What changed in this filing

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Item 1A. Risk Factors

2021-03-11 compared with 2020-03-11 · 331 added, 723 removed, 55 unchanged (95% of the section changed)

Risk Factors-

You should carefully consider the risk

factors set forth below and in other reports that we file from time to time with the Securities and Exchange Commission and the

other information in this Annual Report on Form 10-K.

The matters discussed in the risk factors, and additional risks and uncertainties

not currently known to us or that we currently deem immaterial, could have a material adverse effect on our business, financial

condition, results of operation and future growth prospects and could cause the trading price of our common stock to decline.

You should carefully consider the risk factors set forth below and in other reports that we file from time to time with the Securities and Exchange Commission and the other information in this Annual Report on Form 10-K.

The matters discussed in the risk factors, and additional risks and uncertainties not currently known to us or that we currently deem immaterial, could have a material adverse effect on our business, financial condition, results of operation and future growth prospects and could cause the trading price of our common stock to decline.

Risks Related to the COVID-19 Pandemic or Another Pandemic

The coronavirus pandemic (COVID-19) or another pandemic may cause a variety of business disruptions and future business risks.

The COVID-19 pandemic has adversely impacted the U.S.

economy and supply chains and created volatility in U.S.

financial markets.

The COVID-19 pandemic has disrupted our business operations to a limited degree already, and there is a risk that state and federal authorities’ responses to the COVID-19 pandemic or another pandemic may disrupt our business in the future.

The COVID-19 pandemic also poses a risk to our business which includes delays by third party providers of goods or services to our business, inability to operate in-person at our offices, interruptions to our sales, research and development, and administrative activities, and disruptions to our manufacturing operations, including the ability to staff our manufacturing operations at full capacity or at all.

Similarly, state or federal authorities may also be affected in their capacity or capability to operate as normal and may impact the timeline of product authorizations which may disrupt our business plans.

Our corporate office, laboratory in Buffalo, and production facility remain open and are operating under strict safety protocols.

We continue to encourage remote work arrangements by our employees where job duties permit.

At times during 2020, we were unable to have our full staff (or any staff) in our laboratory in Buffalo and some of our external research and development partners operated (or are still operating) on a modified or limited schedule, which slowed our research activities.

These interruptions have had a minimal impact on our research operations.

The future extent of the impact of the COVID-19 pandemic or another pandemic, including our ability to execute our business strategies as planned, will depend on future developments, including the duration and severity of the pandemic, which are highly uncertain and cannot be predicted.

The COVID-19 pandemic may also impact our ability to access the U.S.

capital markets on a timetable and under terms that are advantageous to the Company.

Our executive leadership team and staff are monitoring this evolving situation and its impacts on our business.

We will continue to monitor the local, state and federal guidance regarding our business practices.

Risks Related to Our Business and Operations

We have had a history of losses, and we may be unable

to achieve and sustain profitability.

We have experienced net losses of approximately

$26.6 million, $8.0 million and $13.0 million during the years ended December 31, 2019, 2018, and 2017, respectively.

current balance of cash and cash equivalents and short-term investment securities is adequate to sustain operations for a number

of years, generating net income in the future will depend on our ability to successfully operate our cigarette manufacturing facility,

sell and market our proprietary tobacco and hemp products, and generate royalty revenue from the licensing of our intellectual

We have had a history of losses, and we may be unable to achieve and sustain profitability.

We have experienced net losses of approximately $19.7 million, $26.6 million and $8.0 million during the years ended December 31, 2020, 2019, and 2018, respectively.

While our current balance of cash and cash equivalents and short-term investment securities is adequate to sustain our current planned operations, generating net income in the future will depend on our ability to successfully operate our cigarette manufacturing facility, create, sell and market our

proprietary tobacco and hemp products, and generate royalty revenue from the licensing of our intellectual property.

There is no guarantee that we will be able to achieve or sustain profitability in the future.

An inability to successfully

achieve profitability may decrease our long-term viability.

We have had a history of negative cash flow, and our ability

to sustain positive cash flow is uncertain.

We have had a history of negative cash flow from operating activities,

before cash used in investing activities and cash provided by financing activities, including approximately $14.6 million of negative

cash flow from operations during the year ended December 31, 2019.

We believe our current position of cash and cash equivalents

and short-term investment securities is adequate to sustain operations and to meet all current obligations as they come due for

a number of years.

Generation of positive cash flow from operations will depend on our ability to successfully implement the net

income generating activities discussed in the previous risk factor discussion.

An inability to successfully implement our net income

producing initiatives may decrease our long-term viability.

If regulations by the FDA requiring the reduction of nicotine

to minimally or non-addictive levels in all cigarettes sold in the U.S.

are delayed or do not become implemented, then the demand

for our proprietary Very Low Nicotine Content tobacco may not substantially increase in the U.S.

On July 28, 2017, the FDA publicly announced

that it intends to implement new regulations that will mandate minimally or non-addictive levels of nicotine in all cigarettes

sold in the U.S.

However, there can be no assurance that

the FDA will implement such new regulations or, if implemented, when such regulations would take effect.

In the event the FDA does

not implement such new regulations or implementation is delayed, then the demand for our proprietary VLNC tobacco may not substantially

increase in the U.S.

and such action would have a material adverse effect on our business and operations.

If we fail to obtain FDA and foreign regulatory approvals

for authorization to market our VLNC tobacco as a Modified Risk Cigarette, we will be unable to commercialize this potential product

in and outside the U.S.

Although our PMTA for our VLNC tobacco

cigarettes has been authorized by the FDA for marketing and sale in the United States, there can be no assurance that our

MRTPA for our VLNC tobacco cigarettes will be authorized by the FDA and/or that our VLNC tobacco cigarettes will be approved

by foreign regulators.

In addition, there can be no assurance that all necessary approvals will be granted for our potential

products or that review or actions will not involve delays caused by requests for additional information or testing that

could adversely affect the time and cost to market and sell our potential products.

The development, testing, manufacturing,

and marketing of our potential products are subject to extensive regulation by governmental authorities in the United States and

throughout the world.

In particular, the process of obtaining approvals by the FDA and other international FDA equivalent agencies in targeted countries is costly and time consuming, and the time required for such

approvals is uncertain.

Our MRTPA for our VLNC tobacco cigarettes must undergo an extensive regulatory approval process mandated

by the FDA in the U.S.

and any other approval processes required by FDA-equivalent agencies in foreign countries where we want

to introduce our potential products.

The scope of review, including product testing

and exposure studies, to be required by the FDA under the Tobacco Control Act in order for cigarettes to be marketed as Modified

Risk Cigarettes has not yet been fully established, even though the FDA issued Modified Risk Tobacco Product Applications Draft

Guidance on March 30, 2012.

The FDA could force the removal of our products from the

The FDA has broad authority over the

regulation of tobacco products.

The FDA could, among other things, force us to remove from the U.S.

market our VLNC tobacco

cigarettes even after the FDA authorization on December 17, 2019 of our PMTA or the potential future authorization of our

MRTPA for us to market in the U.S.

our VLNC tobacco cigarettes, as well as the FDA could levy fines or change their

regulations on advertising.

Any adverse action by the FDA could have a material adverse impact on our business.

Negative press from being in the hemp/cannabis space could

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

The hemp plant and the marijuana plant are

both part of the same cannabis genus of plant, except that hemp, by definition, has not more than 0.3% THC content and is

legal under the federal 2018 Farm Bill and certain state laws, but the same plant with a higher THC content is defined as marijuana,

which is legal under certain state laws, is not legal under federal law.

The similarities between these plants can cause confusion,

and our activities with legal hemp may be incorrectly perceived as us being involved in federally illegal marijuana.

Also, despite

growing support for the marijuana industry and legalization of marijuana in certain U.S.

states, many individuals and businesses

remain opposed to the marijuana industry.

Any negative press resulting from the incorrect perception that we have entered into

the marijuana space could result in a loss of current or future business.

It could also adversely affect the public’s perception

of us and lead to reluctance by new parties to do business with us or to own our common stock.

We cannot assure you that additional

business partners, including but not limited to financial institutions, banking institutions and customers, will not attempt to

end or curtail their relationships with us.

Any such negative press or cessation of business could have a material adverse effect

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

business-related cannabinoid production is dependent on laws pertaining to the hemp/cannabis industry .

On December 20, 2018, the Agricultural Improvement

Act of 2018, which is also known as the “2018 Farm Bill,”

was enacted and legalized hemp and hemp products under U.S.

federal law, but with compliance still being required with all applicable state hemp laws and all regulations developed by the

United States Department of Agriculture (“USDA”).

In addition, the FDA is regulating products derived from help, including

cannabidiol (“CBD”), for compliance under the Federal Food, Drug and Cosmetic Act and has issued several warning letters

to firms marketing CBD products to treat disease or for other therapeutic uses.

Under the Federal Food, Drug and Cosmetic Act,

any product intended to affect the structure or function of the body of humans or animals is considered a drug that must receive

premarket approval by the FDA through its new drug application process.

Thus, participants in the hemp industry will need to comply

with all applicable federal and state laws, rules and regulations in the cultivation, transportation, and sale of hemp and hemp

derived products, including the Federal Food, Drug and Cosmetic Act.

As of January 1, 2020, (i) federal law and

the laws of 47 states in the United States and the District of Columbia have legalized hemp, (ii) 33 states and the District of

Columbia allow their citizens to use medical marijuana and, (iii) 11 states and the District of Columbia have legalized marijuana

for adult recreational use.

An inability to successfully achieve profitability will decrease our long-term viability.

We have had a history of negative cash flow, and our ability to sustain positive cash flow is uncertain.

As a result of our extensive research and development activities and regulatory expenses seeking FDA approvals, we have had a history of negative cash flow from operating activities, before cash used in investing activities and cash provided by financing activities, including approximately $15.6 million during the year ended December 31, 2020.

We believe our current position of cash and cash equivalents and short-term investment securities is adequate to sustain operations and to meet all current planned obligations as they come due for over one year.

Generation of positive cash flow from operations will depend on our ability to successfully implement income generating activities discussed in the previous risk factor discussion.

An inability to successfully implement positive cash flows from operating activities will decrease our long-term viability.

If we fail to obtain FDA and foreign regulatory approvals for authorization to market our VLNC tobacco as a Modified Risk Cigarette, we will be unable to commercialize this potential product in and outside the U.S.

Although our PMTA for our VLNC tobacco cigarettes has been authorized by the FDA for marketing and sale in the United States, there can be no assurance that our MRTPA for our VLNC tobacco cigarettes will be authorized by the FDA and/or that our VLNC tobacco cigarettes will be approved by foreign regulators.

In addition, there can be no assurance that all necessary approvals will be granted for our potential products or that review or actions will not involve delays caused by requests for additional information or testing that could adversely affect the time and cost to market and sell our potential products.

The development, testing, manufacturing, and marketing of our potential products are subject to extensive regulation by governmental authorities in the United States and throughout the world.

In particular, the process of obtaining approvals by the FDA and other international FDA equivalent agencies in targeted countries is costly and time consuming, and the time required for such approvals is uncertain, as are the ultimate decisions of these agencies.

Our MRTPA for our VLNC tobacco cigarettes must undergo an extensive regulatory approval process mandated by the FDA in the U.S.

and any other approval processes required by FDA-equivalent agencies in foreign countries where we want to introduce our potential products.

The scope of review, including product testing and exposure studies, to be required by the FDA under the Tobacco Control Act in order for cigarettes to be marketed as Modified Risk Cigarettes has not yet been fully established, even though the FDA issued Modified Risk Tobacco Product Applications Draft Guidance on March 30, 2012.

Additionally, as a combustible product, albeit one pursuing a modified exposure order, our product may be subject to different considerations or requirements by regulators than products undergoing similar regulatory reviews.

Delays or the denial of our MRTPA for our VLNC tobacco cigarettes or another future application by the FDA or another regulatory authority would negatively impact our business and planned operations and could result in a loss of time and expense pursuing such approvals and the inability to commercialize such potential products at all.

Our competitors may develop products that are less expensive, safer or otherwise more appealing, which may diminish or eliminate the commercial success of any potential product that we may commercialize.

If our competitors market products that are less expensive, safer or otherwise more appealing than our potential products, or that reach the market before our potential products, we may not achieve commercial success.

The market may choose to continue utilizing existing products for any number of reasons, including familiarity with or pricing of these existing products.

The failure of our PMTA product or our MRTPA product to compete with products marketed by our competitors would impair our ability to generate revenue, which would have a material adverse effect on our future business, financial condition, results of operations, and cash flows.

Our competitors may:

● develop and market products that are less expensive, safer, or otherwise more appealing than our products;

● commercialize competing products before we or our partners can launch our products;

● initiate or withstand substantial price competition more successfully than we can.

If we fail to stay at the forefront of technological change, we may be unable to compete effectively.

Our competitors may render our technologies obsolete by advances in existing technological approaches or the development of new or different approaches, potentially eliminating the advantages that we believe we derive from our research approach and proprietary technologies.

Our competitors may:

● operate larger research and development programs or have substantially greater financial resources than we do;

● have greater success in recruiting skilled technical and scientific workers from the limited pool of available talent;

● more effectively negotiate third-party licenses and strategic relationships;

● take advantage of acquisition or other opportunities more readily than we can.

Negative press from being in the hemp/cannabis space could have a material adverse effect on our business, financial condition, and results of operations.

The hemp plant and the marijuana plant are both part of the same cannabis genus of plant, except that hemp, by definition, has not more than 0.3% THC content and is legal under the federal 2018 Farm Bill and certain state laws, but the same plant with a higher THC content is defined as marijuana, which is legal under certain state laws, is not legal under federal law.

The similarities between these plants can cause confusion, and our activities with legal hemp may be incorrectly perceived as us being involved in federally illegal marijuana.

Also, despite growing support for the marijuana industry and legalization of marijuana in certain U.S.

states, many individuals and businesses remain opposed to the marijuana industry.

Any negative press resulting from the incorrect perception that we have entered into the marijuana space could result in a loss of current or future business.

It could also adversely affect the public’s perception of us and lead to reluctance by new parties to do business with us or to own our common stock.

We cannot assure you that additional business partners, including but not limited to financial institutions, banking institutions and customers, will not attempt to end or curtail their relationships with us.

Any such negative press or cessation of business could have a material adverse effect on our business, financial condition, and results of operations.

Any business-related cannabinoid production is dependent on laws pertaining to the hemp/cannabis industry .

On December 20, 2018, the Agricultural Improvement Act of 2018, which is also known as the “2018 Farm Bill,” was enacted and legalized hemp and hemp products under U.S.

federal law, but with compliance still being required with all applicable state hemp laws and all regulations developed by the United States Department of Agriculture (“USDA”).

In addition, the FDA is regulating products derived from hemp, including cannabidiol (“CBD”), for compliance under the Federal Food, Drug and Cosmetic Act and has issued several warning letters to firms marketing CBD products to treat disease or for other therapeutic uses.

Under the Federal Food, Drug and Cosmetic Act, any product intended to affect the structure or function of the body of humans or animals is considered a drug that must receive premarket approval by the FDA through its new drug application process.

Thus, participants in the hemp industry will need to comply with all applicable federal and state laws, rules and regulations in the cultivation, transportation, and sale of hemp and hemp derived products, including the Federal Food, Drug and Cosmetic Act.

As of January 1, 2021, (i) federal law and the laws of 47 states in the United States and the District of Columbia have legalized hemp, (ii) 36 states in the United States, the District of Columbia, Guam, Puerto Rico, and the U.S.

Virgin Islands have enacted laws and/or regulations that recognize, in one form or another, legitimate medical uses for cannabis/marijuana and consumer use of cannabis/marijuana in connection with medical treatment, and (iii) 15 states in the United States, the District of Columbia, Guam, and the Northern Mariana Islands have legalized cannabis/marijuana for adult recreational use.

Many other states are considering similar legislation.

Conversely, under the federal Controlled Substance

Act (the “CSA”), the policies and regulations of the federal government and its agencies are that marijuana has no

medical benefit and a range of activities are prohibited, including cultivation, possession, personal use, and interstate distribution

of marijuana.

Conversely, under the federal Controlled Substance Act (the “CSA”), the policies and regulations of the federal government and its agencies are that marijuana has no medical benefit and a range of activities are prohibited, including cultivation, possession, personal use, and interstate distribution of marijuana.

In the event the U.S.

Department of Justice begins strict enforcement of the CSA in states that have laws legalizing

medical and/or adult recreational marijuana, there may be a direct and adverse impact to any future business or prospects that

we may have in the marijuana business.

Even in those jurisdictions in which the manufacture and use of medical marijuana has been

legalized at the state level, the possession, use, and cultivation of marijuana all remain violations of federal law that are punishable

by imprisonment and substantial fines.

Moreover, individuals and entities may violate federal law if they intentionally aid and

abet another in violating these federal controlled substance laws or conspire with another to violate them.

We currently conduct sponsored research

on hemp in Oregon, Maryland and The Netherlands with third-parties that possess all necessary permits and licenses to engage legally

in such activities.

We have conducted hemp research in Virginia and Canada with third-parties possessing all necessary permits

and licenses to engage legally in such activities.

In order to carry out research in other countries, similar licenses are required

to be issued by the relevant authority in each country.

We also conduct hemp research in our laboratories in New York under

a license granted to us by the State of New York.

Local, state, federal, and international

hemp and marijuana laws and regulations are broad in scope and subject to evolving interpretations, which could require us to incur

substantial costs associated with compliance requirements.

In addition, violations of these laws, or allegations of such violations,

could disrupt our business and result in a material adverse effect on our operations.

In addition, it is possible that regulations

may be enacted in the future that will be directly applicable to our proposed business regarding cannabinoid production.

also possible that the federal government will begin strictly enforcing existing laws, which may limit the legal uses of the hemp

plant and its derivatives and extracts, such as cannabinoids.

However, our work in hemp would continue since hemp research, development,

and commercialization activities are permitted under applicable federal and state laws, rules, and regulations.

We cannot predict

the nature of any future laws, regulations, interpretations, or applications, nor can we determine what effect additional governmental

regulations or administrative policies and procedures, when and if promulgated, could have on our activities in the legal hemp

We expect to continue to acquire or invest in other companies,

which may divert our management’s attention, result in additional dilution to our stockholders, and consume resources that

are necessary to sustain our business.

We recently made an investment in Panacea,

a vertically-integrated developer, producer and seller of legal, hemp-derived, CBD products, with extraction, distillation, testing

and manufacturing operations located in a 51,000 square foot facility in Golden, Colorado.

We expect to continue to acquire or

invest in complementary solutions, services, technologies, or businesses in the future.

We may also enter into relationships with

other businesses to expand our intellectual property portfolio, which could involve preferred or exclusive licenses or investments

in other companies.

Negotiating these transactions can be time-consuming, difficult and expensive, and our ability to complete

these transactions may often be subject to conditions or approvals that are beyond our control.

Consequently, these transactions,

even if undertaken and announced, may not close.

Acquisitions may also disrupt our business,

divert our resources, and require significant management attention that would otherwise be available for the development of our

Moreover, the anticipated benefits of any acquisition, investment, or business relationship may not be realized or we

may be exposed to unknown liabilities, including litigation against the companies that we may acquire.

In connection with any such

transaction, we may:

issue additional equity securities that would dilute our stockholders;

use cash that we may need in the future to operate our business;

incur debt on terms unfavorable to us, that we are unable to repay,

or that may place burdensome restrictions on our operations;

incur large charges or substantial liabilities;

become subject to adverse tax consequences or substantial depreciation,

deferred compensation, or other acquisition-related accounting charges.

Any of these risks could harm our business.

Integration of an acquired company’s operations

may present challenges.

The integration of an acquired company requires,

among other things, coordination of administrative, sales and marketing, accounting and finance functions, and expansion of information

and management systems.

Integration may prove to be difficult due to the necessity of coordinating geographically separate organizations

and integrating personnel with disparate business backgrounds and accustomed to different corporate cultures.

We may not be able

to retain key employees of an acquired company.

Additionally, the process of integrating a company may require a disproportionate

amount of time and attention of our management and financial and other resources.

Any difficulties or problems encountered in an

integration could have a material adverse effect on our business.

In addition, we may only be able to conduct

limited due diligence on an acquired company’s operations.

Following an acquisition, we may be subject to liabilities arising

from an acquired company’s past or present operations, including liabilities related to data security, encryption and privacy

of customer data, and these liabilities may be greater than the warranty and indemnity limitations that we negotiate.

Any liability

that is greater than these warranty and indemnity limitations could have a negative impact on our financial condition.

Even if successfully integrated, there can

be no assurance that our operating performance after an acquisition will be successful or will fulfill management’s objectives.

We intend to distribute and sell our potential products

outside of the U.S., which will subject us to other regulatory risks.

In addition to seeking authorization from

the FDA to market our VLNC tobacco cigarettes as a Modified Risk Cigarette in the U.S., we intend to seek governmental approvals

required to market our VLNC tobacco cigarettes and our other products in other countries.

Marketing of our products is not permitted

in certain countries until we have obtained required approvals or exemptions in these individual countries.

The regulatory review

process varies from country to country, and approval by foreign governmental authorities is unpredictable, uncertain, and generally

Our ability to market our potential products could be substantially limited due to delays in receipt of, or failure

to receive, the necessary approvals or clearances.

We anticipate commencing the applications required in some or all of these

countries following authorization by the FDA;

however, we may decide to file applications in advance of the FDA authorization

if we determine such filings to be both time and cost effective.

If we export any of our potential products, or products that

have not yet been cleared for commercial distribution in the U.S., then such products may be subject to FDA export restrictions.

Failure to obtain necessary regulatory approvals could impair our ability to generate revenue from international sources.

Business interruptions, whether caused by natural disaster,

terrorism, economic downturns, global pandemics or other events, could negatively impact our business.

A natural disaster

(such as an earthquake, hurricane, fire, or flood) or an act of terrorism could cause substantial delays in our operations, damage

or destroy our equipment or facilities, and cause us to incur additional expenses and lose revenue.

The insurance we maintain against

natural disasters may not be adequate to cover our losses in any particular case, which would require us to expend significant

resources to replace any destroyed assets, thereby materially and adversely affecting our financial condition and prospects.

Other global incidents could have a similar effect of disrupting our business to the extent they reach and impact the areas in

which we operate, the availability of inventory we need, the customers we serve, the partners on whom we rely for products or services

or the employees who operate our businesses.

For example, the outbreak of the coronavirus currently being experienced globally

could disrupt our supply chain for tobacco, as well as negatively impact employee productivity, including affecting the availability

of employees reporting for work.

Further, the coronavirus outbreak has affected, and may continue to affect, the economies and

financial markets of many countries, which may result in an economic downturn.

Our studies and testing of any of our potential products

may produce negative or inconclusive results and we may decide, or regulators may require us, to conduct additional studies and/or

testing for these potential products or cease our studies and testing.

We do not know whether further studies and

testing of our potential products will demonstrate safety and efficacy sufficient to result in marketable products.

be able to obtain approval or marketing authorization for these potential products or our anticipated time of bringing these potential

products to the market may be substantially delayed.

We may also experience significant additional development costs and be required

to undertake additional studies and/or testing if we change our potential products.

Any such delays or costs could have a material

adverse effect on our business.

Our working capital requirements involve estimates based

on demand expectations and may increase beyond those currently anticipated, which could harm our operating results and financial

We have no experience in selling Modified

Risk Cigarettes on a commercial basis.

As a result, we intend to base our funding and inventory decisions

on estimates of future demand.

If demand for our products does not increase as quickly as we have estimated, our inventory and

expenses could rise, and our business and operating results could suffer.

Alternatively, if we experience sales in excess of our

estimates, our working capital needs may be higher than those currently anticipated.

Our ability to meet any demand for our products

may depend on our ability to arrange for additional financing for any ongoing working capital shortages, since it is likely that

cash flow from sales will lag behind our investment requirements.

We may require additional capital before we can complete

the FDA authorization process for our Modified Risk Tobacco Product Application (“MRTPA”).

We may require additional capital in the

future before we can complete the FDA authorization process for our MRTPA.

The cost of completing the FDA authorization process

for our MRTPA is difficult to estimate since it is currently unknown exactly what the FDA will require.

If we raise additional

funds through the issuance of equity securities to complete the FDA authorization process for our MRTPA, our stockholders may

experience substantial dilution, or the equity securities may have rights, preferences or privileges senior to those of existing

stockholders.

If we raise additional funds through debt financings, these financings may involve significant cash payment obligations

and covenants that restrict our ability to operate our business and make distributions to our stockholders.

We could also wait

for our own revenues and profits to be sufficient for us to provide such funding, which could delay our completion of the FDA authorization

process for our MRTPA.

Department of Justice begins strict enforcement of the CSA in states that have laws legalizing medical and/or adult recreational marijuana, there may be a direct and adverse impact to

any future business or prospects that we may have in the marijuana business.

Even in those jurisdictions in which the manufacture and use of medical marijuana has been legalized at the state level, the possession, use, and cultivation of marijuana all remain violations of federal law that are punishable by imprisonment and substantial fines.

Moreover, individuals and entities may violate federal law if they intentionally aid and abet another in violating these federal controlled substance laws or conspire with another to violate them.

We currently conduct sponsored research on hemp in Maryland and the Netherlands with third parties that possess all necessary permits and licenses to engage legally in such activities.

We have conducted hemp research in Virginia, Oregon, and Canada with third-parties possessing all necessary permits and licenses to engage legally in such activities.

In order to carry out research in other countries, similar licenses are required to be issued by the relevant authority in each country.

We also conduct hemp research in our laboratories in New York under a license granted to us by the State of New York.

Local, state, federal, and international hemp and marijuana laws and regulations are broad in scope and subject to evolving interpretations, which could require us to incur substantial costs associated with compliance requirements.

In addition, violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our operations.

In addition, it is possible that regulations may be enacted in the future that will be directly applicable to our proposed business regarding cannabinoid production.

It is also possible that the federal government will begin strictly enforcing existing laws, which may limit the legal uses of the hemp plant and its derivatives and extracts, such as cannabinoids.

However, our work in hemp would continue since hemp research, development, and commercialization activities are permitted under applicable federal and state laws, rules, and regulations.

We cannot predict the nature of any future laws, regulations, interpretations, or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on our activities in the legal hemp industry.

A key aspect of the revised strategy for cannabis is to reach an agreement with third parties to research characteristics of the cannabis plant and commercialize patented products through the value chain.

Any inability to produce hemp/cannabis products due to regulatory restrictions or otherwise would have a material adverse impact on our business and operations.

Our studies and testing of any of our potential products may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional studies and/or testing for these potential products or cease our studies and testing.

We do not know whether further studies and testing of our potential products will demonstrate safety and efficacy sufficient to result in marketable products.

We may not be able to obtain approval or marketing authorization for these potential products or our anticipated time of bringing these potential products to the market may be substantially delayed.

We may also experience significant additional development costs and be required to undertake additional studies and/or testing if we change our potential products.

Furthermore, the development of new products is costly, time-consuming, and has no guarantee of success.

Any such delays or the inability to effectively develop new products in a cost-effective manner would have a material adverse effect on our business.

We have no experience marketing and selling Modified Risk Tobacco products and any potential hemp/cannabis products and our working capital and inventory estimates based on demand expectations may be incorrect, which could harm our operating results and financial condition.

While members of management are experienced in the selling of conventional cigarette products, we have no experience in selling Modified Risk Tobacco Products or any hemp/cannabis derived products on a commercial basis.

As work towards potentially commercializing one or more of our potential products for sale, including our VLN cigarettes, we intend to base our working capital and inventory decisions on management’s estimates of future demand.

If demand for such potential new products does not increase as quickly as we have estimated, our inventory costs and working capital expenses could rise, and our business and operating results could suffer.

Alternatively, if we experience sales in excess of our estimates, our working capital and inventory needs may be higher than those currently anticipated.

Since our Modified Risk Tobacco is not widely available and must be grown specifically for our potential products, any

shortage in such tobacco could prevent us from increasing sales to meet demand and any surplus could result in inventory obsolescence and become a total loss.

Similarly, for any potential hemp/cannabis products to be marketed and sold, our management must make estimates for inventory, distribution, marketing and compliance with regulations, which could provide to be incorrect.

Our ability to meet any demand for our products may depend on our ability to arrange for additional financing for any ongoing working capital shortages, since it is likely that cash flow from sales will lag behind our investment requirements.

Any inability to incorrectly estimate demand for future products could negatively harm our operating results and financial condition.

We may acquire or invest in other companies, which may divert our management’s attention, result in additional dilution to our stockholders, and consume resources that are necessary to sustain our business or result in losses.

We may acquire or invest in complementary solutions, services, technologies, or businesses in the future.

We may also enter into relationships with other businesses to expand our intellectual property portfolio, which could involve preferred or exclusive licenses or investments in other companies.

Negotiating these transactions can be time-consuming, difficult and expensive, and our ability to complete these transactions may often be subject to conditions or approvals that are beyond our control.

Consequently, these transactions, even if undertaken and announced, may not close.

Acquisitions may also disrupt our business, divert our resources, and require significant management attention that would otherwise be available for the development of our business.

Moreover, the anticipated benefits of any acquisition, investment, or business relationship may not be realized or we may be exposed to unknown liabilities, including litigation against the companies that we may acquire.

We may be unable to restructure our investment in Panacea which could result in further impairment or losses.

As a result of increased competition and other macroeconomic factors, our investment in Panacea has been impaired since the date of our initial investment—see Note 6 to our consolidated financial statements for further information.

Although we recently entered into a non-binding agreement with Panacea to potentially restructure our investment and business relationship, the agreement is preliminary, non-binding, subject to change, and may not occur.

The failure to restructure our investment with Panacea could result in further impairment of our investment, additional capital investments to fund operations, losses as a result of a default on their $7 million principal convertible note receivable with us, litigation, or further losses.

We may require additional capital before we can complete the FDA authorization process for our Modified Risk Tobacco Product Application (“MRTPA”).

We may require additional capital in the future before we can complete the FDA authorization process for our MRTPA and to commercialize and market VLN ® successfully.

The cost of completing the FDA authorization process for our MRTPA is difficult to estimate since it is currently unknown exactly what the FDA will require;

there is no precedent for the authorization of a combusted product under the MRTP requirements.

If we raise additional funds through the issuance of equity securities to complete the FDA authorization process for our MRTPA, our stockholders may experience substantial dilution, or the equity securities may have rights, preferences or privileges senior to those of existing stockholders.

If we raise additional funds through debt financings, these financings may involve significant cash payment obligations and covenants that restrict our ability to operate our business and make distributions to our stockholders.

We could also wait for our own revenues and profits to be sufficient for us to provide such funding, which could delay our completion of the FDA authorization process for our MRTPA.

We also could elect to seek funds through arrangements with collaborators or licensees.

To the extent that

we raise additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to our

technologies or our potential products or grant licenses on terms that are not favorable to us.

If we cannot raise additional capital on

acceptable terms, we may not be able to, among other things:

To the extent that we raise additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to our technologies or our potential products or grant licenses on terms that are not favorable to us.

If we cannot raise additional capital on acceptable terms, we may not be able to, among other things:

● undertake the steps necessary to seek FDA authorization of our MRTPA;

6 unchanged sentences

● respond to competitive pressures or unanticipated working capital requirements.

We have no experience in managing growth.

If we fail to

manage our growth effectively, we may be unable to execute our business plan or to address competitive challenges adequately.

From 2013 to February 15, 2020, we grew from nine (9) employees

to sixty-seven (67) employees.

Any growth in our business will place a significant strain on our managerial, administrative, operational,

financial, information technology and other resources.

We intend to further expand our overall business, customer base, employees

and operations, which will require substantial management effort and significant additional investment in our infrastructure.

will be required to continue to improve our operational, financial and management controls and our reporting procedures and we

may not be able to do so effectively.

As such, we may be unable to manage our growth effectively.

Our manufacturing facility is subject to FDA regulations.

Manufacturers of tobacco products must comply

with FDA regulations which require, among other things, compliance with the FDA’s evolving regulations on Current Good Manufacturing

Practices (“cGMP(s)”), which are enforced by the FDA through its facilities inspection program.

The manufacture of

products is subject to strict quality control, testing and record keeping requirements, and continuing obligations regarding the

submission of safety reports and other post-market information.

We cannot guarantee that our current manufacturing facility will

pass FDA inspections and/or similar inspections in foreign countries to produce our tobacco products, or that future changes to

cGMP manufacturing standards will not also negatively affect the cost or sustainability of our manufacturing facility.

The loss of a significant customer for whom we manufacture

tobacco products could have an adverse impact on our results of operation.

Currently, a significant portion of our

revenues (and corresponding accounts receivable) from manufacturing tobacco products are derived from our three largest customers,

with whom we do not have an agreement requiring them to purchase a minimum amount of products from us or guaranteeing any minimum

future purchase amounts from us.

Such customers may, at any time, delay or decrease their level of purchases from us or cease doing

business with us altogether.

Since many of our manufacturing costs are fixed, if sales to such customers cease or are reduced,

we may not obtain sufficient purchase orders from other customers necessary to offset any such losses or reductions, which could

have a negative impact on our results of operations.

Federal, state and local governmental actions, including

actions by the FDA, may have an adverse impact on us and/or our customers for whom we manufacture tobacco products.

We and our customers for whom we

manufacture tobacco products face significant governmental regulation, including efforts aimed at reducing the incidence of

Actions by the FDA and other federal, state or local governments or agencies may impact the adult tobacco

consumer acceptability of or access to tobacco products (for example, through product standards proposed by the FDA for

nicotine and flavors including menthol), delay or prevent the launch of new or modified tobacco products or products with claims of reduced

risk, require the recall or other removal of tobacco products from the marketplace, impose additional manufacturing, labeling

or packing requirements, interrupt manufacturing or otherwise significantly increase the cost of doing business.

more of these actions may have a material adverse impact on us or the business of our customers for whom we make tobacco

products, which could have a negative impact on our results of operations.

Our principal competitors in the modified risk tobacco

products market have, and any future competitors may have, greater financial and marketing

resources than we do, and they may therefore develop products or other technologies similar or superior to ours, or otherwise compete

more successfully than we do.

We have no experience in selling

modified risk tobacco products.

As of December 31, 2019, the only company that has received authorization from the FDA to

market modified risk tobacco products in the United States is Swedish Match, which has significantly greater resources than

The industry consists of major domestic and international companies, most of which have existing relationships in the

markets in which we plan to sell, as well as financial, technical, marketing, sales, manufacturing, scaling capacity,

distribution and other resources and name recognition substantially greater than ours.

In addition, we expect new competitors

will enter the markets for our products in the future.

Potential customers may choose to do business with our more

established competitors because of their perception that our competitors are more stable, are more likely to complete various

projects, can scale operations more quickly, have greater manufacturing capacity, are more likely to continue as a going

concern, and lend greater credibility to any joint venture.

If we are unable to compete successfully against manufacturers of

other modified risk tobacco products, our business could suffer, and we could lose or be unable to obtain market share.

Our competitors may develop products that are less expensive,

safer or otherwise more appealing, which may diminish or eliminate the commercial success of any potential product that we may

commercialize.

If our competitors market products that

are less expensive, safer or otherwise more appealing than our potential products, or that reach the market before our potential

products, we may not achieve commercial success.

The market may choose to continue utilizing existing products for any number of

reasons, including familiarity with or pricing of these existing products.

The failure of our PMTA product or our MRTPA product

to compete with products marketed by our competitors would impair our ability to generate revenue, which would have a material

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

Our competitors may:

develop and market products that are less expensive, safer, or otherwise more appealing than our products;

commercialize competing products before we or our partners can launch our products;

initiate or withstand substantial price competition more successfully than we can.

If we fail to stay at the forefront of technological change,

we may be unable to compete effectively.

Our competitors may render our technologies

obsolete by advances in existing technological approaches or the development of new or different approaches, potentially eliminating

the advantages that we believe we derive from our research approach and proprietary technologies.

Our competitors may:

operate larger research and development programs or have substantially greater financial resources than we do;

have greater success in recruiting skilled technical and scientific workers from the limited pool of available talent;

more effectively negotiate third-party licenses and strategic relationships;

take advantage of acquisition or other opportunities more readily than we can.

Government mandated prices or taxes, production control

programs, shifts in crops driven by economic conditions, and adverse weather patterns may increase the cost or reduce the quality

of the tobacco and other agricultural products used to manufacture our products.

We depend on independent tobacco farmers

to grow our specialty proprietary tobaccos with specific nicotine contents for our potential products.

As with other agricultural

commodities, the price of tobacco leaf can be influenced by imbalances in supply and demand, and crop quality can be influenced

by variations in weather patterns, diseases, and pests.

We must also compete with other tobacco companies for contract production

with independent tobacco farmers.

Tobacco production in certain countries is subject to a variety of controls, including government

mandated prices and production control programs.

Changes in the patterns of demand for agricultural products could cause farmers

to plant less tobacco.

Any significant change in tobacco leaf prices or taxes, quality and quantity could affect our profitability

and our business.

Product liability claims, product recalls, or other claims

could cause us to incur losses or damage our reputation.

The risk of product liability claims or

product recalls, and associated adverse publicity, is inherent in the development, manufacturing, marketing, and sale of modified

risk tobacco products.

Any product recall or lawsuit seeking significant monetary damages may have a material adverse effect on

our business and financial condition.

A successful product liability claim against us could require us to pay a substantial monetary

Though we currently have no pending product liability claims against us, we cannot assure you that such claims will not

be made in the future.

The failure of our information systems to function as

intended or their penetration by outside parties with the intent to corrupt them could result in business disruption, litigation and regulatory action, and loss of revenue, assets, or personal or

confidential data (Cybersecurity).

We use information systems to help

manage business processes, collect and interpret business data and communicate internally and externally with employees,

suppliers, customers and others.

Some of these information systems are managed by third-party service providers.

backup systems and business continuity plans in place, and we take care to protect our systems and data from unauthorized

Any cybersecurity breaches would be reported to the Board of Directors and appropriate actions taken.

On a quarterly

basis, during our Board meetings, we review the status of events or lack thereof.

A failure of our systems to function as

intended, or penetration of our systems by outside parties intent on extracting or corrupting information or otherwise

disrupting business processes, could place us at a competitive disadvantage, result in a loss of revenue, assets or personal

or other sensitive data, litigation and regulatory action, cause damage to our reputation and that of our brands and result

in significant remediation and other costs.

The loss of a significant customer for whom we manufacture tobacco products could have an adverse impact on our results of operation.

Currently, a significant portion of our revenues (and corresponding accounts receivable) from manufacturing tobacco products are derived from our three largest customers, and we do not have an agreement with such customers requiring them to purchase a minimum amount of products from us or guaranteeing any minimum future purchase amounts from us.

Such customers may, at any time, delay or decrease their level of purchases from us or cease doing business with us altogether.

Since many of our manufacturing costs are fixed, if sales to such customers cease or are reduced, we may not obtain sufficient purchase orders from other customers necessary to offset any such losses or reductions, which could have a negative impact on our results of operations.

Our principal competitors in the conventional or modified risk tobacco products market have, and any future competitors may have, greater financial and marketing resources than we do, and they may therefore develop products or other technologies similar or superior to ours, or otherwise compete more successfully than we do.

While there is significant management experience in selling conventional products, we have no experience in selling modified risk tobacco products.

As of December 31, 2020, the only companies that have received authorization from the FDA to market modified risk tobacco products in the United States are Swedish Match and Phillip Morris SA, which both have significantly greater resources than us.

The industry consists of major domestic and international companies, most of which have existing relationships in the markets in which we plan to sell, as well as financial, technical, research and development, marketing, sales, manufacturing, scaling capacity, distribution and other resources and name recognition substantially greater than ours.

In addition, we expect new competitors will enter the markets for our products in the future and the nature and extent of this market entrance cannot be quantified at this time.

Potential customers may choose to do business with our more established competitors because of their perception that our competitors are more stable, are more likely to complete various projects, can scale operations more quickly, have greater manufacturing capacity, are more likely to continue as a going concern, and lend greater credibility to any joint venture.

If we are unable to compete successfully against manufacturers of other modified risk tobacco products for the custom of adult who smoke, our business could suffer, and we could lose or be unable to obtain market share.

Product liability claims, product recalls, or other claims could cause us to incur losses or damage our reputation.

The risk of product liability claims or product recalls, and associated adverse publicity, is inherent in the development, manufacturing, marketing, and sale of modified risk tobacco products.

Any product recall or lawsuit seeking significant monetary damages may have a material adverse effect on our business and financial condition.

A successful product liability claim against us could require us to pay a substantial monetary award.

Though we currently have no pending product liability claims against us, we cannot assure you that such claims will not be made in the future and any such claim could cause us to incur substantial losses or damage our reputation.

The failure of our information systems to function as intended or their penetration by outside parties with the intent to corrupt them could result in business disruption, litigation and regulatory action, and loss of revenue, assets, or personal or confidential data (cybersecurity).

We use information systems to help manage business processes, collect and interpret business data and communicate internally and externally with employees, suppliers, customers and others.

Some of these information

systems are managed by third-party service providers.

We have backup systems and business continuity plans in place, and we take care to protect our systems and data from unauthorized access.

However, a failure of our systems to function as intended, or penetration of our systems by outside parties intent on extracting or corrupting information or otherwise disrupting business processes, could place us at a competitive disadvantage, result in a loss of revenue, assets or personal or other sensitive data, litigation and regulatory action, cause damage to our reputation and that of our brands and result in significant remediation and other costs.

Any cybersecurity incident could cause substantial harm to our business and result in regulatory action, fines, and/or substantial costs.

We have limited experience in managing growth.

If we fail to manage our growth effectively, we may be unable to execute our business plan or to address competitive challenges adequately.

From 2013 to December 31, 2020, we grew from nine (9) employees to sixty-seven (67) employees.

Any future growth in our business will place a significant strain on our managerial, administrative, operational, financial, information technology and other resources.

We intend to further expand our overall business, customer base, employees and operations, which will require substantial management effort and significant additional investment in our infrastructure.

We will be required to continue to improve our operational, financial and management controls and our reporting procedures and we may not be able to do so effectively.

As such, we may be unable to manage our growth effectively and such failure would have a material adverse impact on our operations.

Business interruptions, whether caused by natural disaster, terrorism, economic downturns, global pandemics or other events, could negatively impact our business.

A natural disaster (such as an earthquake, hurricane, fire, or flood), pandemics (including the COVID-19 pandemic), or an act of terrorism could cause substantial delays in our operations, damage or destroy our equipment or facilities, and cause us to incur additional expenses and lose revenue.

The insurance we maintain against natural disasters may not be adequate to cover our losses in any particular case, which would require us to expend significant resources to replace any destroyed assets, thereby materially and adversely affecting our financial condition and prospects.

Other global incidents could have a similar effect of disrupting our business to the extent they reach and impact the areas in which we operate, the availability of inventory we need, the customers we serve, the partners on whom we rely for products or services or the employees who operate our businesses.

For example, the outbreak of COVID-19 or another pandemic could disrupt our supply chain for tobacco, as well as negatively impact employee productivity, including affecting the availability of employees reporting for work.

Any business interruption caused by such unforeseen events could have a material adverse impact on our business and operations.

Risks Related to the Tobacco Industry

The third-party tobacco products made in our manufacturing

business face significant governmental action aimed at increasing regulatory requirements with the goal of significantly restricting

the use of tobacco products.

As of December 31, 2019, most of the revenues

of our manufacturing business are from the production of tobacco cigarettes and filtered cigars made for third-party brand owners

of such products.

Cigarette and filtered cigar companies face significant governmental action, especially in the United States

pursuant to the Tobacco Control Act, including but not limited to efforts aimed at reducing the incidence of tobacco use, restricting

marketing and advertising, imposing regulations on packaging, mandating warnings and disclosure of flavors or other ingredients,

prohibiting the sale of tobacco products with certain flavors or other characteristics, limiting or prohibiting the sale of tobacco

products by certain retail establishments and the sale of tobacco products in certain packaging sizes, and seeking to hold retailers

and distributors responsible for the adverse health effects associated with both smoking and exposure to environmental tobacco

Governmental actions, combined with the diminishing social acceptance of smoking and private actions to restrict smoking,

have resulted in reduced industry volume in the United States and in certain other countries, and we expect that these factors

will continue to reduce consumption levels in these markets.

Significant regulatory developments will

take place over the next few years in many markets, driven principally by the World Health Organization’s Framework Convention

on Tobacco Control (“FCTC”).

The FCTC is the first international public health treaty on tobacco, and its objective

is to establish a global agenda for tobacco regulation with the purpose of reducing initiation of tobacco use and encouraging cessation.

In addition, the FCTC has led to increased efforts by tobacco control advocates and public health organizations to reduce the appeal

of tobacco products.

Partly because of some or a combination of these efforts, unit sales of tobacco products in certain markets,

principally Western Europe and Japan, have been in general decline and we expect this trend to continue.

Our operating results

could be significantly affected by any significant increase in the cost of complying with new regulatory requirements.

If the FDA’s proposed rule regarding graphic health

warnings on cigarette packaging and in cigarette advertising is finalized, the final rule is likely to have a negative impact on

sales of our third-party customers’ products and potential Company products.

On August 16, 2019, as required by the Federal

Cigarette Labeling and Advertising Act, as amended by the Family Smoking Prevention and Tobacco Control Act, the FDA issued a proposed

rule to modify the required warnings that appear on cigarette packages and in cigarette advertisements.

The FDA proposes to require

tobacco product manufacturers to display one of thirteen pairs of text warnings and photorealistic images depicting negative health

consequences of smoking.

If finalized, the rule would require, within 15 months of finalization, the graphic health warnings to

appear directly on the cigarette package and be directly visible beneath the cellophane wrapping and comprise the top 50 percent

of the front and rear panels of cigarette packages.

FDA first promulgated a final rule in September 2012, which would have imposed

graphic health warning requirements to those proposed in the FDA’s August 2019 proposed rule.

However, a federal appellate

court vacated the September 2012 rules after holding that the rule was unconstitutional.

If the FDA successfully implements these

revised regulations announced in its August 2019 proposed rule, and any reviewing federal court does not strike them down on constitutional

or other grounds, then all cigarettes manufactured for sale or distribution in the United States will need to include these new

graphic health warnings on their packages consistent with the effective date(s) included in such regulations.

Any resulting reduction

in the number of smokers will probably reduce the demand for the products manufactured by our factory for our potential Company

products and for third-party brand owners of such products.

We may become subject to litigation related to cigarette

smoking and exposure to environmental tobacco smoke, or ETS, which could severely impair our results of operations and liquidity.

Although we are not currently subject to

legal proceedings related to cigarette smoking or ETS, we may become subject to litigation related to the sale of our Modified

Risk Cigarettes.

Legal proceedings covering a wide range of matters related to tobacco use are pending or threatened in various

The manufacturing of tobacco products subjects us to significant governmental regulation and the failure to comply with such regulations could have a material adverse effect on our business and subject us to substantial fines or other regulatory actions.

As of December 31, 2020, most of the revenues of our manufacturing business are from the production of tobacco cigarettes and filtered cigars made for third-party brand owners of such products and we anticipate generating future revenue from the sales of our VLNC cigarettes and other modified risk tobacco products, assuming we obtain regulatory approvals.

Companies that manufacture and/or sell tobacco products face significant governmental regulation, especially in the United States pursuant to the Tobacco Control Act, including but not limited to efforts aimed at reducing the incidence of tobacco use, restricting marketing and advertising, imposing regulations on packaging, mandating warnings and disclosure of flavors or other ingredients, prohibiting the sale of tobacco products with certain flavors or other characteristics, requiring compliance with certain environmental standards, limiting or prohibiting the sale of tobacco products by certain retail establishments and the sale of tobacco products in certain packaging sizes, and seeking to hold retailers and distributors responsible for the adverse health effects associated with both smoking and exposure to environmental tobacco smoke.

Manufacturers of tobacco products must comply with FDA regulations which require, among other things, compliance with the FDA’s evolving regulations on Current Good Manufacturing Practices (“cGMP(s)”), which are enforced by the FDA through its facilities inspection program.

The manufacture of products is subject to strict quality

control, testing and record keeping requirements, and continuing obligations regarding the submission of safety reports and other post-market information.

We cannot guarantee that our current manufacturing facility will pass FDA inspections and/or similar inspections in foreign countries to produce our tobacco products, or that future changes to cGMP manufacturing standards will not also negatively affect the cost or sustainability of our manufacturing facility.

We and our customers for whom we manufacture tobacco products also face significant governmental regulation, including efforts aimed at reducing the incidence of tobacco use.

Actions by the FDA and other federal, state or local governments or agencies may impact the adult tobacco consumer acceptability of or access to tobacco products (for example, through product standards proposed by the FDA for nicotine and flavors including menthol), delay or prevent the launch of new or modified tobacco products or products with claims of reduced risk, require the recall or other removal of tobacco products from the marketplace, impose additional manufacturing, labeling or packing requirements, interrupt manufacturing or otherwise significantly increase the cost of doing business.

Any one or more of these actions may have a material adverse impact on us or the business of our customers for whom we make tobacco products, which could have a negative impact on our results of operations.

Significant regulatory developments will take place over the next few years in many markets, driven principally by the World Health Organization’s Framework Convention on Tobacco Control (“FCTC”).

The FCTC is the first international public health treaty on tobacco, and its objective is to establish a global agenda for tobacco regulation with the purpose of reducing initiation of tobacco use and encouraging cessation.

In addition, the FCTC has led to increased efforts by tobacco control advocates and public health organizations to reduce the appeal of tobacco products.

Partly because of some or a combination of these efforts, unit sales of conventional tobacco products in certain markets, principally Western Europe and Japan, have been in general decline and we expect this trend to continue.

Our operating results could be significantly affected by any significant increase in the cost of complying with new regulatory requirements.

Compliance with current and future regulations regarding tobacco could have a material impact on our business and operations and could result in fines, government actions to restrict or prevent sales of products, as well as result in substantial costs and expenses.

If the FDA’s proposed rule regarding graphic health warnings on cigarette packaging and in cigarette advertising is finalized, the final rule is likely to have a negative impact on sales of our third-party customers’ products and potential Company products.

On August 16, 2019, as required by the Federal Cigarette Labeling and Advertising Act, as amended by the Family Smoking Prevention and Tobacco Control Act, the FDA issued a proposed rule to modify the required warnings that appear on cigarette packages and in cigarette advertisements.

The FDA proposes to require tobacco product manufacturers to display one of thirteen pairs of text warnings and photorealistic images depicting negative health consequences of smoking.

If finalized, the rule would require, within 15 months of finalization, the graphic health warnings to appear directly on the cigarette package and be directly visible beneath the cellophane wrapping and comprise the top 50 percent of the front and rear panels of cigarette packages.

FDA first promulgated a final rule in September 2012, which would have imposed graphic health warning requirements to those proposed in the FDA’s August 2019 proposed rule.

However, a federal appellate court vacated the September 2012 rules after holding that the rule was unconstitutional.

If the FDA successfully implements these revised regulations announced in its August 2019 proposed rule, and any reviewing federal court does not strike them down on constitutional or other grounds, then all cigarettes manufactured for sale or distribution in the United States will need to include these new graphic health warnings on their packages consistent with the effective date(s) included in such regulations.

Any resulting reduction in the number of smokers will probably reduce the demand for the products manufactured by our factory for our potential Company products and for third-party brand owners of such products.

If regulations by the FDA requiring the reduction of nicotine to minimally or non-addictive levels in all cigarettes sold in the U.S.

are delayed or not implemented, then the anticipated resulting demand for our proprietary Very Low Nicotine Content tobacco may not occur.

On July 28, 2017, the FDA publicly announced that it intends to implement new regulations that will mandate minimally or non-addictive levels of nicotine in all cigarettes sold in the U.S.

There can be no assurance that the FDA will implement such new regulations or, if implemented, when such regulations would take effect.

In the event the FDA does not implement such new regulations or implementation is delayed, then the anticipated resulting demand for our proprietary VLNC tobacco may not occur and such action would have a material adverse effect on our future business and operations.

We may become subject to litigation related to cigarette smoking and/or exposure to environmental tobacco smoke, or ETS, which could severely impair our results of operations and liquidity.

Although we are not currently subject to legal proceedings related to cigarette smoking or ETS, we may become subject to litigation related to the sale of our Modified Risk Cigarettes or other tobacco products we sell or manufacture.

Legal proceedings covering a wide range of matters related to tobacco use are pending or threatened in various U.S.

and foreign jurisdictions.

Various types of claims are raised in these proceedings, including product liability, consumer

protection, antitrust, tax, contraband shipments, patent infringement, employment matters, claims for contribution, and claims

of competitors and distributors.

Litigation is subject to uncertainty and

it is possible that there could be adverse developments in pending cases.

An unfavorable outcome or settlement of pending tobacco

related litigation could encourage the commencement of additional litigation.

The variability in pleadings, together with the actual

experience of management in litigating claims, demonstrates that the monetary relief that may be specified in a lawsuit bears little

relevance to the ultimate outcome.

Damages claimed in some tobacco-related

litigation are significant and, in certain cases, range into the billions of dollars.

We anticipate that new cases will continue

Various types of claims are raised in these proceedings, including product liability, consumer protection, antitrust, tax, contraband shipments, patent infringement, employment matters, claims for contribution, and claims of competitors and distributors.

Litigation is subject to uncertainty and it is possible that there could be adverse developments in pending cases.

An unfavorable outcome or settlement of pending tobacco related litigation could encourage the commencement of additional litigation.

The variability in pleadings, together with the actual experience of management in litigating claims, demonstrates that the monetary relief that may be specified in a lawsuit bears little relevance to the ultimate outcome.

Damages claimed in some tobacco-related litigation are significant and, in certain cases, range into the billions of dollars.

We anticipate that new cases will continue to be filed.

The FCTC encourages litigation against tobacco product manufacturers.

It is possible that our results of operations,

cash flows, or financial position could be materially affected by an unfavorable outcome or settlement of litigation.

It is possible that our results of operations, cash flows, or financial position could be materially affected by an unfavorable outcome or settlement of litigation.

Cigarettes are subject to substantial taxes.

increases in cigarette-related taxes have been proposed or enacted and are likely to continue to be proposed or enacted in numerous

jurisdictions.

These tax increases may affect the sales of our potential Company products and our third-parties customers’

tobacco products manufactured at our factory, which could result in decreased sales and profitability of our manufacturing business.

Tax regimes, including excise taxes, sales

taxes, and import duties, can disproportionately affect the retail price of manufactured cigarettes versus other tobacco products,

or disproportionately affect the relative retail price of our Modified Risk Cigarettes versus lower-priced cigarette brands manufactured

by our competitors.

Increases in cigarette taxes are expected to continue to have an adverse impact on sales of cigarettes resulting

in (i) lower consumption levels, (ii) a shift in sales from manufactured cigarettes to other tobacco products or to lower-price

cigarette categories, (iii) a shift from local sales to legal cross-border purchases of lower price products, and (iv) illicit

products such as contraband and counterfeit.

We may become subject to governmental investigations on

a range of matters.

Tobacco companies are often subject to investigations,

including allegations of contraband shipments of cigarettes, allegations of unlawful pricing activities within certain markets,

allegations of underpayment of custom duties and/or excise taxes, and allegations of false and misleading usage of descriptors

such as “lights” and “ultra-lights.” We cannot predict the outcome of any investigations to which we may

become subject, but we may be materially affected by an unfavorable outcome of potential future investigations.

Significant increases in cigarette-related taxes have been proposed or enacted and are likely to continue to be proposed or enacted in numerous jurisdictions.

These tax increases may affect the sales of our potential Company products and our third-parties customers’ tobacco products manufactured at our factory, which could result in decreased sales and profitability of our manufacturing business.

Tax regimes, including excise taxes, sales taxes, and import duties, can disproportionately affect the retail price of manufactured cigarettes versus other tobacco products, or disproportionately affect the relative retail price of our Modified Risk Cigarettes versus lower-priced cigarette brands manufactured by our competitors.

Increases in cigarette taxes are expected to continue to have an adverse impact on sales of cigarettes resulting in (i) lower consumption levels, (ii) a shift in sales from manufactured cigarettes to other tobacco products or to lower-price cigarette categories, (iii) a shift from local sales to legal cross-border purchases of lower price products, and (iv) illicit products such as contraband and counterfeit.

Government mandated prices or taxes, production control programs, shifts in crops driven by economic conditions, climatic or adverse weather patterns may increase the cost or reduce the quality of the tobacco and other agricultural products used to manufacture our products.

We depend on independent tobacco farmers to grow our specialty proprietary tobaccos with specific nicotine contents for our potential products.

As with other agricultural commodities, the price of tobacco leaf can be influenced by imbalances in supply and demand, and crop quality can be influenced by variations in weather patterns, diseases, and pests.

We must also compete with other tobacco companies for contract production with independent tobacco farmers.

Tobacco production in certain countries is subject to a variety of controls, including government mandated prices and production control programs.

Changes in the patterns of demand for agricultural products could cause farmers to plant less tobacco.

Any significant change in tobacco leaf prices or taxes, quality and quantity could affect our profitability and our business.

We intend to distribute and sell our potential products outside of the U.S., which will subject us to other regulatory risks.

In addition to seeking authorization from the FDA to market our VLNC tobacco cigarettes as a Modified Risk Tobacco Product in the U.S., we intend to seek governmental approvals required to market our VLNC tobacco cigarettes

and our other products in other countries.

Marketing of our products is not permitted in certain countries until we have obtained required approvals or exemptions in these individual countries.

The regulatory review process varies from country to country, and approval by foreign governmental authorities is unpredictable, uncertain, and generally expensive.

Our ability to market our potential products could be substantially limited due to delays in receipt of, or failure to receive, the necessary approvals or clearances.

We anticipate commencing the applications required in some or all of these countries following authorization by the FDA;

however, we may decide to file applications in advance of the FDA authorization if we determine such filings to be both time and cost effective.

If we export any of our potential products, or products that have not yet been cleared for commercial distribution in the U.S., then such products may be subject to FDA export restrictions.

Failure to obtain necessary regulatory approvals could impair our ability to generate revenue from international sources.

We may become subject to governmental investigations on a range of matters.

Tobacco companies are often subject to investigations, including allegations of contraband shipments of cigarettes, allegations of unlawful pricing activities within certain markets, allegations of underpayment of custom duties and/or excise taxes, and allegations of false and misleading usage of descriptors such as “lights” and “ultra-lights.” We cannot predict the outcome of any investigations to which we may become subject, but we may be materially affected by an unfavorable outcome of potential future investigations.

The FDA could force the removal of our products from the U.S.

The FDA has broad authority over the regulation of tobacco products.

The FDA could, among other things, force us to remove from the U.S.

market our VLNC tobacco cigarettes even after the FDA authorization on December 17, 2019 of our PMTA or the potential future authorization of our MRTPA for us to market in the U.S.

our VLNC tobacco cigarettes, as well as the FDA could levy fines or change their regulations on advertising.

Any adverse action by the FDA could have a material adverse impact on our business.

Risks Related to Intellectual Property

Our proprietary rights may expire or may not otherwise

adequately protect our intellectual property, products and potential products, and if we cannot obtain adequate protection of our

intellectual property, products and potential products, we may not be able to successfully market our products and potential products.

Our commercial success will depend in part

on obtaining and maintaining intellectual property protection for our technologies, products, and potential products.

be able to protect our technologies, products, and potential products from unauthorized use by third parties to the extent that

valid and enforceable patents cover them, or to the extent that other market exclusionary rights apply.

The patent positions of life sciences companies,

like ours, can be highly uncertain and involve complex legal and factual questions for which important legal principles remain

No consistent policy regarding the breadth of claims allowed in such companies’ patents has emerged to date in

the United States.

Certain of our proprietary rights have expired or may expire or may not otherwise adequately protect our intellectual property, products and potential products, and if we cannot obtain adequate protection of our intellectual property, products and potential products, we may not be able to successfully market our products and potential products.

Our commercial success will depend in part on obtaining and maintaining intellectual property protection for our technologies, products, and potential products.

We will only be able to protect our technologies, products, and potential products from unauthorized use by third parties to the extent that valid and enforceable patents cover them, or to the extent that other market exclusionary rights apply.

The patent positions of life sciences companies, like ours, can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved.

No consistent policy regarding the breadth of claims allowed in such companies’ patents has emerged to date in the United States.

The general patent environment outside the United States also involves significant uncertainty.

we cannot predict the breadth of claims that may be allowed or that the scope of these patent rights could provide a sufficient

degree of future protection that could permit us to gain or keep our competitive advantage with respect to these products and technology.

Accordingly, we cannot predict the breadth of claims that may be allowed or that the scope of these patent rights could provide a sufficient degree of future protection that could permit us to gain or keep our competitive advantage with respect to these products and technology.

Additionally, life science companies like ours are often dependent on creating a pipeline of products.

We may not be able to develop

additional potential products or proprietary technologies that produce commercially viable products or that are themselves patentable.

Although there are currently no challenges

to any portion of our intellectual property, our issued patents may be subject to challenge and potential invalidation by third

Changes in either the patent laws or in the interpretations of patent laws in the United States, or in other countries,

may diminish the value of our intellectual property.

In addition, others may independently develop similar or alternative products

and technologies that may be outside the scope of our intellectual property.

Should third parties obtain patent rights to similar

products or technology, this may have an adverse effect on our business.

The expiration of a portion of the QPT patent

family in 2018 may provide third parties with the freedom to target the QPT gene in the tobacco plant, which may give third-parties

the freedom to target the QPT gene in experiments to try to reduce nicotine levels in tobacco plants to levels that may satisfy

the planned new nicotine reduction regulations coming from the FDA.

There can be no assurance about whether any third-parties will

or will not be successful in such efforts, how long or short in time such efforts will entail and/or if such efforts will or will

not infringe other genes and other intellectual property on which we have continuing patent protection that would need to be used,

in combination with QPT, to result in VLNC tobacco.

If our competitors are able to successfully reduce nicotine levels in tobacco

plants without violating our patent protections, our ability to license our technology would be negatively impacted and we would

likely face increased competition.

We also rely on trade secrets to protect

our technology, products, and potential products, especially where we do not believe patent protection is appropriate or obtainable.

We may not be able to develop additional potential products or proprietary technologies that produce commercially viable products or that are themselves patentable.

Although there are currently no challenges to any portion of our intellectual property, our issued patents may be subject to challenge and potential invalidation by third parties.

Changes in either the patent laws or in the interpretations of patent laws in the United States, or in other countries, may diminish the value of our intellectual property.

In addition, others may independently develop similar or alternative products and technologies that may be outside the scope of our intellectual property.

Should third parties obtain patent rights to similar products or technology, this may have an adverse effect on our business.

The expiration of a portion of the QPT patent family in 2018 may provide third parties with the freedom to target the QPT gene in the tobacco plant.

This could result in experiments to try to reduce nicotine levels in tobacco plants to levels that may satisfy the planned new nicotine reduction regulations coming from the FDA.

There can be no assurance about whether any third-parties will or will not be successful in such efforts, how long or short in time such efforts will entail and/or if such efforts will or will not infringe other genes and other intellectual property on which we have continuing patent protection that would need to be used, in combination with QPT, to result in VLNC tobacco.

If our competitors are able to successfully reduce nicotine levels in tobacco plants without violating our patent protections, our ability to license our technology would be negatively impacted and we would likely face increased competition.

We note however, that even if achieved, competitors would still be required to pursue FDA regulatory pathways, such as PMTA and MRTP, which in themselves are lengthy, complicated, and costly activities.

We also rely on trade secrets to protect our technology, products, and potential products, especially where we do not believe patent protection is appropriate or obtainable.

Trade secrets, however, are difficult to protect.

While we believe that we use reasonable efforts to protect our trade secrets,

our own, our licensees’ or our strategic partners’ employees, consultants, contractors or advisors may unintentionally

or willfully disclose our information to competitors.

We seek to protect this information, in part, through the use of non-disclosure

and confidentiality agreements with employees, consultants, advisors, and others.

These agreements may be breached, and we may

not have adequate remedies for a breach.

In addition, we cannot ensure that those agreements will provide adequate protection for

our trade secrets, know-how, or other proprietary information, or prevent their unauthorized use or disclosure.

To the extent that consultants or key employees

apply technological information independently developed by them or by others to our products and potential products, disputes may

arise as to the proprietary rights of the information, which may not be resolved in our favor.

Key employees are required to assign

all intellectual property rights in their discoveries to us.

However, these key employees may terminate their relationship with

us, and we cannot preclude them indefinitely from dealing with our competitors.

If our trade secrets become known to competitors

with greater experience and financial resources, the competitors may copy or use our trade secrets and other proprietary information

in the advancement of their products, methods, or technologies.

If we were to prosecute a claim that a third party had illegally

obtained and was using our trade secrets, it could be expensive and time consuming and the outcome could be unpredictable.

courts outside the United States are sometimes less willing to protect trade secrets than courts in the United States.

if our competitors independently develop equivalent knowledge, we would lack any contractual claim to this information, and our

business could be harmed.

The ability to commercialize our potential products will

depend on our ability to sell such products without infringing the patent or proprietary rights of third parties.

If we are sued

for infringing intellectual property rights of third parties, such litigation could be costly and time consuming and an unfavorable

outcome could have a significant adverse effect on our business.

The ability to commercialize our potential

products will depend on our ability to sell such products without infringing the patents or other proprietary rights of third

Third-party intellectual property rights in our field are complicated, and third-party intellectual property rights in

these fields are continuously evolving.

While we have conducted searches for such third-party intellectual property rights, we

have not performed specific searches for third-party intellectual property rights that may raise freedom-to-operate issues, and

we have not obtained legal opinions regarding commercialization of our potential products.

As such, there may be existing patents

that may affect our ability to commercialize our potential products.

In addition, because patent applications

are published up to 18 months after their filing, and because patent applications can take several years to issue, there may be

currently pending third-party patent applications and freedom-to-operate issues that are unknown to us, which may later result

in issued patents.

If a third-party claims that we infringe

on its patents or other proprietary rights, we could face a number of issues that could seriously harm our competitive position,

While we believe that we use reasonable efforts to protect our trade secrets, our own, our licensees’ or our strategic partners’ employees, consultants, contractors or advisors may unintentionally or willfully disclose our information to competitors.

We seek to protect this information, in part, through the use of non-disclosure and confidentiality agreements with employees, consultants, advisors, and others.

These agreements may be breached, and we may not have adequate remedies for a breach.

In addition, we cannot ensure that those agreements will provide adequate protection for our trade secrets, know-how, or other proprietary information, or prevent their unauthorized use or disclosure.

To the extent that consultants or key employees apply technological information independently developed by them or by others to our products and potential products, disputes may arise as to the proprietary rights of the information, which may not be resolved in our favor.

Key employees are required to assign all intellectual property rights in their discoveries to us.

However, these key employees may terminate their relationship with us, and we cannot preclude them indefinitely from dealing with our competitors.

If our trade secrets become known to competitors with greater experience and financial resources, the competitors may copy or use our trade secrets and other proprietary information in the advancement of their products, methods, or technologies.

If we were to prosecute a claim that a third party had illegally obtained and was using our trade secrets, it could be expensive and time consuming and the outcome could be unpredictable.

In addition, courts outside the United States are sometimes less willing to protect trade secrets than courts in the United States.

Moreover, if our competitors independently develop equivalent knowledge, we would lack any contractual claim to this information, and our business could be harmed.

The ability to commercialize our potential products will depend on our ability to sell such products without infringing the patent or proprietary rights of third parties.

If we are sued for infringing intellectual property rights of third parties, such litigation could be costly and time consuming and an unfavorable outcome could have a significant adverse effect on our business.

The ability to commercialize our potential products will depend on our ability to sell such products without infringing the patents or other proprietary rights of third parties.

Third-party intellectual property rights in our field are complicated, and third-party intellectual property rights in these fields are continuously evolving.

While we have conducted searches for such third-party intellectual property rights, we have not performed specific searches for third-party intellectual property rights that may raise freedom-to-operate issues, and we have not obtained legal opinions regarding commercialization of our potential products.

As such, there may be existing patents that may affect our ability to commercialize our potential products.

In addition, because patent applications are published up to 18 months after their filing, and because patent applications can take several years to issue, there may be currently pending third-party patent applications and freedom-to-operate issues that are unknown to us, which may later result in issued patents.

If a third-party claims that we infringe on its patents or other proprietary rights, we could face a number of issues that could seriously harm our competitive position, including:

● infringement claims that, with or without merit, can be costly and time consuming to litigate, can delay the regulatory approval process, and can divert management’s attention from our core business strategy;

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● redesigning our process so that it does not infringe the third-party intellectual property, which may not be possible, or which may require substantial time and expense including delays in bringing our potential products to market.

Such actions could harm our competitive

position and our ability to generate revenue and could result in increased costs.

Our patent applications may not result in issued patents,

which may have a material adverse effect on our ability to prevent others from commercially exploiting products similar to ours.

We own or exclusively control many issued

patents and pending patent applications.

We cannot be certain that these patent applications will issue, in whole or in part, as

Such actions could harm our competitive position and our ability to generate revenue and could result in increased costs.

Our patent applications may not result in issued patents, which may have a material adverse effect on our ability to prevent others from commercially exploiting products similar to ours.

We own or exclusively control many issued patents and pending patent applications.

We cannot be certain that these patent applications will issue, in whole or in part, as patents.

Patent applications in the United States are maintained in secrecy until the patents are published or are issued.

publication of discoveries in the scientific or patent literature tends to lag behind actual discoveries by several months, we

cannot be certain that we are the first creator of inventions covered by pending patent applications or the first to file patent

applications on these inventions.

We also cannot be certain that our pending patent applications will result in issued patents

or that any of our issued patents will afford protection against a competitor.

In addition, patent applications filed in foreign

countries are subject to laws, rules and procedures that differ from those of the United States, and thus we cannot be certain

that foreign patent applications related to U.S.

Since publication of discoveries in the scientific or patent literature tends to lag behind actual discoveries by several months, we cannot be certain that we are the first creator of inventions covered by pending patent applications or the first to file patent applications on these inventions.

We also cannot be certain that our pending patent applications will result in issued patents or that any of our issued patents will afford protection against a competitor.

In addition, patent applications filed in foreign countries are subject to laws, rules and procedures that differ from those of the United States, and thus we cannot be certain that foreign patent applications related to U.S.

patents will be issued.

Furthermore, if these patent applications issue, some

foreign countries provide significantly less effective patent enforcement than in the United States.

The status of patents involves complex legal

and factual questions and the breadth of claims allowed is uncertain.

Accordingly, we cannot be certain that the patent applications

that we or our licensors file will result in patents being issued, or that our patents and any patents that may be issued to us

in the near future will afford protection against competitors with similar technology.

In addition, patents issued to us may be

infringed upon or designed around by others and others may obtain patents that we need to license or design around, either of which

would increase costs and may adversely affect our operations.

Furthermore, if these patent applications issue, some foreign countries provide significantly less effective patent enforcement than in the United States.

The status of patents involves complex legal and factual questions and the breadth of claims allowed is uncertain.

Accordingly, we cannot be certain that the patent applications that we or our licensors file will result in patents being issued, or that our patents and any patents that may be issued to us in the near future will afford protection against competitors with similar technology.

In addition, patents issued to us may be infringed upon or designed around by others and others may obtain patents that we need to license or design around, either of which would increase costs and may adversely affect our operations.

We license certain patent rights from third-party owners.

If such owners do not properly maintain or enforce the patents underlying such licenses, our competitive position and business

prospects could be harmed.

We license rights to third-party intellectual

property that is necessary or useful for our business, and we may enter into additional licensing agreements in the future.

success could depend in part on the ability of some of our licensors to obtain, maintain, and enforce patent protection for their

intellectual property, in particular, those patents to which we have secured exclusive rights.

Our licensors may not successfully

prosecute the patent applications to which we are licensed.

Even if patents are issued with respect to these patent applications,

our licensors may fail to maintain these patents, may determine not to pursue litigation against other companies that are infringing

these patents, or may pursue such litigation less aggressively than we could.

Without protection for the intellectual property

we license, other companies might be able to offer substantially identical products for sale, which could adversely affect our

competitive business position and harm our business prospects.

worldwide exclusive licenses relating to tobacco from NCSU involve multiple patent families.

The exclusive rights under the NCSU

agreements expire on the date on which the last patent or registered plant variety covered by the subject license expires in the

country or countries where such patents or registered plant varieties are in effect.

The NCSU licenses relate predominately to

issued patents, and our exclusive rights in the NCSU licenses are expected to expire in 2036 .

worldwide sublicense from Anandia, a plant biotechnology company based in Vancouver, Canada, grants us exclusive rights in the

United States and co-exclusive rights with Anandia everywhere else in the world (except not in Canada where Anandia retains exclusive

rights) to certain patents and patent applications relating to certain genes in the hemp/cannabis plant that are required for the

production of cannabinoids, the “active ingredients” in the cannabis plant.

The Anandia sublicense continues through

the life of the last-to-expire patent, which is expected to be in 2035 .

If such owners do not properly maintain or enforce the patents underlying such licenses, our competitive position and business prospects could be harmed.

We license rights to third-party intellectual property that is necessary or useful for our business, and we may enter into additional licensing agreements in the future.

Our success could depend in part on the ability of some of our licensors to obtain, maintain, and enforce patent protection for their intellectual property, in particular, those patents to which we have secured exclusive rights.

Our licensors may not successfully prosecute the patent applications to which we are licensed.

Even if patents are issued with respect to these patent applications, our licensors may fail to maintain these patents, may determine not to pursue litigation against other companies that are infringing these patents, or may pursue such litigation less aggressively than we could.

Without protection for the intellectual property we license, other companies might be able to offer substantially identical products for sale, which could adversely affect our competitive business position and harm our business prospects.

Our worldwide exclusive licenses relating to tobacco from NCSU involve multiple patent families.

The exclusive rights under the NCSU agreements expire on the date on which the last patent or registered plant variety covered by the subject license expires in the country or countries where such patents or registered plant varieties are in effect.

The NCSU licenses relate predominately to issued patents, and our exclusive rights in the NCSU licenses are expected to expire in 2036.

Our worldwide sublicense from Anandia, a plant biotechnology company based in Vancouver, Canada, grants us exclusive rights in the United States and co-exclusive rights with Anandia everywhere else in the world (except not in Canada where Anandia retains exclusive rights) to certain patents and patent applications relating to certain genes in the hemp/cannabis plant that are required for the production of cannabinoids, the “active ingredients” in the cannabis plant.

The Anandia sublicense continues through the life of the last-to-expire patent, which is expected to be in 2035.

Risks Related to Ownership of Our Common Stock

An active trading market for our common stock may not

be sustained, and you may not be able to resell your shares at or above the price at which you purchased them.

An active trading market for our shares

may not be sustained.

In the absence of an active trading market for our common stock, shares of common stock may not be able to

be resold at or above the purchase price of such shares.

Although there can be no assurances, we expect that our common stock will

continue to be quoted on the New York Stock Exchange American market (“NYSE American”).

However, even if our common

stock continues to be quoted on the NYSE American, there is no assurance that an active market for our common stock will continue

in the foreseeable future.

An active trading market for our common stock may not be sustained, and you may not be able to resell your shares at or above the price at which you purchased them.

An active trading market for our shares may not be sustained.

In the absence of an active trading market for our common stock, shares of common stock may not be able to be resold at or above the purchase price of such shares.

Although there can be no assurances, we expect that our common stock will continue to be quoted on the New York Stock Exchange American market (“NYSE American”).

However, even if our common stock continues to be quoted on the NYSE American, there is no assurance that an active market for our common stock will continue in the foreseeable future.

There also can be no assurance that we can maintain such listing on the NYSE American.

If we are ever

no longer listed on the NYSE American or other national stock exchange in the future, then it would be more difficult to dispose

of shares or to obtain accurate quotations as to the market value of our common stock compared to securities of companies whose

shares are traded on national stock exchanges.

Our stock price may be highly volatile and could decline

Our common stock is currently traded on

the NYSE American and the market price for our common stock has been volatile.

Further, the market prices for securities in general

have been highly volatile and may continue to be highly volatile in the future.

The following factors, in addition to other risk

factors described in this section, may have a significant impact on the market price of our common stock:

If we are ever no longer listed on the NYSE American or other national stock exchange in the future, then it would be more difficult to dispose of shares or to obtain accurate quotations as to the market value of our common stock compared to securities of companies whose shares are traded on national stock exchanges.

Our stock price may be highly volatile and could decline in value.

Our common stock is currently traded on the NYSE American and the market price for our common stock has been volatile.

Further, the market prices for securities in general have been highly volatile and may continue to be highly volatile in the future.

The following factors, in addition to other risk factors described in this section, may have a significant impact on the market price of our common stock:

● failure or discontinuation of any of our research programs;

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● litigation or public concern about the safety of our products or potential products;

negative press or publicity regarding us or our common

● negative press or publicity regarding us or our common stock;

● the announcement of litigation against us or the results of on-going litigation;

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● third-party sales of large blocks of our common stock or third party short-selling activity;

● third-party articles regarding us or our securities;

● pending or future shareholder litigation;

● future developments with respect to our investment in Panacea;

● sales of our common stock by our executive officers, directors, or significant stockholders;

● equity sales by us of our common stock or securities convertible into common stock to fund our operations.

These and other external factors may cause

the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily

selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock.

In addition, in the

past, when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation

against the company that issued the stock, such as the current class action and derivative lawsuits.

Such lawsuits and any future

related lawsuits could cause us to incur substantial costs defending the lawsuit and can also divert the time and attention of

our management, which would have a negative adverse impact on our business.

These and other external factors may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock.

In addition, in the past, when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock, such as the current class action and derivative lawsuits.

Such lawsuits and any future related lawsuits could cause us to incur substantial costs defending the lawsuit and can also divert the time and attention of our management, which would have a negative adverse impact on our business.

See the risk factor below entitled:

“We are named

defendant in certain litigation matters, including federal securities class action lawsuits and derivative complaints;

unable to resolve these matters favorably, then our business, operating results and financial condition may be adversely affected.”

We are named defendant in certain litigation matters,

including federal securities class action lawsuits and derivative complaints;

if we are unable to resolve these matters favorably,

then our business, operating results and financial condition may be adversely affected.

We are currently involved in certain litigation

matters, including securities class action and derivative litigation.

“We are named defendant in certain litigation matters, including federal securities class action lawsuits and derivative complaints;

if we are unable to resolve these matters favorably, then our business, operating results and financial condition may be adversely affected.”

We are named defendant in certain litigation matters, including federal securities class action lawsuits and derivative complaints;

if we are unable to resolve these matters favorably, then our business, operating results and financial condition may be adversely affected.

We are currently involved in certain litigation matters, including securities class action and derivative litigation.

See "Item 3 – Legal Proceedings"

in this Annual Report on Form 10-K.

We cannot at this time predict the outcome of these matters or any future litigations matters

(whether related or unrelated) or reasonably determine the probability of a material adverse result or reasonably estimate range

of potential exposure, if any, that these matters or any future matters might have on us, our business, our financial condition

or our results of operations, although such effects, including the cost to defend, any judgements or indemnification obligations,

among others, could be materially adverse to us.

In addition, in the future, we may need to record litigation reserves with respect

to these matters.

Further, regardless of how these matters proceed, it could divert our management’s attention and other

resources away from our business.

Future sales of our common stock will result in dilution

to our common stockholders.

Sales of a substantial number of shares

of our common stock in the public market may depress the prevailing market price for our common stock and could impair our ability

to raise capital through the future sale of our equity securities.

Additionally, if the holders of outstanding options or warrants

exercise or convert those shares, as applicable, our common stockholders will incur dilution in their relative percentage ownership.

included in this Annual Report on Form 10-K.

We cannot at this time predict the outcome of these matters or any future litigations matters (whether related or unrelated) or reasonably determine the probability of a material adverse result or reasonably estimate range of potential exposure, if any, that these matters or any future matters might have on us, our business, our financial condition or our results of operations, although such effects, including the cost to defend, any judgements or indemnification obligations, among others, could be materially adverse to us.

In addition, in the future, we may need to record litigation reserves with respect to these matters.

Further, regardless of how these matters proceed, it could divert our management’s attention and other resources away from our business.

Future sales of our common stock will result in dilution to our common stockholders.

Sales of a substantial number of shares of our common stock in the public market may depress the prevailing market price for our common stock and could impair our ability to raise capital through the future sale of our equity securities.

Additionally, if any of the holders of outstanding options or warrants exercise or convert those shares, as applicable, our common stockholders will incur dilution in their relative percentage ownership.

The prospect of this possible dilution may also impact the price of our common stock.

We do not expect to declare any dividends on our common

stock in the foreseeable future.

We have not paid cash dividends to date

on our common stock.

We currently intend to retain our future earnings, if any, to fund the development and growth of our business,

and we do not anticipate paying any cash dividends on our common stock for the foreseeable future.

Additionally, the terms of any

future debt facilities may preclude us from paying dividends on the common stock.

As a result, capital appreciation, if any, of

our common stock could be the sole source of gain for the foreseeable future.

Anti-takeover provisions contained in our articles of

incorporation and bylaws, as well as provisions of Nevada law, could impair a takeover attempt.

Our amended and restated articles of incorporation

and bylaws currently contain provisions that, together with Nevada law, could have the effect of rendering more difficult or discouraging

an acquisition deemed undesirable by our board of directors.

Our corporate governance documents presently include the following

We do not expect to declare any dividends on our common stock in the foreseeable future.

We have not paid cash dividends to date on our common stock.

We currently intend to retain our future earnings, if any, to fund the development and growth of our business, and we do not anticipate paying any cash dividends on our common stock for the foreseeable future.

Additionally, the terms of any future debt facilities may preclude us from paying dividends on the common stock.

As a result, capital appreciation, if any, of our common stock could be the sole source of gain for the foreseeable future.

Anti-takeover provisions contained in our articles of incorporation and bylaws, as well as provisions of Nevada law, could impair a takeover attempt.

Our amended and restated articles of incorporation and bylaws currently contain provisions that, together with Nevada law, could have the effect of rendering more difficult or discouraging an acquisition deemed undesirable by our board of directors.

Our corporate governance documents presently include the following provisions:

● providing for a “staggered” board of directors in which only one-third (1/3) of the directors can be elected in any year;

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● limiting the liability of, and providing indemnifications to, our directors and officers.

These provisions, alone or together, could

delay hostile takeovers and changes in control of our Company or changes in our management.

As a Nevada corporation, we also may become

subject to the provisions of Nevada Revised Statutes Sections 78.378 through 78.3793, which prohibit an acquirer, under certain

circumstances, from voting shares of a corporation’s stock after crossing specific threshold ownership percentages, unless

the acquirer obtains the approval of the stockholders of the issuer corporation.

The first such threshold is the acquisition of

at least one-fifth, but less than one-third of the outstanding voting power of the issuer.

We may become subject to the above referenced

Statutes if we have 200 or more stockholders of record, at least 100 of whom are residents of the State of Nevada and do business

in the State of Nevada directly or through an affiliated corporation.

As a Nevada corporation, we are subject

to the provisions of Nevada Revised Statutes Sections 78.411 through 78.444, which prohibit an “interested stockholder”

from entering into a combination with the corporation, unless certain conditions are met.

An “interested stockholder”

is a person who, together with affiliates and associates, beneficially owns (or within the prior two years did own) 10 percent

or more of the corporation’s voting stock.

Any provision of our amended and restated

articles of incorporation, our bylaws or Nevada law that has the effect of delaying or deterring a change in control of our Company

could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect

the price that some investors are willing to pay for our common stock.

Unresolved Staff Comments.

These provisions, alone or together, could delay hostile takeovers and changes in control of our Company or changes in our management.

As a Nevada corporation, we also may become subject to the provisions of Nevada Revised Statutes Sections 78.378 through 78.3793, which prohibit an acquirer, under certain circumstances, from voting shares of a corporation’s stock after crossing specific threshold ownership percentages, unless the acquirer obtains the approval of the stockholders of the issuer corporation.

The first such threshold is the acquisition of at least one-fifth, but less than one-third of the outstanding voting power of the issuer.

We may become subject to the above referenced Statutes if we have 200 or more stockholders of record, at least 100 of whom are residents of the State of Nevada and do business in the State of Nevada directly or through an affiliated corporation.

As a Nevada corporation, we are subject to the provisions of Nevada Revised Statutes Sections 78.411 through 78.444, which prohibit an “interested stockholder” from entering into a combination with the corporation, unless certain conditions are met.

An “interested stockholder” is a person who, together with affiliates and associates, beneficially owns (or within the prior two years did own) 10 percent or more of the corporation’s voting stock.

Any provision of our amended and restated articles of incorporation, our bylaws or Nevada law that has the effect of delaying or deterring a change in control of our Company could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.

Item 1B 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