ITEM 1A. RISK FACTORS
The Company is subject to risks, certain of which are described below. The occurrence of any one or more of these risks or uncertainties could have a material adverse effect on the value of any investment in the Company and the financial condition or operating results of the Company. Additional risks and uncertainties not presently known to the Company or that the Company currently deems immaterial may also impair the Company’s business operations. Due to the nature of the Company and its business, investors should carefully consider all such risks, including those set out in the discussion below, together with the other information in this Form 10-K and our other filings with the SEC and Canadian Securities Administrators.
Summary Risk Factors
The following is a summary of some of the risks and uncertainties that could materially adversely affect our business, financial condition and results of operations. You should read this summary together with the more detailed description of each risk factor contained below.
• the current illegality of cannabis under federal law, the U.S. federal regulatory landscape and enforcement related to medical or adult use cannabis, including political risks, civil asset forfeiture and regulation by additional regulatory authorities;
• regulatory and political changes to U.S. federal, state and local laws related to medical or adult use cannabis, including political risks and regulation by additional regulatory authorities;
• rescheduling may lower the barriers to entry for well-capitalized institutional competitors;
• the federal rescheduling process is subject to significant procedural delays and legal challenges;
• the impacts of economic uncertainty stemming from disruptions in U.S. and global markets, inflation, rising interest rates, and changes in consumer and business confidence;
• our outstanding indebtedness and potential future indebtedness, including our ability to repay such indebtedness;
• reliance on key management;
• market acceptance of existing and new products and potential returns or recalls of our products;
• potential cultivation biosecurity failures;
• consumer acceptance of our brand portfolio;
• the accuracy of our forecasted demand for our products;
• our ability to accurately forecast, manage and monetize inventory;
• the potential for fraudulent activity by employees, contractors and consultants;
• our exposure to growth-related operational and execution risks;
• potential negative findings in our clinical research with respect to our products;
• potential product liability claims;
• our exposure to natural phenomena and resulting potential uninsured or under insured losses;
• the risk that our property will be subject to civil asset forfeiture;
• our corporate structure and our resulting reliance on the performance of our subsidiaries and affiliates;
• our expansion-by-acquisition strategy;
• our ability to acquire businesses and cannabis licenses in desired markets and the integration and operation of acquired businesses;
• the typically limited operations of businesses we acquire;
• the unconventional due diligence process in the cannabis industry;
• our ability to acquire and lease properties suitable for the cultivation, production and sale of cannabis;
• potential limited representations and warranties of businesses we may acquire;
• our acquisition of businesses in developing cannabis markets;
• our lack of portfolio diversification by industry and geographic concentration;
• our use of joint ventures, strategic partnerships and alliances;
• our contractual relationships with our consolidated variable interest entities;
• existing competition and new market entrants;
• the introduction of synthetic alternatives to cannabis products by pharmaceutical and other companies;
• the immaturity of the cannabis industry and limited comparable, competitive and established industry best practices;
• the availability of and our reliance on third-party suppliers, service providers, contractors and manufacturers, and any significant interruption of these relationships, including negative changes to quality, availability, pricing, trade policy and other economics;
• changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences;
Table of Contents
• wholesale and retail price fluctuations;
• public opinion and perception of the cannabis industry;
• the availability of raw or other materials;
• rising or volatile energy costs;
• agricultural and environmental risks and the impacts of environmental regulations on the cannabis industry and environmental protections;
• physical security risks, such as theft;
• disparate state-by-state regulatory landscapes and licensing regimes for medical and adult use cannabis;
• the difficulties cannabis businesses face accessing and maintaining banking or financial services due to federal regulations;
• the cost and difficulty of complying with various regulatory schemes;
• the impact of state social equity legislation as it relates to the cannabis industry;
• the risk of high bonding and insurance costs;
• environmental regulations;
• effects of changes in laws and policies governing employees and by union organizing activity;
• increased unionization efforts and labor shortages;
• potential scrutiny from Canadian authorities due to our status as an SEC Foreign Issuer;
• potential divestment of licenses if required by regulatory authorities;
• our dependency on the banking industry;
• required public disclosure and governmental filings containing personal information of our officers, investors and other stakeholders;
• potential findings by regulatory authorities that one of our stockholders is unsuitable;
• the risk that our directors, officers, employees or investors are barred from entering the U.S.;
• the ability to, and constraints on, promoting and marketing cannabis products;
• potential U.S. Food and Drug Administration governance of the cannabis industry;
• the potential limitations on our ability to enforce our contracts or any liens granted to us;
• the potential lack of access to federal bankruptcy protections in the U.S.;
• reliance on information technology systems, the potential disclosure of personal information of patients and customers and cybersecurity risks;
• our increasing use of, or failure to effectively implement, artificial intelligence (AI) and automated systems;
• our reliance on third-party software providers;
• costs related to preserving our brand identity;
• our ability to protect our intellectual property due to limited intellectual property protection available for cannabis products and the potential infringement by third parties;
• potential infringement or misappropriation claims;
• the risk of financial crimes;
• the inability to realize the anticipated benefits of the Continuance, or to do so within the anticipated timeframe;
• the risk of receiving no return on our securities;
• our elimination of individual liability and indemnification rights against our directors, officers and employees under Nevada law;
• our organizational documents contain provisions that may prevent transactions that could be beneficial to our stockholders and may insulate our management from removal;
• the time and resources necessary to comply with corporate governance practices and securities rules and regulations;
• our management’s ability to maintain effective internal controls;
• potential dilution if we issue additional shares of Common Stock;
• market perception of sales of a substantial amount of Common Stock;
• transfer restrictions on our Common Stock;
• price volatility of our Common Stock;
• our stockholders’ limited participation in our affairs;
• our expectation to not declare or pay out dividends;
• certain of our stockholders holding Common Stock representing greater than 5% of our voting power;
• the taxation of cannabis companies in the U.S., including the impact of Section 280E of the Code; and
• other risks described in this Form 10-K, as more particularly described herein.
Table of Contents
Risks Related to Our Business and Operations – General
Cannabis, other than hemp, remains illegal under U.S. federal law, and therefore any change in federal enforcement could have material adverse impact on our business, financial condition and results of operations.
To date, in the U.S. 40 states plus the District of Columbia and the U.S. territories of Puerto Rico, Guam, the Commonwealth of Northern Marina Islands, and the U.S. Virgin Islands have authorized comprehensive medical cannabis programs, 24 states plus the District of Columbia and the U.S. territories of Guam, the Commonwealth of Northern Mariana Islands, and the U.S. Virgin Islands have authorized comprehensive programs for medical and adult use (i.e. recreational) cannabis, and eight states allow the use of low THC and high CBD products for specified medical uses.
Under U.S. federal law, however, those activities are illegal. Cannabis, other than hemp, is currently a Schedule I controlled substance under the CSA, which means it is viewed by the U.S. federal government as a drug that has a high potential for abuse and no therapeutic value. Therefore, even in U.S. states and territories that have legalized cannabis to some extent, the cultivation, possession and sale of cannabis violates the Controlled Substances Act and is punishable by imprisonment, substantial fines and forfeiture. Moreover, individuals and entities may violate U.S. federal law if they aid and abet another in violating the Controlled Substances Act, or conspire with another to violate the law. Violating the Controlled Substances Act is also a predicate for other crimes in the U.S., including money laundering laws and the Influenced and Organizations Act. The U.S. Supreme Court has ruled that the U.S. federal government has the authority to regulate and criminalize the sale, possession and use of cannabis in the U.S., even for individual medical purposes, regardless of whether it is legal under state law. To date, however, the U.S. federal government has not enforced those laws companies (and their vendors) complying with state cannabis law. In October of 2022, the Biden Administration announced its intention to review the regulation of cannabis under the CSA by directing the Secretary of Health and Human Services and the Attorney General to initiate the administrative process to expeditiously review cannabis’s Schedule I status. In August of 2023, the HHS recommended to the DEA that cannabis be rescheduled to Schedule III under the CSA. On December 2, 2024, the DEA held a preliminary formal hearing regarding the rescheduling of cannabis, and additional hearings were scheduled from January 21, 2025 to March 6, 2025. On January 13, 2025, Chief Administrative Law Judge presiding over the rescheduling of cannabis ordered that the hearing scheduled for January 21, 2025 was , and that the proceedings in the matter were stayed, pending a resolution of an interlocutory appeal to the DEA Administrator. A joint status update must be provided to the tribunal ninety (90) days from the issuance of the order, and every ninety (90) days thereafter. In addition, in November 2024, Donald Trump was elected president of the U.S. and announced that Pam Bondi would be his pick for attorney general. On December 18, 2025, President Trump issued the Executive Order, which directs federal agencies to expedite the process of rescheduling cannabis from a Schedule I to a Schedule III controlled substance under the CSA. The effect of the Executive Order may be that the cultivation, manufacturing, distribution, sale or possession of cannabis in the U.S. is no longer federally and would lessen at the federal level and remove Section 280E tax considerations, however, the final effects are dependent on other government actions. such actions and the ongoing rule making process, there can be no guarantees that the rescheduling rule making process will continue on a certain timeline or at all under this administration or that any rules will come out of the rule making process that will the Company. The Executive Order, and agency implementation of the Executive Order does not federally legalize adult use and would not federally authorize or approve state sanctioned medical programs. Although we believe that our business activities are compliant with applicable state and local laws in the United States, strict compliance with state and local cannabis laws would not provide a defense to any federal proceeding which may be brought us. Any such proceedings may result in a material effect on us. We derive substantially all of our revenues from the cannabis industry. The enforcement of applicable U.S. federal laws a significant risk to us.
The likelihood of any future adverse enforcement against companies complying with state cannabis laws remains uncertain. In 2018, then-U.S. Attorney General Jeff Sessions issued the Sessions Memorandum rescinding the DOJ’s previous guidance under the Cole Memorandum that had given federal prosecutors discretion not to enforce federal law in states that legalized cannabis, as long as the state’s legal regime adequately addressed specified federal priorities. The Sessions Memorandum, which remains in effect, states that each U.S. Attorney’s Office should follow established principles that govern all federal prosecutions when deciding which cannabis activities to prosecute. As a result, federal prosecutors can use their prosecutorial discretion to decide to prosecute state-legal cannabis activities. Since the Sessions Memorandum was issued, however, U.S. Attorneys have not targeted state law compliant cannabis entities. The policy of not prosecuting companies complying with state cannabis laws continued under U.S. Attorney General Merrick Garland. The DOJ may change its enforcement policies at any time, with or without advance notice, under current U.S. Attorney General, Pam Bondi.
Table of Contents
Additionally, since 2014, versions of the U.S. omnibus spending bill have included a provision prohibiting the DOJ from using appropriated funds to prevent states from implementing their medical-use cannabis laws. While the omnibus spending bill affords some protection to medical cannabis businesses, we also operate adult use cannabis businesses that are permissible under state and local laws. Consequently, some of our operations may be outside any protections extended to medical-use cannabis under the spending bill provision. This could subject us to greater and different U.S. federal legal and other risks as compared to businesses where cannabis is sold exclusively for medical use, which, in turn, could materially and adversely affect our business. Furthermore, any change in the U.S. federal government’s enforcement posture with respect to state-licensed cannabis sales, including the enforcement postures of individual federal prosecutors in judicial districts where we operate, would lead to an inability to execute our business plan, likely resulting in significant losses with respect to our customer base and adversely affecting our business, financial condition and results of operations.
In addition to criminal liability for producing, manufacturing, distributing and selling cannabis, other subsections of the CSA criminalize related activities with expanded sentences and increased penalties for corporations. For example, entities or persons who manage or control a property and knowingly make that property available for the purposes of manufacturing, distributing or using any controlled substances can be found liable under the Controlled Substances Act. We own properties on which activities prohibited by the Controlled Substances Act occur. Therefore, a federal prosecutor could prosecute us as an owner of “drug-involved premises” and we could be found to violate U.S. federal law by virtue of these assets. Additionally, we intend to acquire and invest in businesses that are directly or indirectly engaged in the medical and adult use cannabis industry in the U.S. where state and local law permits such activities.
Our anticipated funding of businesses engaged in the medical and adult use cannabis industry, whether through loans or through other forms of investment, is currently illegal under applicable U.S. federal laws. Any criminal charges brought against us could result not only in the inability to execute our business plan, but the cessation of our operations and could further result in significant fines, penalties and losses, which would adversely affect our business, financial condition and results of operations.
THE CONSEQUENCES OF SUCH GOVERNMENTAL ENFORCEMENT WOULD BE MATERIALLY DETRIMENTAL TO US, OUR BUSINESS AND THE VALUE OF OUR COMMON STOCK AND COULD RESULT IN THE FORFEITURE OR SEIZURE OF ALL OR SUBSTANTIALLY ALL OF OUR ASSETS.
Table of Contents
There is a substantial risk of regulatory or political change to federal, state and local laws permitting cannabis activities. Such changes could have a material adverse impact on our business, financial condition and results of operations.
Continued development of the U.S. cannabis industry depends upon legislative authorization of cannabis at the federal, state and local level. The status quo of, or progress in, the federal or state regulated U.S. cannabis industry, while encouraging, is not assured and any number of factors could slow or halt further progress in this area. The political environment surrounding the cannabis industry in the U.S. in general can be volatile and the regulatory framework remains in flux. While there may be ample public support for legislative action permitting the production and use of cannabis, numerous factors impact and can delay the legislative and regulatory processes. If pro-cannabis regulations are not enacted, or enacted but subsequently repealed or amended, or enacted with prolonged phase-in periods, our growth targets and prospects, and thus, the effect on the return of investor capital, could be extended or reduced.
Further, there is no guarantee that, at some future date, voters or the applicable state legislative bodies will not repeal, overturn or limit any such legislation legalizing the cultivation, manufacture, sale, distribution or consumption of medical or adult use cannabis. Local and city ordinances may strictly limit or restrict the applicability of state laws to their jurisdictions and the distribution of cannabis in their jurisdictions in a manner that may make it extremely difficult or impossible to transact business that is necessary for the continued operation of the cannabis industry generally and us specifically. Although our operations are legal under the laws of the states in which our business operates, local governments have the ability to limit, restrict and ban cannabis businesses from operating within their jurisdiction. Land use, zoning, ordinances and similar federal, state and local laws could be adopted or changed and have a material adverse effect on our business.
In addition, the rule making process to reschedule cannabis to a Schedule III substance under the CSA is ongoing at the time of this filing. We cannot predict the effects such rescheduling would have on our business, and there is no guarantee that the formal rule making process will happen within a certain timeframe or that cannabis will be rescheduled. If cannabis were rescheduled to a Schedule III substance, we cannot predict the federal regulations that may be put into place regarding the cannabis industry. On December 18, 2025, President Trump issued the Executive Order, which directs federal agencies to expedite the process of rescheduling cannabis from a Schedule I to a Schedule III controlled substance under the CSA. The effect of the Executive Order may be that the cultivation, manufacturing, distribution, sale or possession of cannabis in the U.S. is no longer federally illegal and would lessen criminal penalties at the federal level and remove Section 280E tax considerations; however, the final effects are dependent on other government actions. Despite such actions and the ongoing rule making process, there can be no guarantees that the rescheduling rule making process will continue on a certain timeline or at all under this administration or that any rules will come out of the rule making process that will benefit the Company. The Executive Order, and agency implementation of the Executive Order does not federally legalize adult use and would not federally authorize or approve state sanctioned medical programs. Cannabis would still be subject to the same FDA drug approval process as all other substances, and sales outside of FDA approval, would still be at the federal level. In addition, particularly considering the U.S. congressional elections that occurred in 2024, there is no guarantee that on-going pro-cannabis federal legislative efforts such as the State Reform Act or the SAFER Act will continue, that the Executive Order will result in the rescheduling of cannabis on a particular timeframe or at all, that certain legislation, such as certain banking restrictions, will change as a result of the Executive Order, or that legislation that further restricts the cannabis industry at the federal U.S. level will not be proposed or passed. We cannot predict if newly-elected state officials will change the regulatory schemes regarding cannabis in the states where we operate.
Any one of these factors could slow or halt additional legislative authorization of cannabis, which could harm our business, financial condition and results of operations. If the U.S. federal government begins to enforce U.S. federal laws relating to cannabis in states where the sale and use of cannabis is currently legal, or if existing state laws are repealed or curtailed, our business or operations in those states or under those laws would be materially and adversely affected. As they amend or develop legislation and regulations, state and local regulators and legislatures may use the regulatory process to slow the growth of multi-state operators like us, with the intent of creating increased opportunities for resident farmers and entrepreneurs, which could severely restrict our ability to operate in those jurisdictions. Federal actions against any individual or entity engaged in the cannabis industry or a substantial repeal of cannabis related legislation could adversely affect our business and our assets or investments. Maintaining compliance with complex and ever-changing regulations and laws, including sometimes unclear regulations and laws, can be a task, and a materially compliant business can be found in of one or more laws, rules or regulations while remaining materially or substantially compliant with applicable state cannabis laws.
Table of Contents
Rescheduling may lower the barriers to entry for well-capitalized institutional competitors.
For years, the Schedule I status of cannabis acted as a barrier to entry that kept large-scale pharmaceutical, tobacco, and consumer packaged goods companies from entering the industry. Schedule III status may provide the legal cover these entities need to enter the market. These competitors possess significantly greater financial resources, global supply chains, and experience with federal regulatory agencies. Due to the uncertainty of rescheduling and the potential timeline for these competitors to enter the market, the impact is unclear.
The federal rescheduling process is subject to significant procedural delays and legal challenges that could postpone or nullify any anticipated benefits.
The process of moving cannabis to Schedule III is governed by the Administrative Procedure Act, which requires a public comment period and potentially lengthy administrative hearings. Opponents of rescheduling may file lawsuits to stay or vacate the final rule, alleging procedural flaws or conflicts with international treaty obligations. Any such litigation could leave us in a state of regulatory uncertainty for years.
Challenging U.S. and global economic conditions may negatively impact our business, financial condition and results of operations.
Any disruptions and volatility in U.S. and global financial markets, inflation, potential recession and declining consumer and business confidence could lead to decreased levels of consumer spending and higher costs. Our operations have been, and could continue to be affected by inflation, and could be effected by any potential recession, real or perceived market disruptions, the unemployment level, the impact of a federal government shutdown, or rising or elevated interest rates that reach levels that influence consumer trends and spending and, consequently, impact our sales volume, pricing, cost of goods and profitability. In addition, economic uncertainty may make it more difficult to access financing at the rates we have received previously. Further, continued high interest rates may increase the cost of servicing our debt, which may limit our ability to fund capital expenditures for new cultivation facilities. Additionally, as cannabis remains a discretionary purchase for many, inflationary pressure on household essentials, such as food, fuel and rent, could lead consumers to trade down to lower-margin value brands or reduce their overall frequency of purchase, potentially to further price compression in certain markets.
These macroeconomic developments could negatively impact our business, which depends on the general economic environment and levels of consumer spending. In addition, macroeconomic conditions could cause budgetary pressures for our wholesale and end customers, which could result in a delay or reduction in their spending, and in turn could adversely affect our business. We may not be able to maintain our existing customers or attract new customers, or we may be forced to increase or reduce the price of our products. We are unable to predict the likelihood of the occurrence, duration, or severity of a recession or other disruptions in the U.S. credit and financial markets and adverse U.S. and global economic conditions. Any general or market-specific economic downturn could have a material adverse effect on our business, financial condition and results of operations.
Table of Contents
The Company and certain of our subsidiaries are borrowers under secured debt facilities, and we may be unable to repay, renew or refinance our indebtedness when it becomes due. Further, our debt facilities contain covenants that restrict our business and they may be difficult or costly for us to comply with. If we are unable to repay, renew or refinance our debts as they become due, it would have a material adverse effect on our business, financial condition and results of operations and the value of our Common Stock.
The Company and certain of our subsidiaries are borrowers of secured indebtedness and are subject to risks typically associated with secured debt financing, which are heightened by the cannabis regulatory environment in the U.S. Our cash flows could be insufficient to satisfy the amount of required payments of principal and interest and we may not be able to repay our indebtedness. Our ability to make scheduled payments of principal and interest on our indebtedness when due depends on our future cash flow which is subject to the financial performance and results of our business, the value of our assets, prevailing economic conditions, the cannabis regulatory environment, prevailing interest rate levels and other financial, competitive and operational factors impacting the cannabis industry, many of which are beyond our control.
The covenants of our indebtedness limit our ability to engage in activities that may be in the Company’s long-term best interest. In addition, compliance with the financial, operational and reporting covenants, including obligations to maintain minimum cash balances at certain financial institutions, increases our legal and financial costs, make certain activities more difficult or restricted, and may be time-consuming or costly and increase demand on the Company’s systems and resources. Our failure to comply with any of these covenants could result in a default, which could result in increased default interest rates, the acceleration of repayment of our debt or our lenders’ foreclosure on our assets securing our indebtedness.
We may not be able to renew or refinance our indebtedness on substantially similar terms, or at all, particularly in an environment of economic uncertainty such as the one discussed above in “— Challenging U.S. and global economic conditions may negatively impact our business, financial condition and results of operations .” Our ability to access short-term and long-term lending and capital markets to obtain, and the availability of acceptable terms and conditions of, financing are impacted by many factors, including the liquidity and volatility of the overall lending and capital markets, the cannabis regulatory environment and the current state of the economy, including the cannabis industry. There can be no assurances that we will be able to access the lending and capital markets to refinance our indebtedness. We may have to pay higher interest rates and additional fees and expenses, and we may have to agree to terms that could increase the cost of our indebtedness structure. If we are unable to renew or refinance our indebtedness on terms that are not materially less favorable than the terms currently available to us or obtain alternative or additional financing arrangements, we may not be to timely repay our indebtedness, which may result in a under our indebtedness, which could result in our lenders’ on our assets securing our indebtedness.
The Company and our subsidiaries may incur additional indebtedness, and we may be unable to borrow on better or substantially similar terms to our existing indebtedness. New indebtedness facilities may contain covenants that further restrict our business and they may be difficult or costly for us to comply with. If we were to incur additional indebtedness that increases the cost of our indebtedness structure, it would have a material adverse effect on our business, financial condition and results of operations and the value of our Common Stock.
We may incur additional indebtedness. As funds are borrowed, additional interest and debt service increases the expense of operating our business. In addition, lenders of future borrowings may require additional restrictions on our business and operations and additional assets to secure our obligations. Our ability to access short-term and long-term lending and capital markets to obtain, and the availability of acceptable terms and conditions of, financing are impacted by many factors, including the liquidity and volatility of the overall lending and capital markets, the cannabis regulatory environment and the current state of the economy, including the cannabis industry. We may have to pay higher interest rates and additional fees and expenses, and we may have to agree to terms that could increase the cost of our indebtedness structure.
Table of Contents
We rely on the expertise of our management team and other employees experienced in the cannabis industry, and the loss of key personnel could negatively affect our business, financial condition and results of operations.
Our success largely depends upon the continued services of our executive officers and management team members. If one or more of our executive officers or management members is unable or unwilling to continue in his or her present position, we may not be able to replace such individual readily, if at all. Additionally, we may incur additional expenses to recruit and retain new executive officers and management members and personnel with experience in the cannabis industry. We do not maintain “key person” life insurance on any of our executive officers. Because of these factors, the loss of the services of any key persons could adversely affect our business, financial condition and results of operations.
We face risks related to our products.
We have committed and expect to continue committing significant resources and capital to develop and market existing products and new products and services. These products are relatively untested in the marketplace, and we cannot assure that we will achieve market acceptance for new products and services that we may offer in the future, or that our products that achieve market acceptance will maintain that acceptance over time. Moreover, these and other new products and services may be subject to significant competition with offerings by new and existing competitors. In addition, new products and services may pose a variety of challenges and require us to attract additional qualified employees. The failure to successfully develop and market these new products and services could have a material adverse effect on our business, financial condition and results of operations. We also face competition from hemp and illicit market products that are not subject to testing or regulation by state agencies and that are not subject to the same taxes state-legal cannabis businesses face, and may be priced significantly lower than our products.
Our products may be returned or recalled, which could damage our brand identity and adversely affect our business, financial condition and results of operations.
Despite quality control procedures, cultivators, manufacturers and distributors of cannabis products are sometimes subject to the recall or return of their products for a variety of reasons, including product defects, such as contamination, unintended harmful side effects or interactions with other substances, packaging safety and inadequate or inaccurate labeling disclosure. While we employ testing procedures, there is no guarantee such procedures will catch all defects. If any of our products or any of the products that we purchase from a third party are recalled due to an alleged product defect or for any other reason, we could be required to incur the unexpected expense of the recall and any legal proceedings that might arise in connection with the recall, and may a significant amount of sales and may not be to replace those sales at an acceptable margin or at all. A or return of our products could lead to a in our brand identity, decreased demand for our products or limit our ability to purchase from a third-party and could have a material effect on our business, financial condition and results of operations.
Cultivation biosecurity failures, including the introduction or spread of plant pathogens such as Hop Latent Viroid (“HpLVd”), could materially adversely affect our yields, product quality, and operating results .
HpLVd can remain asymptomatic for extended periods while significantly reducing plant vigor, yield, and cannabinoid potency, which may delay detection and amplify losses. Despite the testing processes we employ, pathogens may spread through infected clones, tools, personnel movement, or shared environments, and our biosecurity, testing, sanitation, and quarantine controls may prove insufficient or inconsistently executed. An outbreak could require crop destruction, facility remediation, replacement of genetics, and extended production downtime, resulting in inventory write-downs, higher operating costs, supply shortfalls, margin compression, and reputational harm. Limitations in diagnostic accuracy or timing, reliance on third-party inputs, and human execution risk may further constrain prevention and response efforts. If we are unable to effectively prevent, detect, or mitigate such biosecurity , our business, financial condition, and results of operations could be materially affected.
Table of Contents
We are dependent on the popularity of consumer acceptance of our brand portfolio.
Our ability to generate revenue and be successful in the implementation of our business plan is dependent on consumer acceptance of and demand for our products. Acceptance of our products depends on several factors, including availability, cost, ease of use, familiarity of use, convenience, effectiveness, safety and reliability. If customers do not accept our products, or if such products fail to adequately meet customers’ needs and expectations, our ability to continue generating revenues could be reduced. As the number of available licenses increase in the markets in which we operate, and the illicit market and psychoactive hemp-based products proliferate, additional competition and increased product availability may result in competitors undercutting our prices. From time to time, we may need to reduce our prices in response to competitive and customer pressures and to maintain our market share, which could materially reduce our revenues.
Our sales volumes are difficult to forecast and a failure in the expected demand for our products to materialize could have a material adverse effect on our business, financial condition and results of operations.
As a result of the early stage of the cannabis industry, ongoing U.S. state and federal regulatory and policy changes for medical and adult use cannabis and unreliable levels of market supply, the market data available for cannabis demand can be limited. We must rely largely on our own market research to forecast sales, as detailed forecasts are not generally obtainable from other sources in the states in which our business operates. Additionally, any market research and our own projections of sales, demographics, demand and similar consumer research, are based on assumptions from limited and unreliable market data. A failure in the expected level of demand for our products to materialize as a result of competition, regulatory changes, technological change or other factors could have a material adverse effect on our business, financial condition and results of operations.
Our ability to accurately forecast, manage, and monetize inventory is subject to uncertainty and could materially adversely affect our operating results.
As a multi-state cannabis operator, inventory predictability is affected by biological variability in cultivation cycles, inconsistent yields and potency, biosecurity events, regulatory testing and hold periods, processing capacity constraints, and variability in consumer demand across markets and product categories. Forecasting errors or operational disruptions may result in excess, obsolete, or aged inventory requiring discounting, reprocessing, or destruction, as well as inventory write-downs or impairments. Conversely, inventory shortfalls may limit our ability to meet customer demand, fulfill wholesale commitments, or maintain retail shelf availability, adversely affecting revenue, margins, and brand equity. Additionally, inventory planning relies on assumptions regarding market growth, pricing, regulatory conditions, and execution across cultivation, manufacturing, and distribution functions, which may not prove accurate. If we are unable to effectively predict and align inventory levels with demand and operational capacity, our business, financial condition, and results of operations could be materially adversely affected.
There is a risk of fraudulent or illegal activity by our employees, contractors and consultants, and any fraudulent or illegal acts could negatively affect our business, financial condition and results of operations.
We are exposed to the risk that our employees, independent contractors and consultants may engage in fraudulent or other illegal activity. Misconduct by these parties could include intentional, reckless or negligent conduct or disclosure of unauthorized activities that violates: (i) government regulations; (ii) manufacturing standards; (iii) federal and state healthcare fraud and abuse laws and regulations; (iv) laws that require the true, complete and accurate reporting of financial information or data; (v) our contractual agreements; or (vi) our policies and code of ethics. It may not always be possible for us to identify and deter misconduct by our employees and other third parties, and the precautions taken by us to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or or in protecting us from governmental or other actions or lawsuits stemming from a to be in compliance with such laws or regulations. If any such or actions are instituted us, and we are not in them or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, and administrative , , monetary , contractual , reputational , profits and future earnings and of our operations, any of which could have a material effect on our business, financial condition and results of operations.
Table of Contents
We are subject to growth-related operational and execution risks and our inability to mitigate and address these risks would have a material adverse effect on our business plan, financial results and financial condition.
We are subject to growth-related operational and execution risks, including integration of acquired businesses, facilities, systems, personnel, and other capacity constraints, efficient management of assets and pressure on our internal systems and controls. Our ability to manage growth effectively will require us to continue to implement and improve our integration processes and operational and financial systems and to expand, train and manage our employee base. Our inability to effectively manage our growth may have a material adverse effect on our business financial results and financial condition.
Past performance is not necessarily indicative of future results, and if our actual operations differ materially from management’s expectations, it could have a material adverse effect on our business, financial condition and results of operations.
Our growth is in large part attributable to acquisitions of existing cannabis businesses and licenses. Our past operational performance may not be indicative of our future operating results. There can be no assurance that the revenue growth, cashflow, operating margins and other historical operating results achieved by us will be achieved by us going forward, and our financial performance and operating results may be materially different.
Clinical research with respect to our products is ongoing, and negative findings could lead to rollbacks of state legalizations laws and negative public perceptions of cannabis, which would negatively affect our business, financial condition and results of operations.
Research in the U.S. and internationally regarding the medical benefits, viability, safety, efficacy, dosing and social acceptance of cannabis or isolated cannabinoids remains in early stages. There have been relatively few clinical trials on the benefits of cannabis or isolated cannabinoids. Although we rely on the articles, reports and studies that support our beliefs regarding the medical benefits, viability, safety, efficacy, dosing and social acceptance of cannabis, future research and clinical trials may prove such beliefs to be incorrect, or could raise concerns regarding, and public perceptions relating to, cannabis. Further, the cannabis industry is highly dependent upon consumer perception, which can be significantly influenced by scientific research or findings, regulatory investigations, litigation, media attention and other publicity regarding the consumption of cannabis products. There can be no assurance that future scientific research or findings, regulatory investigations, litigation, media attention or other publicity will be favorable to the cannabis market or any particular product, or consistent with earlier publicity.
Future research studies and clinical trials may reach negative conclusions regarding the medical benefits, viability, safety, efficacy, dosing, social acceptance or other facts and perceptions related to cannabis, which could lead to rollbacks in state regulation or otherwise have a material adverse effect on the demand for our products with the potential to lead to a material adverse effect on our business, financial condition and results of operations. There is no assurance that such adverse research studies or clinical trials will not arise.
We may be subject to litigation.
We may become party to litigation from time to time in the ordinary course of business, which could adversely affect our business. Should any litigation in which we become involved be determined against us, such a decision could adversely affect our ability to continue operating and the market price for the Common Stock. Even if we are involved in litigation and win, litigation can redirect significant financial and other resources of the Company.
Table of Contents
We may be subject to product liability claims which could adversely affect our business, financial condition and results of operations.
We manufacture, process and distribute products designed to be ingested and used topically by humans, and therefore we face an inherent risk of exposure to product liability claims, regulatory action and litigation if our products are alleged to have caused loss or injury. In addition, the manufacture and sale of cannabis products involve risk of injury to consumers due to tampering by unauthorized third parties or product contamination. Previously unknown adverse reactions resulting from human consumption and use of cannabis products alone or in combination with other medications or substances could occur. Although we have quality control procedures in place, we may be subject to various product liability claims, including, among others, that the products produced by us, or the products that we purchase from third party licensed producers, caused injury or illness, include inadequate instructions for use or include concerning possible side effects or interactions with other substances. A product liability claim or regulatory action us could result in increased costs, could affect our reputation, and could have a material effect on our business, financial condition and results of operations. There can be no assurances that product liability insurance will be obtained or maintained on acceptable terms or with adequate coverage potential liabilities.
We are exposed to various operational risks and natural phenomena, any of which may be uninsured or underinsured, and uninsured losses could have a material adverse effect on our business, financial condition and results of operations.
We may be affected by a number of operational risks and natural phenomena for which we may not be adequately insured, including labor disputes; catastrophic accidents; fires; blockades or other acts of social activism; equipment defects, malfunction and failures; changes in the regulatory environment; impact of non-compliance with laws and regulations (both related and unrelated to the cannabis industry); the outbreak of a global pandemic; and inclement weather conditions, hurricanes, floods, earthquakes and other natural disasters. Such risks can cause interruption of operations, shortage of staff, disruption of supply chain, market volatility, personal injury, loss of life, suspension of operations, to facilities, to or of property, equipment and the environment. There is no assurance that the foregoing risks and will not result in to, or of, our properties, dispensary facilities and cultivation and production facilities, or cause personal or death, environmental or have an impact on our operations, costs, monetary , potential legal liability and governmental action, any of which could have a material effect on our business, financial condition and results of operations.
In addition, there can be no assurance that we will not encounter hazardous conditions, such as asbestos or lead, at the sites of the real estate used to operate our business, which may delay the development of our business. Climate change or significant weather events may accelerate or exacerbate environmental conditions in ways that adversely affect the business due to potential negative effects on agricultural conditions, increased difficulty in construction projects to support our operations, and ownership or leasing of real property generally. Upon encountering a hazardous condition, work at our facilities may be suspended. If we receive notice of a hazardous condition, we may be required to correct the condition prior to continuing construction. If additional hazardous conditions were present, it would likely delay construction and may require significant expenditure of our resources to correct the conditions. Such conditions could have a material effect on our business, financial condition and results of operations.
We plan to continuously monitor our operations for quality control and safety and to mitigate risk. However, there are no assurances that our safety procedures will always prevent damage and we may be affected by liability or sustain losses in respect of risks and hazards. Although we maintain insurance coverage, such insurance does not cover all of the potential risks associated with our business and operations, including natural disasters.
The cost of insurance for companies engaged in cannabis-related activities is higher than many other industries and we may be unable to maintain insurance to cover these risks at economically feasible premiums, in part or at all. In addition, insurance coverage may not be available to us or may not be adequate to cover any resulting liability. In certain locations where we operate, such as Florida, it may be difficult to get insurance at reasonable costs, or at all, that will adequately cover adverse weather events such as hurricanes. Moreover, insurance against risks such as environmental pollution or other hazards encountered in our operations is not generally available on acceptable terms. The occurrence of a significant uninsured claim, a claim in excess of the insurance coverage limits then maintained by us, or a claim at a time when we are not able to obtain liability insurance, could have a material adverse effect on our business, financial condition and results of operations.
Table of Contents
Our property is subject to risk of civil asset forfeiture.
Because the cannabis industry remains illegal under U.S. federal law, any property owned by participants in the cannabis industry that is either used in the course of conducting or comprises the proceeds of a cannabis business could be subject to seizure by law enforcement and subsequent civil asset forfeiture. Even if the owner of the property were never charged with a crime, the property in question could still be seized and subject to an administrative proceeding by which, with minimal process, it could become subject to forfeiture.
Changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences, may have a material adverse impact on our business, operating results, and financial condition.
Our business requires significant packaging, construction, and other materials. We strategically and proactively procure these materials from our suppliers in sufficient quantities to facilitate supply chain demands and on relevant construction timelines. On February 20, 2026, the U.S. Supreme Court ruled that certain previously imposed tariffs under the International Emergency Economic Powers Act (“IEEPA”) were unauthorized. While this ruling may lead to potential refunds of duties previously paid, President Trump immediately transitioned to a new 15% global import tariff under Section 122 of the Trade Act of 1974 (the “Trade Act”). We cannot yet predict the effect of these new tariffs, recently imposed or future U.S. tariffs on imports or the extent to which other countries will impose quotas, duties, tariffs, taxes or other similar restrictions upon the import of materials in the future, nor can we predict future trade policy or the terms of any renegotiated trade agreements and their impact on our business.
The U.S. government has adopted new approaches to trade policy and in some cases, may renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreements. While the Supreme Court has limited the President’s authority to impose open-ended tariffs under IEEPA, the administration has utilized alternative statutory authorities, such as Section 122, to impose time-limited surcharges, and has raised the possibility of seeking congressional extensions or imposing significant additional tariff increases under Section 232 or Section 301of the Trade Act or expanding the tariffs to capture other countries and certain types of foreign goods. A significant portion of our operational infrastructure, including LED lighting, climate control systems, extraction hardware, and specialized packaging, is sourced from international markets, particularly China and Southeast Asia. Recent and proposed shifts in U.S. trade policy, including the current 15% global tariff and other tariffs on certain imports, could drastically increase the cost of building out or maintaining our facilities. These costs are difficult to pass on to consumers in a highly competitive, price-sensitive market. Additionally, the legal and administrative uncertainty following the recent U.S. Supreme Court ruling, including the process for seeking duty refunds and the potential for rapid shifts between different statutory tariff regimes, may make it more or for us to procure packaging, construction, and other materials. As a result, we may experience supply chain or increased pricing of such procured materials and planned projects may be , which could have a material effect on our current and expansion strategy as well as our business, operating results and financial condition.
In addition, in response to both the invalidated IEEPA tariffs and the newly imposed Section 122 tariffs, other countries have implemented or may implement retaliatory tariffs on U.S. goods. Political tensions as a result of trade policies could reduce trade volume, investment, technological exchange, and other economic activities between major international economies, resulting in a material adverse effect on global economic conditions and the stability of global financial markets, which could in turn have a material adverse impact on our business, operating results and financial condition.
Table of Contents
Risks Related to Our Business and Operations – Organizational Structure and Acquisition-Based Strategy
The Company is the ultimate holding company in its corporate organizational structure. As such, the Company depends on the performance of its subsidiaries and affiliates and therefore any material declines in the financial health or prospects of these entities will adversely affect our business, liquidity, financial condition and results of operations.
We are a holding company, and the vast majority of our assets are the ownership interests we hold in our subsidiaries. As a result, our investors, lenders and creditors are subject to the risks attributable to our subsidiaries. As a holding company, we conduct all of our business operations through our subsidiaries and affiliates, which generate all of our revenues. Consequently, to the extent we cannot raise funds from the issuance of debt or equity securities, our cash flow and ability to complete our business plan and growth objectives are dependent on the earnings of our subsidiaries and the distribution of those earnings to us. The ability of our subsidiaries and affiliates to pay dividends and other distributions to us or to any of our other subsidiaries will depend on their operating results and are subject to laws and regulations which require that solvency and capital standards be maintained as well as contractual restrictions contained in mortgages, credit facilities and other similar agreements. In the event of a liquidation or reorganization of any of our subsidiaries or affiliates, lenders and trade creditors may be entitled to payment of their claims from the assets of such subsidiaries or affiliates before us. Accordingly, any decline in the financial performance or prospects of any of our subsidiaries or affiliates will adversely affect our investment in such subsidiaries or affiliates, the value of our assets and our ability to receive cashflow and realize a return on our investment.
We engage in acquisitions, dispositions and other strategic transactions, which present numerous execution risks. We may encounter unforeseen obstacles related to these transactions that would negatively impact our business, financial condition and results of operations and our Common Stock.
Material acquisitions, dispositions and other strategic transactions involve a number of execution risks, including: (i) potential disruptions to our ongoing business; (ii) distraction of management; (iii) our becoming more financially leveraged; (iv) the anticipated benefits and cost savings of those transactions not being realized fully, or taking longer to realize than expected; (v) an increase in the scope and complexity of our operations, including in employee relations as a result of growth or acquiring existing union and collective bargaining agreements; and (vi) a loss or reduction of control over our assets. Additionally, we may issue Common Stock and other equity interests as consideration in such transactions, which issuances would dilute our existing stockholders’ equity holdings in the Company.
Our acquisitions are subject to varying degrees of approval which include in some cases, among other things, (i) approval by the Company’s stockholders; (ii) approval by local and state authorities of the change in ownership in the cannabis licensee or the deemed sale, transfer or assignment of the cannabis-related licenses; and (iii) other state and local regulatory approvals. We are unable to predict when all required approvals or authorizations will be obtained, if at all.
After acquisitions are consummated, the presence of one or more material liabilities of an acquired company or limitations on its operations that are unknown to us at the time of acquisition could have a material adverse effect on our business, financial condition and results of operations.
We may not be able to identify and acquire businesses and cannabis licenses in desired markets or successfully integrate acquired businesses and assets that we deem necessary to achieve our desired growth, which would negatively impact our business plans, financial condition and results of operations.
The ability to achieve desired growth will depend in part on our ability to identify, evaluate, successfully negotiate and consummate acquisition and investment opportunities with target companies on prices that reflect the value of such target companies. Achieving this objective in a cost-effective manner is a product of our sourcing capabilities, our management of the negotiation and investment process, the ability to structure and provide purchase prices on terms that are attractive to target companies as well as our access to financing on acceptable terms. Failure to successfully consummate and integrate suitable acquisitions and investments could have a material adverse effect on our business, financial condition and results of operations.
Table of Contents
Many of the businesses that we acquire or invest in are early-stage companies that may have limited operations or revenues. These businesses may underperform our targets and projections and thus negatively impact our business, financial condition and results of operations.
We may acquire and make investments in businesses that we perceive to have potential future value but have little operating history, no significant sources of operating cash flow and no revenues from operations. Our resources and opportunity costs spent on these companies are subject to risks and uncertainties that new businesses with no operating history or limited financial results may face. In particular, there is a risk that these early-stage businesses will not be able to meet anticipated performance targets or financial projections, which could have a material adverse effect on our business plans, financial condition and results of operations.
The uncertain, fragmented and early-stage nature of the cannabis industry often results in an unconventional due diligence process and acquisition and transaction terms that could result in unknown and materially detrimental consequences to us.
The uncertainty inherent in various aspects of the cannabis industry can result in what otherwise would be considered inadequate acquisition and investment due diligence information and assumption of uncertain legal consequences relative to a target acquisition or investment. The reluctance of banks and other financial institutions to facilitate financial transactions in the cannabis industry can result in inadequate and unverifiable financial information about target acquisitions and investments, as well as cash management practices that are vulnerable to theft and fraud. The lack of established, traditional sources of financing for industry participants can result in unusual and uncertain arrangements affecting the ownership and obligations of a target investment. The reluctance of some professionals and advisors to represent cannabis-industry participants in financings and other business transactions can result in the lack of documentation setting forth the terms of agreements and understandings, inadequately documented transactions, and transactions that in whole or in part do not comply with applicable state or local laws, among other consequences. We have acquired or invested in, and may in the future acquire or invest in, businesses and companies that are or may become party to legal proceedings, have financial and other due diligence information, employ cash management practices, written or adequate legal documents governing significant transactions, policies and processes with respect to compliance with laws and otherwise have known or unknown conditions that could be to its business and assets, which in turn could have a material effect on our business, financial condition and results of operations.
Table of Contents
Competition for the acquisition and leasing of properties suitable for the cultivation, production and sale of medical and adult use cannabis may impede our ability to make acquisitions or increase the cost of these acquisitions, which could negatively impact our business, financial condition and results of operation.
We compete for the acquisition of properties suitable for the cultivation, production and sale of medical and adult use cannabis with entities engaged in agriculture and real estate investment activities, including corporate agriculture companies, cultivators, producers and sellers of cannabis. In addition, in certain markets the local governments have authority to choose where any cannabis establishment will be located. These authorized areas are frequently removed from other retail operations. Because the cannabis industry remains illegal under U.S. federal law, the disadvantaged tax status of businesses deriving their income from cannabis, and the reluctance of the banking industry to support cannabis businesses, it may be difficult for us to locate and obtain the rights to operate at various preferred locations. Property owners may violate their mortgages by leasing to us, and those property owners that are willing to allow use of their facilities may require payment of above fair market value rents to reflect the scarcity of such locations and the risks and costs of providing such facilities. All of these factors may prevent us from acquiring and leasing desirable properties, may cause an increase in the price we must pay for properties or may result in us having to lease our properties on less terms than we expect.
Our competitors may have greater financial and operational resources than we do and may be willing to pay more for certain assets or may be willing to accept more risk than we believe can be prudently managed. In particular, larger companies may enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies.
Our competitors may also adopt transaction structures similar to ours, which would decrease our competitive advantage in offering flexible transaction terms. In addition, due to a number of factors, including but not limited to potential greater clarity of the laws and regulations governing medical cannabis by state and federal governments, the number of entities and the amount of funds competing for suitable investment properties may increase, resulting in increased demand and increased prices paid for these properties. If we pay higher prices for properties or enter into leases for such properties on less favorable terms than we expect, our profitability and ability to generate cash flow may be adversely impacted. Increased competition for properties may also preclude us from acquiring those properties that would generate attractive returns to us.
We may purchase businesses and assets with limited representations and warranties from, or recourse to, the sellers of those businesses and assets. These limited representations and warranties and lack of recourse could result in no or limited legal remedies for unknown and materially detrimental problems with the business or assets we acquire, which in turn could negatively impact our business, financial condition and results of operations.
We may acquire businesses and assets with only limited representations and warranties from the sellers regarding the quality of the business, its operating results, liabilities and risks and quality of assets. We may have limited or no recourse to the sellers if they breach their representations or warranties in the applicable transaction documents. As a result, if defects or liabilities are subsequently discovered, we may not be able to pursue a claim for damages against the sellers. The extent of damages that we may incur as a result of such matters cannot be predicted, but potentially could have a material adverse effect on the value of our assets and revenue streams and financial performance. Further, some of our remedies and recourse may consist of obligations of cannabis operations, and our remedies may be limited if deemed unenforceable under federal laws or for other regulatory reasons.
We may enter or acquire businesses in developing markets where regulation of medical or adult use cannabis is uncertain or in process, exposing us to additional risks and expenses with respect to regulatory compliance.
We may enter markets or acquire businesses and assets in developing markets where the regulation of cannabis is uncertain. The medical or adult use cannabis regulatory regime in a market may not be settled at such time and final regulations with respect to cannabis licenses may still be unknown. If final regulations differ from our expectations, or the existing terms of the acquired license are changed by the adoption of final regulations, we may realize less value from the expansion or acquisition than expected. This possibility, as well as other general uncertainties surrounding cannabis markets with regulation that is not established, could have consequences detrimental to our business plan and asset values, which in turn could have a material adverse effect on our business, financial condition and results of operations.
Table of Contents
Our business and asset portfolio are not highly diversified by industry and our sales are geographically concentrated. If our cannabis business and assets underperform, our business, financial condition and results of operations would be negatively impacted.
Our assets are associated with the medical and adult use cannabis industry. While we may purchase other assets and make investments not limited to the cannabis industry, we intend to maintain and continue to acquire businesses, licenses and assets related to the cannabis industry. Thus, we have, and are expected to have, limited industry diversity as to asset type and revenue generation. Additionally, our business is geographically concentrated in the U.S. states in which we hold licenses to operate cannabis-related businesses. In particular, we have substantial operations in Florida, which accounted for approximately 28% of our consolidated sales as of December 31, 2025, where all sales are for medical products and are generated solely by our retail stores given the vertical integration requirements of Florida’s cannabis regulations. As a result, our business, financial condition, and results of operations are particularly sensitive to economic, regulatory, and competitive conditions in Florida. Should economic conditions deteriorate, competitive pressure intensify, or adverse regulatory changes occur within the region, our results of operations and financial position would be negatively impacted. In addition, Florida is prone to extreme weather events and natural disasters, such as hurricanes, which could cause significant property damage, business , or supply chain . Insurance coverage for such events may be , , or prohibitively expensive. Furthermore, any changes in state law, in the potential legalization of adult-use cannabis, or regulatory actions could materially impact our business. See “-- We are to various operational risks and natural phenomena, any of which may be or , and could have a material effect on our business, financial condition and results of operations ” for more information. This of industry and geographic diversification increases the risk associated with the revenue streams we expect to receive from our businesses and assets and, as a result, could have a material effect on our business, financial condition and results of operations.
Our use of joint ventures, strategic partnerships and alliances may expose us to risks associated with jointly owned investments.
We currently operate parts of our business through joint ventures with other companies or individuals, and we may enter into additional joint ventures and strategic alliances in the future. Joint venture investments may involve risks not otherwise present in investments made solely by us, including: (i) we may not control the joint ventures; (ii) our joint venture partners may not agree to distributions that we believe are appropriate; (iii) where we do not have substantial decision-making authority, we may experience impasses or disputes with our joint venture partners on certain decisions, which could require us to expend additional resources to resolve such impasses or disputes, including litigation or arbitration; (iv) our joint venture partners may become insolvent or bankrupt, fail to fund their share of capital contributions or fail to fulfill their obligations as a joint venture partner; (v) the arrangements governing our joint ventures may contain certain conditions or milestone events that may never be or ; (vi) our joint venture partners may have business or economic interests that are with ours and may take actions to our interests; (vii) we may as a result of actions taken by our joint venture partners with respect to our joint venture investments; and (viii) it may be for us to exit a joint venture if an arises or if we desire to sell our interest for any reason. Any of the foregoing risks could have a material effect on our business, financial condition and results of operations. In addition, we may, in certain circumstances, be liable for the actions of our joint venture partners.
The contractual arrangements we have with our consolidated variable interest entities (“VIEs”) are not as secure as direct ownership of such entities.
We have, and may in the future, enter into financing arrangements with certain VIEs to provide funding for potential capital expenditures including, but not limited to, the construction of dispensaries and other facilities. Our existing VIEs are, and may in the future be, owned by certain of our employees or their affiliates. We may enter into Management Service Agreements with these VIEs, which grant us the ability to make business operating decisions, manage and staff employees, determine product mix, and direct allocation of cash. The Management Service Agreements may also allow us to limit distributions from the entity.
We consolidate VIEs with the Company for financial reporting purposes. If we were to hold such entities directly, we would be able to exercise our rights as an equity holder directly to effect changes in the boards, managers or employees of those entities, which could affect changes at the management and operational level. In contrast, under our current contractual arrangements with these VIEs, we may not be able to directly change the members of the boards, managers or employees of these entities and would have to rely on the entities and the entities’ equity holders to perform their obligations in order to exercise our control over the entities. If any of these affiliated entities or their equity holders fail to perform their respective obligations under the contractual arrangements, we may have to incur substantial costs and expend additional resources to enforce such arrangements.
Table of Contents
Risks Related to our Business and Operations – The Cannabis Industry
If we are unable to compete effectively with current and potential participants in the cannabis industry and the illicit and psychoactive hemp-based markets, or if competition with current and potential market participants results in pricing pressure on our products, our business, financial condition and results of operations will be adversely impacted.
The U.S. cannabis industry is, and is expected to continue to be, competitive. A number of other companies engage in, and may in the future engage in, cannabis-related businesses, operate businesses in competition with us, purchase businesses and assets and/or make investments that we will also seek to purchase or make. This competition may increase the price we must pay for acquisitions, make it more difficult for us to acquire licenses and purchase additional businesses and assets and put pricing pressure on our products, making it more difficult to operate at a profit. The inability to operate at a profit and acquire licenses, businesses and assets on terms favorable to us may adversely impact the revenue stream, geographic footprint and growth that we anticipate achieving.
Large conglomerates and companies who also recognize the potential for financial success through acquisitions and investment in the cannabis industry could strategically purchase or assume control of dispensaries and cultivation and production facilities in the states in which we operate or plan to operate. In doing so, these larger competitors could establish price setting and cost controls which would effectively “price out” many of the participants in the varied businesses operating in the cannabis industry. While the trend in most state laws and regulations seemingly deters this type of takeover, the industry in the U.S. is young and the future regulatory landscapes at both the state and federal level remain largely unknown.
We also face competition from the psychoactive hemp-based market and the illicit market, along with illegal dispensaries and cultivation operations that are unlicensed and unregulated, and that are selling cannabis products, including products with higher concentrations of active ingredients, and using delivery methods that we may be prohibited from offering due to laws and regulations. Any inability or unwillingness by law enforcement authorities to enforce existing laws prohibiting the unlicensed production and sale of cannabis and cannabis products could result in increased competition for us. Any or all these events could have a material adverse effect on our business, financial condition and results of operations.
Synthetic products may compete with cannabis and cannabis products resulting in increased competition and downward pressure on demand, volume and the profitability of our products, which could adversely affect our business, financial conditions and results of operations.
The pharmaceutical industry may attempt to compete with or dominate the cannabis industry through the development and distribution of synthetic products that emulate the effects and treatment of organic cannabis. If they are successful, the widespread popularity of such synthetic products could change the demand, volume and profitability of cannabis and cannabis related products. This competition could adversely affect our ability to secure long-term profitability and success through sustainable and profitable operations and could have a material adverse effect on our business, financial condition and results of operations.
We face risks due to industry immaturity and limited comparable, competitive or established industry best practices.
As a relatively new industry, there are not many established operators in the cannabis industry with business models we can follow or build upon. Similarly, there is limited information about comparable companies available to industry participants and potential investors to review in making business and investment decisions.
Stockholders and investors should consider, among other factors, our prospects for success in light of the risks and uncertainties encountered by companies like us. For example, unanticipated expenses and problems or technical difficulties may occur, which may result in material delays in the expansion or operation of our business. We may fail to successfully address these risks and uncertainties or fail to successfully implement our operating strategies. If we fail to do so, it could materially harm our business to the point of having to cease operations and could impair the value of our Common Stock such that investors may lose their entire investments.
Table of Contents
We rely on third-party suppliers, manufacturers and contractors based in the U.S., and any significant interruption or negative change in the quality, availability, trade policy, pricing and other economics of these relationships could have a material adverse effect on our business, financial condition and results of operations.
The cultivation, extraction, production, sale and distribution of cannabis and cannabis products is dependent on a number of key inputs from third-party suppliers based in the U.S. and their related costs, including raw materials, electricity, water and other local utilities. Many of these inputs are provided by local suppliers, manufacturers and contractors operating in the same state or U.S. region as our operations, especially with respect to energy sources and other utilities. Some of these inputs may only be available from a single supplier or a limited group of suppliers. If a sole source supplier were to go out of business, fail to ship products in a timely manner, fail to produce products that meet our quality standards, have limited supply, become unwilling to do business with a cannabis business or substantially raise its prices, we might be unable to find a replacement for such source locally, regionally or anywhere within the U.S. in a cost-effective or timely manner or at all, which could materially and adversely impact our reputation and operations. Further, the rates charged for electricity and other energy sources may increase due to diminished supply, general economic conditions, rising inflation or general economic , and the cost of raw materials and other components, natural gas and electricity may be affected by geopolitical , such as ongoing between Russia and Ukraine and Israel and Hamas, changes in trade policies, including the imposition of new tariffs or increases in existing tariffs between the United States, Mexico, China or other countries, or reactionary measures including tariffs, legal , or currency , climate change and harvesting conditions. If our suppliers were to increase costs for any reason, we may need to increase costs to our end consumers, which may not be in offsetting cost pressures. Consumers may be less willing to pay a price differential for our branded products and may increasingly purchase lower-priced offerings from us or our competitors, or may some purchases altogether, particularly of our premium products, during an economic or times of increased inflationary pressure.
We also rely on relationships with numerous business partners and third-party service providers located in the U.S. Unless and until the U.S. federal legal landscape with respect to cannabis changes, there is a significant risk that U.S. business partners and third party service providers may be required or otherwise decide to suspend, limit or withdraw services and business relationships to avoid prosecution by federal authorities under U.S. federal laws. Any inability to secure partners and required services or to do so on appropriate terms could have a material adverse effect on our business plans, financial condition and results of operations.
A drop in the wholesale or retail price of cannabis products in the geographic areas in which we operate would negatively impact our business, financial condition and results of operations.
The price and demand for our products is determined on a state-by-state basis and depends in part on the price and supply of commercially-grown cannabis in the particular state, and costs of cannabis are affected by various state regulations that limit the sourcing and procurement of cannabis products. Fluctuations in economic and market conditions and changes in regulations that impact the prices and supply of commercially grown cannabis, such as increases in the supply of cannabis and the decrease in the price of products using commercially grown cannabis, could cause increased competition and restrictions on selling products, resulting in our revenues and profitability declining, which would have a negative impact on our business, financial condition and results of operations.
Table of Contents
Inconsistent public opinion and perception of the medical and adult use cannabis industry may hinder market growth and state adoption of cannabis, which would adversely impact our growth plans and current operations and result in an adverse effect on our business, financial condition and results of operations.
Public opinion and support for medical and adult use cannabis has traditionally been inconsistent and varies from state to state. While public opinion and support appears to be rising generally in the U.S. for legalizing medical and adult use cannabis, it remains an issue subject to differing opinions surrounding the level of legalization (for example, medical cannabis only as opposed to legalization in general). Inconsistent public opinion and perception of medical and adult use cannabis hinders the growth of the cannabis industry and state adoption, which could have a material adverse effect on our business plans, financial condition and results of operations.
Our dependence upon consumer perceptions means that adverse scientific research reports, findings, regulatory proceedings, litigation, media attention or other publicity, regardless of accuracy or merit, could have a material adverse effect on us. Further, adverse publicity reports or other media attention regarding the safety, efficacy and quality of cannabis generally, or our products specifically, or associating the consumption of cannabis with illness or other negative effects or events, could have a material adverse effect on our sales and profits. Adverse publicity reports or other media attention could arise even if the adverse effects associated with such products resulted from consumers’ failure to consume the products appropriately or as directed.
The cannabis industry is subject to the risks inherent in an agricultural business, including environmental factors and the risk of crop failure. These risks could negatively impact our business, financial condition and results of operations.
The growing of cannabis is an agricultural process. As such, we are subject to the risks inherent in an agricultural business, including risks of climate change, crop failure and destruction presented by water scarcity, power failure, fires, insects, plant diseases and similar agricultural risks. These factors could have an adverse effect on our business, financial condition and results of operations.
We may be adversely impacted by rising or volatile energy costs and available supply.
Cannabis cultivation and processing consumes considerable energy, which makes us vulnerable to rising energy costs and available supply, including the price and availability of oil and natural gas. Accordingly, recent rising or volatile energy costs and supply disruptions caused by global supply constraints, inflation, limits on U.S. production and sanctions imposed on certain imports may adversely impact our business operations, financial condition and results of operations.
We face physical security risks. Any theft or other security event could lead to human injury and financial losses that would negatively affect our business, financial condition and results of operations. If a security breach resulted in substantial cannabis diversion, we could become a target for federal cannabis enforcement.
The business premises and assets of our operating locations are targets for theft. While we have implemented security measures at each of our locations and continue to monitor and seek to improve our security measures, our cultivation, production and dispensary facilities could be subject to break-ins, robberies and other breaches in security. If there was a breach in security and we fell victim to a robbery or theft, our employees or customers could be harmed and the loss of cannabis products, cultivation and production equipment or cash may be uninsured or underinsured, all of which could have a material adverse effect on our business, financial condition and results of operations. Furthermore, if such losses resulted in cannabis diversion, especially diversion to minors or across state lines, we could become a target for federal enforcement action, which could lead to or civil sanctions that would materially impact our business, financial condition and results of operations.
Table of Contents
Risks Related to our Business and Operations – Government Regulation of Cannabis
Disparate state-by-state regulatory landscapes and the constraints related to holding cannabis licenses in various states results in operational and legal structures that could have materially detrimental consequences to our business, financial condition and results of operations.
We realize, and will continue to realize, the benefits from cannabis licenses pursuant to several different operational and legal structures, depending on the regulatory requirements for specific states, including realizing the economic benefit of cannabis licenses through Management Service Agreements, which are often with third parties who hold the cannabis license. Management Service Agreements may be required to comply with applicable state laws and regulations or are in response to perceived risks that we determine warrants such arrangements.
The foregoing structures present various risks to us, including the following risks, each of which could have a material adverse effect on our business, financial condition and results of operations:
• A regulatory authority may determine that these Management Service Agreement structures are in violation of an existing legal or regulatory requirement or it may change the legal or regulatory requirements such that this contractual structure violates such changed requirements. We cannot provide assurance that a license application submitted by a third party for operations that would be governed by a Management Service Agreement will be approved or renewed.
• There could be a material and adverse impact on the revenue stream we intend to receive from a Management Service Agreement structure. If a Management Service Agreement is terminated, we will no longer receive any economic benefit from the applicable dispensary or cultivation license previously subject to the Management Service Agreement.
• These structures could potentially result in the funds invested by us for the development and operation of the business subject to the applicable license being used for unintended purposes, such as to fund litigation or damages from a contractual breach by the license holder.
• Under a Management Service Agreement structure, we will not be the holder of the applicable cannabis license, and therefore, we only would have contractual rights with respect to any interest in any such license. If the license holder fails to adhere to its contractual agreement with the us, or if the license holder makes, or fails to make, decisions in respect of the license that we disagree with, we will only have contractual recourse and will not have recourse to any regulatory authority.
• The license holder may renege on its obligation to pay fees and other compensation pursuant to a Management Service Agreement or violate other provisions of these agreements.
• The license holder’s acts or omissions may violate the applicable license, thus jeopardizing the status and economic value of the license holder and, by extension, us.
• The license holder may attempt to terminate the Management Service Agreement with us in violation of its express terms.
In any or all of the above situations, it would be difficult and expensive for us to protect our rights through litigation, arbitration or similar proceedings.
Table of Contents
Our business is subject to a variety of laws regarding financial transactions related to cannabis, which could subject us to legal claims or otherwise adversely affect our business, financial condition or results of operations.
We are subject to a variety of laws and regulations that prohibit money laundering, including the Money Laundering Control Act and any related or similar rules, regulations or guidelines issued, administered or enforced by governmental authorities in the U.S. or any other jurisdiction in which we have business operations. Financial institutions in the U.S. that we rely on are subject to the Bank Secrecy Act. The penalties for violation of these laws include imprisonment, substantial fines and forfeiture.
In 2014, the DOJ directed federal prosecutors to exercise restraint in prosecuting money laundering violations arising in the state legal cannabis programs and to consider the federal enforcement priorities enumerated in the Cole Memorandum when determining whether to charge institutions or individuals based upon cannabis-related activity. In the same year, the Treasury Department issued guidance that clarified how financial institutions can provide services to cannabis-related businesses, consistent with financial institutions’ obligations under the Bank Secrecy Act. Then Attorney General Sessions’ rescission of the DOJ’s guidance on the state cannabis programs increased uncertainty and heightened the risk that U.S. federal law enforcement authorities could seek to pursue money laundering charges against entities or individuals, engaged in supporting the U.S. cannabis industry. In January 2018, the Treasury Department issued additional guidance that the 2014 guidance would remain in place until further notice, despite the rescission of the DOJ’s earlier guidance memoranda. While proposed legislation such as the SAFE Banking Act, SAFER Banking Act and the CLIMB Act may make it easier for cannabis companies to access U.S. financial institutions, there is no guarantee that these acts will pass in the near future or at all, or that they will not significantly change prior to passing.
If any of our business activities, any dividends or distributions therefrom, or any profits or revenue accruing thereby are found to be in violation of money laundering statutes, we could be subject to criminal liability and significant penalties and fines. Any violations of these laws, or allegations of violations could disrupt our operations and involve significant management distraction and expenses. As a result, money laundering charges could materially and adversely affect our business, financial condition and results of operations. Additionally, proceeds from our business activities could be subject to seizure or forfeiture if they are found to be illegal proceeds of a crime transmitted in of anti-money laws, which could have a material effect on our business, financial condition and results of operations.
THE CONSEQUENCES OF SUCH GOVERNMENTAL ENFORCEMENT WOULD BE MATERIALLY DETRIMENTAL TO US, OUR BUSINESS AND THE VALUE OF OUR COMMON STOCK AND COULD RESULT IN THE FORFEITURE OR SEIZURE OF ALL OR SUBSTANTIALLY ALL OF THE COMPANY’S ASSETS.
Compliance with regulations regarding cannabis is difficult and costly because the regulation of cannabis differs by jurisdiction, is uncertain and frequently changes. Compliance with applicable regulatory laws may be costly and take an extended period of time which may adversely affect our business, financial condition and financial results. If we fail to comply with applicable laws regarding cannabis, our business, financial condition and results of operations may be adversely affected.
Achievement of our business objectives is contingent, in part, upon our compliance with regulatory requirements enacted by governmental authorities and obtaining all regulatory approvals, where necessary, for the operation of our business and the sale of our products. We cannot predict the impact of the compliance regime regulatory bodies where we operate (to the extent we are subject to such regulations) are implementing or may implement that may affect our business. Similarly, we cannot predict the cost and time that will be required to secure or renew all appropriate regulatory licenses and approvals for the operation of our business or the sale of our products, or the cost and extent of testing, tracking, documentation, reporting and other compliance requirements that may be required by governmental authorities. The impact of governmental compliance regimes, the cost in obtaining and maintaining regulatory approvals and any delays in obtaining, or failure to obtain regulatory approvals may significantly delay or impact existing markets and the development of new markets, products and sales initiatives and could have a material adverse effect on our business plans, results of operations and financial condition.
Table of Contents
Recent and proposed state legislation throughout the U.S. has prioritized minority and diversity participation in the cannabis industry, including providing licensing preferences to minority owners, individuals with specified criminal convictions, local residents and individuals and businesses from economically depressed or disadvantaged areas. Social equity state legislation could prevent, limit or discourage us from obtaining new licenses, renewing licenses or participating in new or existing markets, which would have a material adverse impact on our business, financial condition and results of operations.
Recent and proposed state legislation throughout the U.S. has prioritized minority and diversity participation in the cannabis industry, including providing licensing preferences to minority owners, individuals with specified criminal convictions, local residents and individuals and businesses from economically depressed or disadvantaged areas. As new medical and adult use legislation is passed, multi-state operators such as us may be prevented, limited or discouraged from obtaining new licenses, renewing licenses or from participating in new markets or existing markets, or may be required to partner with specific individuals, who may be difficult to find and agree to terms with. Social equity initiatives could adversely impact our ability to increase or maintain market share and revenues in certain states, expand our geographic footprint or obtain a positive return on our acquisitions or investments, all of which could have a material adverse impact on our business, financial condition and results of operations. However, on January 20, 2025, President Trump issued an executive order ending certain federal diversity, equity and inclusion programs. While this order targets federal-level programs, its implementation has created significant uncertainty for state-level cannabis social equity initiatives that rely on federal administrative cooperation or grant funding. As such, we are uncertain whether the programs discussed above will continue in the cannabis industry. Furthermore, the legal landscape for state social equity programs has become increasingly due to a split in federal appellate court rulings. While some circuits have upheld local residency preferences, others, including the Second Circuit in 2025, have found that prioritizing in-state applicants is . These rulings and subsequent lawsuits have led to significant and freezes in the issuance of new licenses in several of our core markets. We cannot predict whether these programs will be struck down, amended, or indefinitely by , which could our expansion timelines and increase our legal and compliance costs.
There is a risk of high bonding and insurance costs which could materially impact our business, financial condition and results of operations.
There is risk that some or all state and local regulatory agencies will require entities and individuals engaged in aspects of the cannabis business to post a bond and maintain specified levels of insurance when applying for a cannabis-related license or renewal as a guarantee of payment of sales and franchise tax. It remains an unknown cost that could have a negative impact on our ultimate success or our participation in the business opportunities ultimately selected.
Unknown additional or increased regulatory fees, required fundings and taxes may be assessed in the future, which could materially impact our business, financial condition and results of operations.
Various states and localities have imposed (or may in the future impose) licensing and other fees to fund, among other things, schools, road improvements, low-income and moderate-income housing and financing for social equity operators. Additionally, multiple states in the U.S. are considering, or may in the future consider, special taxes, funding requirements or increasing or adding fees on businesses in the cannabis industry, including substantial licensing fees. The imposition of additional taxes, required fundings or increased fees would adversely affect our operating results and expected returns on acquisitions, investments and business opportunities.
We are subject to environmental regulations, and future changes in environmental regulations could have a material adverse effect on our business, financial condition and results of operations.
Our operations are subject to environmental regulations in the various jurisdictions in which we operate. These regulations mandate, among other things, the maintenance of air and water quality standards, emissions standards and land reclamation. They also set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Environmental legislation is evolving in a manner which will require stricter standards and enforcement, increased compliance costs, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects, and a heightened degree of responsibility for companies and their officers, directors and employees. There is no assurance that future changes in environmental regulation will not have a material adverse effect on our business, financial condition, and results of operations.
Table of Contents
Our operating results may be adversely affected by changes in laws and policies governing employers and by union organizing activity.
Congress and certain state legislatures continue to consider and pass legislation that increases our costs of doing business, including increased minimum wages and requiring employers to provide paid sick leave or paid family leave. In addition, our employee-related operating costs may be increased by union organizing activity, and the National Labor Relations Board adopted regulatory changes that could facilitate union organizing. If we are unable to reflect these increased expenses in our pricing or otherwise modify our operations to mitigate the effects of such increases, our operating results will be adversely affected.
Increased unionization efforts and labor shortages could increase our operating costs and disrupt our ability to maintain consistent production levels.
The cannabis industry is seeing a surge in organized labor activity, often incentivized by state Labor Peace Agreement requirements (e.g., in New Jersey). If a significant portion of our cultivation or retail workforce were to unionize, we could experience higher labor costs, more rigid work rules, and the potential for work stoppages or strikes. Furthermore, the specialized nature of cannabis cultivation requires skilled labor; an intensely competitive labor market may force us to increase wages and benefits beyond our current projections to retain talent, which would further squeeze our operating margins.
As an SEC Foreign Issuer in Canada with cannabis-related business activities, the Company may be subject to heightened scrutiny by Canadian authorities, which could negatively affect our business, financial condition and results of operations.
Because Verano is classified as an SEC Foreign Issuer in Canada, its business, operations and investments , and any future businesses, operations and investments, may become the subject of heightened scrutiny by regulators, stock exchanges and other authorities in Canada. As a result, we may be subject to significant direct and indirect interaction with Canadian public officials.
We may be required by regulatory authorities to divest licenses, which would adversely impact our business, financial condition and results of operations.
Some states in which we operate, or expect to operate, limit or may in the future limit, the number of licenses that can be held by one consolidated entity within that state. We may hold more than the prescribed number of licenses in a state, including after consummating an acquisition of a business that also holds licenses in the applicable state, and accordingly we may be required to divest licenses and related operations in order to comply with applicable regulations or in order to receive approval to consummate such acquisition. The required divestiture of licenses and related operations may result in us accepting sales prices below market value and the incurrence of divestiture costs and disruptions which could have a material adverse effect on our business, financial condition and results of operations.
Table of Contents
We are dependent on the banking industry, and we have difficulty accessing or consistently maintaining banking or other financial services due to the federal illegality of cannabis businesses, which could adversely impact our business, financial condition and results of operations.
Our participation in the cannabis industry limits our ability to do business or establish collaborative relationships with U.S. financial institutions that may fear disruption or increased regulatory scrutiny of their own activities.
We are dependent on the banking industry. Our business operating functions, including payroll for employees, equipment and property lease payments, and the payment of other vendor and operating expenses, are reliant on having access to traditional banking services. We require access to banking services to make and receive payments in a timely manner, and these could be jeopardized if we lose access to bank accounts. Most federal and federally insured banks currently do not serve cannabis businesses on the stated ground that growing and selling cannabis is illegal under federal law, even though the Treasury Department issued guidelines to banks in February 2014 that clarified how financial institutions can provide services to cannabis-related businesses, consistent with financial institutions’ obligations under the Bank Secrecy Act. When cannabis businesses are able to find a bank that will provide services, they face extensive customer due diligence in light of complex state regulatory requirements and guidance from the Treasury Department, and these reviews are time-consuming and costly, creating additional barriers to financial services for, and imposing additional compliance requirements on, us. While the U.S. federal government has generally not initiated financial state-law compliant cannabis companies or their vendors, the U.S. federal government theoretically could initiate such , at least companies in the adult use cannabis markets. The continued uncertainty surrounding financial transactions related to cannabis activities, including legislation such as the SAFE Banking Act, the SAFER Banking Act and the CLIMB Act, and the subsequent risks this uncertainty presents to U.S. financial institutions may result in their services to the cannabis industry or limiting their ability to provide services to the cannabis industry or ancillary businesses providing services to the cannabis industry. Additionally, increased institutional interest in the cannabis sector may lead to more rigorous know your customer and anti-money from financial partners. If our internal controls are deemed to track source of funds or related-party transactions with the granularity required by major national banks, we may be access to the very banking services that rescheduling from Schedule I to Schedule III was intended to provide. This could result in a continued reliance on expensive, non-traditional financing.
We, our directors, officers, investors and other stakeholders may be required to disclose personal information to regulatory authorities. Failing to do so could put our licenses in jeopardy and negatively impact our business, financial condition and results of operations.
We own, operate, manage, and provide products or services to various U.S. state-licensed cannabis businesses. Acquiring even a minimal or indirect interest in a U.S. state-licensed cannabis business can trigger requirements to disclose directors’, officers’, investors’ and other stakeholders’ personal information to applicable regulatory authorities. While these requirements vary by jurisdiction, some require interest holders to personally apply for regulatory approval and to provide tax returns, compensation agreements, fingerprints for background checks, criminal history records and other personal documents and information. Some states require disclosures of directors, officers and holders of more than a specified percentage of equity of the applicant. While some states allow exceptions for investments in publicly traded companies like us, not all states do so, and some of these public company exceptions are limited to companies traded on a U.S. stock exchange, which we are not. If these regulations apply to us, our directors, investors, officers and other stakeholders are required to comply with the regulations or face the possibility that our relevant cannabis license could be revoked or cancelled by the state licensing authority.
Table of Contents
If one of our stockholders is found unsuitable by one of our licensing authorities, we may seek to redeem such stockholder’s ownership interests and we may be forced to use our cash or incur debt to fund such redemption of our securities. If we are unable to redeem our securities, such failure could result in the loss of current or potential cannabis licenses which would have an adverse effect on our revenues, financial performance and growth objectives.
We may seek to redeem our securities held by certain stockholders in the event (i) a licensing authority has determined that the stockholder is unsuitable to own securities of a cannabis licensee, or (ii) we have determined that the stockholder’s ownership of our securities may result in the loss, suspension or revocation (or similar action) with respect to our cannabis licenses or in us being unable to obtain any new cannabis licenses, in each case including as a result of the evaluation of such person’s suitability review or such person otherwise failing to comply with the requirements of a licensing authority. Any redemption and the price of such redemption would be determined by our board of directors (the “ Board ”) and, if a license application has been filed, after consultation with the applicable licensing authority. Any redemption may be required to be made at a premium to the market value of such securities, and a redemption diverts our cash resources from other productive uses and may require us to obtain additional financing which may involve additional restrictive covenants and further leveraging of our assets. In the event we seek to redeem specified securities and are to do so, such may result in the of one or more current or potential cannabis licenses which would have an effect on our revenues, financial performance, growth objectives and geographic diversity.
Our employees, business partners and investors may be subject to the risk of being barred from entry into the U.S. If our business partners, investors or personnel are barred from entering the United States, it could negatively impact our business, financial condition and results of operations.
Because cannabis remains illegal under U.S. federal law, non-U.S. citizens employed at, conducting business with or investing in U.S. state licensed cannabis businesses could face detention, denial of entry or lifetime bans from the U.S. for their associations with U.S. cannabis businesses. Entry happens at the sole discretion of the officers on duty of the U.S. Customs and Border Protection and these officers have wide latitude to ask questions to determine the admissibility of a foreign national.
Applicable state laws may prevent us from maximizing our potential income, including by restricting our sales and marketing activities. If our profits are constrained by such regulations, it could negatively impact our business, financial condition and results of operations.
The development of our business and operating results may be hindered by applicable restrictions on sales and marketing activities imposed by government regulatory bodies. The cannabis regulatory environment in the U.S. limits our ability to grow sales among existing customers and reach new customers in a manner similar to other industries. If we are unable to effectively market our products and compete for market share, or if the costs of compliance with government legislation and regulation cannot be absorbed through increased prices for our products, our sales and operating results could be adversely affected.
Table of Contents
Cannabis may become subject to increased regulation by the FDA or the Bureau of Alcohol, Tobacco, Firearms and Explosives (the “ATF”). If we are unable to comply with applicable regulations, it could have a material adverse effect on our business, financial condition and results of operations.
At this time, cannabis remains a Schedule I controlled substance under U.S. federal law. On December 18, 2025, President Trump issued the Executive Order, which directs federal agencies to expedite the process of rescheduling cannabis from a Schedule I to a Schedule III controlled substance. The effect of this executive order would lessen criminal penalties at the federal level and remove Section 280E tax considerations, however, the final effects of this executive order are dependent on other government actions. The Executive Order, and agency implementation of the Executive Order does not federally legalize adult use and would not federally authorize or approve state sanctioned medical programs. Cannabis would still be subject to the same FDA drug approval process as all other substances, and sales outside of FDA approval, would still be criminal at the federal level.
Additionally, the FDA may issue rules and regulations, including good manufacturing practices, related to the growth, cultivation, harvesting and processing of cannabis. Clinical trials may be needed to verify the efficacy and safety of cannabis products. It is also possible that the FDA would require facilities that grow medical-use cannabis to register with the FDA and comply with federally prescribed regulations. In the event that some or all of these regulations are imposed, the impact on the cannabis industry is unknown, including what costs, requirements and possible prohibitions may be enforced. If we become subject to these enhanced regulations prescribed by the FDA and are unable to comply, it may have a material adverse effect on our business, financial condition and results of operations.
It is also possible that the federal government could seek to regulate cannabis under the ATF. The ATF may issue rules and regulations related to the use, transporting, sale and advertising of cannabis or cannabis products, including smokeless cannabis products.
Because cannabis is illegal at the U.S. federal level, we may be unable to enforce our contracts, which could negatively impact our business, financial condition and results of operations.
Judges in multiple U.S. states have on several occasions refused to enforce contracts for the repayment of money when the loan was used in connection with activities that violate federal law, even if there is no violation of state law. Therefore, there is uncertainty that we will be able to legally enforce our agreements through U.S. legal proceedings because cannabis is illegal at the U.S. federal level.
Because states may not allow or enforce the pledge of cannabis assets as collateral, we may not be able to obtain financing or obtain better terms of financing on a secured basis or enforce any liens we may be granted on the inventory or licenses of third parties that secure our payment and other rights.
In general, the laws of the states that have legalized the sale and cultivation of cannabis do not expressly or impliedly allow for the pledge of cannabis inventory as collateral for the benefit of third parties that do not possess the requisite licenses and entitlements to cultivate, sell or possess cannabis pursuant to the applicable state law. Likewise, the laws of those states generally do not allow for the transfer of licenses and entitlements to sell or produce cannabis products to third parties that were not directly granted such licenses and entitlements by the applicable state agency. The inability to enforce liens on cannabis inventory and licenses that secure the payment of debt and other contractual rights increases the risk of loss resulting from breaches of the applicable agreements by the contracting parties, which, in turn, could have a material adverse effect on our ability to obtain secured financing, or obtain better terms on financing, or secure any loans or advances we make to third parties in the cannabis industry.
Table of Contents
Because cannabis is illegal under U.S. federal law, we may lack access to U.S. bankruptcy protections, which could negatively impact our business, financial condition and results of operations.
Because the use of cannabis is illegal under U.S. federal law, certain U.S. federal courts have denied cannabis businesses bankruptcy protections, thus making it difficult for lenders and investors to quantify the risk of being able to recoup their investments in the cannabis industry in the event of an insolvency. If we were to become insolvent, there is no guarantee that U.S. federal bankruptcy protections would be available, the unavailability of which would have a material adverse effect on any restructuring transaction.
Additionally, there is no guarantee that we will be able to effectively enforce any interests we may have in our subsidiaries, affiliates and investments. A bankruptcy or other similar insolvency event of an entity in which we hold an interest that precludes such entity from performing its obligations owed to us under an agreement may have a material adverse effect on our business, financial condition and results of operations. Further, should an entity in which we hold an interest have insufficient assets to pay its liabilities, it is possible that other liabilities will be satisfied prior to the liabilities or equity owed to us. In addition, bankruptcy or other similar insolvency proceedings are often a complex and lengthy process, the outcome of which may be uncertain and could result in a material adverse effect on our business, financial condition and results of operations.
Also, some state cannabis laws preclude entities which become insolvent from holding medical or adult use cannabis licenses. Any insolvency proceedings by the Company could therefore put the operations of our subsidiaries or affiliates at risk, which would have a negative impact on theirs and our consolidated business, financial condition and results of operations.
Table of Contents
Risks Related to our Business and Operations – Information Technology, Cybersecurity and Intellectual Property
We are subject to risks related to our information technology systems, including cyber-security risks. Successful cyber-attacks or technological malfunctions can result in, among other things, financial losses, the inability to process transactions, the unauthorized release of confidential information and reputational risk, all which would negatively impact our business, financial condition and results of operations.
Our use of technology is critical to our continued operations. We are susceptible to operational, financial and information security risks resulting from cyber-attacks or technological malfunctions. Successful cyber-attacks or technological malfunctions affecting us or our respective service providers can result in, among other things, financial losses, the inability to process transactions, the unauthorized release of customer information or other confidential information and reputational risk. Depending on the severity of a potential cybersecurity incident, our customers’ data, our employees’ data, our intellectual property (including trade secrets and research and development), and other third-party data (such as suppliers and vendors) could be compromised, which could adversely affect our business. As cybersecurity threats continue to evolve, we may be required to use additional resources to continue to modify or protective measures or to security , which could have a material effect on our business, financial condition and results of operations. Traditional cybersecurity defenses may be AI- . We have seen a global rise in cyber- , where actors use AI to impersonate executives or vendors to authorize wire transfers. As a cannabis operator handling significant cash-equivalent transactions and sensitive patient health data, a could lead to regulatory , of licensure, and brand . Our reliance on third-party seed-to-sale software also introduces concentration risk, where a single in a common vendor could operations across multiple states simultaneously.
In connection with our products and services, we may receive, process, store and transmit sensitive business information and, in certain circumstances, personal medical and other information. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data, including any personal information, we could incur liability and reputational damage and could be subject to civil fines and penalties, including under the Health Insurance Portability and Accountability Act of 1966 (“ HIPAA ”), and other relevant state and federal privacy laws in the U.S.
Our increasing use of, or failure to effectively implement, artificial intelligence (AI) and automated systems could lead to operational disruptions, data inaccuracies, or legal liabilities.
We are exploring and integrating AI technologies into our cultivation monitoring, supply chain forecasting, and retail customer engagement platforms. These technologies are complex and rapidly evolving. If the algorithms we use are flawed, or if the data used to train them is biased or inaccurate, it could lead to suboptimal cultivation yields, inventory imbalances, or discriminatory marketing practices. Furthermore, the use of generative AI by our employees or third-party vendors could result in the unintended disclosure of trade secrets or intellectual property. The regulatory landscape for AI is nascent; new laws may impose costly compliance requirements or restrict our ability to use certain automated tools for hiring or customer profiling.
We rely on third-parties to provide numerous capabilities that we depend upon on to operate, and a disruption of these systems could adversely affect our business.
We are dependent on vendors and third-party software providers, such as our seed-to-sale tracking software providers and point of sale transaction processing providers to operate our business. A serious disruption to any of these could significantly limit our ability to serve our customers and operate profitably. The failure of one or more such providers to provide the expected services, provide them on a timely basis or provide them at the prices we expect, or otherwise meet our performance standards and expectations (including with respect to data security, compliance and data privacy and protection laws) may adversely affect our business. Further, if we found it necessary to replace any such service provider, disruptions arising from the transition of functions to an alternative provider, or the costs developing our own software if we were unable to find an alternate provider, may have a material adverse effect on our results of operations or financial condition. Any disruption could cause our business and competitive position to and cause our operating results to be reduced.
Table of Contents
Strong brand identities are important to our success, and we may have to incur significant expenses to maintain our brand identities. If we are unable to protect our brands or if the cost is excessive, it could negatively affect our business, financial condition and results of operations.
We believe that establishing and maintaining the brand identities of our retail dispensaries and products are critical aspects of attracting, expanding and keeping a large customer base. Promotion and enhancement of brands will depend largely on our success in operating our dispensaries and providing high-quality products. If customers and patients do not perceive our retail operations and products to consistently be of high quality and value, or if we introduce new products, change products or enter into new business ventures that are not favorably received by customers and patients, we risk diluting our brand identities and decreasing their attractiveness to existing and potential customers. Moreover, in order to attract and retain customers and to promote and maintain brand equity in response to competitive pressures, we may have to substantially increase our financial commitment to creating and maintaining distinct brand loyalty among customers. We may incur significant expenses in an attempt to promote and maintain our brands, and if such efforts are not successful it could have a material adverse effect on our business, financial condition and results of operations.
We are reliant on intellectual property rights. If we fail to protect our intellectual property it could negatively affect our business, financial condition and results of operations.
Our success will depend in part on our ability to use and develop new extraction technologies, recipes, formulations, know-how and novel cannabis genetics. We may be vulnerable to competitors who develop competing technology, whether independently or as a result of acquiring access to the proprietary products and trade secrets of acquired businesses. In addition, effective future patent, copyright and trade secret protection may be diminished or limited based on significant innovation and advances within the market. If we fail to adequately maintain and enhance protection over our proprietary techniques and processes, as well as over our unregistered intellectual property, including our policies, procedures and training manuals, it could have a material adverse effect on our business, financial condition and results of operations.
There is limited trademark protection for cannabis products. If we are unable to protect our trademarks, it could negatively affect our business, financial condition and results of operations.
Because producing, manufacturing, processing, possessing, distributing, selling and using cannabis is illegal under the Controlled Substances Act, the United States Patent and Trademark Office will not permit the registration of any trademark that identifies cannabis products. As a result, we likely will be unable to protect our cannabis related trademarks beyond the geographic areas in which we conduct business. The use of our trademarks outside the states in which we operate by one or more other persons could have a material adverse effect on the value of our trademarks and as a result, on our business, financial condition and results of operations.
Table of Contents
Our trade secrets may be difficult to protect. Our failure to maintain meaningful trade secret protection could adversely affect our competitive position and our business, financial condition and results of operations.
Our success depends upon the skills, knowledge, and experience of our scientific and technical personnel, our consultants and advisors, as well as our contractors. Because we operate in a highly competitive industry, we rely in part on trade secrets to protect our proprietary technologies and processes. However, trade secrets are difficult and costly to protect. We enter into business protection, confidentiality and non-disclosure agreements with our partners, employees, consultants, outside scientific collaborators, developers and other advisors. These agreements generally require that the receiving party will keep confidential and not disclose to third parties our confidential information developed by the receiving party or made known to the receiving party by us during the course of the receiving party’s relationship with us. These agreements also generally provide that inventions conceived by the receiving party in the course of rendering services to us will be our exclusive property. In addition, we enter into assignment agreements to further perfect our rights in our intellectual property, including trade secrets, inventions, work product and confidential information.
These confidentiality, inventions, assignment and business protection agreements may be breached and may not effectively assign intellectual property rights to us. Our trade secrets also could be independently discovered or reverse engineered by competitors, in which case we would not be able to prevent the use of such trade secrets by our competitors. The enforcement of a claim alleging that a party illegally obtained and was using our trade secrets could be difficult, expensive and time consuming and the outcome would be unpredictable. In addition, courts may be less willing to protect trade secrets related to cannabis activities. The failure to obtain or maintain meaningful trade secret protection could adversely affect our competitive position.
We may be exposed to infringement or misappropriation claims by third parties, which, if determined adversely to us, could subject us to significant liabilities and other costs, negatively impacting our business, financial condition and results of operations.
Our success will depend in part on our ability to use and develop new extraction technologies, recipes, know-how and new strains of cannabis without infringing the intellectual property rights of third parties. We cannot assure that third parties will not assert intellectual property claims against us or companies we acquire. We are subject to additional risks if entities licensing intellectual property to us do not have adequate rights in the licensed materials. If third parties assert trademark, copyright or patent infringement or violation of other intellectual property rights against us or companies we acquire, we will be required to defend ourselves in litigation or administrative proceedings, which can be both costly and time consuming and may significantly divert the efforts and resources of our personnel. An determination in any such or proceeding to which we may become a party could subject us to significant liability to third parties, require us to seek licenses from third parties or pay ongoing royalties or subject us to prohibiting the development and operation of our applications.
Our business may be adversely affected by an increasing prevalence of fraud and other financial crimes.
We are susceptible to fraudulent activity that may be committed against us or our customers which may result in financial losses or increased costs to us or our customers, disclosure or misuse of our information or our customers' information, misappropriation of assets, privacy breaches against our customers, litigation or damage to our reputation. Such fraudulent activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering and other dishonest acts. Nationally, reported incidents of fraud and other financial have increased year-over-year. We have also experienced due to apparent and other financial . While we have policies and procedures designed to prevent such , there can be no assurance that such will not occur.
Table of Contents
Risks Related to our Securities, Internal Controls and Governance
We may be unable to realize the anticipated benefits of the Continuance, or we may be unable to do so within the anticipated timeframe.
On November 3, 2025, we completed the Continuance from British Columbia to the State of Nevada. While we believe this move will enhance shareholder value by reducing administrative costs and providing greater corporate flexibility, these benefits may not be fully realized, or we may be unable to realize the benefits within the anticipated timeframe. Our expectations are based on several assumptions that could prove incorrect, leading to the following risks, among others:
• The laws of the State of Nevada differ in material respects from the British Columbia Business Corporations Act. Nevada law provides broader discretion and greater protection for directors and officers against personal liability, which may be perceived by shareholders as a reduction in their ability to hold management accountable. These differences in corporate governance may lead to shareholder dissatisfaction or litigation, which could be costly and time-consuming to defend.
• The integration of our corporate identity into the Nevada legal framework requires significant management time and focus. If our leadership is diverted from our core business strategy to manage the administrative and legal complexities of the Continuance, our operational results could suffer. Furthermore, if we fail to update our internal controls and procedures to meet Nevada’s specific regulatory environment in a timely manner, we could face compliance failures.
If we are unable to realize the anticipated benefits of the Continuance within the expected timeframe, or at all, it could have a material adverse effect on our business, financial condition, and the market price of our Common Stock
A return on our securities is not guaranteed.
There is no guarantee that our Common Stock will earn any positive return in the short or long term. A holding of Common Stock is speculative, involves a high degree of risk and should be undertaken only by holders whose financial resources are sufficient to enable them to assume such risks and who have no need for immediate liquidity in their investment. An investment in Common Stock is appropriate only for investors who have the capacity to absorb a loss of some or all of their investment.
The elimination of individual liability against our directors and officers under Nevada law and the existence of indemnification rights for our directors and officers may result in substantial expenditures by us and may discourage claims for wrongful acts against our directors and officers, which could negatively impact our business, financial condition and results of operations.
Our articles of incorporation contain a provision permitting the elimination of personal liability of our directors and officers to us and our stockholders for damages caused by a director or officer to the extent provided for under Nevada law. We may also incur contractual indemnification obligations under employment agreements with our officers or agreements entered into with our directors. These indemnification obligations could result in us incurring substantial expenditures to cover the cost of settlement or damage awards against our directors and officers, which may be uninsured or underinsured and for which we may be unable to recoup. These agreements and the resulting costs may also discourage us from bringing a lawsuit against directors and officers for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our stockholders against our directors and officers even though such actions, if , might otherwise us and our stockholders.
Table of Contents
Our organizational documents contain provisions that may prevent transactions that could be beneficial to our stockholders and may insulate our management from removal .
Our articles of incorporation and bylaws:
• require certain procedures to be followed and time periods to be met for any stockholder to propose matters to be considered at annual or special meetings of stockholders, including nominating directors for election at those meetings; and
• authorize our Board to issue up to 1,000,000,000 shares of preferred stock (the “Preferred Stock”) without stockholder approval and to set the rights, preferences and other designations, including voting rights, of those shares as the Board may determine.
In addition, we may be subject to the provisions of certain Nevada statutes that could have the effect of prohibiting or limiting certain transactions with our stockholders or discouraging acquisitions of our capital stock
Nevada’s “combinations with interested stockholders” statutes (Sections 78.411 through 78.444, inclusive, of the Nevada Revised Statutes, or NRS) provide that specified types of business “combinations” between certain Nevada corporations and any person deemed to be an “interested stockholder” of the corporation are prohibited for two years after such person first becomes an “interested stockholder” unless the corporation’s board of directors approves the combination (or the transaction by which such person becomes an “interested stockholder”) in advance, or unless the combination is approved by the board of directors and 60% of the corporation’s voting power not beneficially owned by the interested stockholder, its affiliates and associates. Furthermore, in the absence of prior approval certain restrictions may apply even after such two-year period. For purposes of these statutes, an “interested stockholder” is any person who is (1) the beneficial owner, directly or indirectly, of 10% or more of the voting power of the outstanding voting shares of the corporation, or (2) an affiliate or associate of the corporation and at any time within the two previous years was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then-outstanding shares of the corporation. The definition of the term “combination” is sufficiently broad to cover most significant transactions between a corporation and an “interested stockholder.” These statutes generally apply to Nevada corporations with 200 or more stockholders of record. However, a Nevada corporation may elect in its articles of incorporation not to be governed by these particular laws, but if such election is not made in the corporation’s original articles of incorporation, the amendment (1) must be approved by the affirmative vote of the holders of stock representing a majority of the outstanding voting power of the corporation not owned by interested stockholders or their affiliates and associates, and (2) is not until 18 months after the vote approving the amendment and does not apply to any combination with a person who first became an interested stockholder on or before the date of the amendment. We have made such an opt-out election in our articles of incorporation.
Nevada’s “acquisition of controlling interest” statutes (NRS 78.378 to 78.3793, inclusive) prohibit an acquirer, under certain circumstances, from voting its shares of a target corporation’s stock after crossing certain ownership threshold percentages, unless the acquirer obtains approval of the target corporation’s disinterested stockholders. The statute specifies three thresholds: one-fifth or more but less than one-third, one-third but less than a majority, and a majority or more, of the outstanding voting power. Generally, once an acquirer crosses one of the above thresholds, those shares in an offer or acquisition and acquired within 90 days thereof become “control shares” and such control shares are deprived of the right to vote until disinterested stockholders restore the right. These provisions also provide that if control shares are accorded full voting rights and the acquiring person has acquired a majority or more of all voting power, all other stockholders who do not vote in favor of authorizing voting rights to the control shares are entitled to demand payment for the fair value of their shares in accordance with Nevada’s dissenter’s rights statutes. A corporation may elect to not be governed by, or “opt out” of, the control share provisions by making an election in its articles of incorporation or bylaws, provided that the opt-out election must be in place on the 10th day following the date an acquiring person has acquired a controlling interest, that is, crossing any of the three thresholds described above. We have opted out of the control share statutes in our bylaws.
These provisions of our organizational documents and the NRS, alone or in combination with each other, may discourage transactions involving actual or potential changes of control, including transactions that otherwise could involve payment of a premium over prevailing market prices to holders of common stock, could limit the ability of stockholders to approve transactions that they may deem to be in their best interests, and could make it considerably more difficult for a potential acquirer to replace management.
Table of Contents
The Company is a public issuer in the U.S. and is classified as an SEC Foreign Issuer in Canada. The Board and management must devote time and resources to compliance initiatives, corporate governance practices and securities rules and regulations that impose various requirements on public companies. These additional costs and management attention could negatively impact our business, financial condition and results of operations.
As a public issuer in the U.S., the Company is subject to the rules and regulations of the SEC and the reporting requirements of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”). As an SEC Foreign Issuer in Canada with the Common Stock listed on Cboe, the Company is also subject to certain reporting requirements and rules and regulations under Canadian securities laws and the rules of Cboe. Application of both existing or new U.S. or Canadian regulatory requirements applicable to us may have adverse consequences on our ability to issue securities to acquire companies or to raise capital in private placements or prospectus offerings.
As a public company, there are costs associated with legal, accounting and other expenses related to regulatory and stock exchange listing compliance in the U.S. as well as in Canada. Securities legislation and the rules and policies of the SEC, Canadian Securities Administrators and Cboe require reporting and listed companies to, among other things, adopt corporate governance and related practices, and to continuously prepare and disclose material information, all of which add to a company’s legal and financial compliance costs. Complying with these U.S. and applicable Canadian statutes, regulations and requirements has historically occupied a significant amount of time of the Board and management.
Stockholder activism, the political environment and a high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which could then result in additional compliance costs and affect the manner in which we operate our business. We also devote greater resources than a non-reporting company otherwise would to communications and other activities involving stockholders, investors and analysts which are typically considered important for publicly traded companies. Any new regulations or disclosure obligations or additional stockholder communications and activities may increase our legal and financial compliance costs and may make some compliance activities more time-consuming and costly.
Our management must devote substantial time and cost to effective internal controls required by Section 404(a) of the Sarbanes-Oxley Act of 2002 (“SOX”). These requirements take time and resources and increase our legal and financial compliance costs. If we are unable to maintain effective internal controls, our ability to produce timely and accurate financial statements could be impaired, investors could lose confidence in our financial information and the price of our Common Stock could decline.
As a U.S. reporting company and an SEC Foreign Issuer in Canada, we are required to maintain effective disclosure controls and procedures and internal controls over financial reporting. Our management is required to furnish a report on our internal controls over financial reporting in our Annual Reports on Form 10-K. In addition, our independent registered public accounting firm is required, pursuant to Section 404(b) of SOX, to attest to the effectiveness of our internal control over financial reporting and we are required to include such attestation in our Annual Reports on Form 10-K.
We have incurred significant costs related to maintaining our internal controls over financial reporting, and cannot predict or estimate the amount of time resources and additional costs we may incur or the impact and timing of such use of resources and costs. We may encounter problems or delays in implementing any changes necessary to make a favorable assessment of our internal controls over financial reporting.
Any testing by us conducted in connection with Section 404 of SOX may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses that may require prospective or retrospective changes to our consolidated financial statements, or identify other areas for further attention or improvement. Inferior internal controls could impair our ability to produce timely and accurate financial statements and cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our Common Stock.
Despite the efforts we have undertaken, there is a risk in the future that we will not be able to conclude, within the prescribed time frame or at all, that our internal control over financial reporting is effective as required by Section 404 of SOX. If within the prescribed time frame, we cannot favorably assess the effectiveness of our internal control over financial reporting, or if our independent registered public accounting firm is unable to provide an unqualified attestation report on our internal controls, investors could lose confidence in our financial information and the price of our Common Stock could decline.
Table of Contents
Additional issuances of Common Stock, or securities convertible into Common Stock, may result in voting and economic dilution to our stockholders.
We plan to issue additional securities in the future in connection with acquisitions, equity incentives, securities offerings and financing transactions (including through the sale of securities convertible into or exchangeable or exercisable for shares of our capital stock), which will dilute our stockholders’ holdings in the Company. Our articles of incorporation permit the issuance of 5,000,000,000 shares of Common Stock and 1,000,000,000 shares of Preferred Stock, and our stockholders have no pre-emptive rights in connection with any further issuances. The Board has discretion to determine the price and the terms of further issuances , and such terms could include rights, preferences, and privileges superior to those of our existing outstanding securities . We cannot predict the size or nature of future issuances or the effect that future issuances and sales of our securities will have on the market price of our Common Stock. Issuances of a substantial number of additional securities by us, or the perception that such issuances could occur, may adversely affect the prevailing market price of our Common Stock. With any additional issuance of our securities, investors will suffer dilution to their voting power and we may experience dilution in our revenue and earnings per share.
Sales of substantial amounts of Common Stock in the public market or the perception that such substantial sales may occur may have an adverse effect on the market price of our Common Stock.
Sales of a substantial number of shares of our Common Stock in the public market could occur at any time by existing holders of Common Stock. These sales, or the market perception that stockholders intend to sell a large number of shares of Common Stock, could reduce the market price of our Common Stock. If this occurs and continues, it could impair our ability to issue Common Stock as consideration in our acquisitions, raise additional capital through the sale of securities, and attract investors, along with other adverse consequences.
Upon issuance, transfer restrictions under securities laws or contractual terms may apply to our Common Stock. When transfer restrictions expire or are otherwise lifted, the holders of the unrestricted Common Stock may seek to sell the shares in the public markets, and the increase in the volume of available Common Stock for sale may have an adverse effect on the market price of our Common Stock.
When issued, Common Stock may be subject to restrictions on transfer under applicable securities laws or contractual terms. In anticipation of and following the expiration or lifting of these transfer restrictions, the sales price of our Common Stock may experience a decline due to additional shares of Common Stock being available for sale on the public markets. The sale of a significant amount of shares of Common Stock by existing stockholders or the perception by investors that such sales may occur, could adversely affect the prevailing market price for our Common Stock.
Table of Contents
Our Common Stock is subject to price volatility.
The market price for our Common Stock may be volatile and subject to wide fluctuations in response to numerous factors, many of which will be beyond our control, including the following:
• actual or anticipated fluctuations in our annual and quarterly results of operations;
• operating and financial performance that varies from the expectations of management, securities analysts and investors;
• changes or anticipated changes in U.S. federal cannabis regulations, including the rescheduling of cannabis as a controlled substance and the ability of cannabis companies to access banking services;
• changes or anticipated changes in state cannabis regulations affecting our business and operations;
• the public announcement of pending or consummated material acquisitions, business combinations, divestitures, investments or partnerships by us or our competitors;
• recommendations by securities research analysts;
• changes in the economic performance or market valuations of companies in the cannabis industry;
• the addition or departure of our directors or executive officers and other key personnel;
• sales or perceived sales of additional shares of Common Stock;
• announcements of developments and other material events by us or our competitors;
• fluctuations to our costs of vital production materials and services;
• changes in financial markets and economies and general market conditions, such as inflation, interest rates, recessions and product price volatility; and
• news reports relating to trends, concerns, technological or competitive developments, regulatory changes and other related issues in the cannabis industry or our target markets.
In recent years, the securities markets in the U.S. and Canada have experienced a high level of price and volume volatility, and the market prices of securities of many cannabis companies have experienced wide fluctuations in price which have not necessarily been related to the operating performance, underlying asset values or prospects of such companies. Increased levels of volatility and resulting market turmoil may adversely impact the price of our Common Stock. There can be no assurance that the fluctuations in the price of our Common Stock will not occur.
Table of Contents
A decline in the price or trading volume of our Common Stock could affect our ability to consummate acquisitions, expand existing operations, or raise further capital and could cause increased dilution to stockholders and adversely impact our ability to continue current operations, which would have a negative impact on our revenues and profitability.
A prolonged decline in the price or trading volume of our Common Stock could in the future result in a reduction in the liquidity of our Common Stock and inhibit our ability to raise capital. Because a significant portion of our acquisitions and operations have been, and may continue to be, financed through the issuance of equity securities, a decline in the price or trading volume of our Common Stock could be especially detrimental to our growth strategy, liquidity and operations and may cause us to issue additional shares of Common Stock we otherwise would not need to, which would be dilutive to our stockholders. Such reductions may force us to reallocate funds from other planned uses and may have a material adverse effect on our business plan and operations, including our ability to operationalize existing licenses, consummate acquisitions and complete planned capital expenditures. If the price or trading volume of our Common Stock declines, there can be no assurance that we will be able to raise additional capital or generate funds from operations sufficient to meet our obligations. If we are to raise sufficient capital in the future, we may not have the resources to continue our normal operations.
If securities or industry analysts do not publish research or reports about us or publish misleading, inaccurate, or unfavorable research about us, our business, share price and trading volume could decline.
The trading market for our Common Stock may be influenced by the research and reports that securities or industry analysts publish about us, our business, prospects, market, or competitors. If few securities or industry analysts cover us, the trading price and volume of our Common Stock would likely be negatively impacted. If one or more of the analysts who covers us downgrades our Common Stock, publishes inaccurate or unfavorable research about our business, or provides more favorable relative recommendations about competitors, the price of our Common Stock would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our Common Stock could decrease, which could cause the price or trading volume of our Common Stock to decline.
An investor may face liquidity risks with an investment in our Common Stock.
There is a significant liquidity risk associated with an investment in our Common Stock. Our Common Stock currently trades on Cboe in Canada and is quoted on the OTCQX in the U.S. We cannot predict at what prices our Common Stock will continue to trade or be quoted, and there is no assurance that an active trading market will be sustained. Our Common Stock does not currently trade on a U.S. national securities exchange. In the event our Common Stock begins trading on any U.S. national securities exchange, we cannot predict at what prices our Common Stock will trade and there is no assurance that an active trading market will develop or be sustained.
Trading in securities quoted on the OTCQX is often thin and characterized by wide fluctuations in trading prices due to many factors, some of which may have little to do with our financial results, operations or business prospects. This volatility could depress the market price of our Common Stock for reasons unrelated to our operating performance or financial results. Moreover, the OTCQX is not a U.S. national securities exchange, and trading of securities on the OTCQX is often more sporadic than the trading of securities listed on a U.S. national securities exchange such as the Nasdaq Stock Market or the New York Securities Exchange. These factors may result in investors having difficulty reselling our Common Stock on the OTCQX.
Stockholders have little or no rights to participate in our business affairs.
Other than the limited rights of stockholders under our articles of incorporation and bylaws, and pursuant to applicable Canadian, U.S. federal and Nevada laws, the day-to-day decisions regarding the management of our affairs will be made exclusively by the Board and our officers acting under the authority and supervision of the Board. Our stockholders will have little or no control over our current or future business, investment decisions, or other affairs, including the selection and investment in licensees, dispensaries, cultivation operations and real estate. Further, Nevada law provides that the selection of a period for the achievement of corporate goals is the responsibility of the directors. We may also retain consultants, advisors and agents to provide various services to us, over which the stockholders will have no control.
Table of Contents
We do not expect to declare or pay dividends, and restrictions in our credit facilities restrict our ability to pay cash dividends.
Holders of our Common Stock, will not have a right to receive dividends on such shares unless declared by the Board. We have not paid dividends in the past, and we do not anticipate that we will declare or pay any dividends in the foreseeable future. The declaration of dividends is at the discretion of the Board, even if we have sufficient funds, net of our liabilities, to pay dividends, and the declaration of any dividend will depend on our financial results, cash requirements, future prospects, credit facility restrictions and other factors deemed relevant by the Board. Any dividends paid by us would be subject to withholding taxes as further summarized under the heading “ Risks Related to Taxation .”
Certain stockholders hold over 5% of the Company’s voting power.
As of March 10, 2026 , George Archos, our Chairman and Chief Executive Officer, exercises in the aggregate, approximately 7.5% of the voting power in respect of our outstanding Common Stock. In addition, per a public ownership filing made by the entity, Eminence Capital, LP beneficially owned 27,786,719 shares of Common Stock as of November 14, 2025, the date of Eminence Capital LP’s latest filing regarding its holdings of Verano equity, which represents approximately 7.7% of the voting power in respect of our outstanding shares. As a result, Mr. Archos and Eminence Capital, LP each has the ability to impact the outcome of matters submitted to our stockholders for approval, including the election and removal of directors and any material business transactions. Even if Mr. Archos does not retain any employment with us, he will continue to have the ability to exercise this voting power.
As our Chairman and Chief Executive Officer, Mr. Archos has control over our day-to-day management and the implementation of major strategic decisions, subject to authorization and oversight by the Board. As a member of the Board, Mr. Archos owes a fiduciary duty to the Company and is obligated to act honestly and in good faith.
Such impact on voting power could have the effect of delaying, deterring, or preventing a change of control or other business combination, which could, in turn, have an adverse effect on the market price of our Common Stock or prevent our stockholders from realizing a premium over the then-prevailing market price for their Common Stock. In addition, sales of significant amounts of shares beneficially held by Mr. Archos or Eminence Capital, LP or the prospect of these sales, could adversely affect the market price of our Common Stock.
Table of Contents
Risks Related to Taxation
As a cannabis business, the IRS takes the view that we are subject to certain tax provisions that have a material adverse effect on our business, financial condition, and results of operations. We may not be successful in defending our tax filing positions, which could adversely impact our financial condition and results of operations.
Under Section 280E of the Code, “no deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of Schedule I and II of the CSA) which is prohibited by Federal law or the law of any state in which such trade or business is conducted.” The IRS has interpreted this provision to apply to cannabis operations, prohibiting cannabis operators such as us, from deducting expenses directly associated with cannabis businesses. Section 280E and related IRS enforcement activity has had a significant impact on the operations of cannabis companies. As a result, an otherwise profitable business may, in fact, operate at a loss, after taking into account its United States income tax expenses. The Company has taken a position that it may deduct ordinary and necessary business expenses and that such expenses are not limited to the application of Section 280E of the Code.
The IRS has asserted against various state-legal cannabis businesses in the U.S that Section 280E applies to limit deductions for such businesses. Although the IRS has clarified its position by allowing the deduction of certain expenses, the IRS has interpreted this allowance very narrowly, deeming substantial other customary operating and general administrative costs as non-deductible. While there are currently several pending cases before various administrative and federal courts challenging the applicability of Section 280E, there is no guarantee that these administrative and/or federal courts will issue an interpretation of Section 280E that aligns with our position or that is otherwise favorable to the cannabis industry.
The IRS’s interpretations of Section 280E of the Code substantially limits our ability to deduct certain expenses from our federal taxable income for U.S. tax purposes.
If the IRS determined, and courts upheld that Section 280E does apply to restrict our deduction of business expenses, our U.S. federal taxable income would likely exceed our actual profits, and the IRS would likely continue to apply Section 280E to us indefinitely. This result may change if cannabis is rescheduled as a Schedule III substance under the CSA or if federal legislation affects Section 280E. We cannot predict whether such rescheduling or federal legislation will occur within a given timeframe or at all, and thus cannot predict the future applicability or effect of Section 280E on our business or operations.
