Item 1A. Risk Factors The Company is subject to numerous risks and uncertainties, any of which could have a significant or material adverse effect on our business, financial condition, liquidity or consolidated financial statements. You should carefully consider the risk factors disclosed below and under the heading Risk Factors, which are included in the 2024 2025 Form 10-K, which was also filed on SEDAR. The risks described therein and herein are not the only ones we face. Other than set forth herein, there have been no material changes from the risk factors previously disclosed. We have included a more fulsome explanation of the risks associated with the Arrangement in the definitive proxy statement that we filed with the Securities and Exchange Commission on May 11, 2026. Risks Related to the Arrangement We may not complete the proposed Continuance, we may not realize the anticipated benefits of the Continuance, or we may not realize the anticipated benefits of the Continuance within the anticipated timeframe. On April 24, 2026, we announced our intention to seek shareholder approval of a proposed arrangement which involves, among other things, the continuance of the Company out from the province of British Columbia, Canada and the concurrent domestication of the Company in the State of Nevada in the United States (the "Continuance"). We believe the Continuance will enhance shareholder value by better aligning our corporate structure with our operations and allowing us to operate more efficiently. However, there can be no assurance that the Continuance will be completed. Among other reasons, shareholders may not approve the Continuance or the Board may decide not to proceed with the Continuance. Even if the Continuance is completed, we may not be able to realize the anticipated benefits of the Continuance, or may not be able to realize the anticipated benefits of the Continuance within the anticipated timeframe. Our expectations with respect to the benefits of the Continuance and the timeframe in which those benefits may occur are subject to several assumptions that could prove incorrect. If the Continuance is completed but does not provide the anticipated benefits, or does not provide the anticipated benefits within the anticipated timeframe, we may incur additional expenses, lose potential opportunities, or face other adverse consequences, and if expected benefits do not meet investor or analyst expectations, the market price of our common stock may decline. Risks Related to the Regulatory Environment Cannabis is illegal under U.S. federal law. In the U.S., cannabis is largely regulated at the state level. Each state in which we operate (or are currently proposing to operate) authorizes, as applicable, medical and/or adult-use cannabis production and distribution by licensed or registered entities, and numerous other states have legalized adult use of cannabis in some form. However, under U.S. federal law, the possession, use, cultivation, and transfer of cannabis and any related drug paraphernalia is illegal, and any such acts are criminalized under the Controlled Substances Act (CSA). Cannabis is a Schedule I controlled substance under the CSA, and is thereby deemed to have a high potential for abuse, no accepted medical use in the U.S., and a lack of safety for use under medical supervision. The concepts of medical cannabis, retail cannabis and adult-use cannabis do not exist under U.S. federal law. However, 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 marijuanas Schedule I status. On August 29, 2023, the Department of Health and Human Services (HHS) delivered a recommendation to move cannabis from Schedule I to Schedule III to the U.S. Drug Enforcement Administration (DEA). 29 On May 21, 2024, the DEA published a proposed rule in the Federal register by which it proposed to transfer marijuana from Schedule I of the CSA to Schedule III. The DEA stated that the re-scheduling would be consistent with the view of the Department of Health and Human Services that marijuana has a currently accepted medical use as well as HHSs views about marijuanas abuse potential and level of physical or psychological dependence. The DEA further stated that if the transfer to Schedule III is finalized, the regulatory controls applicable to Schedule III controlled substances would apply, as appropriate, along with existing marijuana-specific requirements and any additional controls that might be implemented, including those that might be implemented to meet U.S. treaty obligations. If marijuana is transferred to Schedule III, the manufacture, distribution, dispensing, and possession of marijuana would remain subject to the applicable criminal prohibitions of the CSA. Any drugs containing a substance within the CSAs definition of marijuana would also remain subject to the applicable prohibitions in the Federal Food, Drug, and Cosmetic Act. As part of the proposed rule, the DEA solicited public comments through July 22, 2024. The proposed rule received over 40,000 comments. On August 29, 2024, the DEA announced in the Federal Register that it would be holding a hearing on December 2, 2024, to address procedural and scheduling matters. Merits-based hearings were set to begin on January 1, 2025, with testimony from government witnesses, but these hearings were stayed indefinitely. On December 18, 2025, President Trump signed an executive order directing U.S. Attorney General Pam Bondi to complete the rescheduling process in an expeditious manner. On April 23, 2026, the Department of Justice announced that it placed U.S. Food and Drug Administration (FDA) approved cannabis products and products containing medical cannabis subject to a qualifying state-issued license in Schedule III and announced that the DEA would be withdrawing the prior notice of hearing and terminating those proceedings. The DEA will hold new administrative hearings beginning on June 29, 2026. On April 28, 2026, the DEA issued rules in the Federal Register rescheduling FDA-approved cannabis products and products containing medical cannabis from a state medical cannabis license from Schedule I to Schedule III of the CSA (Rescheduling Rule). The Rescheduling Rule also created an expedited process for state medical cannabis licensees to register with the DEA, enabling these entities holding state medical cannabis licenses to engage in the manufacture, distribution, and/or dispensing of cannabis for medical purposes under federal law. The Rescheduling Rule did not appear to address or amend the legality of adult-use cannabis. On May 4, 2026, SAM, Inc. (d/b/a Smart Approaches to Marijuana) and National Drug and Alcohol Screening Association, Inc. filed a petition in the U.S. Court of Appeals for the District of Columbia challenging the Rescheduling Rule. If the petitioners are successful, the Rescheduling Rule could be subject to being set aside. While further federal action could result in the decriminalization of cannabis for medical and adult use by descheduling or rescheduling of non-medical marijuana, there are no assurances if or when there could be any further change in the regulation of marijuana under the CSA. Additionally, it is not yet clear how the mechanics of the partial rescheduling of cannabis will impact business operations. Although we believe that our business activities are compliant with applicable state and local laws in the U.S., compliance with state and local cannabis laws would not necessarily provide a defense to any federal proceeding which may be brought against us, even if the Company registers medical cannabis operations with the DEA. Any such proceedings may result in a material adverse effect on us. We derive 100% of our revenues from the cannabis industry. The enforcement of applicable U.S. federal laws poses a significant risk to us. Violations of any U.S. federal laws and regulations could result in significant fines, penalties, administrative sanctions, or settlements arising from civil proceedings conducted by either the U.S. federal government or private citizens. We may also be subject to criminal charges under the CSA, and if convicted could face a variety of penalties including, but not limited to, disgorgement of profits, cessation of business activities or divestiture. Any of these penalties could have a material adverse effect on our reputation and ability to conduct our business, our holding (directly or indirectly) of medical and adult-use cannabis licenses in the U.S., our financial position, operating results, profitability or liquidity or the market price of our publicly-traded shares. In addition, it is difficult for us to estimate the time or resources that would be needed for the investigation, settlement or trial of any such proceedings or charges, and such time or resources could be substantial. 30 As a cannabis business, we may be subject to certain tax provisions that have a material adverse effect on our business, financial condition and results of operations. Under Internal Revenue Code Section 280E (Section 280E) 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. This provision has been applied by the U.S. Internal Revenue Service (the IRS) to cannabis operations, and the IRS has taken the position that Section 280E prohibits companies engaged in such operations from deducting expenses directly associated with the sale of cannabis. As a result of Section 280E, an otherwise profitable business may, in fact, operate at a loss, after taking into account its U.S. income tax expenses. Consequently, Section 280E and related IRS enforcement activity may have a significant impact on the operations of cannabis companies, including our Company. The Rescheduling Rule removes medical cannabis sales from the application of Section 280E on a prospective basis, starting with calendar year 2026 for companies that register with the DEA, and therefore may provide tax relief to the Company with respect to its medical cannabis operations to the extent Section 280E applies to the Companys operations. The Rescheduling Rule also encouraged the IRS to make tax relief from Section 280E retroactive, but there is no guarantee the IRS will follow such guidance. The difference in tax treatment between our medical and non-medical cannabis products and operations may increase our accounting and compliance costs. The re-classification of cannabis or changes in U.S. controlled substance laws and regulations could have a material adverse effect on our business, financial condition and results of operations. In light of the Rescheduling Rule, medical cannabis subject to a qualifying state-issued license is now classified as a Schedule III substance. If cannabis more broadly is re-classified as a Schedule II or lower controlled substance under the CSA, the ability to conduct research on the medical benefits of cannabis would most likely be more accessible; however, if cannabis is re-classified to a lower schedule, the resulting re-classification would result in the need for approval by the FDA if medical claims are made about our medical cannabis products. As a result of such a re-classification, the manufacture, importation, exportation, domestic distribution, storage, sale and use of such products could become subject to a significant degree of regulation by the DEA. In that case, we may be required to be registered to perform these activities and have the security, control, recordkeeping, reporting and inventory mechanisms required by the DEA to prevent drug loss and diversion. Obtaining the necessary registrations may result in delay of the manufacturing or distribution of our products. The DEA conducts periodic inspections of registered establishments that handle controlled substances. Failure to maintain compliance could have a material adverse effect on our business, financial condition and results of operations. The DEA may seek civil penalties, refuse to renew necessary registrations, or initiate proceedings to restrict, suspend or revoke those registrations. In certain circumstances, violations could lead to criminal proceedings.