RYTHM, Inc.

Previous wording

The 2018 Farm Bill, which federally legalized hemp and hemp products, could be amended to severely restrict or prohibit the Company’s hemp-derived THC products.

Current wording

The 2018 Farm Bill, which federally legalized hemp and hemp products, was amended in a way that would severely restrict or prohibit the Company’s hemp-derived THC products.

Previous wording

States are passing their own laws regulating, restricting or prohibiting hemp-derived products, creating a difficult regulatory patchwork within which to operate.

Current wording

States are passing their own laws regulating, restricting, or prohibiting hemp-derived THC products, creating a difficult regulatory patchwork within which to operate.

Previous wording

State and local authorities have been active over the last few years implementing their own laws regulating the cultivation, manufacturing, testing, marketing, and sale of both intoxicating and non-intoxicating hemp products. Some states ban these products altogether. Other state laws permit hemp-derived products but impose new regulatory frameworks containing licensing and labeling requirements, age gates, amount and potency restrictions, allowable types of products, and restricting where the products may be sold. The varied state regulatory framework for hemp products poses risks to manufacturing, marketing, selling, and shipping hemp-derived products around the country, whether wholesale or direct to consumers via online or brick and mortar retail locations. Additionally, hemp legislation is pending at the state level around the country, creating additional risk to the sale and transport of products already produced under existing laws. Unforeseen regulatory obstacles or compliance costs related to state laws may hinder the Company’s ability to successfully compete in some markets for such products. Further, states in which the Company currently sells its hemp-derived products could decide in the future to ban these products altogether. If these regulatory changes occurred, the revenue streams we expect to receive from our businesses and assets would be at risk and, as a result, could have a material adverse effect on our business, financial condition and results of operations.

Current wording

State and local authorities have been active over the last few years, implementing their own laws regulating the cultivation, manufacturing, testing, marketing, and sale of both intoxicating and non-intoxicating hemp products. Some states ban these products altogether. Other state laws permit hemp-derived THC products but impose new regulatory frameworks containing licensing and labeling requirements, age gates, amount and potency restrictions, allowable types of products, and restrictions on where the products may be sold. The varied state regulatory framework for hemp products poses risks to manufacturing, marketing, selling, and shipping hemp-derived THC products around the country, whether wholesale or direct to consumers via online or brick-and-mortar retail locations. Additionally, hemp legislation is pending at the state level around the country, creating additional risk to the sale and transport of products already produced under existing laws. Unforeseen regulatory obstacles or compliance costs related to state laws may hinder the Company’s ability to successfully compete in some markets for such products. Further, states in which the Company currently sells its hemp-derived THC products could decide in the future to ban these products altogether. If these regulatory changes occur, the revenue streams we expect to receive from our businesses and assets would be at risk and, as a result, such changes could have a material adverse effect on our business, financial condition, and results of operations.

Previous wording

Hemp-derived THC products are not permitted under the FDCA.

Current wording

Hemp-derived THC products are not permitted under the Federal Food, Drug, and Cosmetic Act.

Previous wording

The Food and Drug Administration (“FDA”) has taken the position that ingestible products over which it has jurisdiction, including foods, beverages, and dietary supplements, that contain cannabinoids such as THC, including hemp-derived delta-9 THC, are not permitted under the Federal Food, Drug, and Cosmetic Act (“FDCA”). The FDA has not evaluated THC, and therefore does not consider it to be GRAS (Generally Recognized as Safe) for use in foods, including beverages. The FDA has also found that because THC is in certain drugs approved by FDA, it cannot be used in foods/beverages or dietary supplements. Accordingly, per the FDA, foods/beverages and dietary supplements containing hemp-derived THC do not comply with the FDCA. FDA enforcement of its position has thus far been minimal and limited to sending warning letters to a relatively small number of companies, primarily those claiming to prevent, diagnose, mitigate, treat, or cure diseases, or who target toward children. The FDA has issued warnings about products that resemble candy or other items appealing to children, emphasizing that such products could pose a risk of unintentional ingestion and potential harm due to the presence of cannabinoids. The FDA may decide in the future to increase enforcement activities, regardless of whether a company has made health claims related to its products or markets to children, which could impact the Company’s offering of hemp-derived THC beverages and materially impact operations and revenue.

Current wording

The Food and Drug Administration (“FDA”) has taken the position that ingestible products over which it has jurisdiction, including foods, beverages, and dietary supplements, that contain cannabinoids such as THC, including hemp-derived THC, are not permitted under the Federal Food, Drug, and Cosmetic Act (“FDCA”). The FDA has not evaluated THC as a food ingredient, and therefore does not consider it to be GRAS (Generally Recognized as Safe) for use in foods, including beverages. The FDA has also found that because THC is in certain drugs approved by the FDA, it is precluded from use in foods/beverages or dietary supplements. The FDA has articulated its intention to focus enforcement on products claiming to prevent, diagnose, mitigate, treat, or cure diseases, and/or manufacturers who target products toward children. The FDA has issued warnings about products that resemble candy or other items appealing to children, emphasizing that such products could pose a risk of unintentional ingestion and potential harm due to the presence of cannabinoids. Thus far, such enforcement has been limited to sending warning letters to a relatively small number of companies. The FDA may decide in the future to increase enforcement activities, regardless of whether a company makes health claims related to its products or markets to children, which could impact the Company’s offering of hemp-derived THC beverages and materially impact operations and revenue.

Previous wording

The FDA could issue new regulations that prohibit or strictly limit the sale of hemp-derived products.

Current wording

The FDA could issue new regulations that prohibit or strictly limit the sale of hemp-derived THC products.

Previous wording

The FDA has previously declined to issue regulations for the manufacture and sale of hemp-derived products. For example, in 2023, the FDA denied three citizen petitions asking the FDA to conduct rulemaking to allow the marketing of CBD, another hemp-derived cannabinoid, as dietary supplements. In conjunction with these denials, the FDA has publicly stated that a new regulatory pathway should be created by Congress to regulate CBD and other cannabinoid products. The FDA could nevertheless decide to regulate hemp products in the future. New FDA regulations could materially and negatively impact operations and revenue. New FDA regulations could also require financial investment in additional compliance mechanisms which could impact our profitability and the market price for our Common Stock.

Current wording

The FDA has previously declined to issue regulations for the manufacture and sale of hemp-derived THC products. For example, in 2023, the FDA denied three citizen petitions asking the FDA to conduct rulemaking to allow the marketing of CBD, another hemp-derived cannabinoid, as dietary supplements. In conjunction with these denials, the FDA has publicly stated that a new regulatory pathway should be created by Congress to regulate CBD and other cannabinoid products. The 2026 Appropriations Act directs the FDA to create and maintain lists of allowable and prohibited cannabinoids and promulgate other regulations further defining what items will qualify as a container for purposes of measuring cannabinoid content. The FDA could also decide to change or increase its enforcement of hemp products based on this new directive. New FDA regulations could materially and negatively impact the Company’s operations and revenue. New FDA regulations could also require the Company to make financial investments in additional compliance mechanisms which could impact our profitability and the market price for our Common Stock.

Previous wording

Other federal agencies may take enforcement actions against companies selling hemp-derived products.

Current wording

Other federal agencies may take enforcement actions against companies selling hemp-derived THC products.

Previous wording

The Federal Trade Commission (“FTC”) and FDA frequently collaborate on enforcement where their jurisdictions overlap, particularly in regulating the advertising, labeling, and promotion of food, cosmetics, medical devices, and OTC drugs. In the CBD market, the FTC has joined the FDA in issuing warning letters to companies whose advertisements lacked competent and reliable scientific evidence, thereby violating the FTC Act, 15 U.S.C. § 41 et seq. The FTC has also independently issued warning letters to CBD companies for making exaggerated or misleading claims without sufficient scientific backing. While FTC enforcement actions related to CBD were historically limited to warnings, in December 2020, the agency initiated its first formal enforcement action against six CBD companies for allegedly making unsupported health claims, leading to settlement agreements that required them to cease such claims and pay monetary judgments. In 2023 and 2024, the FTC sent cease and desist letters to companies marketing hemp-derived THC products that appealed to children. The regulatory landscape and potential for future FTC enforcement actions could pose an ongoing risk to the Company’s offering of hemp-derived THC products.

Current wording

The Federal Trade Commission (“FTC”) and FDA frequently collaborate on enforcement where their jurisdictions overlap, particularly in regulating the advertising, labeling, and promotion of food, cosmetics, medical devices, and OTC (over-the-counter) drugs. In the CBD market, the FTC has joined the FDA in issuing warning letters to companies that lacked competent and reliable scientific evidence supporting their advertisements, thereby violating the FTC Act, 15 U.S.C. § 41 et seq. The FTC has also independently issued warning letters to CBD companies for making exaggerated or misleading claims without sufficient scientific backing. While FTC enforcement actions related to CBD were historically limited to warnings, in December 2020, the agency initiated its first formal enforcement action against six CBD companies for allegedly making unsupported health claims, leading to settlement agreements that required those companies to cease such claims and pay monetary judgments. In 2023 and 2024, the FTC sent cease and desist letters to companies marketing hemp-derived THC products that it determined appealed to children. Although the Company does not intend to make any unsubstantiated claims regarding its products, the FTC may disagree with our assessment of our claims. The regulatory landscape and potential for future FTC enforcement actions could pose an ongoing risk to the Company’s offering of hemp-derived THC products, especially if the Company’s products are targeted by the FTC, or the FTC and FDA together, in the future for any reason.

Previous wording

Hemp-derived products are federally illegal if they exceed 0.3% delta-9-THC on a dry weight basis.

Current wording

Hemp-derived THC products are federally illegal if they exceed 0.3% delta-9-THC on a dry weight basis.

Previous wording

Hemp-derived products which exceed a delta-9 THC concentration of 0.3% on a dry weight basis are federally illegal under the Controlled Substances Act (the “CSA”). The CSA classifies cannabis as an illegal Schedule I drug, meaning it is considered to have a high potential for abuse and no accepted medical use.

Current wording

Hemp-derived THC products which exceed a delta-9-THC concentration of 0.3% on a dry weight basis are federally illegal under the Controlled Substances Act (the “CSA”).

Previous wording

Any failure to keep the delta-9-THC in hemp-derived products below 0.3% on a dry weight basis could subject us to action by regulatory authorities and/or to lawsuits by consumers. In addition, the approval of medical and recreational marijuana by many states has created a situation in which it may be difficult or impossible for regulators and courts to determine whether the delta-9-THC levels reflected in consumers’ blood tests are the result of hemp-derived products or marijuana products. This may result in regulatory actions or lawsuits. Certain hemp-derived products may, over time, gradually increase their delta-9-THC or total THC concentration, and this may ultimately cause such products to exceed the applicable concentration level, making such products illegal in certain jurisdictions. If any of these situations occur, the Company may be subject to regulatory action or lawsuits that could have a material adverse effect on the Company.

Current wording

Any failure by the Company or our partners to keep the delta-9-THC in our hemp-derived THC products below 0.3% on a dry weight basis, either in the manufacturing process or in the final product, could subject us to action by regulatory authorities and/or to lawsuits by consumers. Certain hemp-derived THC products may, over time, gradually increase their delta-9-THC or total THC concentration, and this may ultimately cause such products to exceed the applicable concentration level, making such products illegal in certain jurisdictions. In addition, the approval of medical and recreational marijuana by many states has created a situation in which it may be difficult or impossible for regulators and courts to determine whether the delta-9-THC levels reflected in consumers’ blood tests are the result of hemp-derived THC products or marijuana products. This may result in regulatory actions or lawsuits. If any of these situations occur, we may be subject to regulatory action or lawsuits that could have a material adverse effect on the Company.

Previous wording

The Company currently sells its products in Canada and may conduct sales in other international markets in the future. Doing so would subject the Company to the laws, regulations, and international treaties of the countries where it operates or engages in trade. Failure to adhere to existing or evolving regulations in any jurisdiction could materially impact the Company’s business. There is also a risk that authorities in these jurisdictions may determine that the Company was or is not in compliance with local laws. If its past or present activities are found to violate such regulations, the Company could face enforcement actions, including civil or criminal penalties, fines, damages, operational restrictions or restructuring, asset seizures, and the denial of regulatory approvals.

Current wording

The Company currently sells certain of its products in Canada and may conduct sales in other international markets in the future. Doing so would subject the Company to the statutes, regulations, and international treaties of the countries where it operates or engages in trade. Failure to adhere to existing or evolving laws in any jurisdiction could materially impact the Company’s business. There is also a risk that authorities in these jurisdictions may determine that the Company was or is not in compliance with their laws. If its past or present activities are found to violate such laws, the Company could face enforcement actions, including civil or criminal penalties, fines, damages, operational restrictions or restructuring, asset seizures, and the denial of regulatory approvals.

Previous wording

Third parties with whom we do business may perceive themselves as being exposed to reputational risk because of their relationship with us due to our cannabis and hemp-related business activities and may as a result, refuse to do business with us.

Current wording

Third parties with whom we do business may perceive themselves as being exposed to reputational, and even legal, risk because of their relationship with us due to our hemp- and limited cannabis-related licensing activities and may, as a result, refuse to do business with us.

Previous wording

The third parties with whom we do business may perceive that they are exposed to reputational risk because of our cannabis and/or hemp-related business activities. Any third-party service provider could suspend or withdraw its services if it perceives that the potential risks exceed the potential benefits of providing such services to us. Specifically, while we have banking relationships and believe that the services can be procured from other institutions, we may, in the future, have difficulty maintaining existing or securing new bank accounts or clearing services. Our failure to establish or maintain business relationships could have a material adverse effect on our business, financial condition and results of operations.

Current wording

The third parties with whom we do business may perceive that they are exposed to reputational, or possibly even legal, risk because of our hemp- or limited cannabis-related business activities. Any third-party service provider or customer could suspend or withdraw its business if it perceives that the potential risks exceed the potential benefits of doing business with us. Specifically, while we have banking relationships and believe that the services we rely on can be procured from other institutions, we may, in the future, have difficulty maintaining existing or securing new bank accounts or clearing services. Our failure to establish or maintain business relationships could have a material adverse effect on our business, financial condition, and results of operations.

Previous wording

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 and purchase businesses and assets or make investments that we will also seek to purchase or make. We face and expect to continue to face competition from state-licensed medical and adult-use dispensaries.

Current wording

The U.S. cannabis and hemp industries are, and are expected to continue to be, competitive. A number of other companies engage in, and may in the future engage in, cannabis or hemp-related businesses, operate businesses in competition with us, and purchase businesses and assets or make investments that we will also seek to purchase or make. We face and expect to continue to face competition from state-licensed medical and adult-use dispensaries as well as the illicit market. Additionally, if the Attorney General reschedules cannabis to Schedule III, competition from state-licensed cannabis companies could intensify as the industry becomes more normalized.

Previous wording

Large chain stores, manufacturers, retailers, beverage and other consumer products companies that also recognize the potential for financial success through acquisitions and investment in the hemp-derived beverage industry could strategically acquire competitors or invest in creating their own brands. In doing so, these larger competitors could produce and sell competing products at a lower price and establish a larger brand presence. We may not have the personnel, products, marketing and distribution capabilities, and/or financial resources to compete effectively against such larger competitors.

Current wording

Large chain stores, manufacturers, retailers, and beverage and other consumer products companies that also recognize the potential for financial success through acquisitions and investment in the hemp-derived THC industry could strategically acquire competitors or invest in creating their own brands. In doing so, these larger competitors could produce and sell competing products at a lower price and establish a larger brand presence than we have. We may lack the personnel, products, marketing, and distribution capabilities, and/or financial resources to compete effectively against such larger competitors.

Previous wording

We also face competition from the illicit market and illegal dispensaries and cultivation operations that are unlicensed, not regulated and that are selling cannabis or hemp products. Any inability or unwillingness of law enforcement authorities to enforce existing laws prohibiting the unlicensed production and sale of cannabis or hemp 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.

Current wording

We also face competition from the illicit market and illegal dispensaries and cultivation operations that are unlicensed, not regulated and that are selling cannabis or hemp-derived products. Any inability or unwillingness of law enforcement authorities to enforce existing laws prohibiting the unlicensed production and sale of cannabis or hemp-derived products could result in increased competition for us. Additionally, illicit products may be unsafe, and negative press caused by such products could impact the reputation of our products with consumers who may not distinguish between responsible suppliers like the Company and illicit operators. Any or all these events could have a material adverse effect on our business, financial condition, and results of operations.

Previous wording

Public opinion and support for cannabis and hemp-derived products 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 cannabis and loosening limitations of hemp-derived products, it remains a controversial issue subject to differing opinions surrounding the level of legalization. Inconsistent public opinion and perception of cannabis and hemp hinders growth of the cannabis and hemp industries, which could have a material adverse effect on our business plans, financial condition and results of operations.

Current wording

Public opinion and support for cannabis and hemp-derived THC products has traditionally been inconsistent and varies from state to state. While public opinion and support has historically been increasing in the U.S. for legalizing cannabis and for continued access to hemp-derived THC products, opposition to legalization remains, and the support could diminish. Inconsistent public opinion and perception of cannabis and hemp hinder growth of the hemp industry, which could have a material adverse effect on our business plans, financial condition, and results of operations.

Previous wording

Consumer perception of our products may be significantly influenced by scientific research or findings, regulatory investigations, litigation, media attention and other publicity regarding the consumption of cannabis and hemp-derived products. There can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media attention or other research findings or publicity will be favorable to the cannabis or hemp markets or any particular product, or consistent with earlier publicity. Future research reports, findings, regulatory proceedings, litigation, media attention or other publicity that is perceived as less favorable than, or questions earlier research reports, findings or publicity could have a material adverse effect on the demand for our products. Our dependence upon consumer perceptions means that such adverse reports, whether or not accurate or with merit, could ultimately have a material adverse effect on our business, results of operations, financial condition and cash flows. Further, adverse publicity reports or other media attention regarding the safety, efficacy and quality of cannabis or hemp-derived products in general, or our products specifically, or associating the consumption of cannabis or hemp-derived products with illness or other negative effects or events, could have such a material adverse effect. A failure or alleged failure of quality control processes and procedures could result in negative consumer perception of our products or legal claims against us. Adverse publicity reports or other media attention could arise even if the adverse effects associated with such products resulted from consumers’ failure to consume such products appropriately or as directed.

Current wording

Consumer perception of our products may be significantly influenced by scientific research or findings, regulatory investigations, litigation, media attention, and other publicity regarding the consumption of cannabis and hemp-derived THC products. There can be no assurance that future scientific research and findings, regulatory proceedings, litigation, media attention, or other research findings or publicity will be favorable to the cannabis or hemp markets or any particular product, or consistent with earlier publicity. Future research reports, findings, regulatory proceedings, litigation, media attention, or other publicity that is perceived as less favorable than, or questions earlier research reports, findings, or publicity, could have a material adverse effect on the demand for our products. Our dependence upon consumer perceptions means that such adverse reports, whether or not accurate or with merit, could ultimately have a material adverse effect on our business, results of operations, financial condition, and cash flows. Further, adverse publicity reports or other media attention regarding the safety, efficacy, and quality of hemp-derived THC products in general, or our products specifically, or associating the consumption of cannabis or hemp-derived THC products with illness or other negative effects or events, could have a material adverse effect. A failure or alleged failure of quality control processes and procedures could result in negative consumer perception of our products or legal claims against us. Adverse publicity reports or other media attention could arise even if the adverse effects associated with such products resulted from consumers’ failure to consume such products appropriately or as directed.

Previous wording

Hemp-derived products may be shown to have negative health and/or safety impacts upon consumers

Current wording

Hemp-derived THC products may be shown to have negative health and/or safety impacts upon consumers.

Previous wording

The health and safety impacts of hemp-derived products have not yet been established via traditional scientific and/or clinical studies. The FDA appears to believe that certain hemp-derived products may have significant adverse health impacts upon human beings, especially in regard to potential liver toxicity or liver damage. If the FDA, scientific research and/or clinical studies ultimately demonstrate negative health and/or safety impacts of hemp-derived products upon consumers, then our business and the trading price of our Common Stock may be materially adversely affected.

Current wording

The health and safety impacts of hemp-derived THC products have not yet been established via traditional scientific and/or clinical studies. The FDA appears to believe that certain CBD products may have significant adverse health impacts upon human beings, especially in regard to potential liver toxicity or liver damage. If the FDA, scientific research and/or clinical studies ultimately demonstrate negative health and/or safety impacts of cannabis or hemp-derived THC products on consumers, our business and the trading price of our Common Stock could be materially adversely affected.

Previous wording

As a relatively new industry, there are relatively few operators in the hemp-derived beverage industry whose business models we can follow or build upon. Similarly, there is no or limited information about comparable companies available for potential investors to review in making a decision about whether to invest in us.

Current wording

Because the hemp-derived THC industry is new, there are relatively few operators in the industry whose business models we can follow or build upon. Similarly, there is no or limited information about comparable companies available for potential investors to review in making a decision about whether to invest in us.

Previous wording

We believe that established businesses in other industries may have a strong economic interest in opposing the development of the cannabis and hemp industries. Cannabis and hemp may be seen by companies in other industries as an attractive alternative to their products, including alcohol, and as an alternative to various commercial pharmaceuticals. Many industries that could view the emerging cannabis and hemp industries as economic threats are well established, with vast economic and federal and state lobbying resources. It is possible that companies within these industries could use their resources to attempt to slow or reverse legislation legalizing cannabis and hemp, and to create negative public perception of legalization of cannabis and hemp. Any inroads these companies make in halting or impeding legislative initiatives that would be beneficial to the cannabis and hemp industries could have a detrimental impact on some of our customers and, in turn, on our operations.

Current wording

We believe that established businesses in other industries may perceive strong economic interests in opposing the development of the cannabis and hemp industries. Cannabis and hemp may be seen by companies in other industries as an attractive alternative to their products, such as alcohol, and as an alternative to various commercial pharmaceuticals. Many industries that could view the emerging cannabis and hemp industries as economic threats are well established, with vast economic and federal and state lobbying resources. It is reported that companies within these industries may have played a role in the recent federal legislation to reverse the 2018 Farm Bill’s legalization of certain hemp products, and it is possible these industries play similar roles in anti-cannabis efforts. Any inroads these companies make in halting or impeding legislative initiatives that would be beneficial to the cannabis and hemp industries could have a detrimental impact on some of our customers and, in turn, on our operations.

Previous wording

Our business depends in part on client licensing

Current wording

Our business depends in part on our customers obtaining and/or maintaining appropriate licensing.

Previous wording

Our business is partly dependent on certain of our customers obtaining various licenses from various municipalities and state licensing agencies. There can be no assurance that any or all licenses necessary for our customers to operate their businesses will be obtained, retained, or renewed. If a licensing body were to determine that a customer of ours had violated applicable rules and regulations, there is a risk the license granted to that customer could be revoked, which could adversely affect our operations. There can be no assurance that our existing customers will be able to retain their licenses going forward, or that new licenses will be granted to existing and new market entrants.

Current wording

Our business is partly dependent on certain of our customers obtaining various licenses from various municipalities and state licensing agencies. There can be no assurance that any or all licenses necessary for our customers to operate their businesses will be obtained, retained, or renewed. If a licensing body were to determine that a customer of ours had violated applicable rules and regulations, there is a risk the license granted to that customer could be revoked, which could adversely affect our revenue streams from such clients. There can be no assurance that our existing customers will be able to retain their licenses going forward, or that the Company would be able to acquire new customers to sell its products in those markets.

Previous wording

Although we intend to continue to maintain insurance to protect against certain risks in such amounts as we consider to be reasonable, our insurance will not cover all the potential risks associated with our operations. We may also be unable to maintain insurance to cover these risks at economically feasible premiums. Insurance coverage may not continue to be available or may not be adequate to cover any resulting liability. Moreover, insurance against certain hazards encountered in our operations may not be generally available on acceptable terms. We might also become subject to liability for pollution or other hazards which we may not be insured against or which we may elect not to insure against because of premium costs or other reasons. Losses from these events may cause us to incur significant costs that could have a material adverse effect upon our financial performance and results of operations.

Current wording

Although we intend to continue to maintain insurance to protect against certain risks in such amounts as we consider to be reasonable, our insurance will not cover all the potential risks associated with our operations. We may also be unable to maintain insurance to cover these risks at economically feasible premiums, particularly given changes to federal law under the 2026 Appropriations Act. Insurance coverage may cease to be available or may not be adequate to cover any resulting liability. Moreover, insurance against certain hazards encountered in our operations may not be generally available on acceptable terms. We might also become subject to liability for pollution or other hazards which we may not be insured against or which we may elect not to insure against because of premium costs or other reasons. Losses from these events may cause us to incur significant costs that could have a material adverse effect upon our financial performance and results of operations.

Previous wording

We participate in an evolving industry

Current wording

We participate in an evolving and volatile industry.

Previous wording

The cannabis and hemp industries are not yet well-developed, and many aspects of these industries’ development and evolution cannot be accurately predicted. While we have attempted to identify many risks specific to the cannabis and hemp industries, you should carefully consider that there are other risks that cannot be foreseen or are not described in this report, which could materially and adversely affect our business and financial performance. We expect that the cannabis and hemp markets and our business will evolve in ways that are difficult to predict. Our long-term success may depend on our ability to successfully adjust our strategy to meet the changing market dynamics. If we are unable to successfully adapt to changes in the cannabis and hemp industries, our operations could be adversely affected.

Current wording

The hemp industry is still new, and many aspects of the industry’s development and evolution cannot be accurately predicted. While we have attempted to identify many risks specific to the hemp industry, you should carefully consider that there are other risks that cannot be foreseen or are not described in this report, which could materially and adversely affect our business and financial performance. We expect that the hemp and cannabis markets and our business will continue to evolve in ways that are difficult to predict. Our long-term success may depend on our ability to successfully adjust our strategy to meet the changing market dynamics. If we are unable to successfully adapt to changes in the hemp and cannabis industries, our operations could be adversely affected.

Previous wording

Since the use of cannabis is illegal under federal law, there is a compelling argument that banks cannot lawfully accept or deposit funds from businesses involved with cannabis. Consequently, businesses involved in the cannabis industry often have trouble finding a bank willing to accept their business. The inability to open bank accounts may make it difficult for some of our customers to operate and their reliance on cash can result in a heightened risk of theft, which could harm their businesses and, in turn, harm our business. Although the proposal of the Secure and Fair Enforcement Regulation Banking Act, also referred to as the SAFER Banking Act, would allow banks to work with cannabis businesses and prevent federal banking regulators from intervening or punishing those banks, the legislation still requires the approval of the U.S. House and Senate. There can be no assurance that the SAFER Banking Act or any similar legislation will become law in the U.S. Additionally, most courts have denied cannabis-related businesses bankruptcy protection, thus making it very difficult for lenders to recoup their investments, which may limit the willingness of banks to lend to our customers and to us.

Current wording

Since the use of cannabis is illegal under federal law, and hemp-derived THC may become illegal under the 2026 Appropriations Act, there may be a compelling argument that banks cannot lawfully accept or deposit funds from businesses involved with cannabis, or, after November 12, 2026, hemp-derived THC. Consequently, businesses involved in the cannabis industry often have, and the hemp industry may have, trouble finding a bank willing to accept their business. The inability to open bank accounts may make it difficult for some of our customers or licensees to operate and their reliance on cash can result in a heightened risk of theft, which could harm their businesses and, in turn, harm our business. Although the proposal of the Secure and Fair Enforcement Regulation Banking Act, also referred to as the SAFER Banking Act, would allow banks to work with cannabis businesses and prevent federal banking regulators from intervening or punishing those banks, the legislation still requires the approval of the U.S. House and Senate. There can be no assurance that the SAFER Banking Act or any similar legislation will become law in the U.S.

Previous wording

We have a relatively short operating history, which makes it difficult to evaluate our business and future prospects. We have been in existence since June 2016 and much of our revenue growth occurred during 2021 and 2022, with a decrease of revenues noted in 2023 and 2024. In addition, we have entered into a new line of business following the acquisition of Señorita, which has a limited operating history and have discontinued our Cultivation business. We have encountered, and will continue to encounter, risks and difficulties frequently experienced by growing companies in rapidly changing industries, including those related to:

Current wording

We have a relatively limited operating history, which may make it difficult to evaluate our business and future prospects. Although we were formed in June 2016, we have since discontinued our cultivation and extraction operations and have recently entered new lines of business, including the development and commercialization of hemp-derived THC products and the licensing of consumer packaged goods brands. These newer business lines have a limited operating history, which increases the uncertainty associated with assessing our performance and future results. We have encountered, and will continue to encounter, risks and difficulties frequently experienced by growing companies in rapidly changing industries, including those related to:

Previous wording

At December 31, 2024, we had approximately $31.2 million of cash and cash equivalents. Our operating plan may change because of factors currently unknown to us, and we may need to seek additional funds sooner than planned. Even if we are able to substantially increase revenue and reduce operational expenditures, we may need to raise additional capital, either through borrowings, private offerings, public offerings, or some type of business combination, such as a merger or buyout, and there can be no assurance that we will be successful in such pursuits. Accordingly, if we are unable to generate adequate cash from operations, and if we are unable to find sources of funding, it may be necessary for us to sell one or more lines of business or all or a portion of our assets, enter into a business combination, or reduce or eliminate operations. These possibilities, to the extent available, may be on terms that result in significant dilution to our shareholders or that result in our investors losing all of their investment in our company.

Current wording

As of December 31, 2025, we had approximately $32.2 million of cash and cash equivalents. Our operating plan may change because of factors currently unknown to us, and we may need to seek additional funds sooner than planned. Even if we are able to substantially increase revenue and reduce operational expenditures, we may need to raise additional capital, either through borrowings, private offerings, public offerings, or some type of business combination, such as a merger or buyout, and there can be no assurance that we will be successful in such pursuits. Accordingly, if we are unable to generate adequate cash from operations, and if we are unable to find sources of funding, it may be necessary for us to sell one or more lines of business or all or a portion of our assets, enter into a business combination, or reduce or eliminate operations. These possibilities, to the extent available, may be on terms that result in significant dilution to our shareholders or that result in our investors losing all of their investment in our company.

Previous wording

We face exposure to the risk that employees, independent contractors or consultants may engage in fraudulent or other illegal activities. Misconduct by these parties could be intentional, reckless and/or negligent conduct. There may be disclosure of unauthorized activities that violate government regulations, manufacturing standards, healthcare laws, abuse laws and other financial reporting laws. Further, 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 these activities may not always be effective. As a result, we could face potential penalties and litigation.

Current wording

We face exposure to the risk that employees, independent contractors, or consultants may engage in fraudulent or other illegal activities. Misconduct by these parties could be intentional, reckless and/or negligent conduct. There may be disclosure of unauthorized activities that violate government regulations, manufacturing standards, health care laws, abuse laws, and other financial reporting laws. Further, 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 these activities may not always be effective. As a result, we could face potential penalties and litigation.

Previous wording

Furthermore, we cannot provide assurance that our internal controls and compliance systems will protect us from acts committed by our employees, agents or business partners, including Green Thumb, in violation of U.S. federal or state or local laws. Any improper acts or allegations could damage our reputation and subject us to civil or criminal investigations and related shareholder lawsuits, could lead to substantial civic and criminal monetary and non-monetary penalties and could cause us to incur significant legal and investigatory fees.

Current wording

Furthermore, we cannot provide assurance that our internal controls and compliance systems will protect us from acts committed by our employees, agents, or contracted third parties in violation of U.S. federal or state or local laws. Any misconduct or even allegations could damage our reputation and subject us to civil or criminal investigations and shareholder lawsuits, could lead to substantial civil and criminal monetary and non-monetary penalties or damages, and could cause us to incur significant legal and investigatory fees.

Previous wording

Since our inception, we have strategically acquired several businesses, and plan to continue to make strategic acquisitions, some of which may be material. These acquisitions may involve a number of financial, accounting, managerial, operational, legal, compliance, and other risks and challenges, including the following, any of which could adversely affect our results of operations:

Current wording

Since our inception, we have strategically acquired several businesses, and we may continue to make strategic acquisitions, some of which may be material. These acquisitions may involve a number of financial, accounting, managerial, operational, legal, compliance, and other risks and challenges, including the following, any of which could adversely affect our results of operations:

Previous wording

We may record goodwill and other intangible assets on our consolidated balance sheet in connection with our acquisitions. If we are not able to realize the value of these assets, we may be required to incur charges relating to the impairment of these assets, which could materially impact our results of operations.

Current wording

We may record goodwill, intangible assets or other assets on our consolidated balance sheet in connection with our acquisitions. If we are not able to realize the value of these assets, we may be required to incur charges relating to the impairment of these assets, which could materially impact our results of operations.

Previous wording

We currently have, and may in the future enter into, additional strategic alliances with third parties that we believe will complement or augment our existing business. In particular, we currently rely on Green Thumb for significant legal, accounting and operational support through a shared services agreement. Our ability to complete strategic alliances is dependent upon, and may be limited by, the availability of suitable candidates and capital. In addition, strategic alliances could present unforeseen integration obstacles or costs, may not enhance our business and may involve risks that could adversely affect us, including significant amounts of management time that may be diverted from operations in order to pursue and complete such transactions or maintain such strategic alliances. Future strategic alliances could result in the incurrence of additional debt, costs and contingent liabilities, and there can be no assurance that future strategic alliances will achieve, or that our existing strategic alliances will continue to achieve, the expected benefits to our business or that we will be able to consummate future strategic alliances on satisfactory terms, if at all. Termination of any strategic alliances, including our shared services agreement with Green Thumb, could significantly disrupt our business. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

Current wording

We currently have, and may in the future enter into, additional strategic alliances with third parties that we believe will complement or augment our existing business. In particular, we currently have shared services agreements with Green Thumb for significant legal, accounting and operational support, including sales and marketing support. Our ability to complete strategic alliances is dependent upon, and may be limited by, the availability of suitable candidates and capital. In addition, strategic alliances could present unforeseen integration obstacles or costs, may not enhance our business and may involve risks that could adversely affect us, including significant amounts of management time that may be diverted from operations in order to pursue and complete such transactions or maintain such strategic alliances. Future strategic alliances could result in the incurrence of additional debt, costs and contingent liabilities, and there can be no assurance that future strategic alliances will achieve, or that our existing strategic alliances will continue to achieve, the expected benefits to our business or that we will be able to consummate future strategic alliances on satisfactory terms, if at all. Termination of any strategic alliances, including our shared services agreement with Green Thumb, could significantly disrupt our business. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

Previous wording

In order to position our business to take advantage of particular future growth opportunities and/or consolidate our more capable businesses, we have in the past and may in the future pursue a strategy of focusing on one or more specialized facets of our products and services. These actions may require that we abandon or divest certain assets or businesses that no longer fit within our evolving strategic direction, as we did with the sale of our cultivation business. Abandoning or divesting certain assets or businesses may entail engaging in discussions, evaluating opportunities and entering into agreements, potentially resulting in transactions involving significant risks and uncertainties that could adversely affect our business, results of operations and financial condition. We may not be able to find potential buyers on favorable terms, we may experience disruption to our business and/or we may divert management attention from other business concerns, lose key employees and possibly retain certain liabilities related to these potential transactions.

Current wording

In order to position our business to take advantage of particular future growth opportunities and/or consolidate our more capable businesses, we have in the past and may in the future pursue a strategy of focusing on one or more specialized facets of our products and services. These actions may require that we abandon or divest certain assets or businesses that no longer fit within our evolving strategic direction, as we did with the sale of our cultivation business and exit of our extraction business. Abandoning or divesting certain assets or businesses may entail engaging in discussions, evaluating opportunities and entering into agreements, potentially resulting in transactions involving significant risks and uncertainties that could adversely affect our business, results of operations and financial condition. We may not be able to find potential buyers on favorable terms, we may experience disruption to our business and/or we may divert management attention from other business concerns, lose key employees and possibly retain certain liabilities related to these potential transactions.

Previous wording

If we are not in compliance with certain of these covenants, in addition to other actions the Investor may require, the amounts outstanding under the Note may become immediately due and payable. This immediate payment may negatively impact our financial condition. In addition, any failure to make scheduled payments of interest and principal on our outstanding indebtedness would likely harm our ability to incur additional indebtedness on acceptable terms. Our cash flow and capital resources may be insufficient to pay interest and principal on our debt in the future. If that should occur, our capital raising or debt restructuring measures may be unsuccessful or inadequate to meet our scheduled debt service obligations, which could cause us to default on our obligations and further impair our liquidity.

Current wording

If an event of default under the Notes occurs and is not waived, the holder can elect to accelerate all or a portion of the then-outstanding principal amount of the applicable Notes, plus accrued and unpaid interest, including default interest, which accrues at a rate per annum equal to 14% from the date of a default or event of default. This immediate payment may negatively impact our financial condition. In addition, any failure to make scheduled payments of interest and principal on our outstanding indebtedness would likely harm our ability to incur additional indebtedness on acceptable terms. Our cash flow and capital resources may be insufficient to pay interest and principal on our debt in the future. If that should occur, our capital raising or debt restructuring measures may be unsuccessful or inadequate to meet our scheduled debt service obligations, which could cause us to default on our obligations and further impair our liquidity.

Previous wording

Our ability to make scheduled payments on our debt and other financial obligations depends on our financial and operating performance. Our financial and operating performance will continue to be subject to prevailing economic conditions and to financial, business, and other factors, some of which are beyond our control. Failure within any applicable grace or cure periods to make such payments, or comply with any covenant, would create a default under the Notes. Our cash flow and existing capital resources may be insufficient to repay our debt at maturity, in which case we would have to extend such maturity date, or otherwise repay, refinance, and/or restructure the obligations under the Note, including with proceeds from the sale of assets, and additional equity or debt capital. If we are unsuccessful in obtaining such extension, or entering into such repayment, refinance, or restructure prior to maturity, or any other default existed under the Note, the Investor could accelerate the indebtedness under the Note, foreclose against its collateral, or seek other remedies, which would jeopardize our ability to continue our current operations.

Current wording

Our ability to make scheduled payments on our debt and other financial obligations depends on our financial and operating performance. Our financial and operating performance will continue to be subject to prevailing economic conditions and to financial, business, and other factors, some of which are beyond our control. Failure within any applicable grace or cure periods to make such payments, or comply with any covenant, would create a default under the Notes. Our cash flow and existing capital resources may be insufficient to repay our debt at maturity, in which case we would have to extend such maturity date, or otherwise repay, refinance, and/or restructure the obligations under the Notes, including with proceeds from the sale of assets, and additional equity or debt capital. If we are unsuccessful in obtaining such extension, or entering into such repayment, refinance, or restructure prior to maturity, or any other default existed under the Notes, the holder could accelerate the indebtedness under the Notes, foreclose against its collateral, or seek other remedies, which would jeopardize our ability to continue our current operations and raise substantial doubt about the Company’s ability to continue as a going concern.