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Item 1A. Risk Factors

2026-06-04 compared with 2025-06-10 · 159 added, 137 removed, 224 unchanged (57% of the section changed)

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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.

These disclosures reflect our beliefs and opinions as to factors that could materially and adversely affect the Company and its securities in the future.

References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future.

Risks Related to Our Indebtedness

We may not be able to refinance or renew our indebtedness or be able to borrow under our ABL credit facility or other future credit facilities, which may have a material adverse effect on our financial condition.

We may not be able to renew or refinance our senior secured indebtedness, including our ABL credit facility, or other indebtedness on substantially similar terms, or at all, whether due to volatility and disruption of global credit markets or otherwise.

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 ABL credit facility and other senior secured indebtedness on terms that are substantially similar to the terms currently available to us or obtain alternative or additional financing arrangements, we may not be able to repay the ABL credit facility, our senior secured indebtedness, or certain of our other indebtedness, which may result in a default.

We may not continue to have access to the capital markets to obtain long-term and short-term financing on acceptable terms and conditions.

We access the short-term capital markets and, from time to time, the long-term markets to obtain financing.

Our access to, and the availability of acceptable terms and conditions of, such financing are impacted by many factors, including:

(i) our credit ratings;

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

and (iii) the current state of the economy, including the

tobacco industry.

There can be no assurances that we will continue to have access to the capital markets on terms acceptable to us.

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

Also, a substantial portion of our debt, including borrowings under our 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 in an amount sufficient to enable us to service our indebtedness or to fund our other liquidity needs.

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 debt service obligations.

As of March 31, 2026, we had approximately $932.9 million in aggregate principal amount of indebtedness.

Our substantial debt could have important consequences, including:

• making it more difficult for us to satisfy our obligations with respect to our senior credit obligations and our other obligations,

• requiring us to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing the funds available for operations, working capital, capital expenditures, acquisitions, product development, and other purposes,

• 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, and

• exposing us to the risk of increased interest rates, as a substantial portion of our debt is subject to variable interest rates.

Despite current indebtedness levels, we may incur additional debt, which could increase the risks associated with our significant leverage.

We may incur substantial additional indebtedness in the future to the extent permitted under our existing credit arrangements.

As of March 31, 2026, $747.3 million was available for borrowing under our short and long-term credit facilities, including letters of credit.

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

Risks Related to Our Leaf Tobacco Operations

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Demand for our leaf tobacco or processing services could be materially reduced if cigarette manufacturers decide to significantly vertically integrate their operations, whether through the acquisition of our competitors, establishing new operations, contracting directly with suppliers, or otherwise.

In general, our results of operations have not been adversely affected by vertical integration initiatives, and some customers have reversed certain aspects of their previous efforts to vertically integrate operations.

In general, our results of operations have not been adversely affected by vertical integration initiatives, and some customers have reversed certain aspects of their previous efforts to

vertically integrate operations.

However, significant vertical integration by our customers could have a material adverse effect on our financial performance.

Shifts in customer requirements for sourcing tobacco may negatively affect our organizational structure, asset base, and results of operations, including shifts resulting from the imposition of tariffs.

Shifts in customer requirements for sourcing tobacco could negatively affect our organizational structure, asset base, and results of operations, including shifts resulting from the imposition of tariffs.

We procure and process leaf tobacco across multiple countries and regions, and customer procurement strategies and decisions may be influenced by prevailing macroeconomic conditions, including currency fluctuations, such as changes in currency exchange rates relative to the United States Dollar (“USD”), the imposition of tariffs and other changes in international trade policies.

For example, tariffs announced by the U.S.

government have resulted in the imposition of retaliatory tariffs by impacted governments, and recent tariff actions, and future tariff actions, by the U.S.

government may result in additional tariffs being imposed.

As a result, we have experienced, and continue to experience, shifts in customer purchasing behavior in affected jurisdictions.

In addition to risks that we may not be able to fully supply customer needs from unaffected regions in response to such shifts in purchasing behavior, such shifts have required, and may continue to require, the Company to evaluate and adjust how we conduct our business and operations in affected regions.

While we continue to monitor trade developments that could impact our customers and our business, our sales opportunities may be adversely affected by such shifts in customer purchasing behavior and we may not be able to adjust our operations in a timely or efficient manner, which could adversely affect our results of operations.

We have incurred, and may continue to incur, costs as we continue to adjust to shifts in sourcing, including in response to tariff actions.

If our customers significantly alter their requirements for tobacco volumes from certain regions, we may have to change our production facilities and alter our fixed asset base in certain origins.

Shifts in sourcing of tobacco 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.

For example, tariffs imposed in 2018 by China on U.S.

agricultural products, including tobacco, in response to U.S.-imposed tariffs on Chinese manufactured goods, adversely impacted our shipping volumes from the U.S.

at that time since impacted customers sought to source tobacco from jurisdictions not subject to these tariffs.

This shift in customer sourcing requirements adversely affected our results of operations for some time, as it is not possible to immediately adjust to such customer-driven shifts in sourcing origins.

Recent tariffs announced by the U.S.

government, including, for example, on goods from China, Canada, and Mexico, has resulted in the imposition of retaliatory tariffs by impacted governments, and additional tariffs may be imposed.

For example, in March 2025, China's Ministry of Finance announced tariffs on certain agricultural imports from the U.S.

While we continue to monitor trade discussions that could impact our business, we may not be able to timely or efficiently adjust to shifts in sourcing origins as a result of such tariffs, or any other tariffs and retaliatory tariffs that may be imposed in the future, which could similarly adversely affect our results of operations.

We have incurred, and may continue to incur, restructuring charges as we continue to adjust to shifts in sourcing.

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.

In addition, certain of our most significant customers, including Philip Morris International Inc.

and British American Tobacco, have publicly announced intentions to move toward smoke-free products, with smoke-free products replacing traditional cigarettes.

Generally, smoke-free products require less tobacco in production than traditional cigarettes.

An increasing trend toward the replacement of traditional cigarettes with smoke-free products, whether driven by our customers or by consumers, could materially adversely affect our results of operations.

and British American Tobacco, have publicly announced intentions to move toward smoke-free, alternative tobacco and nicotine products replacing traditional cigarettes.

Generally, these alternative tobacco and nicotine products require less, and in some cases no, tobacco in production as compared to traditional cigarettes and other combustible tobacco products.

An increasing shift toward alternative tobacco and nicotine products, whether driven by our customers or by consumer preferences, could materially adversely affect our results of operations.

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

Our financial results may be significantly affected by fluctuations in tobacco growing season conditions and crop sizes, which affect the supply of tobacco to our customers.

Crop sizes may be affected by, among other things, precipitation levels, crop

infestation and disease, the volume of annual tobacco plantings and yields realized by suppliers, and suppliers' elections to grow crops other than tobacco.

Crop sizes may be affected by, among other things, precipitation levels, crop infestation and disease, the volume of annual tobacco plantings and yields realized by suppliers, the availability of crop inputs, and suppliers' elections to grow crops other than tobacco.

The cultivation period for tobacco is dependent upon a number of factors, including the weather and other natural events, such as hurricanes, floods, and tornadoes, and our processing schedule and results of operations for any quarterly period can be significantly altered by these factors.

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The cost of acquiring tobacco can fluctuate greatly due to crop sizes and increased competition in certain markets where we purchase tobacco.

For example, short crops in periods of high demand translate into higher average green prices, higher throughput costs, and less volume to sell.

Furthermore, large crops translate into lower average green prices, lower throughput costs, and excess volume to sell.

The timing and unpredictability of customer indications, orders, and shipments could require us to keep tobacco in inventory, which increases our balance sheet risk and could result in variations in financial results.

For example, short crops in periods of high demand translate into higher average green tobacco prices, higher throughput costs, and less volume to sell.

Conversely, large crops translate into lower average green tobacco prices, lower throughput costs, and excess volume to sell.

From time to time in the ordinary course of business, we may hold significant quantities of processed tobacco in inventory due to the timing and unpredictability of customer indications, orders, and shipments, which increases our balance sheet risk and may contribute to variability in financial results.

The timing of shipments can be materially impacted by shortages of containers and vessels for shipping, increased spot-prices for shipping prompting vessel operators to reduce cargo allocations of our customers' containers covered by lower-priced, long-term shipping arrangements, and infrastructure and accessibility issues in the ports we use for shipment.

We may, from time to time in the ordinary course of business, keep a significant amount of processed tobacco in inventory for our customers.

Control is transferred and revenue is recognized for the sale of inventory at a point in time, in accordance with the shipping terms of the contract.

Control of processed tobacco is transferred and revenue is recognized for the sale of inventory at a point in time, in accordance with the shipping terms of the contract.

As individual shipments may represent significant amounts of revenue, our financial results may vary significantly depending on our customers’ needs and shipping instructions.

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.

These fluctuations result in varying volumes and sales in given periods, which may limit 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 and suppliers may have a material adverse impact on our business, financial condition, results of operations, and cash flows.

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In some locales, we purchase seeds, fertilizer, pesticides, and other products related to growing tobacco, which represent prepaid inventory, and issue them to suppliers with whom we have purchase contracts.

The suppliers then utilize these inputs to grow tobacco, which we are contractually obligated to purchase if they meet our specifications.

The suppliers then utilize these inputs to grow tobacco, which we are contractually obligated to purchase if it meets our specifications.

These advances to tobacco suppliers are settled as part of the consideration paid upon the suppliers delivering us unprocessed tobacco at market prices.

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We 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.

Due to their lower cost structures, these merchants may offer prices on products and services that

are lower than our prices.

Additionally, some of our customers may also directly source leaf tobacco from farmers to meet some of their raw material needs.

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

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In addition, since our leaf tobacco products are used in the manufacturing of tobacco consumer goods, consumer behavior that deprioritizes the purchase of tobacco consumer goods in response to inflationary increases in the price of such goods could result in reduced overall demand for consumer tobacco products and, consequently, for the leaf tobacco we provide to manufacturers, which could materially adversely affect our profitability, results of operations, and financial position.

Risks Related to Our Financial Condition and Capital Structure

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 foreign 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.

If local lenders lose confidence in us as a borrower, 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 foreign 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.

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

We face several risks, such as changes in economic conditions, changes in the leaf tobacco market, changes in regulations affecting the tobacco industry, other changes in demand for our products, increasing expenses, the occurrence of a public health crisis, including a pandemic or epidemic, and increasingly severe and frequent weather-related events and natural disasters.

We may need to raise additional funds through public or private debt, including the local short-term credit lines, equity financing, or other various means to fund our business, both at a holding-company level and at our foreign local leaf tobacco subsidiaries.

Our access to necessary financing may be limited, if it is available at all.

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

Failure of foreign banks in which our subsidiaries deposit funds or the failure of those foreign banks to transfer funds or honor withdrawals, may affect our results of operations.

Funds held by our foreign subsidiaries are often deposited in their local banks.

In addition, we maintain deposit accounts with numerous financial institutions around the world in amounts that exceed applicable governmental deposit insurance levels.

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.

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, may be unable to perform transfers of certain currencies.

If our ability to gain access to these funds was impaired, it could have a material adverse effect on our results of 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.

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 and the availability of capital resources and an inability to renew or refinance short-term operating lines of credit and other short-term indebtedness), 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.

Derivative transactions may expose us to potential losses and counterparty risk.

We may, from time to time, enter certain derivative transactions, including interest rate swaps and foreign exchange contracts.

Changes in the fair value of these derivative financial instruments that are not accounted for as cash flow hedges are reported as income and could materially affect our reported income in any period.

In addition, the counterparties to these derivative transactions may be financial institutions or affiliates of financial institutions, and we would be subject to risks that these counterparties default under these transactions.

In some of these transactions, our exposure to counterparty credit risk may not be secured by any collateral.

Global economic conditions over the last few years have resulted in the actual or perceived failure or financial difficulties of many financial institutions, including bankruptcy.

If one or more of the counterparties to one or more of our derivative transactions not secured by collateral becomes subject to insolvency proceedings, we would become an unsecured creditor in those proceedings with a claim equal to our exposure at the time under those transactions.

We cannot assure you of the financial stability or viability of our counterparties.

Risks Related to the Scope of Our International Operations

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Further, the imposition of governmental sanctions or other restrictions may preclude us from continuing to sell to certain customers or to source leaf tobacco from certain jurisdictions and could have a material adverse effect on our profitability, results of operations, and financial position.

We face risks related to global conflicts, which could significantly disrupt our operations and access to capital.

We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing conflicts in the Middle East, including conflicts involving Iran and Israel.

Our business, financial condition and results of operations may be materially and adversely affected by any negative impact on the global economy and capital markets resulting from such conflicts or any other geopolitical tensions.

and global markets have experienced and will likely continue to experience volatility and disruption following the escalation of geopolitical tensions and the start of the conflicts in the Middle East.

Although the length and impact of the ongoing military conflict is highly unpredictable, the impact of these military conflicts could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions.

Disruption of global financial markets and a recession or market correction, including the significant tariffs imposed by the United States on imports from other countries and other global macroeconomic factors such as inflation and rising interest rates, could reduce our ability to access capital, which could in the future negatively affect our liquidity and could materially affect our business.

In addition, we maintain a number of operations in the Middle East, including a processing facility in Jordan, and supply a number of customers in that region.

The scope of the ongoing military conflicts in the Middle East is highly unpredictable, and nations in the Middle East not directly involved in the conflict have been targeted for attacks.

Accordingly, such hostilities may

directly impact our operations and customers in that region, which could have a material adverse effect on our business and results of operations.

Further, such armed conflicts have adversely affected shipping in that region.

The timing of shipments of our tobacco can be materially impacted by shortages of containers and vessels for shipping, increased spot-prices for shipping prompting vessel operators to reduce cargo allocations of our customers' containers covered by lower-priced, long-term shipping arrangements, and infrastructure and accessibility issues in the ports we use for shipment.

Our results of operations may be materially adversely affected if such conflicts continue to disrupt shipping to the extent that our shipments cannot be made as anticipated or at all.

We are subject to the Foreign Corrupt Practices Act (the "FCPA"), and we operate in jurisdictions that pose a high risk of potential FCPA violations.

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Although our corporate policy prohibits foreign bribery and we have adopted procedures to promote compliance, we cannot assure you that our policy, procedures, and controls will operate effectively at all times to protect us against liability under the FCPA for actions taken by our agents, employees, and intermediaries with respect to our business or any businesses that we may acquire.

Failure to comply with the FCPA, other anti-corruption laws and other laws governing the conduct of business with government entities (including local laws) could lead to criminal and civil penalties and other remedial measures (including further changes or enhancements to our procedures, policies, and controls, the imposition of a compliance monitor at our expense, potential personnel changes and/or disciplinary actions), any of which could have an adverse impact on our business, financial condition, results of operations, and liquidity.

Failure to comply with the FCPA, other anti-corruption laws and other laws governing the conduct of business with government entities (including local laws) could lead to criminal and civil penalties and other remedial measures (including further changes or enhancements to our policies, procedures, and controls, the imposition of a compliance monitor at our expense, potential personnel changes and/or disciplinary actions), any of which could have an adverse impact on our business, financial condition, results of operations, and liquidity.

Investigation of any potential violations of the FCPA or other anti-corruption laws by U.S.

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Though we conduct business in many countries around the world, our sales of tobacco, consistent with the business of the leaf tobacco industry, are generally conducted in USD.

We generally must purchase tobacco in foreign countries using local currency.

Generally, we are required to purchase tobacco in foreign 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.

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Although we operate in many foreign countries and are exposed to fluctuations in the currencies of numerous foreign countries, exchange fluctuation in the Brazilian Real against the USD has the greatest potential for impact on our financial results.

We attempt to reduce such currency risks by matching the timing of our working capital borrowing needs against the tobacco purchasing and processing funds requirements in the currency of the country where the tobacco is grown.

We attempt to reduce such currency risks by matching the timing of our working capital borrowing needs against the tobacco purchasing and processing funds requirements

in the currency of the country where the tobacco is grown.

Fluctuations in the value of foreign currencies can significantly affect our operating results.

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For example, our enterprise resource planning system and our domestic employee payroll system are hosted by external service providers.

Although we have disaster recovery plans and intrusion preventive mitigating tools and services in-place, 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.

Although we have disaster recovery plans and intrusion preventive mitigating tools and services, 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.

We may face more sophisticated cyber-security attacks as a result of the proliferation of generative artificial intelligence providing bad actors with advanced cyber-attack tools.

The failure or disruption of our IT systems to perform as anticipated could disrupt our business and result in decreased performance, significant remediation costs, transaction errors, loss of data, processing inefficiencies, downtime, litigation, and the loss of suppliers or customers.

A significant disruption or failure could have a material adverse effect on our business operations, financial performance, and financial condition.

We cannot assure you that material weaknesses in our internal controls over financial reporting will not be identified in the future.

Although we monitor our internal controls, and improve them as needed, we cannot assure you that material weaknesses will not occur in the future.

We cannot assure you that material weaknesses in our internal control over financial reporting ("ICFR") will not be identified in the future.

Although we monitor our ICFR, and improve them as needed, we cannot assure you that material weaknesses will not occur in the future.

Failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations or result in misstatements in our financial statements in amounts that could be material.

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/or publicly traded debt and could also require additional restatements of our prior reported financial information.

In addition, because we are not an "accelerated filer" under applicable SEC regulations, we are not 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, 2025 and, accordingly, no such report is included in this Form 10-K.

Ineffective ICFR 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/or publicly traded debt and could also require additional restatements of our prior reported financial information.

In addition, because we are not an "accelerated filer" under applicable SEC regulations, we are not required to obtain and present a report of our independent accounting firm with respect to the effectiveness of our ICFR and we have not obtained such a report with respect to an evaluation of our internal controls as of March 31, 2026.

Accordingly, no such report is included in this Form 10-K.

Regulations regarding environmental matters may substantially increase our costs and expose us to potential liability.

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Such regulations govern, among other things, emissions of pollutants into the air, wastewater discharges, waste disposal, the investigation and remediation of soil and groundwater contamination, and the health and safety of our employees.

For example, our products and the raw materials used in its production processes are subject to numerous environmental laws and regulations.

For example, our products and the raw materials used in their production processes are subject to numerous environmental laws and regulations.

We may be required to obtain environmental permits from governmental authorities for certain of its current or proposed operations.

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Government regulations, however, could result in new or more stringent forms of regulatory oversight and disclosures.

These may lead to increased expenditures for environmental controls, land use restrictions, reporting, and other conditions, which could have an adverse effect on our results of operations.

may lead to increased expenditures for environmental controls, land use restrictions, reporting, and other conditions, which could have an adverse effect on our results of operations.

In addition, several governments have implemented or are considering implementing due diligence procedures to ensure strict compliance with environmental, labor, and government regulations.

For example, the European Union enacted broad due

diligence reporting requirements for all industries operating within Europe.

For example, the European Union enacted broad due diligence reporting requirements applicable to all industries operating within its Member States.

Due to general uncertainty regarding the timing, content, and extent of any such regulatory changes, we cannot predict the impact, if any, that these changes could have to our business, financial condition, and results of operations.

Our e-liquids business 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.

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

Our e-liquids business may be subject to these types of claims, including that:

(i) its products caused or contributed to injury, illness, or death;

(ii) it made false, misleading or impermissible claims;

(iii) it failed to include adequate labeling and instructions for use;

and/or (iv) it failed to include adequate warnings concerning possible side effects or interactions with other substances.

Previously unknown adverse reactions resulting from human consumption of these 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.

Our e-liquids business may in the future have to recall certain of its products due to potential contamination and quality assurance concerns.

Product liability claims or regulatory actions against our e-liquids business could result in increased costs and could adversely affect its reputation and goodwill with its consumers.

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

Our joint venture manufactures and supplies e-liquid and consumable nicotine-related products, which inherently carry the risk of exposure to product liability claims, regulatory action, and litigation in the event such products are alleged to have caused injury, harm, or death, and the Company and our related joint venture could be affected by such actions through reputational impact or claims alleging that our supplied materials contributed to the alleged harm.

As a contract manufacturer of, and supplier of inputs for, products that are ingested or otherwise consumed by humans, our joint venture business faces the risk of exposure to product liability claims, regulatory action, and other litigation (including class proceedings and individual proceedings) if such products are alleged to have caused loss, injury, or death.

E-liquids and other consumable nicotine product manufacturers and their suppliers may be subject to these types of claims, including that:

(i) the products caused or contributed to injury, illness, or death;

(ii) the manufacturer or supplier made false, misleading or impermissible statements regarding the products;

(iii) the products lacked adequate labeling and instructions for use;

and/or (iv) the products failed to include sufficient warnings concerning potential side effects or interactions with other substances.

Previously unknown adverse reactions resulting from human consumption of these e-liquids and other consumable nicotine 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, and our joint venture engaged in e-liquids and other consumable nicotine business may in the future have to recall certain of its manufactured products due to potential quality assurance concerns.

Product liability claims or regulatory actions involving e-liquids and other consumable nicotine could increase costs and adversely affect our reputation and relationships with our customers and their consumers.

We cannot assure you that product liability insurance held by the Company or our joint venture 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's becoming subject to significant liabilities that are uninsured.

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 inability to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims could result in the Company or our joint venture becoming subject to significant liabilities that are uninsured.

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

has a highly active plaintiffs’ bar.

Recent years have seen several purported class action lawsuits in the U.S.

against manufacturers and distributors of e-liquids and other vaping products.

against manufacturers, distributors and suppliers of e-liquid and other consumable nicotine-related 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.

Risks Related to Our Capital Structure