What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2023-03-15 compared with 2022-03-11 · 665 added, 689 removed, 293 unchanged (82% of the section changed)

The risk factors summarized and detailed below could materially harm our business, operating results and/or financial condition, impair our future prospects and/or cause the price of our common stock to decline.

These are not all of the risks we face and other factors not presently known to us or that we currently believe are immaterial may also affect our business if they occur.

Material risks that may affect our business, operating results and

financial condition include, but are not necessarily limited to, those relating to:

not all of the risks we face and other factors not presently known to us or that we currently believe are immaterial may also affect our business if they occur.

Material risks that may affect our business, operating results and financial condition

include, but are not necessarily limited to, those relating to:

Risks Related to Our Business and Industry

1 unchanged sentence

our dependence on a small number of third-party suppliers and producers;

the possibility that we will be unable to identify or contract with new suppliers or producers in the event of a supply or product disruption, as well as other supply chain concerns,

including delays in product shipments and increases in freight cost;

the possibility that we will be unable to identify or contract with new suppliers or producers in the event of a supply or product disruption, as well as other supply chain concerns, including delays in

product shipments and increases in freight cost;

the possibility that our licenses to use certain brands or trademarks will be terminated, challenged or restricted;

4 unchanged sentences

contamination of our tobacco supply or products;

uncertainty and continued evolution of the markets for our NewGen and cigar products;

uncertainty and continued evolution of the markets for our products;

complications with the design or implementation of our new enterprise resource planning system could adversely impact our business and operations;

6 unchanged sentences

our products are subject to developing and unpredictable regulation, such as court actions that impact obligations;

increase in state and local regulation of our NewGen products has been proposed or enacted;

increase in tax of our NewGen products could adversely affect our business;

increase in state and local regulation of our products has been proposed or enacted;

increase in tax of our products could adversely affect our business;

sensitivity of end-customers to increased sales taxes and economic conditions including significant increases in the rate of inflation and other declines in purchasing power;

uncertainty surrounding FDA compliance policy;

possible increasing international control and regulation;

3 unchanged sentences

significant product liability litigation;

the effect of the COVID-19 pandemic on our business;

Risks Related to Financial Results, Finances and Capital Structure

1 unchanged sentence

the terms of our indebtedness, which may restrict our current and future operations;

our loss of emerging growth status on December 31, 2021 and ability to comply with the additional disclosure requirements applicable to non-emerging growth companies;

identification a material weakness in our internal control related to ineffective information technology general controls which, if not remediated appropriately or timely, could

result in loss of investor confidence and adversely impact our stock price;

Changes in the method for determining LIBOR or the replacement of LIBOR with an alternative reference rate, may adversely affect interest expense related to outstanding debt;

our ability to comply with required disclosure requirements;

identification of material weaknesses in our internal control over financial reporting, which, if not remediated appropriately or timely, could result in loss of investor confidence and adversely impact our

Risks Related to our Common Stock

our certificate of incorporation and bylaws, as well as Delaware law and certain regulations, could discourage or prohibit acquisition bids or merger proposals, which may adversely

affect the market price of our common stock;

our certificate of incorporation and bylaws, as well as Delaware law and certain regulations, could discourage or prohibit acquisition bids or merger proposals, which may adversely affect the market price of

our common stock;

our certificate of incorporation limits the ownership of our common stock by individuals and entities that are Restricted Investors.

These restrictions may affect the liquidity of our common stock and may

result in Restricted Investors (as defined in our Certificate of Incorporation) being required to sell or redeem their shares at a loss or relinquish their voting, dividend and distribution rights;

future sales of our common stock in the public market could reduce our stock price, and any additional capital raised by us through the sale of equity or convertible securities may

dilute your ownership in us;

These restrictions may affect the liquidity of our common stock and may result in Restricted Investors

(as defined in our Certificate of Incorporation) being required to sell or redeem their shares at a loss or relinquish their voting, dividend and distribution rights;

future sales of our common stock in the public market could reduce our stock price, and any additional capital raised by us through the sale of equity or convertible securities may dilute your ownership in

we may issue preferred stock whose terms could adversely affect the voting power or value of our common stock;

1 unchanged sentence

our business may be damaged by events outside of our or our suppliers’ control, such as the impact of epidemics (e.g., coronavirus), political upheavals, or natural disasters;

adverse impact of climate change;

our reliance on information technology;

11 unchanged sentences

Sales of tobacco products are generally expected to continue to decline.

As a result of restrictions on advertising and promotions, increases in regulation and excise taxes, health concerns, a decline in the social acceptability of tobacco and

tobacco-related products, increased pressure from anti-tobacco groups, and other factors, the overall U.S.

As a result of restrictions on advertising and promotions, increases in regulation and excise taxes, health concerns, a decline in the social acceptability of tobacco and tobacco-related

products, increased pressure from anti-tobacco groups, and other factors, the overall U.S.

market for tobacco products has generally been declining in terms of volume of sales and is expected to continue to decline.

The general climate of declining sales of tobacco products is principally driven by the long-standing declines in cigarettes.

OTP, on the other hand, as measured by MSAi, have continued to generate modest consumer unit

volume gains.

Additionally, cigarillo cigars and MYO cigar wraps have each demonstrated MSAi volume gains in recent years.

Our tobacco products comprised approximately 68% of our total 2021 net sales and, while

some of our sales volume declines have been offset by higher prices or by increased sales in other product categories, there can be no assurance that these price increases or increased sales can be sustained, especially in an environment of

increased regulation, product characteristic restrictions, and taxation and changes in consumer spending habits.

OTP, on the other hand, has been more resilient as measured by MSAi.

Though OTP volumes

declined in 2022 due to post-COVID consumption normalization and economic conditions, volumes were still above pre-COVID levels in 2019 including rolling papers and MYO cigar wraps.

Our tobacco products comprised

approximately 50% of our total 2022 net sales and, while some of our sales volume declines have been offset by higher prices or by increased sales in other product categories, there can be no assurance that these price increases or increased

sales can be sustained, especially in an environment of increased regulation, product characteristic restrictions, and taxation and changes in consumer spending habits.

We depend on a small number of key third-party suppliers and producers for our products.

Our operations are largely dependent on a small number of key suppliers and producers to supply or manufacture our products pursuant to long-term contracts.

In 2021, our two most important

suppliers and producers were:

(i) Swedish Match, which produces all of our loose leaf chewing tobacco in the U.S.;

In 2022, our two most important suppliers

and producers were:

(i) Swedish Match (acquired in 2022 by Philip Morris International Inc.), which produces all of our loose-leaf chewing tobacco in the U.S.;

and (ii) RTI, which provides us with exclusive access to the Zig-Zag ® cigarette paper and related accessories in the U.S.

See “Item 1 – Business – Distribution and Supply Agreements”

See “Item 1 – Business – Distribution and Supply

All of our loose-leaf tobacco products are manufactured for us by Swedish Match pursuant to a ten-year renewable agreement, which we entered into in 2008.

The agreement will automatically be

renewed for five successive ten-year terms unless either party provides at least 180 days’ notice prior to a renewal term of its intent to terminate the agreement or unless otherwise terminated in accordance with the provisions of the agreement.

If a notice of non-renewal is delivered, the contract will expire two years after the date on which the agreement would have otherwise been renewed.

The agreement will automatically be renewed

for five successive ten-year terms unless either party provides at least 180 days’ notice prior to a renewal term of its intent to terminate the agreement or unless otherwise terminated in accordance with the provisions of the agreement.

notice of non-renewal is delivered, the contract will expire two years after the date on which the agreement would have otherwise been renewed.

Under this agreement, we retain the rights to all marketing, distribution and trademarks over the

7 unchanged sentences

business, results of operations, and financial condition.

All of our Zig-Zag ® premium cigarette papers, cigarette tubes, and

injectors are sourced from RTI, pursuant to the Distribution Agreements.

All of our Zig-Zag ® premium cigarette papers, cigarette tubes, and injectors

are sourced from RTI, pursuant to the Distribution Agreements.

In November 2020, Bolloré sold its rights to its trademarks for the Zig-Zag® brand name in the U.S.

and Canada to RTI and, in

connection with the sale, assigned the Distribution Agreements and the License Agreements to RTI.

and Canada to RTI and, in connection with

the sale, assigned the Distribution Agreements and the License Agreements to RTI.

RTI is an affiliate of one of our competitors.

The Distribution Agreements were most recently renewed in 2012 and pursuant to such agreements, we

renegotiate pricing terms every five years.

The Distribution Agreements were initially entered into with Bolloré, the original holder of the cigarette paper-related trademarks for the Zig-Zag ® brand name.

Pursuant to agreements with certain suppliers, we have agreed to store tobacco inventory purchased on our behalf and generally maintain a 12- to 24-month supply of our various tobacco products

at their facilities.

The Distribution Agreements were most recently renewed in 2012 and pursuant to such agreements, we renegotiate pricing

terms every five years.

The Distribution Agreements were initially entered into with Bolloré.

Pursuant to agreements with certain suppliers, we have agreed to store tobacco inventory purchased on our behalf and generally maintain a 12- to 24-month supply of our various tobacco products at

their facilities.

We cannot guarantee our supply of these products will be adequate to meet the demands of our customers.

Further, a major fire, violent weather conditions, or other disasters that affect us or any of our key suppliers or

producers, including RTI or Swedish Match, as well as those of our other suppliers and vendors, could have a material adverse effect on our operations.

Although we have insurance coverage for some of these events, a prolonged interruption in our

operations, as well as those of our producers, suppliers, or vendors, could have a material adverse effect on our business, results of operations, and financial condition.

In addition, we do not know whether we will be able to renew any or all of

our agreements on a timely basis, on terms satisfactory to us, or at all.

Any disruptions in our relationships with RTI or Swedish Match or any other significant supplier, a failure to renew any of our agreements, an inability or unwillingness by any supplier to

produce sufficient quantities of our products in a timely manner or finding a new supplier would have a significant impact on our ability to continue distributing the same volume and quality of products and maintain our market share, even during

a temporary disruption, which could have a material adverse effect on our business, results of operations and financial condition.

Further, a major fire, violent weather conditions, or other disasters that affect us or any of our key suppliers or producers,

including RTI or Swedish Match, as well as those of our other suppliers and vendors, could have a material adverse effect on our operations.

Although we have insurance coverage for some of these events, a prolonged interruption in our operations,

as well as those of our producers, suppliers, or vendors, could have a material adverse effect on our business, results of operations, and financial condition.

In addition, we do not know whether we will be able to renew any or all of our

agreements on a timely basis, on terms satisfactory to us, or at all.

Any disruptions in our relationships with RTI or Swedish Match or any other significant supplier, a failure to renew any of our agreements, an inability or unwillingness by any supplier to produce

sufficient quantities of our products in a timely manner or finding a new supplier would have a significant impact on our ability to continue distributing the same volume and quality of products and maintain our market share, even during a

temporary disruption, which could have a material adverse effect on our business, results of operations and financial condition.

We may be unable to identify or contract with new suppliers or producers in the event of a disruption to our supply of products.

In order to continue selling our products in the event of a disruption to our supply, we would have to identify new suppliers or producers that would be required to satisfy significant

regulatory requirements.

In order to continue selling our products in the event of a disruption to our supply, we would have to identify new suppliers or producers that would be required to satisfy significant regulatory

requirements.

Only a limited number of suppliers or producers (if any) may have the ability to produce our products at the volumes we need, and it could be costly or time-consuming to locate and approve such alternative sources.

Moreover, it may be difficult or costly to find suppliers to produce small volumes of our new products in the event we are looking only to supplement current supply as suppliers may impose minimum order requirements.

In addition, we may be unable

to negotiate pricing or other terms with our existing or new suppliers as favorable as those we currently enjoy.

Even if we were able to successfully identify new suppliers and contract with them on favorable terms, these new suppliers would also

be subject to stringent regulatory approval procedures that could result in prolonged disruptions to our sourcing and distribution processes.

Moreover, it may be

difficult or costly to find suppliers to produce small volumes of our new products in the event we are looking only to supplement current supply as suppliers may impose minimum order requirements.

In addition, we may be unable to negotiate pricing

or other terms with our existing or new suppliers as favorable as those we currently enjoy.

Even if we were able to successfully identify new suppliers and contract with them on favorable terms, these new suppliers would also be subject to

stringent regulatory approval procedures that could result in prolonged disruptions to our sourcing and distribution processes.

Furthermore, there is no guarantee that a new third-party supplier could accurately replicate the production process and taste profile of our existing products.

We cannot guarantee that a

failure to adequately replace our existing suppliers would not have a material adverse effect on our business, results of operations, and financial condition.

We cannot guarantee that a failure to

adequately replace our existing suppliers would not have a material adverse effect on our business, results of operations, and financial condition.

Our licenses to use certain brands and trademarks may be terminated or not renewed.

We are reliant upon brand recognition in the OTP markets in which we compete as the OTP industry is characterized by a high degree of brand loyalty and a reluctance to switch to new or

unrecognizable brands on the part of consumers.

Some of the brands and trademarks under which our products are sold are licensed to us for a fixed period of time in respect of specified markets, such as our Distribution and License Agreements for

use of the Zig-Zag ® name and associated trademarks in connection with certain of our cigarette papers and related products.

We are reliant upon brand recognition in the OTP markets in which we compete as the OTP industry is characterized by a high degree of brand loyalty and a reluctance to switch to new or unrecognizable

brands on the part of consumers.

Some of the brands and trademarks under which our products are sold are licensed to us for a fixed period of time in respect of specified markets, such as our Distribution and License Agreements for use of the Zig-Zag ® name and associated trademarks in connection with certain of our cigarette papers and related products.

We have a number of Licensing Agreements with RTI.

The first of these governs licensing, sourcing and the use of the Zig-Zag ® name with respect to cigarette papers, cigarette tubes, and cigarette injector machines, the second of which governs licensing, sourcing and the use of the Zig-Zag ® name with respect to e-cigarettes, vaporizers, and e-liquids, and the third of which governs the licensing, sourcing and use of the

Zig-Zag trademark on paper cones.

In 2021, we generated approximately $163 million in net sales of Zig-Zag ® products, of

which approximately $79 million was generated from products sold through the License Agreements.

In the event that one or more of these Licensing Agreements are not renewed, the terms of the agreements bind us under a five-year non-compete

clause, under which we cannot engage in direct or indirect manufacturing, selling, distributing or otherwise promoting of cigarette papers of a competitor to Zig-Zag® without RTI’s consent, except in

limited instances.

We do not know whether we will renew these agreements on a timely basis, on terms satisfactory to us, or at all.

As a result of these restrictions, if our licensing agreements with respect to the Zig-Zag® trademark are terminated, we may not be able to access the markets with recognizable brands that would be positioned to compete in these segments.

In the event that the licenses to use the brands and trademarks in our portfolio are terminated or are not renewed after the end of the term, there is no guarantee we will be able to find a

suitable replacement, or if a replacement is found, that it will be on favorable terms.

Any loss in our brand-name appeal to our existing customers as a result of the lapse or termination of our licenses could have a material adverse effect on

our business, results of operations, and financial condition.

2022, we generated approximately $162.0 million in net sales of Zig-Zag ® products, of which approximately $79.0 million was

generated from products sold through the License Agreements.

In the event that one or more of these Licensing Agreements are not renewed, the terms of the agreements bind us under a five-year non-compete clause, under which we cannot engage in

direct or indirect manufacturing, selling, distributing or otherwise promoting of cigarette papers of a competitor to Zig-Zag® without RTI’s consent, except in limited instances.

We do not know whether we

will renew these agreements on a timely basis, on terms satisfactory to us, or at all.

As a result of these restrictions, if our licensing agreements with respect to the Zig-Zag® trademark are terminated,

we may not be able to access the markets with recognizable brands that would be positioned to compete in these segments.

In the event that the licenses to use the brands and trademarks in our portfolio are terminated or are not renewed after the end of the term, there is no guarantee we will be able to find a suitable

replacement, or if a replacement is found, that it will be on favorable terms.

Any loss in our brand-name appeal to our existing customers as a result of the lapse or termination of our licenses could have a material adverse effect on our business,

results of operations, and financial condition.

We may not be successful in maintaining the consumer brand recognition and loyalty of our products.

We compete in a market that relies on innovation and the ability to react to evolving consumer preferences.

The alternative smoking accessories and tobacco industries in general, and the OTP

industry, in particular, are subject to changing consumer trends, demands, and preferences.

The alternative smoking accessories and tobacco industries in general, and the OTP industry,

in particular, are subject to changing consumer trends, demands, and preferences.

Therefore, products once favored may over time become disfavored by consumers or no longer perceived as the best option.

Consumers in the OTP market have

demonstrated a high degree of brand loyalty, but producers must continue to adapt their products in order to maintain their status among these customers as the market evolves.

The Zig-Zag ® brand has strong brand recognition among smokers, and our continued success depends in part on our ability to continue to differentiate the brand names that we own or

license and maintain similarly high levels of recognition with target consumers.

Consumers in the OTP market have demonstrated

a high degree of brand loyalty, but producers must continue to adapt their products in order to maintain their status among these customers as the market evolves.

The Zig-Zag ® brand has strong brand recognition among smokers, and our continued success depends in part on our ability to continue to differentiate the brand names that we own or license and maintain

similarly high levels of recognition with target consumers.

Trends within the alternative smoking accessories and OTP industries change often.

Our failure to anticipate, identify, or react to changes in these trends could,

among other things, lead to reduced demand for our products.

Factors that may affect consumer perception of our products include health trends and attention to health concerns associated with tobacco, price-sensitivity in the presence of

Our failure to anticipate, identify, or react to changes in these trends could, among other things, lead

to reduced demand for our products.

Factors that may affect consumer perception of our products include health trends and attention to health concerns associated with tobacco and other products we sell, price-sensitivity in the presence of

competitors’ products or substitute products, and trends in favor of new NewGen products that are currently being researched and produced by participants in our industry.

For example, in recent years, we have witnessed a shift in consumer

purchases from chewing tobacco to moist snuff due to its increased affordability.

For example, we have witnessed a shift in consumer purchases from chewing

tobacco to moist snuff due to its increased affordability.

Along with our biggest competitors in the chewing tobacco market, which also produce moist snuff, we have been able to shift priorities and adapt to this change.

failure to react to similar trends in the future could enable our competitors to grow or establish their brands’ market shares in these categories before we have a chance to respond.

Consumer perceptions of tobacco-based products are likely to continue to shift, and our success depends, in part, on our ability to anticipate these shifting tastes and the rapidity with which

the markets in which we compete will evolve in response to these changes on a timely and affordable basis.

If we are unable to respond effectively and efficiently to changing consumer preferences, the demand for our products may decline, which

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

Regulations may be enacted in the future, particularly in light of increasing restrictions on the form and content of marketing of tobacco products, that would make it more difficult to appeal

to our consumers or to leverage existing recognition of the brands that we own or license.

Furthermore, even if we are able to continue to distinguish our products, there can be no assurance that the sales, marketing, and distribution efforts of

our competitors will not be successful in persuading consumers of our products to switch to their products.

A failure to react to

similar trends in the future could enable our competitors to grow or establish their brands’ market shares in these categories before we have a chance to respond.

Consumer perceptions of tobacco-based products are likely to continue to shift, and our success depends, in part, on our ability to anticipate these shifting tastes and the rapidity with which the

markets in which we compete will evolve in response to these changes on a timely and affordable basis.

If we are unable to respond effectively and efficiently to changing consumer preferences, the demand for our products may decline, which could

have a material adverse effect on our business, results of operations, and financial condition.

Regulations may be enacted in the future, particularly in light of increasing restrictions on the form and content of marketing of tobacco products, that would make it more difficult to appeal to our

consumers or to leverage existing recognition of the brands that we own or license.

Furthermore, even if we are able to continue to distinguish our products, there can be no assurance that the sales, marketing, and distribution efforts of our

competitors will not be successful in persuading consumers of our products to switch to their products.

Many of our competitors have greater access to resources than we do, which better positions them to conduct market research in relation to

branding strategies or costly marketing campaigns.

Any loss of consumer brand loyalty to our products or reduction of our ability to effectively brand our products in a recognizable way will have a material effect on our ability to continue to

sell our products and maintain our market share, which could have a material adverse effect on our business, results of operations, and financial condition.

Any loss of consumer brand loyalty to our products or reduction of our ability to effectively brand our products in a recognizable way will have a material effect on our ability to continue to sell

our products and maintain our market share, which could have a material adverse effect on our business, results of operations, and financial condition.

Our distribution efforts rely in part on our ability to leverage relationships with large retailers and national chains.

Our distribution efforts rely in part on our ability to leverage relationships with large retailers and national chains to sell and promote our products, which is dependent upon the strength of

the brand names that we own or license and our salesforce effectiveness.

Our distribution efforts rely in part on our ability to leverage relationships with large retailers and national chains to sell and promote our products, which is dependent upon the strength of the

brand names that we own or license and our salesforce effectiveness.

In order to maintain these relationships, we must continue to supply products that will bring steady business to these retailers and national chains.

We may not be able to

sustain these relationships or establish other relationships with such entities, which could have a material adverse effect on our ability to execute our branding strategies, our ability to access the end-user markets with our products or our

ability to maintain our relationships with the producers of our products.

For example, if we are unable to meet benchmarking provisions in contracts or if we are unable to maintain and leverage our retail relationships on a scale sufficient to

make us an attractive distributor, it would have a material adverse effect on our ability to source products, and on our business, results of operations and financial condition.

In addition, there are factors beyond our control that may prevent

us from leveraging existing relationships, such as industry consolidation.

If we are unable to develop and sustain relationships with large retailers and national chains, or we are unable to leverage those relationships due to factors such as a

decline in the role of brick-and-mortar retailers in North America, our capacity to maintain and grow brand and product recognition and increase sales volume will be significantly undermined.

In such an event, we may ultimately be forced to

pursue and rely on local and more fragmented sales channels, which will have a material adverse effect on our business, results of operations and financial condition.

We may not be able to sustain

these relationships or establish other relationships with such entities, which could have a material adverse effect on our ability to execute our branding strategies, our ability to access the end-user markets with our products or our ability to

maintain our relationships with the producers of our products.

For example, if we are unable to meet benchmarking provisions in contracts or if we are unable to maintain and leverage our retail relationships on a scale sufficient to make us an

attractive distributor, it would have a material adverse effect on our ability to source products, and on our business, results of operations and financial condition.

In addition, there are factors beyond our control that may prevent us from leveraging existing relationships, such as industry consolidation.

If we are unable to develop and sustain relationships with

large retailers and national chains, or we are unable to leverage those relationships due to factors such as a decline in the role of brick-and-mortar retailers in North America, our capacity to maintain and grow brand and product recognition and

increase sales volume will be significantly undermined.

In such an event, we may ultimately be forced to pursue and rely on local and more fragmented sales channels, which will have a material adverse effect on our business, results of operations

and financial condition.

We face intense competition and may fail to compete effectively.

2 unchanged sentences

The OTP industry is characterized by brand recognition and loyalty, with product quality, price, marketing and packaging constituting the primary methods of competition.

Substantial marketing

support, merchandising display, competitive pricing and other financial incentives generally are required to introduce a new brand or to improve or maintain a brand’s market position.

Our principal competitors are “big tobacco,” Altria Group,

(formerly Phillip Morris) and British American Tobacco p.l.c.

(formerly Reynolds) as well as Swedish Match, Swisher International and manufacturers of electronic cigarettes, including U.K.-based Imperial Brands PLC.

These competitors are

significantly larger than us and aggressively seek to limit the distribution or sale of other companies’ products, both at the wholesale and retail levels.

For example, certain competitors have entered into agreements limiting

retail-merchandising displays of other companies’ products or imposing minimum prices for OTP products, thereby limiting their competitors’ ability to offer discounted products.

In addition, the tobacco industry is experiencing a trend toward

industry consolidation, most recently evidenced by the December 2018 investment in Juul Labs by Altria, the July 2017 acquisition of Reynolds American, Inc., by British American Tobacco p.l.c., and the June 2015 acquisition of Lorillard, Inc., by

Reynolds American, Inc.

Additional industry consolidation could result in a more competitive environment if our competitors are able to increase their combined resources, enhance their access to national distribution networks, or become acquired

by established companies with greater resources than ours.

Any inability to compete due to our smaller scale as the industry continues to consolidate and be dominated by “big tobacco” could have a material adverse effect on our business, results

of operations and financial condition.

Substantial marketing support,

merchandising display, competitive pricing and other financial incentives generally are required to introduce a new brand or to improve or maintain a brand’s market position.

Our principal competitors are “big tobacco,” Altria Group, Inc.

Phillip Morris) and British American Tobacco p.l.c.

(formerly Reynolds) as well as Swedish Match (purchased by Philip Morris International Inc.), Swisher International and manufacturers of electronic cigarettes, including U.K.-based Imperial Brands

These competitors are significantly larger than us and aggressively seek to limit the distribution or sale of other companies’ products, both at the wholesale and retail levels.

For example, certain competitors have entered into agreements

limiting retail-merchandising displays of other companies’ products or imposing minimum prices for OTP products, thereby limiting their competitors’ ability to offer discounted products.

In addition, the tobacco industry is experiencing a trend

toward industry consolidation, most recently evidenced by the November 2022 acquisition of Swedish Match AB by Philip Morris International Inc., the December 2018 investment in Juul Labs by Altria, the July 2017 acquisition of Reynolds American,

Inc., by British American Tobacco p.l.c., and the June 2015 acquisition of Lorillard, Inc., by Reynolds American, Inc.

Additional industry consolidation could result in a more competitive environment if our competitors are able to increase their

combined resources, enhance their access to national distribution networks, or become acquired by established companies with greater resources than ours.

Any inability to compete due to our smaller scale as the industry continues to consolidate and

be dominated by “big tobacco” could have a material adverse effect on our business, results of operations and financial condition.

“Big tobacco” has also established its presence in the NewGen products market and has begun to make investments in the alternative space.

There can be no assurance that our products will be

able to compete successfully against these companies or any of our other competitors, some of which have far greater resources, capital, experience, market penetration, sales and distribution channels than us.

In addition, there are currently

relatively few U.S.

restrictions on advertising electronic cigarettes and vaporizer products and competitors, including “big tobacco,” may have more resources than us for advertising expenses, which could have a material adverse effect on our

ability to build and maintain market share, and thus have a material adverse effect on our business, results of operations and financial condition.

The competitive environment and our competitive position are also significantly influenced by economic conditions, the state of consumer confidence, competitors’ introduction of low-priced

products or innovative products, higher taxes, higher absolute prices and larger gaps between price categories and product regulation that diminishes the consumer’s ability to differentiate tobacco products.

Due to the impact of these factors, as

well as higher state and local excise taxes and the market share of deep discount brands, the tobacco industry has become increasingly price competitive.

As we seek to adapt to the price competitive environment, our competitors that are better

capitalized may be able to sustain price discounts for long periods of time by spreading the loss across their expansive portfolios, with which we are not positioned to compete.

There can be no assurance that our products will be able to

compete successfully against these companies or any of our other competitors, some of which have far greater resources, capital, experience, market penetration, sales and distribution channels than us.

In addition, there are currently relatively

and maintain market share, and thus have a material adverse effect on our business, results of operations and financial condition.

The competitive environment and our competitive position are also significantly influenced by economic conditions, the state of consumer confidence, competitors’ introduction of low-priced products or

innovative products, higher taxes, higher absolute prices and larger gaps between price categories and product regulation that diminishes the consumer’s ability to differentiate tobacco products.

Due to the impact of these factors, as well as

higher state and local excise taxes and the market share of deep discount brands, the tobacco industry has become increasingly price competitive.

As we seek to adapt to the price competitive environment, our competitors that are better capitalized

may be able to sustain price discounts for long periods of time by spreading the loss across their expansive portfolios, with which we are not positioned to compete.

Competition from illicit sources may have an adverse effect on our overall sales volume, restricting the ability to increase selling prices and damaging brand equity.

Illicit trade and tobacco trafficking in the form of counterfeit products, smuggled genuine products and locally manufactured products on which applicable taxes or regulatory requirements are

evaded, represent a significant and growing threat to the legitimate tobacco industry.

Factors such as increasing tax regimes, regulatory restrictions, and compliance requirements have resulted in more consumers switching to illegal, cheaper

tobacco products and providing greater rewards for smugglers.

Illicit trade and tobacco trafficking in the form of counterfeit products, smuggled genuine products and locally manufactured products on which applicable taxes or regulatory requirements are evaded,

represent a significant and growing threat to the legitimate tobacco industry.

Factors such as increasing tax regimes, regulatory restrictions, and compliance requirements have resulted in more consumers switching to illegal, cheaper tobacco

products and providing greater rewards for smugglers.

We expect that this trend will continue and even accelerate if additional regulatory requirements make it more difficult or expensive to obtain genuine products.

Illicit trade can have

an adverse effect on our overall sales volume, restrict the ability to increase selling prices, damage brand equity and may lead to commoditization of our products.

Although we combat counterfeiting of our products by engaging in certain tactics, such as requiring all sales force personnel to randomly collect our products from retailers in order to be

reviewed for authenticity and using a private investigation firm to help perform surveillance of retailers we suspect are selling counterfeit products, no assurance can be given that we will be able to detect or stop sales of all counterfeit

In addition, we have in the past and will continue to bring suits against retailers and distributors that sell certain counterfeit products.

While we have been successful in securing financial recoveries from and helping to obtain

criminal convictions of counterfeiters in the past, no assurance can be given that we will be successful in any such suits or that such suits will be successful in stopping other retailers or distributors from selling counterfeit products.

if we are successful, such suits could consume a significant amount of management’s time and could also result in significant expenses to the company.

Any failure to track and prevent counterfeiting of our products could have a material adverse

on our ability to maintain or effectively compete for the products we distribute under our brand names, which would have a material adverse effect on our business, results of operations and financial condition.

Illicit trade can have an

adverse effect on our overall sales volume, restrict the ability to increase selling prices, damage brand equity and may lead to commoditization of our products.

Although we combat counterfeiting of our products by engaging in certain tactics, such as requiring all sales force personnel to randomly collect our products from retailers in order to be reviewed

for authenticity and using a private investigation firm to help perform surveillance of retailers we suspect are selling counterfeit products, no assurance can be given that we will be able to detect or stop sales of all counterfeit products.

addition, we have in the past and will continue to bring suits against retailers and distributors that sell certain counterfeit products.

While we have been successful in securing financial recoveries from and helping to obtain criminal convictions

of counterfeiters in the past, no assurance can be given that we will be successful in any such suits or that such suits will be successful in stopping other retailers or distributors from selling counterfeit products.

Even if we are successful,

such suits could consume a significant amount of management’s time and could also result in significant expenses to the company.

Any failure to track and prevent counterfeiting of our products could have a material adverse on our ability to

maintain or effectively compete for the products we distribute under our brand names, which would have a material adverse effect on our business, results of operations and financial condition.

Contamination of, or damage to, our products could adversely impact sales volume, market share and profitability.

Our market position may be affected through the contamination of our tobacco supply or products during the manufacturing process or at different points in the entire supply chain.

significant amounts of inventory of our products in warehouses and it is possible that this inventory could become contaminated during the storage period.

In addition, our suppliers generally keep significant amounts of our inventory on hand and

it is probable that such inventory could become contaminated even prior to arrival at our premises.

If contamination of our inventory or packaged products occurs, whether as a result of a failure in quality control by us or by one of our

suppliers, we may incur significant costs in replacing the inventory and recalling products.

We keep significant

amounts of inventory of our products in warehouses and it is possible that this inventory could become contaminated during the storage period.

In addition, our suppliers generally keep significant amounts of our inventory on hand and it is probable

that such inventory could become contaminated even prior to arrival at our premises.

If contamination of our inventory or packaged products occurs, whether as a result of a failure in quality control by us or by one of our suppliers, we may incur

significant costs in replacing the inventory and recalling products.

We may be unable to meet customer demand and may lose customers who purchase alternative brands or products.

In addition, consumers may lose confidence

in the affected product.

Under the terms of our contracts, we impose requirements on our major suppliers to maintain quality and comply with product specifications and requirements, and on our third-party

co-manufacturer to comply with all federal, state and local laws.

These third-party suppliers, however, may not continue to produce products that are consistent with our standards or that are in compliance with applicable laws, and we cannot

guarantee that we will be able to identify instances in which our third-party suppliers fail to comply with our standards or applicable laws.

A loss of sales volume from a contamination event may also affect our ability to supply our current customers and, in turn, recapture their business in the event they are forced to switch

products or brands, even if on a temporary basis.

In addition, consumers may lose confidence in the affected product.

Under the terms of our contracts, we impose requirements on our major suppliers to maintain quality and comply with product specifications and requirements, and on our third-party co-manufacturer to

comply with all federal, state and local laws.

These third-party suppliers, however, may not continue to produce products that are consistent with our standards or that are in compliance with applicable laws, and we cannot guarantee that we will be

able to identify instances in which our third-party suppliers fail to comply with our standards or applicable laws.

A loss of sales volume from a contamination event may also affect our ability to supply our current customers and, in turn, recapture their business in the event they are forced to switch products or

brands, even if on a temporary basis.

We may also be subject to legal action as a result of a contamination, which could result in negative publicity and affect our sales.

During this time, our competitors may benefit from an

increased market share that could be difficult and costly to regain.

During this time, our competitors may benefit from an increased market share

that could be difficult and costly to regain.

Such a contamination event could have a material adverse effect on our business, results of operations and financial condition.

The market for NewGen products is subject to a great deal of uncertainty and is still evolving.

Vaporizer products and electronic cigarettes, having recently been introduced to market over the past ten years, are at a relatively early stage of development, and represent core components of

a market that is evolving rapidly, highly regulated and characterized by a number of market participants.

Rapid growth in the use of, and interest in, vaporizer products and electronic cigarettes is recent, and may not continue on a lasting

The demand and market acceptance for these products is subject to a high level of uncertainty.

The market for certain of our products is subject to a great deal of uncertainty and is still evolving.

Vapor products and other novel nicotine products, having been introduced to the market over the past fifteen years, are at a relatively early stage of development, and represent core components of a

market that is evolving rapidly, highly regulated and characterized by a number of market participants.

Rapid growth in the use of, and interest in, these products is recent, and may not continue on a lasting basis.

The demand and market acceptance

for these products is subject to a high level of uncertainty.

Therefore, we are subject to all of the business risks associated with a new enterprise in an evolving market.

Continued evolution, uncertainty

and the resulting increased risk of failure of our new and existing product offerings in this market could have a material adverse effect on our ability to build and maintain market share and on our business, results of operations and financial

Further, there can be no assurance that we will be able to continue to effectively compete in the NewGen products marketplace.

Continued evolution, uncertainty and the resulting increased risk of

failure of our new and existing product offerings in this market could have a material adverse effect on our ability to build and maintain market share and on our business, results of operations and financial condition.

Further, there can be no

assurance that we will be able to continue to effectively compete in the vapor and novel nicotine products marketplace.

Complications with the design or implementation of our new enterprise resource planning system could adversely impact our business and operations.

We rely extensively on information systems and technology to manage our business and summarize operating results.

We are beginning to engage in what we expect will be a multi-year

implementation of a new enterprise resource planning (“ERP”) system.

We are currently engaged in the implementation of a new enterprise

resource planning (“ERP”) system.

This ERP system will replace our existing operating and financial systems.

The ERP system is designed to accurately maintain the Company’s financial records, enhance

operational functionality and provide timely information to the Company’s management team related to the operation of the business.

The ERP system implementation process will require the investment of significant personnel and financial

We may not be able to successfully implement the ERP without experiencing delays, increased costs and other difficulties.

If we are unable to successfully design and implement the new

ERP system as planned, or successfully update or integrate our systems when necessary, our financial positions, results of operations and cash flows could be negatively impacted.

The ERP system is designed to accurately maintain the Company’s financial records, enhance operational functionality and provide timely

information to the Company’s management team related to the operation of the business.

The ERP system implementation process requires the investment of significant personnel and financial resources.

not be able to successfully implement the ERP without experiencing delays, increased costs and other difficulties.

If we are unable to successfully design and implement the new ERP system as planned, or successfully update or integrate our

systems when necessary, our financial positions, results of operations and cash flows could be negatively impacted.

Risks Related to Legal, Tax and Regulatory Matters

2 unchanged sentences

Industry critics include special interest groups, the U.S.

Surgeon General, and many legislators and regulators at the

local, state and federal levels.

Surgeon General, and many legislators and regulators at the local,

state and federal levels.

A wide variety of federal, state, and local laws limit the advertising, sale, and use of tobacco, and these laws have proliferated in recent years.

For instance, on April 29, 2021, the FDA announced plans to

propose two tobacco products standards related to combusted tobacco products:

For instance, on May 4, 2022, the FDA proposed two tobacco products

standards related to combusted tobacco products:

(1) a ban on menthol as a characterizing flavor of cigarettes;

and (2) a ban on all characterizing flavors (including menthol) in cigars.

Together with changing public

attitudes towards tobacco consumption, the constant expansion of regulations has been a major cause of the overall decline in the consumption of tobacco products since the early 1970s.

These regulations relate to, among other things, the

importation of tobacco products and shipping throughout the U.S.

market, increases in the minimum age to purchase tobacco products, imposition of taxes, sampling and advertising bans or restrictions, flavor bans or restrictions, ingredient and

constituent disclosure requirements, and media campaigns and restrictions on where consumers may use tobacco products.

Additional restrictions may be legislatively imposed or agreed to in the future.

These limitations may make it difficult for us

to maintain the value of any brand.

Moreover, the current trend is toward increasing regulation of the tobacco industry, which is likely to differ between the various U.S.

Together with changing public attitudes towards tobacco

consumption, the constant expansion of regulations has been a major cause of the overall decline in the consumption of tobacco products since the early 1970s.

These regulations relate to, among other things, the importation of tobacco products and

shipping throughout the U.S.

market, increases in the minimum age to purchase tobacco products, imposition of taxes, sampling and advertising bans or restrictions, flavor bans or restrictions, ingredient and constituent disclosure requirements, and

media campaigns and restrictions on where consumers may use tobacco products.

Additional restrictions may be adopted or agreed to in the future.

These limitations may make it difficult for us to maintain the value of any brand.

The trend toward increasing regulation of the tobacco industry experienced over the last few decades is likely to differ between the various U.S.

states and Canadian provinces in which we currently

2 unchanged sentences

cost-effective manner that allows us to continue to compete in an economically viable way.

Regulations are often introduced without the tobacco industry’s input and have been a significant reason behind reduced industry sales volumes and

increased illicit trade.

Regulations are often introduced without the tobacco industry’s input and have significantly contributed to reduced industry sales volumes and increased

illicit trade.

In 1986, federal legislation was enacted regulating smokeless tobacco products (including dry and moist snuff and chewing tobacco) by, among other things, requiring health warnings on smokeless

tobacco packages and prohibiting the advertising of smokeless tobacco products on media subject to the jurisdiction of the Federal Communications Commission (“FCC”).

Since 1986, other proposals have been made at the federal, state, and local

levels for additional regulation of tobacco products.

Since 1986, other proposals have been made at the federal, state, and local levels

for additional regulation of tobacco products.

It is likely that additional proposals will be made in the coming years.

For example, the Prevent All Cigarette Trafficking Act (“PACT Act”) initially prohibited the use of the U.S.

Service to mail cigarette and smokeless tobacco products and also amended the Jenkins Act, which established cigarette sales reporting requirements for state excise tax collection, to require individuals and businesses that make interstate sales

of certain cigarette or smokeless tobacco comply with state tax laws.

For example, the PACT Act initially prohibited the use of the U.S.

Postal Service to mail cigarette and smokeless tobacco

products and also amended the Jenkins Act, which established cigarette sales reporting requirements for state excise tax collection, to require individuals and businesses that make interstate sales of certain cigarette or smokeless tobacco comply

with state tax laws.

The PACT Act was recently extended to also cover e-cigarette and related products.

The extension of the PACT Act has resulted in increased costs and disruption to our NewGen

business, and those costs may continue to rise if we are unable to adjust our operations to respond relative to our competitors.

See “—Many of our NewGen and cigar products have not obtained premarket authorization from the FDA and are currently

marketed pursuant to a policy of FDA enforcement discretion, which could change.

There could be a material adverse impact on our NewGen business development efforts if the FDA determines that our products are not subject to this compliance

policy, or if our products become subject to increased regulatory compliance burdens imposed by the FDA and other regulatory or legislative bodies.” for further details.

Additional federal or state regulation relating to the manufacture, sale,

distribution, advertising, labeling, mandatory ingredients disclosure and nicotine yield information disclosure of tobacco products could reduce sales, increase costs, and have a material adverse effect on our business, results of operations, and

financial condition.

The extension of the PACT Act has resulted in increased costs and disruption to our NewGen business, and those costs may continue to rise if we

are unable to adjust our operations to respond relative to our competitors.

See “—Many of our products have not obtained premarket authorization from the FDA and are currently marketed pursuant to a policy of FDA enforcement priorities, which could

There could be a material adverse impact on our business development efforts if the FDA determines that our products are not subject to this compliance policy, or if our products become subject to increased regulatory enforcement burdens

imposed by the FDA and other regulatory or legislative bodies.” for further details.

Additional federal or state regulation relating to the manufacture, sale, distribution, advertising, labeling, mandatory ingredients disclosure and nicotine yield

information disclosure of tobacco products could reduce sales, increase costs, and have a material adverse effect on our business, results of operations, and financial condition.

On June 22, 2009, the Family Smoking Prevention and Tobacco Control Act (the “Tobacco Control Act”) granted the FDA regulatory authority over tobacco products.

The Act also amended the Federal

Cigarette Labeling and Advertising Act, which governs how cigarettes can be advertised and marketed, as well as the Comprehensive Smokeless Tobacco Health Education Act (“CSTHEA”), which governs how smokeless tobacco can be advertised and

In addition to the FDA and FCC, we are subject to regulation by numerous other federal agencies, including the Federal Trade Commission (“FTC”), the Department of Justice (“DOJ”), the Alcohol and Tobacco Tax and Trade Bureau (“TTB”),

Environmental Protection Agency (“EPA”), the U.S.

Department of Agriculture (“USDA”), the Consumer Product Safety Commission (“CPSC”), the U.S.

Customs and Border Protection (“CBP”) and the U.S.

Center for Disease Control and

Prevention’s (“CDC”) Office on Smoking and Health.

There have also been adverse legislative and political decisions and other unfavorable developments concerning cigarette smoking and the tobacco industry, which we believe have received

widespread public attention.

The FDA has, and other governmental entities have, expressed concerns about the use of flavors in tobacco products and an interest in significant regulation of such use, up to and including bans in certain products.

There can be no assurance as to the ultimate content, timing or effect of any regulation of tobacco products by governmental bodies, nor can there be any assurance that potential corresponding declines in demand resulting from negative media

attention would not have a material adverse effect on our business, results of operations and financial condition.

Any such regulation has the potential to increase costs and have a material adverse effect on our business, results of operations,

ability to compete, and financial condition.

Cigarette Labeling and Advertising Act, which governs how cigarettes can be advertised and marketed, as well as the Comprehensive Smokeless Tobacco Health Education Act, which governs how smokeless tobacco can be advertised and marketed.

addition to the FDA and FCC, we are subject to regulation by numerous other federal agencies, including the Federal Trade Commission, the Department of Justice, the Alcohol and Tobacco Tax and Trade Bureau , the U.S.

Environmental Protection

Agency, the U.S.

Department of Agriculture (“USDA”), the Consumer Product Safety Commission , the U.S.

Customs and Border Protection and the U.S.

Center for Disease Control and Prevention’s Office on Smoking and Health.

There have also been

adverse legislative and political decisions and other unfavorable developments concerning cigarette smoking and the tobacco industry, which we believe have received widespread public attention.

The FDA has, and other governmental entities have,

expressed concerns about the use of flavors in tobacco products and an interest in significant regulation of such use, up to and including bans in certain products.

There can be no assurance as to the ultimate content, timing or effect of any

regulation of tobacco products by governmental bodies, nor can there be any assurance that potential corresponding declines in demand resulting from negative media attention would not have a material adverse effect on our business, results of

operations and financial condition.

Any such regulation has the potential to increase costs and have a material adverse effect on our business, results of operations, ability to compete, and financial condition.

Our products are regulated by the FDA, which has broad regulatory powers.

1 unchanged sentence

net sales are derived from the sale of products that are currently regulated by the FDA.

The Tobacco Control Act grants the FDA broad regulatory authority

over the design, manufacture, sale, marketing and packaging of tobacco products.

Among the regulatory powers conferred to the FDA under the Tobacco Control Act is the authority to impose tobacco product standards that are appropriate for the

protection of the public health, require manufacturers to obtain FDA review and authorization for the marketing of certain new or modified tobacco products and impose various additional restrictions.

Such restrictions may include requiring

reduction or elimination of the use of particular constituents or components, requiring product testing, or addressing other aspects of tobacco product construction, constituents, properties or labeling.

Specifically, the Tobacco Control Act (i) increases the number of health warnings required on cigarette and smokeless tobacco products, increases the size of warnings on packaging and in

advertising, requires the FDA to develop graphic warnings for cigarette packages, and grants the FDA authority to require new warnings, (ii) imposes restrictions on the sale and distribution of tobacco products, including significant restrictions

on tobacco product advertising and promotion as well as the use of brand and trade names, (iii) bans the use of “light,” “mild,” “low” or similar descriptors on tobacco products, (iv) bans the use of “characterizing flavors” in cigarettes other

than tobacco or menthol, (v) requires manufacturers to report ingredients and harmful constituents and requires the FDA to disclose certain constituent information to the public, (vi) authorizes the FDA to require the reduction of nicotine and

the potential reduction or elimination of other constituents or additives, including menthol, (vii) establishes resource-intensive pre-market and “substantial equivalence” review pathways for tobacco products that are considered new, (viii) gives

the FDA broad authority to deny product applications thereby preventing the sale or distribution of the product subject to the application (and requiring such product to be removed from the market, if applicable), and (ix) requires tobacco

product manufacturers (and certain other entities) to register with the FDA.

The Tobacco Control Act grants the FDA broad regulatory authority over the

design, manufacture, sale, marketing and packaging of tobacco products.

Among the regulatory powers conferred to the FDA under the Tobacco Control Act is the authority to impose tobacco product standards that are appropriate for the protection of

the public health, require manufacturers to obtain FDA review and authorization for the marketing of certain new or modified tobacco products and impose various additional restrictions.

Such restrictions may include requiring reduction or

elimination of the use of particular constituents or components, requiring product testing, or addressing other aspects of tobacco product construction, constituents, properties or labeling.

Specifically, the Tobacco Control Act (i) increases the number of health warnings required on cigarette and smokeless tobacco products, increases the size of warnings on packaging and in advertising,

requires the FDA to develop graphic warnings for cigarette packages, and grants the FDA authority to require new warnings, (ii) imposes restrictions on the sale and distribution of tobacco products, including significant restrictions on tobacco

product advertising and promotion as well as the use of brand and trade names, (iii) bans the use of “light,” “mild,” “low” or similar descriptors on tobacco products, (iv) bans the use of “characterizing flavors” in cigarettes other than tobacco

or menthol, (v) requires manufacturers to report ingredients and harmful constituents and requires the FDA to disclose certain constituent information to the public, (vi) authorizes the FDA to require the reduction of nicotine and the potential

reduction or elimination of other constituents or additives, including menthol, (vii) establishes resource-intensive pre-market and “substantial equivalence” review pathways for tobacco products that are considered new, (viii) gives the FDA broad

authority to deny product applications thereby preventing the sale or distribution of the product subject to the application (and requiring such product to be removed from the market, if applicable), and (ix) requires tobacco product manufacturers

(and certain other entities) to register with the FDA.

The FDA charges user fees based on the USDA unit calculations pro-rated to the annualized FDA congressionally allocated budget.

These fees only apply to certain products currently regulated by

the FDA, which include our core products (other than cigarette paper products), but we may in the future be required to pay such fees on more of our products, and we cannot accurately predict which additional products may be subject to such fees

or the magnitude of such fees, which could become significant.

Although the Tobacco Control Act prohibits the FDA from issuing regulations banning all cigarettes, all smokeless tobacco products, all little cigars, all cigars other than little cigars, all

pipe tobacco, or all roll-your-own tobacco, or requiring the reduction of nicotine yields of a tobacco product to zero, it is likely that regulations with the FDA promulgated pursuant to the Tobacco Control Act could nonetheless result in a

decrease in sales of these products in the U.S.

We believe that such regulation could adversely affect our ability to compete against our larger competitors, who may be able to more quickly and cost-effectively comply with these new rules and

Our ability to gain efficient and timely market clearance for new tobacco products, or even to keep existing products on the market, could also be affected by FDA rules, regulations and enforcement policies.

Some of our currently

marketed products that are subject to FDA regulation will require marketing authorizations from the FDA for us to continue marketing them (e.g., pre-market or substantial equivalence marketing authorizations, as applicable to the product), which

we cannot guarantee we will be able to obtain.

In addition, failure to comply with new or existing tobacco laws under which the FDA imposes regulatory requirements could result in significant financial penalties and government investigations of

To the extent we are unable to respond to, or comply with, new FDA regulations it could have a material adverse effect on our business, results of operations and financial condition.

These fees only apply to certain products currently regulated by the

FDA, which include our core products (other than cigarette paper products), but we may in the future be required to pay such fees on more of our products, and we cannot accurately predict which additional products may be subject to such fees or the

magnitude of such fees, which could become significant.

Although the Tobacco Control Act prohibits the FDA from issuing regulations banning all cigarettes, all smokeless tobacco products, all little cigars, all cigars other than little cigars, all pipe

tobacco, or all roll-your-own tobacco, or requiring the reduction of nicotine yields of a tobacco product to zero, it is likely that regulations with the FDA promulgated pursuant to the Tobacco Control Act could nonetheless result in a decrease in

sales of these products in the U.S.

We believe that such regulation could adversely affect our ability to compete against our larger competitors, who may be able to more quickly and cost-effectively comply with these new rules and regulations.

ability to gain efficient and timely market clearance for new tobacco products, or even to keep existing products on the market, could also be affected by FDA rules, regulations and enforcement policies.

Some of our currently marketed products that

are subject to FDA regulation will require marketing authorizations from the FDA for us to continue marketing them (e.g., pre-market or substantial equivalence marketing authorizations, as applicable to the product), which we cannot guarantee we

will be able to obtain.

In addition, failure to comply with new or existing tobacco laws under which the FDA imposes regulatory requirements could result in significant financial penalties and government investigations of us.

To the extent we are

unable to respond to, or comply with, new FDA regulations it could have a material adverse effect on our business, results of operations and financial condition.

Many of our products contain nicotine, which is considered to be a highly addictive substance.

Many of our products contain nicotine, a chemical that is considered to be highly addictive.

The Tobacco Control Act empowers the FDA to regulate the amount of nicotine found in tobacco

products, but not to require the reduction of nicotine yields of a tobacco product to zero.

Any FDA regulation, whether of nicotine levels or other product attributes, may require us to reformulate, recall and/or discontinue certain of the

products we may sell from time to time, which may have a material adverse effect on our ability to market our products and have a material adverse effect on our business, results of operations and financial condition.

The Tobacco Control Act empowers the FDA to regulate the amount of nicotine found in tobacco products, but

not to require the reduction of nicotine yields of a tobacco product to zero.

Any FDA regulation, whether of nicotine levels or other product attributes, may require us to reformulate, recall and/or discontinue certain of the products we may sell

from time to time, which may have a material adverse effect on our ability to market our products and have a material adverse effect on our business, results of operations and financial condition.

We are required to maintain cash amounts within an escrow account in order to be compliant with a settlement agreement between us and certain U.S.

2 unchanged sentences

cigarette manufacturers entered into the Master Settlement Agreement (“MSA”) and the Smokeless Tobacco Master Settlement Agreement (“STMSA”) with 46 U.S.

and certain U.S.

territories and possessions.

Pursuant to the MSA and subsequent states’ statutes, a “cigarette manufacturer” (which is defined to also include a manufacturer of RYO/MYO cigarette tobacco) has the option of either becoming a

signatory to the MSA, or, as we have elected, operating as a non-participating manufacturer (“NPM”) by funding and maintaining an escrow account, with sub-accounts on behalf of each settling state.

These NPM escrow accounts are governed by

states’ escrow and complementary statutes that are generally monitored by the Office of the State Attorney General.

Pursuant to the MSA and subsequent states’ statutes, a “cigarette manufacturer” (which is defined to also include a manufacturer of roll your won (“RYO”)/MYO cigarette tobacco) has the option of either

becoming a signatory to the MSA, or, as we have elected, operating as a non-participating manufacturer (“NPM”) by funding and maintaining an escrow account, with sub-accounts on behalf of each settling state.

These NPM escrow accounts are governed

by states’ escrow and complementary statutes that are generally monitored by the Office of the State Attorney General.

The statutes require NPM companies to deposit, on an annual basis, into qualified banks’ escrow funds based on the number of

3 unchanged sentences

The investment vehicles available to us are specified in the state escrow agreements and are limited to low-risk government securities.

Various states have enacted or proposed complementary legislation intended to curb the activity of certain manufacturers and importers of cigarettes or MYO tobacco that are selling into MSA

states without signing the MSA or who have failed to properly establish and fund a qualifying escrow account.

We believe we have been fully compliant with all applicable laws, regulations, and statutes, although compliance-related issues may,

from time to time, be disruptive to our business, any of which could have a material adverse effect on our business, results of operations, and financial condition.

Although no such legislation has been proposed or enacted, future changes to the MSA, such as legislation that extends the MSA to products to which it does not currently apply or legislation

that limits the ability of companies to receive unused escrow funds after 25 years, may have a material adverse effect on our business, results of operations and financial condition.

Despite the amounts maintained and funded to the escrow

account, compliance with the funding requirements for the escrow account does not necessarily prevent future federal and/or state regulations with respect to the OTP industry from having a material adverse effect on our business, results of

operations and financial condition.

Various states have enacted or proposed complementary legislation intended to curb the activity of certain manufacturers and importers of cigarettes or MYO tobacco that are selling into MSA states

without signing the MSA or who have failed to properly establish and fund a qualifying escrow account.

We believe we have been fully compliant with all applicable laws, regulations, and statutes, although compliance-related issues may, from time to

time, be disruptive to our business, any of which could have a material adverse effect on our business, results of operations, and financial condition.

Although no such legislation has been proposed or enacted, future changes to the MSA, such as legislation that extends the MSA to products to which it does not currently apply or legislation that

limits the ability of companies to receive unused escrow funds after 25 years, may have a material adverse effect on our business, results of operations and financial condition.

Despite the amounts maintained and funded to the escrow account,

compliance with the funding requirements for the escrow account does not necessarily prevent future federal and/or state regulations with respect to the OTP industry from having a material adverse effect on our business, results of operations and

financial condition.

Increases in tobacco-related taxes have been proposed or enacted and are likely to continue to be proposed or enacted in numerous jurisdictions.

Tobacco products, premium cigarette papers and tubes have long been subject to substantial federal, state and local excise taxes.

Such taxes have frequently been increased or proposed to be

increased, in some cases significantly, to fund various legislative initiatives or further disincentivize tobacco usage.

Such taxes have frequently been increased or proposed to be increased,

in some cases significantly, to fund various legislative initiatives or further disincentivize tobacco usage.

Since 1986, smokeless products have been subject to federal excise tax.

Federally, smokeless products are taxed by weight (in

pounds or fractional parts thereof) manufactured or imported.

Federally, smokeless products are taxed by weight (in pounds or

fractional parts thereof) manufactured or imported.

Since the State Children’s Health Insurance Program (“S-CHIP”) reauthorization in early 2009, which utilizes, among other things, taxes on tobacco products to fund health insurance coverage for

children, the federal excise tax increases adopted have been substantial and have materially reduced sales in the “roll your own” (“RYO”) /MYO cigarette smoking products market, and also caused volume declines in other markets.

RYO/MYO cigarette smoking tobacco and related products market had been one of the fastest growing markets in the tobacco industry in the five years prior to 2009, the reauthorization of S-CHIP increased the federal excise tax on RYO tobacco from

$1.10 to $24.78 per pound, and materially reduced the MYO cigarette smoking tobacco market in the U.S.

There have not been any increases announced since 2009, but we cannot guarantee that we will not be subject to further increases, nor whether

any such increases will affect prices in a way that further deters consumers from purchasing our products and/or affects our net revenues in a way that renders us unable to compete effectively.

In addition to federal excise taxes, every state and certain city and county governments have imposed substantial excise taxes on sales of tobacco products, and many have raised

or proposed to raise excise taxes in recent years.

children, the federal excise tax increases adopted have been substantial and have materially reduced sales in the RYO/MYO cigarette smoking products market, and also caused volume declines in other markets.

Although the RYO/MYO cigarette smoking

tobacco and related products market had been one of the fastest growing markets in the tobacco industry in the five years prior to 2009, the reauthorization of S-CHIP increased the federal excise tax on RYO tobacco from $1.10 to $24.78 per pound,

and materially reduced the MYO cigarette smoking tobacco market in the U.S.

There have not been any increases enacted since 2009, but we cannot guarantee that we will not be subject to further increases, nor whether any such increases will affect

prices in a way that further deters consumers from purchasing our products and/or affects our net revenues in a way that renders us unable to compete effectively.

In addition to federal excise taxes, every state and certain city and county governments have imposed substantial excise taxes on sales of tobacco products, and many have raised or

proposed to raise excise taxes in recent years.

Approximately one-half of the states tax MST on a weight-based versus ad valorem system of taxation.

Additional states may consider adopting such revised tax structures as well.

Tax increases, depending on their parameters, may result in consumers switching between tobacco products or depress overall tobacco consumption, which is likely to

result in declines in overall sales volumes.

Any future enactment of increases in federal or state excise taxes on our tobacco products or rulings that certain of our products should be categorized differently for excise tax purposes

could adversely affect demand for our products and may result in consumers switching between tobacco products or a depression in overall tobacco consumption, which would have a material adverse effect on our business, results of operations and

financial condition.

Many of our NewGen and cigar products have not obtained premarket authorization from the FDA and are currently marketed pursuant to a policy of FDA enforcement discretion, which could change.

There could be a material adverse impact on our NewGen business development efforts if the FDA determines that our products are not subject to this compliance policy, of if our products become subject to increased regulatory compliance burdens

imposed by the FDA and other regulatory or legislative bodies.

Since their introduction, there has been significant uncertainty regarding whether, how and when tobacco regulations would apply to NewGen products, such as electronic cigarettes or other

vaporizer products.

Additional states may

consider adopting such revised tax structures as well.

Tax increases, depending on their parameters, may result in consumers switching between tobacco products or depress overall tobacco consumption, which is likely to result in declines in

overall sales volumes.

Any future enactment of increases in federal or state excise taxes on our tobacco products or rulings that certain of our products should be categorized differently for excise tax purposes could

adversely affect demand for our products and may result in consumers switching between tobacco products or a depression in overall tobacco consumption, which would have a material adverse effect on our business, results of operations and financial

Many of our products have not obtained premarket authorization from the FDA and are currently marketed pursuant to a policy of FDA enforcement priorities, which could change.

There could be a

material adverse impact on our business development efforts if the FDA determines that our products are not subject to this compliance policy, or if our products become subject to increased regulatory enforcement burdens imposed by the FDA and

other regulatory or legislative bodies.

Since their introduction, there has been significant uncertainty regarding whether, how and when tobacco regulations would apply to NewGen products, such as electronic cigarettes or novel nicotine

Based on a decision in December 2010 by the U.S.

Court of Appeals for the D.C.

Circuit (the “Sottera decision”), the FDA is permitted to regulate electronic cigarettes containing tobacco-derived nicotine as “tobacco products”

under the Tobacco Control Act.

Effective August 8, 2016, FDA’s regulatory authority under the Tobacco Control Act was extended to all remaining tobacco products, including:

(i) certain NewGen products (such as electronic

cigarettes, vaporizers and e-liquids) and their components or parts (such as tanks, coils and batteries);

Circuit (the “Sottera decision”), the FDA is permitted to regulate electronic cigarettes containing tobacco-derived nicotine as “tobacco products” under the

Tobacco Control Act.

Effective August 8, 2016, FDA’s regulatory authority under the Tobacco Control Act was extended to all remaining tobacco-derived products, including:

(i) certain NewGen products (such as

electronic cigarettes, vaporizers and e-liquids) and their components or parts (such as tanks, coils and batteries);

(ii) cigars and their components or parts (such as cigar tobacco);

1 unchanged sentence

(iv) hookah products;

or (v) any other tobacco

product “newly deemed” by FDA.

or (v) any other

tobacco product “newly deemed” by the FDA.

These deeming regulations apply to all products made or derived from tobacco intended for human consumption, but excluding accessories of tobacco products (such as lighters).

Subsequently, on

April 14, 2022, the FDA Center for Tobacco Products also obtained jurisdiction over non-tobacco nicotine products (“NTN Products”), including synthetic nicotine.

That law subjects NTN Products to the same requirements as tobacco-derived products.

The deeming regulations require us to (i) register with the FDA and report product and ingredient listings;

(ii) market newly deemed products only after FDA review and approval;

(iii) only make

direct and implied claims of reduced risk if the FDA approves after finding that scientific evidence supports the claim and that marketing the product will benefit public health as a whole;

(iii) only make direct

and implied claims of reduced risk if the FDA approves after finding that scientific evidence supports the claim and that marketing the product will benefit public health as a whole;

(iv) refrain from distributing free samples;

implement minimum age and identification restrictions to prevent sales to individuals under age 18;

(v) implement

minimum age and identification restrictions to prevent sales to individuals under age 18;

(vi) develop an approved warning plan and include prescribed health warnings on packaging and advertisements;

and (vii) refrain from selling the

products in vending machines, unless the machine is located in a facility that never admits youth.

Newly deemed tobacco products are also subject to the other requirements of the Tobacco Control Act, such as that they not be adulterated or

The FDA could in the future promulgate good manufacturing practice regulations for these and our other products, and indeed has indicated it intends to do so, which could have a material adverse impact on our ability and the cost to

manufacture our products.

Marketing authorizations will be necessary in order for us to continue our distribution of certain of our NewGen and cigar products.

The FDA has announced various compliance policies whereby it

does not intend to prioritize enforcement for lack of premarket authorization against newly-deemed products, provided that such tobacco products were marketed as of August 8, 2016;

are not marketed in certain manners likely to be attractive to

and (vii) refrain from selling the products in

vending machines, unless the machine is located in a facility that never admits youth.

Newly deemed tobacco products are also subject to the other requirements of the Tobacco Control Act, such as that they not be adulterated or misbranded.

could in the future promulgate good manufacturing practice regulations for these and our other products, and indeed has indicated it intends to do so, which could have a material adverse impact on our ability and the cost to manufacture our

Marketing authorizations will be necessary in order for us to continue our distribution of certain of our NewGen, cigar, and other novel nicotine products.

The FDA has announced various

compliance policies whereby it does not intend to prioritize enforcement for lack of premarket authorization against newly-deemed products, provided that such tobacco products were marketed as of August 8, 2016;

are not marketed in certain

manners likely to be attractive to youth;

and for which premarket applications were timely submitted.

As a result of recent litigation and subsequent FDA Guidance, marketing applications for newly-deemed products were required to have been submitted no later than September 9,

2020, with the exception of our “grandfathered” products (products in commerce as of February 15, 2007) which are already authorized.

Under the FDA’s compliance policy, such products could remain on the market until September 9, 2021, unless the

FDA makes an adverse determination prior to that date.

Subsequent to September 9, 2021, the FDA indicated its enforcement priority is those applicants who have received negative action on their application, such as a Marketing Denial Order

(“MDO”) or Refuse to File notification and who continue to illegally sell those unauthorized products, as well as products for which manufacturers failed to submit a marketing application.

In September 2020, we submitted applications on a timely basis for the appropriate authorizations for our products that are deemed products not otherwise grandfathered.

We believe that these

products satisfy the criteria for current marketing pursuant to the FDA’s compliance policy.

However, there can be no guarantee that the FDA will agree, and the FDA may bring an enforcement action against our products for lack of premarket

authorization and/or deny our premarket applications.

We have no assurances that the outcome of such application review processes will result in our products receiving marketing authorizations from the FDA.

For instance, on September 14, 2021,

the FDA issued a marketing denial order (“MDO”) for certain of the Company’s proprietary e-liquid products subject of these PMTAs.

The Company filed a Petition for Review in the Sixth Circuit Court of Appeals on September 23, 2021, followed by an

Emergency Motion for a Stay Pending Review on September 30, 2021.

On October 7, 2021, we were informed that the FDA had rescinded its September 14, 2021, MDO.

We therefore withdrew both the Petition and Emergency Stay on October 8, 2021.

Rescission Letter indicated that the FDA had found additional relevant information that was not adequately assessed.

If the FDA were to issue additional MDOs that remained in effect it could have an adverse impact on our business.

We also have certain previously regulated tobacco products which FDA removed from review but remain subject to “provisional” substantial equivalence submissions made on March 22, 2011;

FDA has the discretion to reinitiate review of these products.

As a result of recent litigation and subsequent FDA Guidance, marketing applications for newly-deemed products were required to have been

submitted no later than September 9, 2020, with the exception of our “grandfathered” products (products in commerce as of February 15, 2007) which are already authorized.

Under the FDA’s compliance policy, such products could remain on the market

until September 9, 2021, unless the FDA makes an adverse determination prior to that date.

Subsequent to September 9, 2021, the FDA indicated its enforcement priority is those applicants who have received negative action on their application,

such as a Marketing Denial Order (“MDO”) or Refuse to File notification and who continue to illegally sell those unauthorized products, as well as products for which manufacturers failed to submit a marketing application.

product manufacturers were required to file a PMTA by May 14, 2022, in order to continue selling products currently on the market.

NTN Products subject of a timely-filed PMTA, and not in receipt of a negative action, were allowed to remain on the

market until July 13, 2022, at which time these products became subject to enforcement, similar to tobacco-derived products remaining under review.

In September 2020, we submitted applications on a timely basis for the appropriate authorizations for our products that are deemed products under the 2016 deeming regulations, not

otherwise grandfathered.

We believe that these products satisfy the criteria for current marketing pursuant to the FDA’s compliance policy.

For our NTN products, we filed several PMTAs by May 14, 2022 There

can be no guarantee that the FDA will authorize these products, and the FDA may bring an enforcement action against our products for lack of premarket authorization and/or deny our premarket applications in the meantime.

If the FDA were to issue

additional MDOs that remained in effect it could have an adverse impact on our business.

We also have certain previously regulated tobacco products which the FDA removed from review but remain subject to “provisional” substantial equivalence submissions made on March 22, 2011;

the FDA has the discretion to reinitiate review of these products.

If the FDA establishes regulatory processes that we are unable or unwilling to comply with, our business, results of operations, financial condition and prospects could be adversely

The anticipated costs of complying with future FDA regulations will be dependent on the rules issued by the FDA, the timing and clarity of any new rules or guidance documents accompanying these

rules, the reliability and simplicity (or complexity) of the electronic systems utilized by FDA for information and reports to be submitted, and the details required by FDA for such information and reports with respect to each regulated product.

Failure to comply with existing or new FDA regulatory requirements could result in significant financial penalties and could have a material adverse effect on our business, results of operations, financial condition and ability to market and sell

our products.

Compliance and related costs could be substantial and could significantly increase the costs of operating in our NewGen and cigar product markets.

In addition, failure to comply with the Tobacco Control Act and with FDA regulatory requirements could result in litigation, criminal convictions or significant financial penalties and could

impair our ability to market and sell certain of our NewGen and cigar products.

At present, we are not able to predict whether the Tobacco Control Act will impact our products to a greater degree than competitors in the industry, thus affecting

our competitive position.

Furthermore, in addition to the FDA, there are restrictions being proposed or in effect at the federal, state, and local level related to NewGen products.

For example, the PACT Act has now been

amended to apply to certain NewGen products, which has impacts at the federal and state levels.

These requirements are in addition to any increased regulation of internet sales that may be in effect or passed legislatively at the federal, state,

or local levels, or promulgated via rulemaking by a government agency.

Additionally, state attorneys general have monitored, and in some cases, have issued investigative requests and/or initiated litigation with regard to companies that sell

these products related to online sales, marketing practices, and other aspects of the NewGen business.

Increased regulation of additives in tobacco products through federal, state, or local governments may also adversely affect NewGen and cigar

The application of these types of restrictions, and of any new laws or regulations which may be adopted in the future, to these products could result in additional expenses and require us to change our advertising and labeling, and

methods of marketing and distribution of our products, any of which could have a material adverse effect on our business, results of operations and financial condition.

The anticipated costs of complying with future FDA regulations will be dependent on the rules issued and implemented by the FDA, the timing and clarity of any new rules or guidance documents

accompanying these rules, the reliability and simplicity (or complexity) of the electronic systems utilized by the FDA for information and reports to be submitted, and the details required by FDA for such information and reports with respect to

each regulated product.

ability to market and sell our products.

Compliance and related costs could be substantial and could significantly increase the costs of operating in our product categories.

In addition, failure to comply with the Tobacco Control Act and with FDA regulatory requirements could result in litigation, criminal convictions or significant financial penalties and could impair

our ability to market and sell certain of our products.

At present, we are not able to predict whether the Tobacco Control Act will impact our products to a greater degree than competitors in the industry, thus affecting our competitive position.

Furthermore, in addition to the FDA, there are restrictions being proposed or in effect at the federal, state, and local level related to our products.

For example, the PACT Act has now been amended

to apply to certain NewGen products, which has impacts at the federal and state levels.

These requirements are in addition to any increased regulation of internet sales that may be in effect or passed legislatively at the federal, state, or local

levels, or promulgated via rulemaking by a government agency.

Additionally, state attorneys general have monitored, and in some cases, have issued investigative requests and/or initiated litigation with regard to companies that sell these products

related to online sales, marketing practices, and/or other aspects of the NewGen business.

Increased regulation of additives in tobacco products through federal, state, or local governments may also adversely affect our products.

The application of

these types of restrictions, and of any new laws or regulations which may be adopted in the future, to these products could result in additional expenses and require us to change our advertising and labeling, and methods of marketing and

distribution of our products, any of which could have a material adverse effect on our business, results of operations and financial condition.

Some products we sell are subject to developing and unpredictable regulation.

Some of the products sold through our NewGen distribution vehicles may be subject to uncertain and evolving federal, state and local regulations concerning hemp, CBD and other non-tobacco

consumable products, such as synthetically-derived nicotine, which recently became subject of legislation that would require premarket application filings similar to those required for products currently regulated under the Tobacco Control Act

and potentially negatively impact sales of these products in the near future.

See “Many of our NewGen and cigar products have not obtained premarket authorization from the FDA and are currently marketed pursuant to a policy of FDA enforcement

discretion, which could change.

regulatory compliance burdens imposed by the FDA and other regulatory or legislative bodies.” Regulatory and related enforcement initiatives by authorities related to such products are unpredictable and impossible to anticipate.

We anticipate

that all levels of government, that have not already done so, are likely to seek in some way to regulate these products, but the type, timing, and impact of such regulations remains uncertain.

These regulations include or could include

restrictions prohibiting certain form factors, such as smokable hemp products, or age restrictions.

Accordingly, we cannot give any assurance that such actions would not have a material adverse effect on this emerging business and our NewGen

For instance, on October 21, 2021, the USPS published a Final Rule entitled “Treatment of E-Cigarettes in the Mail,” which followed its earlier publication of the Proposed Rule on

February 19, 2021.

This Final Rule was required as a result of the inclusion of Preventing Online Sales of E-Cigarettes to Children (“POSECA”) in the Further Consolidated Appropriations Act, 2021.

POSECA, among other things, expanded the definition of “cigarettes” in the Jenkins Act and PACT Act to expressly capture electronic nicotine delivery systems (“ENDS”).

Consistent with the Proposed

Rule, the Final Rule extends the existing prohibition on and exceptions to the mailing of “cigarettes” via USPS to include ENDS products, other than the Consumer Testing and Public Health exceptions.

POSECA’s definition of ENDS also captures

non-tobacco products, such as e-liquids that do not contain tobacco-derived nicotine.

Some of the products sold through our NewGen distribution vehicles may be subject to uncertain and evolving federal, state and local regulations concerning hemp, CBD and other

non-tobacco consumable products.

Regulatory and related enforcement initiatives by authorities related to such products are unpredictable and impossible to anticipate.

We anticipate that all levels of

government, that have not already done so, are likely to seek in some way to regulate these products, but the type, timing, and impact of such regulations remains uncertain.

These regulations include or could include restrictions prohibiting

certain form factors, such as smokable hemp products, or age restrictions.

Accordingly, we cannot give any assurance that such actions would not have a material adverse effect on this emerging business and our NewGen strategy.

Significant increases in state and local regulation of our NewGen products have been proposed or enacted and are likely to continue to be proposed or enacted in numerous

2 unchanged sentences

State and local governmental bodies across the U.S.

have indicated NewGen products

may become subject to new laws and regulations at the state and local levels.

have indicated NewGen products may

become subject to new laws and regulations at the state and local levels.

Further, some states and cities, have enacted regulations that require obtaining a tobacco retail license in order to sell electronic cigarettes and vaporizer products.

If one or more states from which we generate or anticipate generating significant sales of NewGen products bring actions to prevent us from selling our NewGen products unless we obtain certain licenses, approvals or permits, and if we are not

able to obtain the necessary licenses, approvals or permits for financial reasons or otherwise and/or any such license, approval or permit is determined to be overly burdensome to us, then we may be required to cease sales and distribution of our

products to those states, which could have a material adverse effect on our business, results of operations and financial condition.

Certain states and cities have already restricted the use of electronic cigarettes and vaporizer products in smoke-free venues, imposed excise taxes, or limited sales of flavored NewGen

one or more states from which we generate or anticipate generating significant sales of NewGen products bring actions to prevent us from selling our NewGen products unless we obtain certain licenses, approvals or permits, and if we are not able to

obtain the necessary licenses, approvals or permits for financial reasons or otherwise and/or any such license, approval or permit is determined to be overly burdensome to us, then we may be required to cease sales and distribution of our products

to those states, which could have a material adverse effect on our business, results of operations and financial condition.

Certain states and cities have already restricted the use of electronic cigarettes and vaporizer products in smoke-free venues, imposed excise taxes, or limited sales of flavored NewGen products.

Additional city, state or federal regulators, municipalities, local governments and private industry may enact additional rules and regulations restricting electronic cigarettes and vaporizer products.

Because of these restrictions, our

customers may reduce or otherwise cease using our NewGen products, which could have a material adverse effect on our business, results of operations and financial condition.

Because of these restrictions, our customers

may reduce or otherwise cease using our NewGen products, which could have a material adverse effect on our business, results of operations and financial condition.

Canada and some Canadian provinces have restricted or are contemplating restrictions on the sales and marketing of electronic cigarettes.

Furthermore, some Canadian provinces have limited the

use of electronic cigarettes and vaporizer products in public places.

Furthermore, some Canadian provinces have limited the use of

electronic cigarettes and vaporizer products in public places.

These measures, and any future measures taken to limit the marketing, sale and use of NewGen products may have a material adverse effect on our sales into Canada.

If our NewGen products become subject to increased taxes it could adversely affect our business.

Presently the federal government and many states do not tax the sale of NewGen products like they do the sale of conventional cigarettes or other tobacco products, all of which generally have

high tax rates and have faced significant increases in the amount of taxes collected on their sales.

Presently the federal government and many states do not tax the sale of NewGen products like they do the sale of conventional cigarettes or other tobacco products, all of which generally have high tax

rates and have faced significant increases in the amount of taxes collected on their sales.

In recent years, however, state and local governments have taken actions to move towards imposing excise taxes on NewGen products.

1 unchanged sentence

over half of the states, as well as, certain localities impose excise taxes on electronic cigarettes and/or liquid vapor.

These tax structures may benefit one type of NewGen product over another, which may result in consumers switching

between NewGen products, other traditional tobacco products, or depress overall consumption in general.

Should federal, state and local governments and or other taxing authorities begin or continue to impose excise taxes similar to those levied

against conventional cigarettes and tobacco products on NewGen products, it may have a material adverse effect on the demand for these products, as consumers may be unwilling to pay the increased costs, which in turn could have a material adverse

effect on our business, results of operations and financial condition.

Our supply to our wholesalers and retailers is dependent on the demands of their customers who are sensitive to increased sales taxes and economic conditions affecting their

These tax structures may benefit one type of NewGen product over another, which may result in consumers switching between

NewGen products, other traditional tobacco products, or depress overall consumption in general.

Should federal, state and local governments and or other taxing authorities begin or continue to impose excise taxes similar to those levied against

conventional cigarettes and tobacco products on NewGen products, it may have a material adverse effect on the demand for these products, as consumers may be unwilling to pay the increased costs, which in turn could have a material adverse effect on

our business, results of operations and financial condition.

Our distribution to our wholesalers and retailers is dependent on the demands of their customers who are sensitive to increased sales taxes and economic conditions affecting their

disposable income.

Consumer purchases of tobacco products are historically affected by economic conditions, such as changes in employment, salary and wage levels, the availability of consumer credit, inflation,

interest rates, fuel prices, sales taxes, and the level of consumer confidence in prevailing and future economic conditions.

Discretionary consumer purchases, such as of OTP, may decline during recessionary periods or at other times when

disposable income is lower, and taxes may be higher.

In addition, some states have begun collecting taxes on internet sales where companies have used independent contractors in those states to solicit sales from residents of those states.

taxes apply to our online sales of NewGen products into those states and may result in reduced demand from the independent wholesalers who may not be able to absorb the increased taxes or successfully pass them onto the end-user without

experiencing reduced demand.

Further, as a result of recent court decisions related to the taxability of internet purchases, states are now able to impose sales tax on internet purchases made from out-of-state sellers, even if the seller does not

have a physical presence in the taxing state.

Consequently, additional states are likely to seek or have begun to impose sales tax on our online sales.

The requirement to collect, track and remit taxes may require us to increase our prices, which

may affect demand for our products or conversely reduce our net profit margin, which could have a material adverse effect on our business, results of operations and financial condition.

Consumer purchases of tobacco products are historically affected by economic conditions, such as changes in employment, salary and wage levels, the availability of consumer credit, inflation, interest

rates, fuel prices, sales taxes, and the level of consumer confidence in prevailing and future economic conditions.

Discretionary consumer purchases, such as of OTP, may decline during recessionary periods or at other times when disposable income

is lower, and taxes may be higher.

As we are currently in an inflationary period, and the Federal Reserve has continuously increased interest rates for the past year, consumer discretionary purchases may decline which could have a material adverse

impact on our business results of operations and financial conditions.

In addition, some states have begun collecting taxes on internet sales.

These taxes apply to our online sales of NewGen products into those states and may result in reduced demand from the independent

wholesalers who may not be able to absorb the increased taxes or successfully pass them onto the end-user without experiencing reduced demand.

Further, as a result of recent court decisions related to the taxability of internet purchases, states

are now able to impose sales tax on internet purchases made from out-of-state sellers, even if the seller does not have a physical presence in the taxing state.

Consequently, additional states are likely to seek or have begun to impose sales tax on

our online sales.

The requirement to collect, track and remit taxes may require us to increase our prices, which may affect demand for our products or conversely reduce our net profit margin, which could have a material adverse effect on our

business, results of operations and financial condition.

We may be subject to increasing international control and regulation.

The World Health Organization’s Framework Convention on Tobacco Control (“FCTC”) is the first international public health treaty that establishes a global agenda to reduce initiation of tobacco

use and regulate tobacco in an effort to encourage tobacco cessation.

The World Health Organization’s Framework Convention on Tobacco Control (“FCTC”) is the first international public health treaty that establishes a global agenda to reduce initiation of tobacco use

and regulate tobacco in an effort to encourage tobacco cessation.

Over 180 governments worldwide have ratified the FCTC.

1 unchanged sentence

further regulate the tobacco industry.

The tobacco industry expects significant regulatory developments to take place over the next few years, driven principally by the FCTC.

Regulatory initiatives that have been proposed, introduced or enacted

These efforts have, over time, expanded to focus broadly on consumer products containing nicotine, such as vapor products.

The tobacco industry expects significant regulatory developments to take place over

the next few years, driven principally by the FCTC.

Regulatory initiatives that have been proposed, introduced or enacted include:

the levying of substantial and increasing tax and duty charges;

9 unchanged sentences

becomes a signatory to the FCTC and/or national laws are enacted in the U.S.

that reflect the major elements of the FCTC, our business, results of operations and financial condition

could be materially and adversely affected.

If NewGen products become subject to one or more of the significant regulatory initiatives proposed under the FCTC, our NewGen products segment may also be materially adversely affected.

that reflect the major elements of the FCTC, our business, results of operations and financial condition could

be materially and adversely affected.

As part of our strategy, we have begun to expand our business into key international locations, such as introducing our moist snuff tobacco products in South America.

International expansion

may subject us to additional or increasing international regulation, either by the countries that are the object of the strategic expansion or through international regulatory regimes, such as the FCTC, to which those countries may be

To the extent our existing or future products become subject to international regulatory regimes that we are unable to comply with or fail to comply with, they may have a material adverse

effect on our business, results of operations and financial condition.

International expansion may

subject us to additional international regulation, either by the countries that are the object of the strategic expansion or through international regulatory regimes, such as the FCTC, to which those countries may be signatories.

To the extent our existing or future products become subject to international regulatory regimes that we are unable to comply with or fail to comply with, they may have a material adverse effect on

our business, results of operations and financial condition.

Our failure to comply with certain environmental, health and safety regulations could adversely affect our business.

The storage, distribution and transportation of some of the products that we sell are subject to a variety of federal and state environmental regulations.

In addition, our manufacturing

facilities are similarly subject to federal, state and local environmental laws.

In addition, our manufacturing facilities are

similarly subject to federal, state and local environmental laws.

We are also subject to operational, health and safety laws and regulations.

Our failure to comply with these laws and regulations could cause a disruption in our

business, an inability to maintain our manufacturing resources, and additional and potentially significant remedial costs and damages, fines, sanctions or other legal consequences that could have a material adverse effect on our business, results

of operations and financial condition.

Our failure to comply with these laws and regulations could cause a disruption in our business, an

inability to maintain our manufacturing resources, and additional and potentially significant remedial costs and damages, fines, sanctions or other legal consequences that could have a material adverse effect on our business, results of operations

and financial condition.

Imposition of significant tariffs on imports into the U.S., could have a material and adverse effect on our business.

We are required to purchase all our cigarette papers, cigarette tubes and cigarette injector machines under the Distribution Agreements from the supplier in France.

Additionally, a substantial

portion of our NewGen products are sourced from China.

In 2018, President Trump and his administration imposed significant additional tariffs on certain goods imported from outside the U.S., and future administrations could impose additional

tariffs in the future.

Additionally, a substantial portion

of our NewGen products are sourced from China.

In 2018, the U.S.

imposed significant additional tariffs on certain goods imported from outside the U.S.

by executive administrative action, and these tariffs remain in place.

Future administrations

could impose additional tariffs in the future.

These additional tariffs apply to a significant portion of our NewGen products and may result in increased prices for our customers.

These increased prices may reduce demand where customers are unable to absorb the

increased prices or successfully pass them onto the end-user.

These increased prices may reduce demand where customers are unable

to absorb the increased prices or successfully pass them onto the end-user.

were to impose additional tariffs on goods we import, it is likely to make it more costly for us to import goods from other countries.

While the current or future

administrations may have a desire to repeal some or all of the tariffs imposed by the Trump administration, no assurance can be given that they will do so.

As a result, our business, financial condition and results of operations could be

materially adversely affected.

While the current or

future administrations may have a desire to repeal some or all of these tariffs no assurance can be given that they will do so.

As a result, our business, financial condition and results of operations could be materially adversely affected.

The scientific community has not yet studied extensively the long-term health effects of certain substances contained in some of our products.

Electronic cigarettes, vaporizers and many of our NewGen products were recently developed and therefore the scientific community has not had a sufficient period of time to study the long-term

health effects of their use.

Electronic cigarettes, vaporizers and many of our NewGen products were recently developed and therefore the scientific community has not had a sufficient period of time to study the long-term health

effects of their use.

Currently, there is no way of knowing whether these products are safe for their intended use.

If the scientific community were to determine conclusively that use of any or all of these products poses long-term health

risks, market demand for these products and their use could materially decline.

If the scientific community were to determine conclusively that use of any or all of these products poses long-term health risks,

market demand for these products and their use could materially decline.

Such a determination could also lead to litigation and significant regulation.

Loss of demand for our product, product liability claims and increased regulation

stemming from unfavorable scientific studies on these products could have a material adverse effect on our business, results of operations and financial condition.

Loss of demand for our product, product liability claims and increased regulation stemming from

unfavorable scientific studies on these products could have a material adverse effect on our business, results of operations and financial condition.

We are subject to significant product liability litigation.

The tobacco industry has experienced, and continues to experience, significant product liability litigation.

Most tobacco liability lawsuits have been brought against manufacturers and sellers

of cigarettes by individual plaintiffs, often participating on a class-action basis, for injuries allegedly caused by cigarette smoking or by exposure to cigarette smoke.

Most tobacco liability lawsuits have been brought against manufacturers and sellers of

cigarettes by individual plaintiffs, often participating on a class-action basis, for injuries allegedly caused by cigarette smoking or by exposure to cigarette smoke.

However, several lawsuits have also been brought against manufacturers and

4 unchanged sentences

material adverse effect on our business, results of operations and financial condition.

In addition to current and potential future claims related to our core tobacco products, we are subject to several lawsuits alleging personal injuries resulting from malfunctioning vaporizer

devices and may be subject to claims in the future relating to our other NewGen products.

In addition to current and potential future claims related to our core tobacco products, we are subject to several lawsuits alleging personal injuries resulting from malfunctioning vaporizer devices

and may be subject to claims in the future relating to our other NewGen products.

We are still evaluating these claims and the potential defenses to them.

3 unchanged sentences

For a description of

current material litigation to which we or our subsidiaries are a party, see “Item 3.

Legal Proceedings” and “Note 18 – Contingencies” in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K,

for additional information.

As a result, we may face substantial costs due to increased product liability litigation relating to new regulations or other potential defects associated with NewGen products we ship, which

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

The COVID-19 pandemic and related economic repercussions may affect our business.

The COVID-19 pandemic and related economic repercussions have created significant volatility, uncertainty, and turmoil in the business environment generally.

While these events have not yet had

a material adverse effect on our business and B2C platforms like ours have seen elevated sales levels from consumer shifts to online purchasing, we can offer no assurance that the COVID-19 pandemic will not have an adverse effect in the future,

particularly if the pandemic worsens or endures for an extended period of time.

The COVID-19 pandemic may adversely impact our financial results.

Our third-party cigar wrap manufacturer in the Dominican Republic was temporarily shut down for

three months, as a result of government efforts to curb the spread of COVID-19.

Since the temporary shutdown, the manufacturer has operated without COVID-19 related interruptions.

While our supply chain has not experienced other pandemic related

interruptions, we have experienced some increase in costs.

We can offer no assurance that the Company will not be adversely affected by the pandemic and related governmental actions in the future, particularly if the COVID-19 pandemic continues

and/or other variants emerge.

Similarly, because we have more than 100 employees, should the federal government reintroduce testing mandates or other measures to combat COVID-19, our workforce and ultimately our results of operations may be

impacted if we have a significant number of employees unwilling to comply with such measures.

If the COVID-19 pandemic continues for an extended period of time or worsens, it could have a material adverse effect on our supply chain or workforce, either of which could have a material

adverse effect on our business, financial condition and liquidity.

In addition, if the impact of the COVID-19 pandemic continues it may heighten other risks that could affect our business.

current material litigation to which we or our subsidiaries are a party, see “Item 3 Legal Proceedings” and Note 18 “Contingencies” in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K, for

additional information.

As a result, we may face substantial costs due to increased product liability litigation relating to new regulations or other potential defects associated with NewGen products we ship, which could

have a material adverse effect on our business, results of operations and financial condition.

Risks Related to Financial Results, Finances and Capital Structure

4 unchanged sentences

(the “New Revolving Credit Facility”) under which only letters of credit of $3.6 million were outstanding as of December 31, 2022.

If we cannot generate sufficient cash flow from operations to service our debt, we may need to further refinance

our debt, dispose of assets or issue equity to obtain necessary funds.

If we cannot generate sufficient cash flow from operations to service our debt, we may need to further refinance our

debt, dispose of assets or issue equity to obtain necessary funds.

We do not know whether we will be able to do any of this on a timely basis or on terms satisfactory to us or at all.

5 unchanged sentences

pay dividends;

The terms of the agreement governing our indebtedness may restrict our current and future operations, which would adversely affect our ability to respond to changes in our

business and to manage our operations.

The indenture governing the Senior Secured Notes and our New Revolving Credit Facility each contain, and any future indebtedness of ours would likely contain, a number of restrictive covenants that impose

significant operating and financial restrictions on us, including restrictions on our ability to, among other things:

repurchase stock.

The terms of the agreement governing our indebtedness may restrict our current and future operations, which would adversely affect our ability to respond to changes in our business

and to manage our operations.

operating and financial restrictions on us, including restrictions on our ability to, among other things:

incur additional debt, disqualified stock and preferred stock;

9 unchanged sentences

could result in an event of default under the facility, which could adversely affect our ability to respond to changes in our business and manage our operations.

In the event of any default under our debt instruments, the lenders under the

facility could elect to declare all amounts outstanding under such instruments to be due and payable and require us to apply all of our available cash to repay these amounts.

If the indebtedness under one of our debt instruments were to be

accelerated, it could cause an event of default and/or a cross-acceleration of our obligations under our other debt instruments and there can be no assurance that our assets would be sufficient to repay this indebtedness in full, which could have

a material adverse effect on our business, results of operations, and financial condition.

Our status as an emerging growth company.

We ceased to be an emerging growth company on December 31, 2021.

As a result, beginning on January 1, 2022 we are required to comply with the disclosure requirements applicable to

non-emerging growth companies, including the requirement to obtain an auditor attestation of our internal control over financial reporting pursuant to the requirements of Section 404 of the Sarbanes-Oxley Act (“Section 404”) as well as

the requirement to provide enhanced disclosure regarding executive compensation and hold a non-binding advisory vote on executive compensation.

Compliance with these new disclosure obligations could be costly and will require our management to devote increased effort toward ensuring compliance with the non-emerging growth company requirements.

We cannot predict or estimate the amount of additional costs we may incur as a result of the change in our status

or the timing of such costs, though such costs may be substantial.

In addition, if we are unable to comply with the disclosure requirements applicable to non-EGCs in a timely manner we may be unable to file our current and periodic reports with

the SEC on time, which could cause investors to lose confidence in our reports and also affect our ability to quickly access the capital markets.

In the event of any default under our debt instruments, the lenders under the facility

could elect to declare all amounts outstanding under such instruments to be due and payable and require us to apply all of our available cash to repay these amounts.

If the indebtedness under one of our debt instruments were to be accelerated, it

could cause an event of default and/or a cross-acceleration of our obligations under our other debt instruments and there can be no assurance that our assets would be sufficient to repay this indebtedness in full, which could have a material

adverse effect on our business, results of operations, and financial condition.

If we fail to establish and maintain proper and effective internal control over financial reporting, our operating results and our ability to operate our business could be harmed.

Section 404 of the Sarbanes-Oxley Act of 2002 requires that we establish and maintain internal control over financial reporting, and we are also required to establish disclosure controls and

procedures under applicable SEC rules.

An effective internal control environment is necessary to enable us to produce reliable financial reports and is an important component of our efforts to prevent and detect financial reporting errors and

Management is required to provide an annual assessment on the effectiveness of our internal control over financial reporting and, as a result of ceasing to be an Emerging Growth Company, our independent registered public accounting firm is

now also required to attest to the effectiveness of our internal control over financial reporting.

Our and our auditor’s testing may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses

and render our internal control over financial reporting ineffective.

As noted below, this year’s assessment led management to conclude that a material weakness exists in our information technology control environment.

No assurance can be given

that we won’t discover additional material weaknesses in the future.

We have incurred and we expect to continue to incur substantial accounting and auditing expense and expend significant management time in complying with the requirements of

Section 404, including the requirement to have such controls tested by our independent registered public accounting firm.

While an effective internal control environment is necessary to enable us to produce reliable financial statements and is an

important component of our efforts to prevent and detect financial reporting errors and fraud, disclosure controls and internal control over financial reporting are generally not capable of preventing or detecting all financial reporting errors

and all fraud.

A control system, no matter how well-designed and operated, is designed to reduce rather than eliminate the risk of material misstatements in our financial statements.

There are inherent limitations on the effectiveness of internal

controls, including collusion, management override and failure in human judgment.

A control system can provide only reasonable, not absolute, assurance of achieving the desired control objectives and the design of a control system must reflect

the fact that resource constraints exist.

If we are not able to comply with the requirements of Section 404, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial

reporting that are deemed to be material weaknesses:

Section 404 of the Sarbanes-Oxley Act of 2002 requires that we establish and maintain internal control over financial reporting, and we are also

required to establish disclosure controls and procedures under applicable SEC rules.

An effective internal control environment is necessary to enable us to produce reliable financial reports and is an important component of our efforts to

prevent and detect financial reporting errors and fraud.

Management is required to provide an annual assessment on the effectiveness of our internal control over financial reporting and our independent registered public accounting firm is

required to attest to the effectiveness of our internal control over financial reporting.

Our and our auditor’s testing may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses and

render our internal control over financial reporting ineffective.

As noted below, this year’s assessment led management to conclude that we have two material weaknesses

in our internal control over financial reporting.

No assurance can be given that we won't discover additional material weaknesses in the future.

We have incurred and we expect to continue to incur substantial accounting and auditing expense and

expend significant management time in complying with the requirements of Section 404, including the requirement to have such controls tested by our independent registered public accounting firm.

While an effective internal control environment

is necessary to enable us to produce reliable financial statements and is an important component of our efforts to prevent and detect financial reporting errors and fraud, disclosure controls and internal control over financial reporting are

generally not capable of preventing or detecting all financial reporting errors and all fraud.

A control system, no matter how well-designed and operated, is designed to reduce rather than eliminate the risk of material misstatements in our

financial statements.

There are inherent limitations on the effectiveness of internal controls, including collusion, management override and failure in human judgment.

A control system can provide only reasonable, not absolute, assurance of

achieving the desired control objectives and the design of a control system must reflect the fact that resource constraints exist.

If we are not able to comply with the requirements of Section 404, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting

that are deemed to be material weaknesses:

our reputation may be adversely affected and our business and operating results could be harmed;

1 unchanged sentence

we could fail to meet our financial reporting obligations;

we could be subject to litigation and/or investigations or sanctions by the Securities and Exchange Commission (the “SEC”), the New York Stock Exchange or other regulatory

We identified a material weakness in our internal control related to ineffective information technology general controls which, if not remediated appropriately or in a timely

manner, could result in loss of investor confidence and adversely impact our stock price.

we could be subject to litigation and/or investigations or sanctions by the SEC, the New York Stock Exchange or other regulatory authorities.

We identified material weaknesses in our internal control over financial reporting which, if not remediated appropriately or in a timely manner, could result in loss of investor

confidence and adversely impact our stock price.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim

2 unchanged sentences

internal control related to ineffective information technology general controls (“ITGCs”) in the areas of user access and program change-management over certain information technology (“IT”) systems that support the Company’s financial reporting

See Part II, Item 9A for additional information.

Internal controls related to the operation of technology systems are critical to maintaining adequate internal control over financial reporting.

As a result, management concluded that our internal control over financial reporting was not effective as of December 31, 2021.

We are implementing remedial measures and, while there can be no

assurance that our efforts will be successful, we plan to remediate the material weakness prior to the end of 2022.

These measures will result in additional technology and other expenses.

If we are unable to remediate the material weakness, or

are otherwise unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately, and to prepare financial statements within

required time periods, could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statements

and in turn, adversely impact our stock price.

Changes in the method of determining the London Interbank Offered Rate (“LIBOR”), or the replacement of LIBOR with an alternative reference rate, may adversely affect interest expense related to

outstanding debt.

Amounts drawn under certain of our debt instruments may bear interest at rates based on LIBOR.

On July 27, 2017, the Financial Conduct Authority in the United Kingdom (the “FCA”) announced that it would phase out

LIBOR as a benchmark by the end of 2021.

The publication of USD LIBOR will cease after June 30, 2023, and the FCA confirmed that use of USD LIBOR will not be permitted in most new contracts after December 31, 2021.

We are currently evaluating the

impact of the potential replacement of the LIBOR interest rate.

In addition, the overall financial markets may be disrupted as a result of the phase-out or replacement of LIBOR.

Uncertainty as to the nature of such potential phase-out and

alternative reference rates or disruption in the financial market could have a material adverse effect on our financial condition, results of operations and cash flows.

While we have developed a remediation plan to address this material weakness, the plan is

still being implemented and therefore the material weakness cannot be deemed remediated.

In addition, we identified control deficiencies that constitute a material weakness in the design and operation of controls associated with the

risk assessment component of the Company’s internal control framework, specifically as it relates to identifying risks around segregation of duties within the financial reporting function, and the identification of all risks relating to the

financial statements and controls that would address such risks.

This impacts business process controls (automated and manual) throughout financial reporting and the business transaction cycles.

See Part II, Item 9A for additional information.

The material weaknesses remain unremediated as of December 31, 2022 and as a result, management concluded that our internal control over financial

reporting was not effective as of December 31, 2022.

These measures will result in additional technology, new personnel, the creation of training programs and other expenses.

If we are unable to remediate the material weaknesses, or are otherwise

unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately, and to prepare financial statements within required time

periods, could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statements and in turn,

adversely impact our stock price.

Risks Related to our Common Stock

Our certificate of incorporation and bylaws, as well as Delaware law and certain regulations, could discourage or prohibit acquisition bids or merger proposals, which may

adversely affect the market price of our common stock.

Our certificate of incorporation and bylaws, as well as Delaware law and certain regulations, could discourage or prohibit acquisition bids or merger proposals, which may adversely

affect the market price of our common stock.

Our certificate of incorporation authorizes our board of directors to issue preferred stock without stockholder approval.

If our board of directors elects to issue preferred stock, it could be

more difficult for a third party to acquire us.

In addition, some provisions of our certificate of incorporation, bylaws and applicable law could make it more difficult for a third party to acquire control of us, even if the change of control

would be beneficial to our stockholders, including:

If our board of directors elects to issue preferred stock, it could be more

difficult for a third party to acquire us.

In addition, some provisions of our certificate of incorporation, bylaws and applicable law could make it more difficult for a third party to acquire control of us, even if the change of control would be

beneficial to our stockholders, including:

limitations on the removal of directors;

4 unchanged sentences

Our certificate of incorporation limits the ownership of our common stock by individuals and entities that are Restricted Investors.

These restrictions may affect the

liquidity of our common stock and may result in Restricted Investors being required to sell or redeem their shares at a loss or relinquish their voting, dividend and distribution rights.

For so long as we or one of our subsidiaries is party to any of the Distribution Agreements, our certificate of incorporation will limit the ownership of our common stock by any “Restricted

Investor” to 14.9% of our outstanding common stock and shares convertible or exchangeable therefor (including our non-voting common stock) (the “Permitted Percentage”).

These restrictions may affect the liquidity of

our common stock and may result in Restricted Investors being required to sell or redeem their shares at a loss or relinquish their voting, dividend and distribution rights.

For so long as we or one of our subsidiaries is party to any of the Distribution Agreements, our certificate of incorporation will limit the ownership of our common stock by any “Restricted Investor”

to 14.9% of our outstanding common stock and shares convertible or exchangeable therefor (including our non-voting common stock) (the “Permitted Percentage”).

A “Restricted Investor” is defined as:

(i) any entity that directly or

indirectly manufactures, sells, markets, distributes or otherwise promotes cigarette paper booklets, filter tubes, injector machines or filter tips in the United States, the District of Columbia, the territories, possessions and military bases of

the United States and the Dominion of Canada (a “RTI Competitor”), (ii) any entity that owns more than a 20% equity interest in any RTI Competitor, or (iii) any person who serves as a director or officer of, or any entity that has the right to

appoint an officer or director of, any RTI Competitor or of any entity that owns more than a 20% equity interest in any RTI Competitor (each, a “Restricted Investor”).

Our certificate of incorporation further provides that any issuance or

transfer of shares to a Restricted Investor in excess of the Permitted Percentage will be ineffective as against us and that neither we nor our transfer agent will register the issuance or transfer of shares or be required to recognize the

transferee or owner as a holder of our common stock for any purpose except to exercise our remedies described below.

Any shares in excess of the Permitted Percentage in the hands of a Restricted Investor will not have any voting or dividend

rights and are subject to redemption by us in our discretion.

(i) any entity that directly or indirectly

manufactures, sells, markets, distributes or otherwise promotes cigarette paper booklets, filter tubes, injector machines or filter tips in the U.S., the District of Columbia, the territories, possessions and military bases of the U.S.

Dominion of Canada (a “RTI Competitor”), (ii) any entity that owns more than a 20% equity interest in any RTI Competitor, or (iii) any person who serves as a director or officer of, or any entity that has the right to appoint an officer or director

of, any RTI Competitor or of any entity that owns more than a 20% equity interest in any RTI Competitor (each, a “Restricted Investor”).

Our certificate of incorporation further provides that any issuance or transfer of shares to a Restricted

Investor in excess of the Permitted Percentage will be ineffective as against us and that neither we nor our transfer agent will register the issuance or transfer of shares or be required to recognize the transferee or owner as a holder of our

common stock for any purpose except to exercise our remedies described below.

Any shares in excess of the Permitted Percentage in the hands of a Restricted Investor will not have any voting or dividend rights and are subject to redemption by us in

our discretion.

The liquidity or market value of the shares of our common stock may be adversely impacted by such transfer restrictions.

As a result of the above provisions, a proposed transferee of our common stock that is a Restricted Investor may not receive any return on its investment in shares it purchases or owns, as the

case may be, and it may sustain a loss.

We are entitled to redeem all or any portion of such shares acquired by a Restricted Investor in excess of the Permitted Percentage (“Excess Shares”) at a redemption price based on a fair market value

formula that is set forth in our certificate of incorporation, which may be paid in any form, including cash or promissory notes, at our discretion.

Excess Shares not yet redeemed will not be accorded any voting, dividend or distribution rights

while they constitute Excess Shares.

As a result of these provisions, a stockholder who is a Restricted Investor may be required to sell its shares of our common stock at an undesirable time or price and may not receive any return on its

investment in such shares.

However, we may not be able to redeem Excess Shares for cash because our operations may not have generated sufficient excess cash flow to fund the redemption and we may incur additional indebtedness to fund all or a

portion of such redemption, in which case our financial condition may be materially weakened.

As a result of the above provisions, a proposed transferee of our common stock that is a Restricted Investor may not receive any return on its investment in shares it purchases or owns, as the case

may be, and it may sustain a loss.

is set forth in our certificate of incorporation, which may be paid in any form, including cash or promissory notes, at our discretion.

Excess Shares not yet redeemed will not be accorded any voting, dividend or distribution rights while they

constitute Excess Shares.

redemption, in which case our financial condition may be materially weakened.

Our certificate of incorporation permits us to require that owners of any shares of our common stock provide certification of their status as a Restricted Investor.

In the event that a person

does not submit such documentation, our certificate of incorporation provides us with certain remedies, including the suspension of the payment of dividends and distributions with respect to shares held by such person and deposit of any such

dividends and distributions into an escrow account.

In the event that a person does not

submit such documentation, our certificate of incorporation provides us with certain remedies, including the suspension of the payment of dividends and distributions with respect to shares held by such person and deposit of any such dividends and

distributions into an escrow account.

As a result of non-compliance with these provisions, an owner of the shares of our common stock may lose significant rights associated with those shares.

Although our certificate of incorporation contains the above provisions intended to assure compliance with the restrictions on ownership of our common stock by Restricted Investors, we may not

be successful in monitoring or enforcing the provisions.

Although our certificate of incorporation contains the above provisions intended to assure compliance with the restrictions on ownership of our common stock by Restricted Investors, we may not be

successful in monitoring or enforcing the provisions.

A failure to enforce or otherwise maintain compliance could lead RTI to exercise its termination rights under the agreements, which would have a material and adverse effect on the Company’s

financial position and its results of operations.

In addition to the risks described above, the foregoing restrictions could delay, defer or prevent a transaction or change in control that might involve a premium price for our common stock or

that might otherwise be in the best interest of our stockholders.

Future sales of our common stock in the public market could reduce our stock price, and any additional capital raised by us through the sale of equity or convertible

securities may dilute our stockholders.

In addition to the risks described above, the foregoing restrictions could delay, defer or prevent a transaction or change in control that might involve a premium price for our common stock or that

might otherwise be in the best interest of our stockholders.

Future sales of our common stock in the public market could reduce our stock price, and any additional capital raised by us through the sale of equity or convertible securities may

dilute our stockholders.

We may sell additional shares of common stock in public or private offerings and may also sell securities convertible to common stock, such as the Convertible Senior Notes.

also be required to issue common stock and conversion of our Convertible Senior Notes at the exercise or vesting of certain awards, s ee Note 13 , “Notes Payable and Long-Term Debt,” in the Notes to

Consolidated Financial Statements included in this Annual Report for further discussion.

We cannot predict the size of future issuances of our common stock or securities convertible into common stock or the effect, if any, that future issuances and sales of shares of our common

stock will have on the market price of our common stock.

Sales of substantial amounts of our common stock (including shares issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect prevailing

market prices of our common stock.

be required to issue common stock and conversion of our Convertible Senior Notes at the exercise or vesting of certain awards, s ee Note 13 , “Notes Payable and Long-Term Debt,” of our Notes to the

Consolidated Financial Statements in Part II, Item 8 of this this Annual Report on Form 10-K for further discussion.

We cannot predict the size of future issuances of our common stock or securities convertible into common stock or the effect, if any, that future issuances and sales of shares of our common stock will

have on the market price of our common stock.

Sales of substantial amounts of our common stock (including shares issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect prevailing market prices

of our common stock.

We may issue preferred stock whose terms could adversely affect the voting power or value of our common stock.

Our certificate of incorporation authorizes us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designations, preferences,

limitations and relative rights, including preferences over our common stock respecting dividends and distributions, as our board of directors may determine.

The terms of one or more classes or series of preferred stock could adversely impact the

voting power or value of our common stock.

Our certificate of incorporation authorizes us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designations, preferences, limitations

and relative rights, including preferences over our common stock respecting dividends and distributions, as our board of directors may determine.

The terms of one or more classes or series of preferred stock could adversely impact the voting power

or value of our common stock.

For example, we might grant holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified transactions.

Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of the common stock.

Similarly, the

repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of the common stock.

General Risks

Our business may be damaged by events outside of our or our suppliers’ control, such as the impact of epidemics (e.g., coronavirus), political upheavals, or natural

Our business may be damaged by events outside of our or our suppliers’ control, such as the impact of epidemics, political upheavals, or natural disasters.

We have manufacturing operations in Tennessee and Kentucky.

Additionally, we have critical suppliers of raw materials and finished products in other countries.

Events may impact our ability to

manufacture products or prevent critical suppliers from performing their obligations to us, through no fault of any party.

Examples of such events could include the effect of potential epidemics, such as COVID-19;

Additionally, we have critical suppliers of raw materials and finished products in other regions of the U.S.

and in other countries.

may impact our ability to manufacture products or prevent critical suppliers from performing their obligations to us, through no fault of any party.

Examples of such events could include the effect of epidemics;

political upheavals including

violent changes in government, regional conflicts and the reaction of the governments throughout the world to those conflicts such as the implementation of sanctions, widespread labor unrest, or breakdowns in civil order;

and natural disasters,

such as hurricanes, tornados, earthquakes or floods.

If such events were to occur and disrupt our manufacturing capabilities or supply arrangements, there can be no assurance that we could quickly remedy the impact and there could be a material

adverse impact on our business, results of operations, and financial condition.

violent changes in government, regional conflicts, such as the ware in Ukraine, and the reaction of the governments throughout the world to those conflicts such as the implementation of sanctions, widespread labor unrest, or breakdowns in civil

and natural disasters, such as hurricanes, tornados, earthquakes or floods.

If such events were to occur and disrupt our manufacturing capabilities or supply arrangements, there can be no assurance that we could quickly remedy the impact and

there could be a material adverse impact on our business, results of operations, and financial condition.

Additionally, current macroeconomic conditions including high inflation, high gas prices and rising interest rates have caused and may continue to cause delays to supply chain and commercial markets,

which limit access to, and increase the cost of, raw materials and services.

Furthermore, challenging economic conditions can create the risk that our suppliers, distributors, logistics providers or other third-party partners suffer financial or

operational difficulties, which may impact their ability to provide us with or distribute finished product or raw materials and services in a timely manner or at all.

Any such delay or distribution challenges could have a material adverse impact

on our business, results of operations an financial conditions.

Climate change may have an adverse impact on our business and results of operations.

Our operations may be impacted by adverse weather patterns or other natural disasters, such as hurricanes, earthquakes, floods, fires, tornadoes, tsunamis, typhoons and volcanic eruptions.

seek to mitigate our business risks associated with climate change by seeking business partners, including within our supply chain, that are committed to operating in ways that protect the environment or mitigate environmental impacts, we recognize

that there are inherent climate-related risks wherever business is conducted.

Our operations may be vulnerable to the adverse effects of climate change, which are predicted to increase the frequency and severity of weather events and other natural

cycles such as wildfires and droughts.

For instance, if a hurricane or tornado were to shut down one of our facilities, our operations could be severely impacted.

Such events have the potential to disrupt our operations, cause manufacturing

facility closures, disrupt the business of our third-party suppliers and impact our customers, all of which may cause us to suffer losses and additional costs to maintain or resume operations.

Reliance on information technology means a significant disruption could affect our communications and operations.

1 unchanged sentence

significantly important tool for our sales staff.

Our marketing and distribution strategy are dependent upon our ability to closely monitor consumer and market trends on a highly specified level, for which we are reliant on our highly

sophisticated data tracking systems, which are susceptible to disruption or failure.

Our marketing and distribution strategy are dependent upon our ability to closely monitor consumer and market trends on a highly specified level, for which we are reliant on our highly sophisticated

data tracking systems, which are susceptible to disruption or failure.

In addition, our reliance on information technology exposes us to cyber-security risks, which could have a material adverse effect on our ability to compete.

Security and privacy breaches may expose us to liability and cause us to lose customers or may disrupt our relationships and ongoing transactions with other entities with whom we contract throughout our supply chain.

The failure of our

information systems to function as intended, or the penetration by outside parties’ intent on disrupting business processes, could result in significant costs, loss of revenue, assets or personal or other sensitive data and reputational harm.

Additionally, in connection with the preparation of our consolidated financial statements for the year ended December 31, 2021, during the fourth quarter of 2021, management identified a

material weakness in internal control related to ineffective ITGCs in the areas of user access and program change-management over certain IT systems that support the Company’s financial reporting processes.

See Part II, Item 9A for additional

In the event we are unable to remediate the material weakness, or are otherwise unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report

financial information accurately, and to prepare financial statements within required time periods, could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other

expenses, negatively affect investor confidence in our financial statements and, in turn, adversely impact our stock price.

privacy breaches may expose us to liability and cause us to lose customers or may disrupt our relationships and ongoing transactions with other entities with whom we contract throughout our supply chain.

The failure of our information systems to

function as intended, or the penetration by outside parties’ intent on disrupting business processes, could result in significant costs, loss of revenue, assets or personal or other sensitive data and reputational harm.

Additionally, in connection with the preparation of our consolidated financial statements for the year ended December 31, 2022, during the fourth quarter of 2022, management identified a material

weakness in internal control related to ineffective ITGCs in the areas of user access and program change-management over certain IT systems that support the Company’s financial reporting processes.

See Part II, Item 9A for additional information.

information accurately, and to prepare financial statements within required time periods, could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses,

negatively affect investor confidence in our financial statements and, in turn, adversely impact our stock price.

Security and privacy breaches may expose us to liability and cause us to lose customers.

Federal and state laws require us to safeguard our wholesalers’, retailers’ and consumers’ financial information, including credit information.

Although we have established

security procedures to protect against identity theft and the theft of our customers’ financial information, our security and testing measures may not prevent security breaches.

We have been in the past and may again in the future be

subject to cyberattacks, including attacks that have resulted in the theft of customer financial information, such as credit card information;

Although we have established security

procedures to protect against identity theft and the theft of our customers’ financial information, our security and testing measures may not prevent security breaches.

We have been in the past and may again in the future be subject to

cyberattacks, including attacks that have resulted in the theft of customer financial information, such as credit card information;

however, no cyberattack we have suffered to date has resulted in material liability to us.

attacks have become increasingly sophisticated over time and maybe conducted or “sponsored” by nation states with significant resources.

We cannot guarantee that a future breach would not result in material liability or otherwise harm our

In the event of any such breach, we may be required to notify governmental authorities or consumers under breach disclosure laws, indemnify consumers or other third parties for losses resulting from the breach, and expend resources

investigating and remediating any vulnerabilities that contributed to the occurrence of the breach.

Typically, we rely on encryption and authentication technology licensed from third parties to enhance

transmission security of confidential information in relation to financial and other sensitive information that we have on file.

Advances in computer capabilities, new discoveries in the field of cryptography, inadequate facility security or

other developments may result in a compromise or breach of the technology used by us to protect customer data.

Any compromise of our security, even a security breach that does not result in a material liability, could harm our reputation and

therefore, our business and financial condition.

In addition, a party who is able to circumvent our security measures or exploit inadequacies in our security measures, could, among other effects, misappropriate proprietary information

(including trade secrets), cause interruptions in our operations or expose customers and other entities with which we interact to computer viruses or other disruptions.

These attacks have become

increasingly sophisticated over time and maybe conducted or “sponsored” by nation states with significant resources.

We cannot guarantee that a future breach would not result in material liability or otherwise harm our business.

In the event of any

such breach, we may be required to notify governmental authorities or consumers under breach disclosure laws, indemnify consumers or other third parties for losses resulting from the breach, and expend resources investigating and remediating any

vulnerabilities that contributed to the occurrence of the breach.

Typically, we rely on encryption and authentication technology licensed from third parties to enhance transmission security of confidential information

in relation to financial and other sensitive information that we have on file.

Advances in computer capabilities, new discoveries in the field of cryptography, inadequate facility security or other developments may result in a compromise or

breach of the technology used by us to protect customer data.

Any compromise of our security, even a security breach that does not result in a material liability, could harm our reputation and therefore, our business and financial condition.

addition, a party who is able to circumvent our security measures or exploit inadequacies in our security measures, could, among other effects, misappropriate proprietary information (including trade secrets), cause interruptions in our

operations or expose customers and other entities with which we interact to computer viruses or other disruptions.

Actual or perceived vulnerabilities may lead to claims against us.

maintain cyber errors and omissions insurance that covers certain cyber risks, our insurance coverage may be insufficient to cover all claims or losses.

To the extent the measures we have taken prove to be insufficient or inadequate, we may

become subject to litigation or administrative sanctions, which could result in significant fines, penalties or damages and harm to our reputation.

While we maintain cyber errors and omissions insurance that

covers certain cyber risks, our insurance coverage may be insufficient to cover all claims or losses.

To the extent the measures we have taken prove to be insufficient or inadequate, we may become subject to litigation or administrative

sanctions, which could result in significant fines, penalties or damages and harm to our reputation.

We may fail to manage our growth.

1 unchanged sentence

We acquired the Stoker’s ® brand in 2003 and have continued to develop it through the introduction of new products, such as moist snuff.

acquisition of the Vapor Beast ® brand in 2016 accelerated our entry into non-traditional retail channels

while the 2018 acquisition of IVG added a top B2C platform which enhances our marketing and selling of proprietary and third-party vapor products to adult consumers.

More recently, the acquisition of Solace provided us with a leading line of

e-liquids and a powerful new product development platform, the acquisition of certain tobacco assets and distribution rights from Durfort and BluntWrap USA secured long-term control of our Zig-Zag MYO cigar wrap products and provided us

access to a portfolio of tobacco products with significant strategic value, and the acquisition of certain tobacco assets from Unitabac expanded our capabilities in the growing cigar market .

However, any future

growth will place additional demands on our resources, and we cannot be sure we will be able to manage our growth effectively.

If we are unable to manage our growth while maintaining the quality of our products and profit margins, or if new

systems that we implement to assist in managing our growth do not produce the expected benefits, our business, financial position, results of operations and cash flows could be adversely affected.

We may not be able to support, financially or

otherwise, future growth, or hire, train, motivate and manage the required personnel.

Our failure to manage growth effectively could also limit our ability to achieve our goals as they relate to streamlined sales, marketing and distribution

operations and the ability to achieve certain financial metrics.

Our acquisition of the Vapor

Beast ® brand in 2016 accelerated our entry into non-traditional retail channels while the 2018 acquisition

of IVG added a top B2C platform which enhances our marketing and selling of proprietary and third-party vapor products to adult consumers.

The acquisition of certain tobacco assets and distribution rights from Durfort and BluntWrap USA

secured long-term control of our Zig-Zag MYO cigar wrap products and provided us access to a portfolio of tobacco products with significant strategic value, and the acquisition of certain tobacco assets from Unitabac expanded our capabilities in

the growing cigar market .

However, any future growth will place additional demands on our resources, and we cannot be sure we will be able to manage our growth effectively.

If we are unable to manage our growth

while maintaining the quality of our products and profit margins, or if new systems that we implement to assist in managing our growth do not produce the expected benefits, our business, financial position, results of operations and cash flows

could be adversely affected.

We may not be able to support, financially or otherwise, future growth, or hire, train, motivate and manage the required personnel.

Our failure to manage growth effectively could also limit our ability to achieve our

goals as they relate to streamlined sales, marketing and distribution operations and the ability to achieve certain financial metrics.

We may fail to successfully integrate our acquisitions or otherwise be unable to benefit from pursuing acquisitions.

We believe there are meaningful opportunities to grow through acquisitions and joint ventures across all OTP and adjacent product categories and we expect to continue a strategy

of selectively identifying and acquiring businesses with complementary products.

We believe there are meaningful opportunities to grow through acquisitions and joint ventures across all OTP and adjacent product categories and we expect to continue a strategy of

selectively identifying and acquiring businesses with complementary products.

We may be unable to identify, negotiate, and complete suitable acquisition opportunities on reasonable terms.

11 unchanged sentences

In response to competitor actions and pricing pressures, we have engaged in significant use of promotional and sales incentives.

We regularly review the results of our promotional spending

activities and adjust our promotional spending programs in an effort to maintain our competitive position.

Accordingly, unit sales volume and sales promotion costs in any period are not necessarily indicative of sales and costs that may be

realized in subsequent periods.

We regularly review the results of our promotional spending activities

and adjust our promotional spending programs in an effort to maintain our competitive position.

Accordingly, unit sales volume and sales promotion costs in any period are not necessarily indicative of sales and costs that may be realized in

subsequent periods.

Additionally, promotional activity significantly increases net sales in the month in which it is initiated, and net sales are adversely impacted in the month after a promotion.

Accordingly, based upon the timing of

our marketing and promotional initiatives, we have and may continue to experience significant variability in our results, which could affect our ability to formulate strategies that allow us to maintain our market presence across volatile

If our fluctuations obscure our ability to track important trends in our key markets, it may have a material adverse effect on our business, results of operations and financial condition.

Accordingly, based upon the timing of our marketing

and promotional initiatives, we have and may continue to experience significant variability in our results, which could affect our ability to formulate strategies that allow us to maintain our market presence across volatile periods.

fluctuations obscure our ability to track important trends in our key markets, it may have a material adverse effect on our business, results of operations and financial condition.

We are subject to the risks of exchange rate fluctuations.

Currency movements and suppliers’ price increases relating to premium cigarette papers and cigarette tubes are the primary factors affecting our cost of sales.

These products are purchased

under the Distribution Agreements and the License Agreements, and we make payments in euros.

These products are purchased under the

Distribution Agreements and the License Agreements, and we make payments in euros.

Thus, we bear certain foreign exchange rate risk for certain of our inventory purchases.

In addition, as part of our strategy, we have begun strategic

international expansions.

In addition, as part of our strategy, we have begun strategic international

As a result, we may be more sensitive to the risks of exchange rate fluctuations.

To manage this risk, we sometimes utilize short-term forward currency contracts to purchase euros for our inventory purchases.

foreign exchange currency policy which governs our hedging of risk.

While we engage in hedging transactions from time to time, no assurance can be made that we will be successful in eliminating currency exchange risks or that changes in currency

rates will not have a material adverse effect on our business, results of operations and financial condition.

We have a foreign exchange

currency policy which governs our hedging of risk.

While we engage in hedging transactions from time to time, no assurance can be made that we will be successful in eliminating currency exchange risks or that changes in currency rates will not have

a material adverse effect on our business, results of operations and financial condition.

and global economic conditions could negatively impact our business, prospects, results of operations, financial condition or cash flows.

Our business and operations are sensitive to global economic conditions.

These conditions include interest rates, energy costs, inflation, recession, fluctuations in debt and equity capital

markets and the general condition of the U.S.

and world economy, including as a result of the effect of the COVID-19 pandemic.

A material decline in the economic conditions affecting consumers, which cause a reduction in disposable income for the

average consumer, may change consumption patterns, and may result in a reduction in spending on OTP or a switch to cheaper products or products obtained through illicit channels.

Material inflation may also lead to significant increases in

property, E&O and other insurance premiums which could affect our results of operations and liquidity and may also result in us self-insuring if the premiums become uneconomical.

Electronic cigarettes, vaporizer, e-liquid, and other NewGen

products are relatively new to market and may be regarded by users as a novelty item and expendable.

As such, demand for our NewGen products may be particularly sensitive to economic conditions such as inflation, recession, high energy costs,

unemployment, changes in interest rates and money supply, changes in the political environment, the ultimate effect on the economy of the COVID-19 pandemic and other factors beyond our control, any combination of which could result in a material

adverse effect on our business, results of operations and financial condition.

These conditions include interest rates, energy costs, inflation, recession, fluctuations in debt and equity capital markets

and the general condition of the U.S.

and world economy.

A material decline in the economic conditions affecting consumers, which cause a reduction in disposable income for the average consumer, may change consumption patterns, and may result in a

reduction in spending on OTP or a switch to cheaper products or products obtained through illicit channels.

Material inflation may also lead to significant increases in property, E&O and other insurance premiums which could affect our results

of operations and liquidity and may also result in us self-insuring if the premiums become uneconomical.

Electronic cigarettes, vaporizer, e-liquid, and other NewGen products are relatively new to market and may be regarded by users as a novelty

item and expendable.

As such, demand for our NewGen products may be particularly sensitive to economic conditions such as inflation, recession, high energy costs, unemployment, changes in interest rates and money supply, changes in the political

environment, and other factors beyond our control, any combination of which could result in a material adverse effect on our business, results of operations and financial condition.

The departure of key management personnel and the failure to attract and retain talent could adversely affect our operations.

Our success depends upon the continued contributions of our senior management.

Our ability to implement our strategy of attracting and retaining the best talent may be impaired by the

decreasing social acceptance of tobacco usage.

Our ability to implement our strategy of attracting and retaining the best talent may be impaired by the decreasing

social acceptance of tobacco usage.

The tobacco industry competes for talent with the consumer products industry and other companies that enjoy greater societal acceptance.

As a result, we may be unable to attract and retain the best

talent, which could have a material adverse effect on our business, results of operations and financial condition.

As a result, we may be unable to attract and retain the best talent, which

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

Our intellectual property rights may be infringed or misappropriated.

We currently rely on trademark and other intellectual property rights to establish and protect our products, including the brand names and logos we own or license.

Third parties have in the

past infringed on and misappropriated and may in the future infringe or misappropriate, these trademarks and our other intellectual property rights.

Our ability to maintain and further build brand recognition is dependent on the continued and

exclusive use of these trademarks, service marks and other proprietary intellectual property rights, including the names and logos we own or license.

Despite our attempts to ensure these intellectual property rights are protected, third parties

may take actions that could materially and adversely affect our rights or the value of this intellectual property.

Any enforcement concerning our intellectual property rights, whether successful or unsuccessful, could result in substantial costs

to us and diversions of our resources.

Expenses related to protecting and enforcing our intellectual property rights, the loss or compromise of any of these rights or the loss of revenues as a result of infringement or misappropriation could have

a material adverse effect on our business, results of operations and financial condition, and may prevent the brands we own or license from growing or maintaining market share.

Third parties have in the past

infringed on and misappropriated and may in the future infringe or misappropriate, these trademarks and our other intellectual property rights.

Our ability to maintain and further build brand recognition is dependent on the continued and exclusive

use of these trademarks, service marks and other proprietary intellectual property rights, including the names and logos we own or license.

Despite our attempts to ensure these intellectual property rights are protected, third parties may take

actions that could materially and adversely affect our rights or the value of this intellectual property.

Any enforcement concerning our intellectual property rights, whether successful or unsuccessful, could result in substantial costs to us and

diversions of our resources.

adverse effect on our business, results of operations and financial condition, and may prevent the brands we own or license from growing or maintaining market share.

Third parties may claim that we infringe or misappropriate their intellectual property rights.

Competitors in the tobacco products and NewGen markets may claim that we infringe on or misappropriate their intellectual property rights.

Such claims, whether or not meritorious, may result in

the expenditure of significant financial and managerial resources, injunctions against us and/or the payment of damages.

Such claims, whether or not meritorious, may result in the

expenditure of significant financial and managerial resources, injunctions against us and/or the payment of damages.

Further, our vapor distribution businesses distribute third party product brands with those suppliers’ branding and imagery.

If that branding or imagery is alleged by other parties to infringe or otherwise violate intellectual property rights, we could be drawn into such litigation.

that branding or imagery is alleged by other parties to infringe or otherwise violate intellectual property rights, we could be drawn into such litigation.

We may fail to meet expectations relating to environmental, social and governance factors.

Market participants, including investors, analysts, customers and other key stakeholders are increasingly focused on environmental, social and governance (“ESG”) factors.

We have recently

determined to adopt a more comprehensive ESG initiative with an initial focus on public health and began to roll-out this new initiative in 2020.

However, the ESG factors by which companies’ corporate responsibility practices are assessed

differ among market participants, are constantly evolving and could result in greater expectations of us and/or cause us to undertake costly initiatives to satisfy such new criteria.

We risk damage to our brand and reputation in the event that

our corporate responsibility procedures or standards do not meet the standards expected by us.

Furthermore, we could fail, or be perceived to fail, in our achievement of our publicly disclosed ESG initiatives or goals and we could also be

criticized for the scope of such initiatives or goals.

If we fail to satisfy the expectations of investors and other key stakeholders or our initiatives are not executed as planned, our reputation and financial results could be materially and

adversely affected.

Market participants, including investors, analysts, customers and other key stakeholders are increasingly focused on ESG factors.

We determined to adopt a comprehensive ESG initiative with an

initial focus on public health and began to roll-out this new initiative in 2020.

However, the ESG factors by which companies’ corporate responsibility practices are assessed differ among market participants, are constantly evolving and could

result in greater expectations of us and/or cause us to undertake costly initiatives to satisfy such new criteria.

We risk damage to our brand and reputation in the event that our corporate responsibility procedures or standards do not meet the

standards expected of us.

Furthermore, we could fail, or be perceived to fail, in our achievement of our publicly disclosed ESG initiatives or goals and we could also be criticized for the scope of such initiatives or goals.

If we fail to satisfy

the expectations of investors and other key stakeholders or our initiatives are not executed as planned, our reputation and financial results could be materially and adversely affected.

Unresolved Staff Comments

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

What changed 10-K

Item 1A. Risk Factors