on business.

The Company's new business lines are heavily regulated in all jurisdictions where they carry on business.

For example, Figr's operations are subject to various laws, regulations, and guidelines by governmental authorities (including Health Canada)

relating to the manufacture, marketing, management, transportation, storage, sale, pricing, and disposal of cannabis and cannabis oil, and also including laws and regulations relating to health and safety, insurance coverage, the conduct of operations, and the protection of the environment.

Additionally, certain activities of the new business lines are legally permissible only in select jurisdictions or pursuant to select specified regulations and restrictions.

For example, while Canadian national and provincial law authorizes the cultivation and sale of cannabis subject to regulatory requirements, United States federal law prohibits the cultivation and sale of non-hemp cannabis.

Similarly, the cultivation and sale of industrial hemp or hemp in the United States is governed by a patchwork of federal, state, and local regulations, including without limitation the 2014 Farm Bill, the 2018 Farm Bill, the USDA interim final rule, state agricultural pilot program requirements, and state commercial hemp plans.

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

The Company intends to pursue the new business lines only in the jurisdictions where legal, and only to the extent permitted by applicable law and regulation.

Among other things, the Company does not intend to grow, cultivate, manufacture, or distribute non-hemp cannabis in the United States, or to export any cannabis grown, or cannabis products manufactured, in Canada to the United States, while such activities remain illegal under United States federal law.

However, any failure to comply with the regulatory requirements applicable to the operations of the new business lines may lead to civil, criminal, and/or administrative enforcement actions, which could result in possible penalties and other sanctions for the Company, its officers, directors, and/or other parties, including but not limited to, the revocation or imposition of additional conditions on licenses to operate;

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

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

the imposition of fines and censures;

and the cessation of business activities, each of such circumstances could have a material adverse effect on the Company's business, financial condition, and results of operations.

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

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

The industry and the regulations governing adult-use cannabis in Canada are rapidly developing, and if they develop in ways that differ from the Company’s expectations, its business and results of operations may be adversely impacted.

The Cannabis Act federally legalized adult-use (non-medical) cannabis in Canada effective as of October 17, 2018.

Under the Cannabis Act, each province and territory of Canada has the ability to separately regulate the distribution and sale of adult-use cannabis within such province or territory, and the laws (including associated regulations) adopted by each province and territory may vary significantly.

Each Canadian province and territory has enacted and implemented regulatory regimes for the distribution and sale of cannabis for adult use.

Regulations continue to be promulgated and amended.

There is no guarantee that federal, provincial and territorial legislation regulating the production, distribution and sale and promotion of cannabis for adult use, or the application and enforcement of such legislation, will not change in the future or that its interpretation by the applicable regulatory and judicial bodies will not differ from that of the Company.

Any such change or difference in interpretation could result in significant additional compliance or other costs and may make participation in such markets uneconomical.

Since cannabis for adult use was only recently legalized in Canada, there may be inconsistencies in the interpretation and enforcement of the Cannabis Act and associated provincial and territorial rules and regulations.

At the federal level, there are limitations on sales and marketing activities, the packaging of cannabis products and use of branding and other promotional activities.

The provinces and territories have also imposed certain restrictions that are more stringent than the federal rules or regulations, such as bans on certain products, raising minimum age of purchase and flavor restrictions.

In addition, Health Canada has experienced delays in approving applications for new licenses, capacity expansions and security clearances required under the Cannabis Act, including with respect to Figr.

Any inconsistencies in the interpretation and enforcement of the Cannabis Act, changes or delays could have a material adverse effect on the Company's business, financial condition and results of operations.

In October 2019, new regulations permitting and governing the production, distribution, promotion and sale of edible cannabis, cannabis extracts and topical cannabis came into effect.

Uncertainty remains, however, with respect to the implementation of regulations under the Cannabis Act that will govern the sale and use of cannabis-related products as well as the various provincial and territorial regimes governing the distribution and sale of cannabis for adult-use purposes.

The impact of these laws, regulations and guidelines on Figr, including increased costs of compliance and other potential risks remain uncertain and, accordingly, may cause Figr to experience adverse effects on their business, financial condition and results of operations.

In Canada, the federal and provincial or territorial legislation and regulatory regimes for cannabis products also include excise duties payable by licensed cannabis producers on adult-use cannabis products, in addition to goods and services tax or harmonized sales tax in certain provinces and territories.

The rate of the excise duties for cannabis products varies by province and territory.

Any significant increase in the rate of excise duties on adult-use cannabis products in the future could reduce consumer demand for adult-use cannabis products and adversely impact the adult-use cannabis industry and market in general.

In addition, any increase in the rate of excise duties on cannabis products in the future could reduce the margins and profitability of Figr.

The Canadian federal regulatory regime includes plain packaging requirements.

Among other things, the packaging of cannabis products may only display the brand name once on each principal display panel in prescribed font and size and only one other brand element, such as a logo, may be displayed in addition to the brand name.

Further, the packaging and promotion of cannabis products must not be appealing to youth.

In addition, the Cannabis Act allows for licenses to be granted for outdoor cultivation and Health Canada commenced granting outdoor cultivation licenses in May 2019.

The implications of permitting outdoor cultivation are not yet known, but outdoor cultivation could reduce start-up capital required for new entrants in the cannabis industry, or permit lower cost expansions by existing industry participants as capital expenditure requirements related to outdoor growing are typically much lower than those associated with indoor growing.

Similarly, it may also ultimately lower prices.

Accordingly, competition from firms holding outdoor cultivation licenses may have a material adverse impact on the business, financial condition, and results of operation of Figr.

Changes to these laws or regulations could negatively affect the competitive position of Figr within its industry and the markets in which it operates, and we cannot assure you that various levels of government in the jurisdictions in which Figr operates will not pass legislation or regulations that adversely impact their business.

The new business lines are reliant on obtaining and maintaining licenses, authorizations, approvals, and permits for each of its businesses.

Each of the new business lines will be required to obtain and maintain certain licenses, approvals and permits in the jurisdictions where their products are produced, licensed or sold.

There are also certain approvals and clearances required for directors, officers, parent corporations and any individual in a position to exercise control over Figr.

We cannot assure you that the Company will be able to obtain or maintain all necessary licenses, approvals and permits or be able to obtain them on a timely basis.

Failure to obtain such licenses, permits or approvals may have a material adverse effect on the Company's business, financial condition and results of operations.

Criticality may be required to submit a New Dietary Ingredient ("NDI") notification to the FDA with respect to hemp extracts.

This could depend on whether Criticality can establish that a particular extract was marketed as a dietary ingredient in a dietary supplement prior to October 15, 1994, or is otherwise currently in the food supply in the same chemical form as used in its dietary supplement product.

If the FDA objects to Criticality's NDI notification, this would have a materially adverse effect upon Criticality and its business.

Further, the FDA’s current compliance policy generally requires that the Company file PMTAs for its finished nicotine-containing e-liquid products by September 9, 2020, or remove them from the market.

The Company intends to file PMTAs for certain products by such date.

In the event that these applications are not timely submitted or approved, the Company may be required to remove these products from the market.

The Company is subject to uncertainty regarding legal and regulatory status and changes.

Achievement of the Company's business objectives is contingent, in part, upon compliance by the new business lines with regulatory requirements enacted by governmental authorities.

The new business lines will incur ongoing costs and obligations related to regulatory compliance.

Failure to comply with regulations may result in additional costs for corrective measures, penalties or in restrictions on operations.

In addition, changes in regulations or in interpretations of existing regulations, more vigorous enforcement thereof or other unanticipated events could require extensive changes to operations, increased compliance costs or give rise to material liabilities, which could have a material adverse effect on the business, results of operations and financial condition of the Company.

Criticality is subject to uncertainty regarding the legal and regulatory status of hemp, including with respect to U.S.

federal and state implementation of the 2018 Farm Bill and related laws, and changes to such laws and regulations may have material adverse effects on the operations of Criticality.

As discussed in Item 1, “Business—Operations of New Business Lines—Industrial Hemp—Regulation” of this Form 10-K, there is significant uncertainty concerning the permissible scope of commercial activity involving industrial hemp, hemp, and hemp-derived products including CBD, as well as the timing and manner of implementation of relevant regulations.

The 2014 Farm Bill only authorized institutions of higher education and state agriculture departments to cultivate industrial hemp, and only to do so for research purposes.

However, it also gave significant discretion to states to regulate industrial hemp pilot programs.

Many states that have adopted pilot programs have registered private companies to cultivate and process industrial hemp.

Additionally, many states, including North Carolina, where Criticality is based, have interpreted the 2014 Farm Bill to permit marketing research concerning industrial hemp through, among other things, commercial marketing and sale of industrial hemp and industrial hemp products.

In contrast, the DEA, FDA, and USDA have taken the position that, under the

2014 Farm Bill, industrial hemp products may not be sold for the purpose of general commercial activity or in states without agricultural pilot programs that permit their sale for research marketing purposes.

These agencies have also taken the position that, under the 2014 Farm Bill, industrial hemp plants and seeds may not be transported across state lines;

although the USDA’s general counsel has issued a legal opinion that interstate shipment of hemp is permitted under the 2014 Farm Bill, not all of the agencies may agree.

There is evidence that Congress does not agree with these agencies’ interpretation of the 2014 Farm Bill, including through its insertion in various appropriations bills language prohibiting the DEA from using funds to impede state agricultural pilot programs.

However, we cannot assure you that such language will be inserted in future appropriations bills while industrial hemp cultivation continues to be governed by the 2014 Farm Bill.

We cannot assure you that these agencies will change their position concerning the permissible scope of commercial activity under the 2014 Farm Bill.

The 2018 Farm Bill, among other things, removes "hemp" and its derivatives (including its cannabinoids, such as CBD) from the Controlled Substances Act and amends the Agricultural Marketing Act of 1946 to provide for commercial production of hemp in the United States.

The passage of the 2018 Farm Bill and the promulgation on October 31, 2019 by the USDA of an interim final rule under the 2018 Farm Bill did not eliminate the uncertainty surrounding the permissible scope of commercial activity involving hemp and hemp products.

As of May 27, 2020, the USDA had approved commercial hemp plans for only seventeen states, thirty-two tribes, and one territory.

In states without approved plans (and for individual growers in those states who have not received federal licenses from the USDA), cultivation of industrial hemp continues to be governed by the more restrictive 2014 Farm Bill and applicable states’ agricultural pilot program requirements, and commercial production of hemp may violate federal law.

Further, there is uncertainty concerning the timing and manner of implementation of the 2018 Farm Bill in each state.

Under the interim final rule, each state may choose if and when to submit a plan for USDA approval.

Until a plan is approved for a growing state, commercial hemp production may not legally begin under the 2018 Farm Bill under state authority in that state.

By way of example, in North Carolina, where Criticality is based, legislation authorizing a state plan was introduced but did not pass in the last legislative session, there has been no proposed state plan, and the NC Hemp Commission has expressed its opposition to operating under the existing interim final regulations.

In contrast, other states (including South Carolina, from which Criticality sources hemp) have approved plans and growers operating under the 2018 Farm Bill.

Moreover, individual growers (including some from which Criticality purchases) may choose to apply for a federal license and be governed by the 2018 Farm Bill.

Additionally, there is uncertainty created by the 2018 Farm Bill’s decision to leave the states as potential primary regulators of hemp production.

States may adopt regulatory schemes that impose different levels of regulation and costs on the production of hemp.

Because many states have not yet obtained USDA approval for plans for commercial hemp production, the timing of the adoption of state plans cannot be assured.

Moreover, the 2018 Farm Bill provides that its provisions do not preempt or limit state laws that regulate the production of hemp.

Accordingly, some states may choose to restrict or prohibit some or all hemp production or sales.

For example, in North Carolina, where Criticality is based, the state legislature previously considered legislation that would have treated “smokeable hemp” (defined as "harvested raw or dried hemp plant material, including hemp buds or hemp flowers, hemp cigars, and hemp cigarettes") as illegal marijuana under state law unless produced and used in compliance with specified requirements.

In addition, the status of the current regulations as an interim final rule creates uncertainty as to the ultimate regulatory structure for commercial hemp production.

The current regulations are temporarily in place, pending public notice and comment on the regulations.

The USDA has received comments on the interim final rule, including critical comments from the NC Hemp Commission.

The USDA may make substantive changes in the regulations when final regulations are approved, and, indeed, has already suggested certain potential changes.

The interim final rule is set to expire on November 1, 2021, unless extended, to provide time for a full rulemaking procedure.

There is uncertainty what the final rules will be, if any, after the rulemaking procedure, and when they will be adopted.

Further, under the 2018 Farm Bill, the FDA has retained authority over Food, Drug, and Cosmetic Act-regulated products containing hemp and its derivatives, including CBD.

Moreover, states have retained regulatory authority through their own analogues to the Food, Drug and Cosmetic Act, and the states may diverge from the federal treatment of the use of hemp as, or in, food, dietary supplements, vapable products, or topical cosmetic products.

We cannot assure you that the FDA or states (under their Controlled Substances Act and Food, Drug, and Cosmetic Act analogues) will ultimately permit the sale of non-pharmaceutical products containing hemp-derived CBD.

Changes in the regulations governing cannabis outside of Canada may adversely impact the Company's prospects.

The Company's growth strategy with respect to international expansion of the new business lines continues to evolve as regulations governing the medical cannabis and industrial hemp industries in the foreign jurisdictions become more fully developed.

Interpretation of these laws, rules, regulations, and their application is ongoing.

New laws, regulations, and guidelines may be enacted and enforced or existing laws, regulations, and guidelines may be interpreted or applied in a manner that could limit or curtail the new business lines expansion plans.

Amendments to current laws, regulations and guidelines,

more stringent implementation or enforcement thereof, enactment of new laws, the adoption of new regulations, or other unanticipated events, including changes in political regimes and attitudes toward cannabis and industrial hemp, are beyond the Company's control and could materially adversely affect the Company's international growth prospects.

Furthermore, additional countries continue to pass laws that allow for the production and distribution of cannabis in one form or another.

International competition and limitations placed on Figr by Canadian regulations might lower the demand for any future Figr products on a global scale.

Amendments to current laws, regulations, and guidelines, more stringent implementation or enforcement thereof or other unanticipated events, including changes in political regimes and attitudes toward the new business lines, are beyond the Company's control and could require extensive changes to the Company's international operations, which in turn may result in a material adverse effect on the Company's business, financial condition and results of operations.

We cannot assure you that the Company will be able to expand cannabis operations into legal jurisdictions outside of Canada, or to expand its industrial hemp operations into other states or internationally, and any such expansion will be subject to risks.

We cannot assure you that any market for cannabis products to be offered by subsidiaries of the Company will develop in any jurisdiction outside of Canada.

Laws, regulations, and perceptions pertaining to cannabis vary widely internationally, and the scope or pace of legalization of medical and adult-use cannabis cannot be predicted or assured.

Similarly, we cannot assure you that the Company will be able to obtain the licenses, approvals and authorizations necessary to source industrial hemp from growers located in and operating under the agricultural pilot programs of states other than Colorado, New York, North Carolina, and Virginia, or to source hemp under the 2018 Farm Bill from growers operating under approved state plans (including but not limited to the South Carolina plan) or under the USDA’s umbrella plan available to individual growers in states without approved plans.

We cannot assure you that United States federal or state legislation regulating the distribution and sale of industrial hemp and hemp will remain unchanged, will be implemented in a way that is favorable to the Company, or will permit the commercial sale of hemp and hemp products nationally or internationally.

If and when additional legal markets for cannabis develop, or the Company is able to expand its industrial hemp operations, the Company’s pursuit of such markets may expose it to new or unexpected risks or significantly increase its exposure to one or more existing risk factors, including economic instability, changes in laws and regulations and the effects of competition.

These factors may limit the Company's capability to successfully expand the operations of its subsidiaries into such jurisdictions and may have a material adverse effect on the Company's business, financial condition, and results of operations.

The Company will become subject to further laws and regulations as it expands internationally.

The Company may expand the new business lines internationally.

If such international expansion occurs, the Company would become subject to the laws and regulations of (as well as international treaties among) the foreign jurisdictions in which it operates or imports or exports products or materials.

In addition, the Company may avail itself of proposed legislative changes in certain jurisdictions to expand its product portfolio, which expansion may include business and regulatory compliance risks as yet undetermined.

Failure by the Company to comply with the current or evolving regulatory framework in any jurisdiction could have a material adverse effect on the Company's business, financial condition, and results of operations.

There is the possibility that any such international jurisdiction could determine that the Company was not or is not compliant with applicable local regulations.

If the Company's historical or current sales or operations were found to be in violation of such international regulations the Company may be subject to enforcement actions in such jurisdictions including, but not limited to civil and criminal penalties, damages, fines, the curtailment or restructuring of the Company's operations or asset seizures and the denial of regulatory applications, each of such circumstances could have a material adverse effect on the Company's business, financial condition, and results of operations.

Violations of applicable law by Figr, including an unlawful transfer of cannabis inventory to jurisdictions, including the United States, in which the sale of such product is unlawful or within Canada other than for permitted use, may subject the Company to potential criminal sanctions.

Figr is required to comply concurrently with a variety of complex federal, state or provincial, and local laws in each jurisdiction where it operates, or to which it exports or proposes to export its products, including laws and regulations relating to health and safety, conduct, or operations and the production, management, transportation, storage, and disposal of our products and of certain material used in our operations.

These laws change frequently and may be difficult to interpret and apply.

Compliance with these laws and regulations requires the investment of significant financial and managerial resources, and a determination that we are not in compliance with these laws and regulations could harm our brand image and business.

Moreover, it is impossible for the Company to predict the cost or effect of such laws, regulations or guidelines upon its future operations.

Under current U.S.

federal law, it is unlawful to operate a business from the U.S.

that engages in the possession, manufacture, distribution, and/or sale of a controlled substance, including cannabis, in a foreign country where such activities are illegal.

Although the Company anticipates that Figr will take precautions to ensure that their operations remain in compliance with all

Canadian laws that might apply to such operations, operational decisions of Figr will be made by personnel not located in the United States, and funding of Figr, to the extent any additional funding is required, would be made by subsidiaries not located in the United States, there is a risk that if Figr were to violate Canadian federal, provincial or local law with respect to the manufacture, distribution, and/or sale of cannabis, including an unlawful transfer of cannabis inventory to jurisdictions, including the United States, in which the sale of such product is unlawful or within Canada other than for permitted use, that may subject the Company, its officers, directors, and other parties to potential criminal sanctions, civil fines, forfeitures, and other penalties in the United States.

Further, under current U.S.

law, it is unlawful to import controlled substances, including marijuana (that is, cannabis plants, plant parts, or derivatives that do not qualify as either hemp, the mature stalks of non-hemp plants, the sterilized seeds of non-hemp plants, or derivatives of such mature stalks or seeds), into the United States, or to transport controlled substances through U.S.

territorial waters, on U.S.

flagged vessels and U.S.

registered aircraft, or accompanied by U.S.

citizens or resident aliens.

Accordingly, there is a risk that if Figr were to violate U.S.

federal or state law with respect to the manufacture, distribution, sale and/or transport of cannabis, even outside the United States, that may subject the Company to potential criminal sanctions, civil fines, forfeitures, and other penalties in the United States.

The presence of THC in Criticality’s CBD products may cause adverse consequences to users of such products that will expose it to the risk of liability and other consequences.

Criticality’s products are made from industrial hemp, which contains THC, though typically at a low level.

As a result of the variability of agricultural products, certain of Criticality’s products contain varying levels of THC.

THC is an illegal or controlled substance in many jurisdictions.

Whether or not ingestion of THC (at low levels or otherwise) is permitted in a particular jurisdiction, there may be adverse consequences to end users who test positive for THC attributed to use of Criticality’s products through unintentional presence in its products of THC, even if only in trace amounts.

In addition, certain metabolic processes in the body may negatively affect the results of drug tests.

Positive tests may adversely affect the end user’s reputation, ability to obtain or retain employment and participation in certain athletic or other activities.

A claim or regulatory action against Criticality based on such positive test results could materially adversely affect its reputation, potentially expose it to material liability and potentially require it to recall its products.

Each of the new business lines faces inherent risk of exposure to product liability claims, regulatory action, and litigation if its products are alleged to have caused significant loss, injury, or death, which is exacerbated by the fact that cannabis use may increase the risk of serious adverse side effects .

As a manufacturer and distributor of products which are ingested or otherwise consumed by humans, each of the new business lines faces the risk of exposure to product liability claims, regulatory action and litigation (including class proceedings and individual proceedings) if its products are alleged to have caused loss, injury or death.

Each of the new business lines may be subject to these types of claims due to allegations that its products caused or contributed to injury, illness or death, made false, misleading or impermissible claims, failed to include adequate labelling and instructions for use or failed to include adequate warnings concerning possible side effects or interactions with other substances.

This risk is exacerbated for Figr by the fact that cannabis use may increase the risk of developing schizophrenia and other psychoses, symptoms for individuals with bipolar disorder, and other side effects.

Previously unknown adverse reactions resulting from human consumption of the products of the new business lines alone or in combination with other medications or substances could also occur.

Restrictions on our ability to ship e-liquids products to consumers from online sales, including recently enacted prohibitions with respect to shipments through on the U.S.

Postal Service, could materially adversely affect our e-liquids businesses.

On February 19, 2021, the USPS published its Proposed Regulations regarding the mailing of cigarettes, e-cigarettes, vaping device products, and e-liquids.

The Proposed Regulations would subject e-cigarettes, vaping devices products, and e-liquid products to all existing restrictions on and exceptions for the mailing of cigarettes, except that the existing exceptions permitting the mailing of cigarettes (i) for consumer testing purposes and (ii) by federal agencies for public health purposes would not be available for the mailing of e-cigarettes, vaping devices products, and e-liquid products.

If the Proposed Regulations were enacted as proposed by the USPS, subject to limited exceptions in applicable USPS regulations (including between legally operating businesses pursuant to applications approved by the USPS), shipment of these products via the USPS would be prohibited on and after the date on which the USPS promulgates the final regulations.

While the USPS did not meet its deadline for issuing the final regulations, the Company expects publication of the final regulations in the second or third quarter of 2021, which would result in a general federal prohibition on the mailing of e-cigarettes and other vaping devices, as well as e-liquids products, by businesses to consumers.

Any such shipments are subject to seizure, and the sender is subject to criminal fines, imprisonment, and civil penalties.

It has generally been reported that certain private delivery services, such as United Parcel Service, DHL and FedEx, have voluntarily implemented similar prohibitions on the use of their services for the delivery of e-cigarettes and other vaping devices, as well as e-liquids products.

In light of the amended PACT Act, described below, it is uncertain whether any other reliable private delivery service will undertake to deliver e-liquids products to consumers.

Historically, a substantial portion of our e-liquids products are sold to consumers through online orders.

Accordingly, our e-liquids businesses will be materially adversely affected by these prohibitions and other restrictions if we are unable to effect shipment of e-liquids products to consumers through reliable and efficient delivery services.

Other provisions of the 2021 Appropriations Act significantly increase the federal regulation of the online sale of our e-liquids products, which may increase our costs and affect the competitiveness of our products as compared to those sold by local retailers, and violations of these regulations could expose us to significant penalties.

Provisions of the 2021 Appropriations Act subject e-cigarettes and other vaping devices, as well as e-liquids products, to the provisions of the PACT Act, which imposes stringent rules on online sellers, including requirements for online retailers to register with the U.S.

Attorney General, verify the age of customers using a commercially available database, collect an adult signature at the point of delivery, and collect all applicable local and state taxes, and affix any required tax stamps to the products sold.

Sellers who do not register or do not comply with the shipping and reporting rules of the PACT Act are subject to civil and criminal penalties, including up to three years in prison.

Accordingly, compliance with the requirements of the PACT Act may significantly increase the costs of our e-liquids online businesses, increasing the prices of our online products and

making them less attractive to consumers as compared to products sold at local retailers.

In addition, failure to comply with the PACT Act could expose us to significant penalties that could materially adversely affect our e-liquids businesses and our financial condition and results of operations.

There are limited long-term data with respect to the efficacy and side effects of nicotine e-liquids products, and future studies may lead to conclusions that dispute or conflict with the Company's understanding and belief regarding the benefits, viability, safety, efficacy, dosing and social acceptance of such products.

In particular, the rapid development of nicotine e-liquids and other vaping products has not provided sufficient time for the medical profession to study the long-term health effects of using such products.

Therefore, it is uncertain as to whether or not nicotine e-liquids and other vaping products are safe for their intended use.

If the medical profession were to determine that using nicotine e-liquids and other vaping products posed a significant threat to long-term human health, consumption could decline rapidly and we may be forced to modify our e-liquids and other vaping products.

Such an outcome may have a material adverse effect on the Company's e-liquids businesses, and results of operations.

In addition, these products could have unexpected side effects, the discovery of which could materially and adversely affect the Company's business, financial condition, and results of operations.

Our e-liquids businesses face inherent risk of exposure to product liability claims, regulatory action, and litigation if their products are alleged to have caused significant loss, injury, or death.

As manufacturers and distributors of products that are ingested or otherwise consumed by humans, our e-liquids businesses face the risk of exposure to product liability claims, regulatory action and litigation (including class proceedings and individual proceedings) if their products are alleged to have caused loss, injury or death.

They may be subject to these types of claims due to allegations that their products caused or contributed to injury, illness or death, made false, misleading or impermissible claims, failed to include adequate labelling and instructions for use or failed to include adequate warnings concerning possible side effects or interactions with other substances.

Previously unknown adverse reactions resulting from human consumption of our e-liquids products alone or in combination with other medications or substances could also occur.

In addition, the manufacture and sale of any ingested or consumable product involves a risk of injury to consumers due to tampering by unauthorized third parties or product contamination.

Any of the new business lines may in the future have to recall certain of its products as a result of potential contamination and quality assurance concerns.

A product liability claim or regulatory action against any of the new business lines could result in increased costs and could adversely affect its reputation and goodwill with its consumers.

Our e-liquids businesses may in the future have to recall certain of their products as a result of potential contamination and quality assurance concerns.

A product liability claim or regulatory action against these businesses could result in increased costs and could adversely affect their reputation and goodwill with their consumers.

We cannot assure you that product liability insurance can be maintained on acceptable terms or with adequate coverage against potential liabilities.

Such insurance is expensive and may not be available in the future on acceptable terms, or at all.

The inability to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims could result in the Company becoming subject to significant liabilities that are uninsured and also could adversely affect commercial arrangements between the new business lines and third parties.

The risk of class-based litigation (and individual litigation) for manufacturers and distributors of cannabis and nicotine e-liquids, THC or CBD vapable oils and other vaping products, and others involved in the cannabis, hemp and vaping markets, is significant, particularly in the face of increasing health and marketing concerns, the potential for product recalls or other product-related issues.

Both the United States and Canada have highly active plaintiffs’ bars.

Recent years have seen an increasing number of purported class action lawsuits in the United States against manufacturers and distributors of nicotine e-liquids, THC or CBD vapable oils and other vaping and CBD products.

Canada, including each of its provinces and territories, generally has a low bar to class certification and is viewed as a highly plaintiff-friendly jurisdiction.

The inability to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims could result in the Company's becoming subject to significant liabilities that are uninsured and also could adversely affect commercial arrangements between our e-liquids businesses and third parties.

The risk of class-based litigation (and individual litigation) for manufacturers and distributors of e-liquids and other vaping products, and others involved in the vaping industry, is significant, particularly in the face of increasing health and marketing concerns, the potential for product recalls or other product-related issues.

The United States has highly active plaintiffs’ bar.

Recent years have seen a number of purported class action lawsuits in the United States against manufacturers and distributors of e-liquids and other vaping products.

These circumstances create enhanced risk and exposure for the Company given the nature of its operations, the products it manufactures, distributes and sells, and its business environment.

Some of the inventory of the new business lines, including cannabis and hemp, is subject to possible write-offs.

The new business lines intend to hold finished goods in inventory and such inventory have a limited shelf life.

Finished goods in inventory may include cannabis, cannabis products, and hemp products.

Even though it is the intention of management to review the amount of inventory on hand in the future, write-off of inventory may still be required.

Any such write-off of inventory could have a material adverse effect on the Company's business, financial condition, and results of operations.

The Company could incur substantial liability that may not be covered by insurance.

The Company has insurance to protect its assets, operations and employees.

While the Company believes its insurance coverage addresses all material risks to which it is exposed and is adequate and customary in its current state of operations, such insurance is subject to coverage limits and exclusions and may not be available for the risks and hazards to which the Company is exposed.

In addition, we cannot assure you that such insurance will be adequate to cover the Company's liabilities or will be generally available in the future or, if available, that premiums will be commercially justifiable.

If the Company were to incur substantial liability and such damages were not covered by insurance or were in excess of policy limits, or if the Company were to incur such liability at a time when it is not able to obtain liability insurance, its business, results of operations and financial condition could be materially adversely affected.

In particular, due to the Company's involvement in the new business lines, it may have a difficult time obtaining the various insurances that are desired to operate its business, which may expose the Company to additional risk and financial liability.

Insurance that is otherwise readily available, such as general liability, and directors and officer's insurance, may be more difficult to find, and more expensive, because of the regulatory regime applicable to the industry.

There are no guarantees that the Company will be able to find such insurance coverage in the future, or that the cost will be affordable.

If the Company is forced to go without such insurance coverage, it may prevent it from entering into certain business sectors, may inhibit growth, and may expose the Company to additional risk and financial liabilities.

The Company could incur unexpected expenses due to product recalls and any legal proceedings that may arise in connection with product recalls.

Manufacturers and distributors of products are sometimes subject to the recall or return of their products for a variety of reasons, including product defects, such as contamination, unintended harmful side effects or interactions with other substances, packaging safety and inadequate or inaccurate labeling disclosure.

If any of the Company's products, including the new business lines, are recalled due to an alleged product defect or for any other reason, the Company could be required to incur the unexpected expense of the recall and any legal proceedings that might arise in connection with the recall.

If any of the Company's products, including our e-liquids businesses, are recalled due to an alleged product defect or for any other reason, the Company could be required to incur the unexpected expense of the recall and any legal proceedings that might arise in connection with the recall.

The Company may lose a significant amount of sales and may not be able to replace those sales at an acceptable margin or at all.

4 unchanged sentences

Additionally, product recalls may lead to increased scrutiny of the Company's operations by applicable regulatory agencies, requiring further management attention and potential legal fees and other expenses.

Hemp plants are vulnerable to specific agricultural risks that may have a material adverse effect on the Company's hemp-related operations.

Hemp plants can be vulnerable to various pathogens including bacteria, fungi, viruses and other miscellaneous pathogens.

Such instances often lead to reduced crop quality, stunted growth and/or death of the plant.

Moreover, hemp is phytoremediative meaning that it may extract toxins or other undesirable chemicals or compounds from the ground in which it is planted.

Various regulatory agencies have established maximum limits for pathogens, toxins, chemicals and other compounds that may be present in agricultural materials.

If the hemp acquired by the Company for supply to Criticality is found to have levels of pathogens, toxins, chemicals, or other undesirable compounds that exceed established limits, the Company may have to destroy the applicable portions of its hemp crop and has been required to do so in the past.

Should the crops be lost due to pathogens, toxins, chemicals or other undesirable compounds, it may have a material adverse effect on the Company's business and financial condition.

The Company's cannabis production estimates are based on assumptions that may prove to be inaccurate.

The Company's estimated annual production of cannabis is based on estimated square footage of cultivation space and the amount of dried cannabis cultivated per plant, which is derived from the historical output of the existing Figr facilities.

If Figr is unable to develop the predicted cultivation space, cultivate the predicted amount of cannabis, or obtain the necessary regulatory approvals, annual cannabis production may be less than predicted, which could have a material adverse effect on the Company's financial condition, and results of operations.

A change in control of the Company, including in connection with the Chapter 11 Cases, may affect Figr’s ability to continue to sell its products in certain provinces in Canada.

Upon change in control of Pyxus, which will occur upon consummation of the Plan, Figr may be required to notify certain Canadian provincial governments with which it has entered into supply agreements.

While the Company does not believe that such a change of control in and of itself will give rise to a termination right of such provincial governments, due to the wide range of rights afforded to the provincial governments under these contracts, there is a risk that such provincial governments may terminate the supply agreements under their general termination rights or cease ordering product from Figr.

In addition, in the event that any such change-in-control transaction also resulted in any change to the directors or officers of Figr, that the new directors and officers will be required to obtain security clearance from Health Canada in order to hold such positions in accordance with the Cannabis Regulations.

Obtaining security clearance requires a thorough background check by Health Canada and is a prolonged process.

Any delays in obtaining required security clearances, may have a material impact on the business and operations of Figr.

Risks Relating to the CCAA Proceedings

Certain of the sales contemplated in the CCAA Proceeding remain subject to the satisfaction of conditions and may not occur, in which case we may be unable to recover funds advanced to the Canadian Cannabis Subsidiaries under the Canadian DIP Facility, and if such sales transactions occur the amount of recovery that the Company may receive with respect to its interests in the Canadian Cannabis Subsidiaries will depend on the amount of claims against the Canadian Cannabis Subsidiaries submitted in the CCAA Proceeding, the extent to which such claims are approved by the Canadian Court and the extent to which the Company’s advancements with respect to Canadian Cannabis Subsidiaries determined by the Canadian Court as debt claims entitled to recovery on the same basis as other unsecured creditor claims and, accordingly, Pyxus may incur additional impairments charges related to our investments in and advances to the Canadian Cannabis Subsidiaries, and Pyxus may be liable under its guarantees of obligations of the Canadian Cannabis Subsidiaries to the extent that those obligations are not fully satisfied by the Canadian Cannabis Subsidiaries in the CCAA Proceeding.

The consummation of all of the contemplated sales with respect to the Canadian Cannabis Subsidiaries are subject to the satisfaction of certain conditions, some of which have not yet been satisfied.

In the event that conditions to the consummation of the respective sales are not satisfied, such sale transaction may not occur, and accordingly the anticipated sales with respect to the Canadian Cannabis Subsidiaries may not generate sufficient net proceeds to fund repayment in full of aggregate borrowings owed under the Canadian DIP Facility.

Further, even if such sales transactions are completed as contemplated and borrowings under the Canadian DIP facility are repaid, the amount of any recovery that the Company may receive related to advancements with respect to the Canadian Cannabis Subsidiaries will depend on the amount of claims against the Canadian Cannabis Subsidiaries submitted in the CCAA Proceeding, the extent to which such claims are approved by the Canadian Court and the extent to which the Company’s advancements with respect to Canadian Cannabis Subsidiaries are determined by the Canadian Court to be debt claims entitled to recovery on the same basis as other unsecured creditor claims with respect to the Canadian Cannabis Subsidiaries.

In the event that such advancements by the Company are not treated in the CCAA Proceedings as debt claims entitled to recovery on the same basis as other unsecured creditor claims Pyxus may not recover a substantial portion or any amounts with respect to such advancements.

In such case, Pyxus may incur further impairment with respect to its advancements in respect to the Canadian Cannabis Subsidiaries.

In addition, Pyxus has guaranteed certain obligations of the Canadian Cannabis Subsidiaries, including office lease obligations and severance that may be owed to certain executives of the Canadian Cannabis Subsidiaries.

To the extent that such obligations are not satisfied by the Canadian Cannabis Subsidiaries, Pyxus may have liability under such guarantees.

To the extent that consummation of the sales transactions contemplated in the CCAA Proceeding, or other aspects of the CCAA Proceeding, are delayed, borrowings of the Canadian Cannabis Subsidiaries under the Canadian DIP Facility may be greater than anticipated and exacerbate concerns with respect to our maintenance of necessary liquidity.

Risks Relating to Other Aspects of Our Operations

9 unchanged sentences

We rely on information technology ("IT") systems, including systems hosted by service providers.

The enterprise resource planning system ("SAP") we have implemented throughout the Company, for example, is hosted by Capgemini and our domestic employee payroll system is hosted by Ceridian.

Although we have disaster recovery plans and several intrusion preventive mitigating tools and services in place, which are active inline services or are tested routinely, our portfolio of hardware and software products, solutions and services and our enterprise IT systems, including those hosted by service providers, may be vulnerable to damage or disruption caused by circumstances beyond our control, such as catastrophic events, power outages, natural disasters, computer system, or network failures, computer viruses or other malicious software programs, and cyber-attacks, including system hacking and other cyber-security breaches.

The enterprise resource planning system we have implemented throughout the Company, for example, is hosted by iTelligence and our domestic employee payroll system is hosted by Ceridian.

natural disasters, computer system, or network failures, computer viruses or other malicious software programs, and cyber-attacks, including system hacking and other cyber-security breaches.

For example, in April 2019, the Company discovered that the email accounts of two Canadian employees had been compromised resulting in the unauthorized access of customer and vendor data.

3 unchanged sentences

We cannot assure you that material weaknesses will not be identified in the future.

We believe that our internal control over financial reporting was effective at March 31, 2020, as reported elsewhere in this Annual Report.

In certain prior years, we identified material weaknesses in our internal control over financial reporting.

Although we intend to continue to aggressively monitor and improve our internal controls, we cannot assure you that other material weaknesses will not occur in the future.

1 unchanged sentence

Ineffective internal controls could cause investors to lose confidence in our reported financial information, which could have a negative effect on the value of our common stock and could also require additional restatements of our prior reported financial information.

In addition, because we are no longer an “accelerated filer” under applicable SEC regulations, we are no longer required to obtain and present a report of our independent accounting firm with respect to the effectiveness of our internal control over financial reporting and we have not obtained such a report with respect to an evaluation of our internal controls as of March 31, 2021 and, accordingly, no such report is included in this Form 10-K.

Regulations regarding environmental matters may affect the Company by substantially increasing the Company's costs and exposing it to potential liability.

18 unchanged sentences

To the extent that any of our indebtedness that extends beyond 2021 bears interest at rates based on LIBOR, the interest rates for these obligations might be subject to change based on recent regulatory changes .

On July 27, 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021.

It is unclear if at that time whether LIBOR will cease to exist or if new methods of calculating LIBOR will be established such that it continues to exist after 2021.

Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S.

financial institutions, is considering replacing USD LIBOR with a new index calculated by short-term repurchase agreements, backed by Treasury securities.

The chief executive of the United Kingdom Financial Conduct Authority (“FCA”), which regulates the London Interbank Offered Rate (“LIBOR”), announced that the FCA intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021.

The Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee which identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative to USD-LIBOR in derivatives and other financial contracts.

In November 2020, the ICE Benchmark Administration Limited, the benchmark administrator for USD LIBOR rates, proposed extending the publication of certain commonly used USD LIBOR settings until

June 30, 2023 and the FCA issued a statement supporting such proposal.

In connection with this proposal, certain U.S.

banking regulators issued guidance strongly encouraging banks to generally cease entering into new contracts referencing USD LIBOR as soon as practicable and in any event by December 31, 2021.

It is not possible to predict the effect of these changes, including when LIBOR will cease to be available or when there will be sufficient liquidity in the SOFR markets.

The future of LIBOR at this time is uncertain.

If LIBOR ceases to exist, we may need to renegotiate any agreements extending beyond 2021 that utilize LIBOR as a factor in determining the interest rate to replace LIBOR with the new standard that is established, which may have an adverse effect on our interest expense and results of operations.

Risks Relating to Ownership of Our Common Stock

Shares of our common stock outstanding immediately prior to the effectiveness of the Plan will be cancelled upon the effectiveness of the Plan, and pursuant to the Plan shares are be issued by New Pyxus upon the effectiveness of the Plan to certain holders of the Second Lien Notes and to the DIP Lenders, who will, pursuant to the Plan, be deemed to have signed the Shareholders Agreement.

We cannot assure you that an active trading market for the New Pyxus common stock to be issued upon the effectiveness of the Plan will develop or be maintained, and the market price of the New Pyxus common stock may be volatile, which could cause the value of your investment to decline.

Upon the effectiveness of the Plan, all shares of our common stock outstanding immediately prior to the effectiveness of the Plan will be cancelled pursuant to the terms of the Plan.

The shares of New Pyxus common stock to be issued in connection with the effectiveness of the Plan will not initially be listed for trading on any national stock exchange.

We cannot assure holders of New Pyxus common stock that an active public market for New Pyxus common stock to be issued upon the effectiveness of the Plan will develop or, if it develops, that it will be sustained.

In the absence of an active public trading market, it may be difficult for holders to liquidate their investment in New Pyxus common stock.

In the event New Pyxus common stock commences trading, the trading price of New Pyxus common stock may fluctuate significantly.

Numerous factors, many of which we have no control over, may have a significant impact on the market prices of New Pyxus common stock.

The Shareholders Agreement implemented upon the effectiveness of the Plan, which is to be deemed to have been signed by all persons receiving shares of New Pyxus common stock pursuant to the Plan, includes their agreement not to transfer such

shares in certain transactions and to certain person as set forth in the Shareholders Agreement.

A description of the Shareholders Agreement is included in "Note 28.

Subsequent Events" to the "Notes to Consolidated Financial Statements".

In the event New Pyxus common stock commences trading, the trading price of such common stock may not accurately reflect the value of its business.

Upon the effectiveness of the Plan, ownership of New Pyxus common stock will be highly concentrated, and there will be a limited number of shares available for trading on any public market if such a market develops.

As a result, future reported trading prices for New Pyxus common stock at any given time may not accurately reflect the underlying economic value of its business at that time.

Future reported trading prices could be higher or lower than the price a shareholder would be able to receive in a sale transaction, and we cannot assure you that there will be sufficient public trading in New Pyxus common stock in the future to create a liquid trading market that accurately reflects the underlying economic value of its business.

If LIBOR ceases to exist, we may need to renegotiate applicable agreements that utilize LIBOR as a factor in determining the interest rate that extend beyond the scheduled LIBOR termination dates to replace LIBOR with the new standard that is established, which may have an adverse effect on our interest expense and results of operations.

Risks Relating to the Ownership of Our Common Stock

Certain shareholders have the ability to exercise controlling influence on various corporate matters.

Upon our emergence from Chapter 11, two shareholders and their respective affiliates, Glendon Capital Management LP (together with its affiliates, the “Glendon Investor”) and Monarch Alternative Capital LP (together with its affiliates, the “Monarch Investor”;

the Glendon Investor and the Monarch Investor are together referred to as the “Significant Shareholders”) beneficially own in the aggregate approximately 56% of our issued and outstanding common stock and, therefore, have significant control on the outcome of matters submitted to a vote of shareholders, including, but not limited to, electing directors and approving corporate transactions.

Pursuant to the terms of a Shareholders Agreement dated as of August 24, 2020 among the Company and certain shareholders, including the Significant Shareholders, each of the Glendon Investor and the Monarch Investor has the right (depending on its continued ownership of a specified percentage of the outstanding shares of our common stock) to nominate up to two individuals for election as directors, and each of them and the other shareholders that are parties to the Shareholders Agreement have agreed to take all necessary action to elect such nominees as directors.

Under our articles of incorporation, the affirmative vote of each of the Glendon Investor and the Monarch Investor, so long as it continues to maintain an Investor Percentage Interest (as defined in the Shareholders Agreement) of at least five percent, is required for the approval of any amendment to the articles of incorporation.

It is our understanding that each of the Glendon Investor and the Monarch Investor hold a significant amount of the Notes and the Term Loans.

In addition, the Glendon Investor and the Monarch Investor are the lenders under the DDTL Facility.

Circumstances may occur in which the interests of the Significant Shareholders could be in conflict with the interests of other shareholders, and the Significant Shareholders could have substantial influence to cause us to take actions that align with their interests.

Should conflicts arise, we can provide no assurance that the Significant Shareholders would act in the best interests of other shareholders or that any conflicts of interest would be resolved in a manner favorable to our other shareholders.

The price of our common stock may be negatively impacted by factors that are unrelated to our operations.

Although our common stock is currently listed for quotation on the OTC Markets, we understand that no securities brokerage firm is making a market in the Company’s common stock.

Trading through the OTC Markets is frequently thin and may be highly volatile.

There is no assurance that a sufficient market will continue in our stock, in which case it could be difficult for shareholders to sell their stock.

The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of the markets in which our businesses operate, quarterly operating results of our competitors, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us.

In addition, the stock market is subject to extreme price and volume fluctuations.

This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.

Our actual financial results may vary significantly from the projections that were filed with the Bankruptcy Court.

Certain projected financial information was included in the disclosure statement relating to the Plan filed with the Bankruptcy Court to support the feasibility of the Plan and our ability to continue operations upon emergence from the Chapter 11 Cases.

This projected financial information was prepared by, and is the responsibility of, our management.

At the time they were prepared, the projections reflected numerous assumptions concerning our anticipated future performance and with respect to prevailing and anticipated market and economic conditions that were and remain beyond our control and that may not materialize.

Projections are inherently subject to substantial and numerous uncertainties and to a wide variety of significant business, economic and competitive risks and the assumptions underlying the projections and/or valuation estimates may prove to be wrong in material respects.

Actual results may vary significantly from those contemplated by the projections.

Those projections were prepared solely for the purpose of the Chapter 11 Cases and have not been, and will not be, updated on an ongoing basis.

Accordingly, such projections are now stale and should no longer be relied upon as a forecast of expected results.

Risks Relating to the Tobacco Industry

6 unchanged sentences

• tax increases on consumer tobacco products;

• potential prohibition on the sale of menthol cigarettes in the United States;

• current and potential actions by state attorneys general to enforce the terms of the Master Settlement Agreement, or MSA, between state governments in the United States and tobacco product manufacturers;

6 unchanged sentences

• the impact of consolidation among multinational cigarette manufacturers.

Tobacco product manufacturer litigation may reduce demand for our products and services.

Our primary customers, the leading cigarette manufacturers, have faced thousands of lawsuits brought throughout the United States and, to a lesser extent, the rest of the world.

These lawsuits have been brought by different types of plaintiffs, including:

(1) individuals and classes of individuals alleging personal injury and/or misleading advertising;

(2) governments (including governmental and quasi-governmental entities in the United States and abroad) seeking recovery of health care costs allegedly caused by cigarette smoking;

and (3) other groups seeking recovery of health care expenditures allegedly caused by cigarette smoking, including third-party health care payors, such as unions and health maintenance organizations.

Damages claimed in some of the smoking and health cases have ranged into the billions of dollars.

There have been many jury verdicts for plaintiffs in tobacco product litigation over the past several years.

Additional plaintiffs continue to file lawsuits.

The effects of the previous and current lawsuits on our customers could reduce their demand for tobacco from us.

Legislation and regulatory and other governmental initiatives could impose burdensome restrictions on the tobacco industry and reduce consumption of consumer tobacco products and demand for our services.

2 unchanged sentences

The act imposes further restrictions on advertising of tobacco products, authorizes the FDA to limit the sales of tobacco products to face-to-face transactions permitting the verification of the age of the purchaser, authorizes a study to determine whether the minimum age for the purchase of tobacco products should be increased and requires submission of reports from manufacturers of tobacco products to the FDA regarding product ingredients and other matters, including reports on health, toxicological, behavioral, or physiologic effects of tobacco products and their constituents.

The act also mandates warning labels and requires packaging to indicate the percentage of domestically grown tobacco and foreign grown tobacco included in the product, although the FDA has issued guidance to the industry announcing its intent to enforce the latter

requirements until further notice.

The FDA has adopted regulations under the act establishing requirements for the sale, distribution, and marketing of cigarettes, as well as package warnings and advertising limitations.

15 unchanged sentences

The full impact of the act, including the May 2016 regulations and any future regulatory action to implement the act, is uncertain.

However, if the effect of the act and FDA regulations under the act is a significant reduction in consumption of tobacco products, it could materially adversely affect our business, volume, results of operations, cash flows and financial condition.

However, if the effect of the act and FDA regulations under the act is a significant reduction in consumption of

tobacco products, it could materially adversely affect our business, volume, results of operations, cash flows and financial condition.

On April 28, 2021, the FDA announced its intention to propose regulations that would ban the sale of menthol flavored cigarettes in the United States.

It is uncertain whether any such regulations will be proposed or adopted.

If such regulations are adopted, consumption of tobacco products in the United States could be materially reduced.

Such a reduction could adversely impact customer demand for our leaf tobacco products, which could materially adversely affect our business, volume, results of operations, cash flows and financial condition.

Reports with respect to the harmful physical effects of cigarette smoking have been publicized for many years, and the sale, promotion and use of cigarettes continue to be subject to increasing governmental regulation.

6 unchanged sentences

Further, in February 2005, the World Health Organization (“WHO”) treaty, the Framework Convention for Tobacco Control (“FCTC”), entered into force.

This treaty, which is binding on 181 nations as of March 31, 2019, requires signatory nations to enact legislation that would require, among other things, specific actions to prevent youth smoking;

This treaty, which the WHO reports has been signed by 182 nations as of March 31, 2021, requires signatory nations to enact legislation that would require, among other things, specific actions to prevent youth smoking;

restrict or prohibit tobacco product marketing;

7 unchanged sentences

and permit and encourage litigation against tobacco product manufacturers.

Due to the present regulatory and legislative environment, a substantial risk exists that past growth trends in tobacco product sales may not continue and that existing sales may decline.

Due to the present regulatory and legislative environment, a substantial risk exists that tobacco product sales may decline.

A significant decrease in worldwide tobacco consumption brought about by existing or future governmental laws and regulations would reduce demand for tobacco products and services and could have a material adverse effect on our results of operations.

2 unchanged sentences

The WHO, through the FCTC, created a formal study group to identify and assess crop diversification initiatives and alternatives to leaf tobacco growing in countries whose economies depend upon tobacco production.

The study group began its work in February 2007.

In its initial report published later that year, the study group indicated that the FCTC did not aim to phase out tobacco growing, but the study group's focus on alternatives to tobacco crops was in preparation for its anticipated eventual decrease in demand resulting from the FCTC's other tobacco control initiatives.

In its initial report published in 2007, the study group indicated that the FCTC did not aim to phase out tobacco growing, but the study group's focus on alternatives to tobacco crops was in preparation for its anticipated eventual decrease in demand resulting from the FCTC's other tobacco control initiatives.

If the objective of the FCTC study group were to change to seek to eliminate or significantly reduce leaf tobacco production and certain countries were to partner with the study group in pursuing this objective, we could encounter difficulty in sourcing leaf tobacco to fill customer requirements, which could have an adverse effect on our results of operations.

4 unchanged sentences

These actions could adversely affect our business, financial condition, and results of operations.

We have been, and continue to be, subject to governmental investigations into, and litigation concerning, leaf tobacco industry buying and other payment practices.

We have been subject to governmental investigations into, and litigation concerning, leaf tobacco industry buying and other payment practices.

The leaf tobacco industry, from time to time, has been the subject of government investigations regarding trade practices.

2 unchanged sentences

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