Vireo Growth (VREOF) Risk Analysis

As a cannabis company, shareholders with an ownership interest of five percent (5%) or more of the Company's issued and outstanding shares (calculated on as-converted to Subordinate Voting Shares basis) are subject to certain conditions and we are entitled to redeem our securities held by such shareholders in order to permit the Company to comply with applicable state licensing regulations. The purpose of the redemption right is to provide the Company with a means of protecting itself from having a shareholder (an "Unsuitable Person"): (i)who a state governmental authority granting licenses to the Company (including to any subsidiary) has determined to be unsuitable to own shares, or (ii)whose ownership of our securities may result in the loss, suspension or revocation (or similar action) with respect to any licenses relating to the conduct of our business relating to the cultivation, processing or dispensing of cannabis or cannabis-derived products in the United States or in the Company being unable to obtain any new licenses in the course of its business, in each case including, but not limited to, as a result of such person's failure to apply for a suitability review from or to otherwise fail to comply with the requirements of a governmental authority, as determined by the Board of Directors in its sole discretion after consultation with legal counsel and, if a license application has been filed, after consultation with the applicable governmental authority. In the event a shareholder's background or status jeopardizes our current or proposed licensure, we may be required to redeem such shareholder's securities in order to continue our operations or obtain licenses in the future. This redemption may divert our cash resources from other productive uses and require us to obtain additional financing that may not be on the best terms for the Company. The inability to obtain additional financing to redeem an Unsuitable Person's securities may result in the loss of a current or potential license.

?Our ability to operate and grow our business and subsidiaries depends in large part on obtaining, maintaining, and renewing in a timely manner the applicable state and local licenses, permits, registrations, and credentials required to cultivate, process, distribute, and/or sell cannabis and cannabis products. There can be no assurance that we will be able to obtain, renew, or maintain such licenses, permits, registrations, or credentials as needed to conduct our operations. An increasing number of state regulators have begun to require or indicated they may soon require entities engaged in certain aspects of the legal cannabis industry, such as dispensary operators, to post bonds or pay significant fees as a condition to applying for, renewing, or maintaining licenses, including as a guarantee of payment of sales and franchise taxes. We are unable to quantify the potential scope or aggregate amount of such bonds or fees in the states in which we currently do, or potentially will, operate. However, any such requirements, individually or in the aggregate, could be substantial and could have a material adverse effect on our results of operations, financial condition, and ultimate business prospects. Further, in many of the states that have legalized cannabis, the applicable laws and regulations do not expressly or impliedly permit the pledge of cannabis inventory as collateral in favor of third parties that do not hold the requisite licenses to cultivate, process, sell, or possess cannabis under state law. State laws also generally do not permit the transfer of state-issued cannabis licenses or entitlements to third parties that have not themselves been granted such licenses or entitlements by the responsible agency. As a result, in connection with our contractual and financing arrangements with clients, counterparties, or subsidiaries, we may not be able to secure our payment and other contractual rights with liens on cannabis inventory or licenses. Our inability to obtain customary collateral security for our arrangements increases the risk of loss in the event of a default or breach by such counterparties, which, in turn, could have a material adverse effect on our business, financial condition, or results of operations. Certain jurisdictions in which we operate also impose limits on the number or type of state-issued cannabis licenses, as well as the level of economic or commercial interests in licensed entities, that a single person or entity may hold within that state. As we complete acquisitions or other strategic transactions, we may, or could in the future, exceed permitted ownership thresholds or otherwise hold more than the prescribed number or type of licenses or interests in licensed entities in particular jurisdictions. In such circumstances, we may be required by regulators to divest certain licenses or equity interests, restructure our holdings, or take other remedial actions in order to comply with applicable state law. Any forced divestiture or restructuring could occur on unfavorable terms, reduce our anticipated returns from acquisitions or investments, limit our growth opportunities in those jurisdictions, and otherwise have a material adverse effect on our business, financial condition, or results of operations.

In U.S. states where cannabis is currently legal, our business is subject not only to state-level laws and regulations but also to the ordinances, rules and policies of counties, municipalities and other local governmental authorities. Even where state law permits and regulates the sale and use of cannabis, local governments often retain broad discretion to regulate, limit or prohibit cannabis-related activities within their jurisdictions, including through zoning, licensing and land use powers. There can be no assurance that local governmental authorities will not exercise their authority to limit, condition or effectively negate the applicability of state cannabis laws in their jurisdictions where permitted. For example, local governments may prohibit cannabis businesses entirely within their borders or in particular zones, adopt restrictive zoning or buffer requirements that significantly limit permissible locations, impose operating conditions such as limited hours, security, signage or odor-control requirements that increase costs or reduce the viability of operations, or enact moratoria or temporary bans that delay or prevent licensing or expansion. Local regulations and policies may change over time due to political developments, community opposition, changes in leadership or shifts in public opinion, and may be adopted or amended with limited notice. As a result, jurisdictions in which we currently operate, or intend to operate, could adopt new or more restrictive rules that adversely affect us. We may be required to incur additional costs to comply with changing local requirements, relocate or modify existing facilities, abandon planned facilities or licenses, or reduce or cease operations in certain areas. Any such local restrictions or changes could limit our ability to enter local markets and result in impairment of assets, increased compliance and legal costs, and operational disruption.

The regulatory framework governing hemp and hemp-derived products in the United States is complex, evolving and uncertain. Although the 2018 Farm Bill removed "hemp" (as defined therein) and its derivatives from the definition of "marijuana" under the CSA, hemp-derived products remain subject to extensive regulation under the FD&C Act and other federal and state laws. The FDA has asserted broad jurisdiction over many categories of hemp-derived products, including foods, dietary supplements, cosmetics and other consumer products, and has not permitted the marketing of certain hemp-derived ingestible products, such as drinks, gummies and other ingestible products containing certain hemp-derived ingredients. Our psychoactive hemp-derived products are not intended for use in the diagnosis, cure, mitigation, treatment, or prevention of any disease or medical condition and are not marketed as drugs. Nevertheless, the FDA may determine that some or all our hemp-derived products, their ingredients, or the manner in which they are manufactured, labeled, promoted, or distributed are not in compliance with applicable federal requirements. There can be no assurance that our products or operations will be deemed to comply with federal laws and regulations, including those enforced by the FDA, now or in the future. The FDA has issued warning letters and taken other enforcement actions against companies marketing hemp-derived products that, in the FDA's view, are unlawfully marketed as conventional foods, dietary supplements, or unapproved drugs, or that are otherwise misbranded or adulterated under the FD&C Act. If the FDA were to determine that our products are being marketed in a manner inconsistent with applicable law or guidance, or that our manufacturing, labeling, or promotion practices are non-compliant, we could be subject to a range of enforcement actions, including, without limitation: (i) warning letters or untitled letters requiring corrective actions; (ii) product seizures; (iii) injunctions or consent decrees restricting or prohibiting certain operations; (iv) civil or criminal fines and penalties; and (v) requirements to recall, re-label, reformulate or discontinue certain products. In addition, in deference to the FDA's position and related public health concerns, various states and municipalities have declared that the sale of certain hemp-derived products, particularly certain ingestible or psychoactive products, is illegal or subject to additional restrictions. State and local authorities may adopt and enforce regulations that are more restrictive than, or inconsistent with, federal policy, and such regulations may change with limited notice. As a result, we may be prohibited or severely limited from selling certain products in particular jurisdictions, may be required to alter formulations, packaging, labeling or marketing, or may need to cease operations in certain markets altogether. Aggressive law enforcement or regulatory action targeting the hemp-derived products industry by federal, state or local authorities and agencies could materially and adversely affect our revenues, profitability, operations and growth prospects. Moreover, adverse regulatory actions or heightened enforcement against the hemp-derived products sector generally or against our respective products specifically could negatively impact investor perception and our access to capital and could have a material adverse effect on the trading price and liquidity of our Subordinate Voting Shares.

Congress has enacted the Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026, which is set to significantly narrow the federal definition of "hemp" and thereby impose new restrictions on hemp-derived cannabinoid products beginning in November 2026 (the "2026 Hemp Restrictions"). As currently understood, these measures would move to a "total THC" framework that aggregates multiple forms of tetrahydrocannabinols, sets very low per-container or per-serving THC limits, and excludes many cannabinoids synthesized or manufactured outside the plant. Specifically, while the current "hemp" definition includes products with a concentration of no more 0.3 percent delta-9 THC on a dry weight basis, the forthcoming "hemp" definition would be limited to only those products with a concentration of no more than 0.3 percent of any THC on a dry weight basis. As a result, many of our current hemp-derived products could be deemed to meet the definition of "marijuana" under the CSA and, therefore, non-compliant under this framework. We may be required to reformulate, relabel, reposition or discontinue products, shift certain items into state-regulated cannabis channels, overhaul our supply chain, testing, packaging and marketing, write down or dispose of inventory, modify or terminate commercial relationships, and limit or cease sales in certain channels or jurisdictions. There can be no assurance that we will be able to successfully adapt our portfolio or that any such efforts will be commercially viable. The 2026 Hemp Restrictions may also intensify the already complex patchwork of federal and state regulation, as states may align with, diverge from, or add to the new federal standards, creating preemption, conflict-of-law and enforcement uncertainties. Federal agencies, including the U.S. Department of Agriculture, FDA, DEA and IRS, appear to have broad discretion in interpreting and enforcing these 2026 Hemp Restrictions, including with respect to testing methodologies, permissible product formats, labeling and claims, and tax treatment. We could face adverse federal tax consequences if our hemp-derived products are treated as controlled substances. We could experience increased regulatory scrutiny, enforcement actions, litigation, and challenges in maintaining relationships with retailers, e-commerce platforms and payment processors. Any of these developments could materially and adversely affect our ability to continue offering some or all of our hemp-derived products, reduce revenues and margins, increase compliance and operating costs, and otherwise have a material adverse effect on our business, financial condition, results of operations and prospects. Future legislative or regulatory developments, including efforts to amend, delay or expand the 2026 Hemp Restrictions, could further increase uncertainty and compliance costs and may not be favorable to our business.

Our business and activities are heavily regulated in all jurisdictions where we conduct business. Our operations are subject to various laws, regulations and guidelines by state and local governmental authorities relating to the manufacture,marketing, management, transportation, storage, sale, pricing and disposal of cannabis, cannabis oil and consumable cannabis products, and also including laws and regulations relating to health and safety, insurance coverage, the conduct of operations and the protection of the environment. Laws and regulations, applied generally, grant government agencies and self-regulatory bodies broad administrative discretion in establishing regulations over our activities, including the power to limit or restrict business activities as well as impose additional disclosure requirements on our products and services. Achievement of our business objectives is contingent, in part, upon compliance with regulatory requirements enacted by these governmental authorities and obtaining all necessary regulatory approvals for the manufacture, production, storage, transportation, sale, import and export, as applicable, of our products. Even among jurisdictions that permit cannabis activities, there is no uniform regulatory framework; instead, each jurisdiction may impose its own licensing regimes, security requirements, product standards, marketing regulations, packaging and labeling rules, testing protocols, track-and-trace systems, zoning and operating restrictions, ownership and control limitations, and tax and reporting obligations. The absence of harmonized regulations means that requirements can vary significantly from one jurisdiction to another and may be overlapping, inconsistent or at times directly conflicting. For example, one jurisdiction may require certain product formulations, testing thresholds or labeling disclosures that differ from, or are not permitted under, the rules of another jurisdiction. Local ordinances may impose stricter limitations than state law on operating hours, permitted activities, or facility locations. Federal prohibitions and enforcement priorities may restrict and complicate activities that are permitted under state law, including movement of funds, use of financial institutions, and transportation of products across state lines. As a result, we may face situations where full compliance with one set of rules creates a risk of non-compliance with another, or where it is unclear which standard will be applied or enforced. While we endeavor to comply with all applicable laws, regulations and guidelines and, to our knowledge, we are in compliance with or are in the process of being assessed for compliance with all such laws, regulations and guidelines, any failure to comply with the regulatory requirements applicable to our operations may expose us to heightened compliance costs and operational complexity. We must design, implement and maintain compliance programs, internal controls, information systems and policies tailored to multiple, and sometimes inconsistent, regulatory regimes. This increases our operating costs, diverts management time and resources from other business initiatives, and may limit our ability to standardize products, processes and systems across our operations. The number, complexity, and evolving nature of applicable laws and regulations increase the risk that we may inadvertently fail to comply with one or more requirements. Regulatory changes may be adopted with limited notice, may be subject to differing interpretations, and may require rapid adjustments to our operations, documentation, product offerings or business practices. Elections, changes in political leadership, or shifts in public sentiment can lead to new or modified legislation or regulations that are more restrictive, more burdensome, or more inconsistently applied. Courts may also interpret existing laws in ways that materially impacts our operations or the legality of our activities. We cannot predict how these changes or uncertainties will affect our business or our ability to remain in compliance. As such, the need to navigate differing and potentially conflicting regulatory regimes may limit the jurisdictions in which we can operate, delay our entry into new markets, require us to exit current markets, or constrain the structure and terms of acquisitions, joint ventures and other strategic transactions. We may be compelled to forgo business opportunities, modify transaction terms, or implement complex structures to address regulatory concerns, any of which could reduce the attractiveness or anticipated benefits of such opportunities. Regulatory issues, enforcement actions, or perceived non-compliance in one jurisdiction may affect our reputation with regulators, counterparties, investors, customers and other stakeholders in other jurisdictions. Counterparties may seek to terminate, modify, or renegotiate agreements based on regulatory developments or enforcement actions, or may be unwilling to enter into new arrangements given perceived regulatory risk. There can be no assurance that we will be able to continuously anticipate, monitor and adequately respond to all legal and regulatory developments affecting our business or that our compliance systems and controls will be sufficient to prevent all violations, particularly in an environment where legal regimes are fragmented, evolving and occasionally inconsistent or in direct tension with one another. Any failure, or perceived failure, to comply with applicable laws and regulations, any significant change in the laws or regulations governing cannabis, or any inability to reconcile differing or conflicting requirements across jurisdictions could have a material adverse effect on our business, financial condition, results of operations and prospects.

Aspects of our business, including our contracts and contractual counterparties, are directly or indirectly involved in marijuana and related activities that are illegal under U.S. federal law and remain illegal or restricted in certain state and local jurisdictions. These include agreements relating to the Schwazze Transaction, the PharmaCann Transaction and the Eaze Merger (each, a "Pending Transaction" and, collectively, the "Pending Transactions"). Because these activities are prohibited at the federal level and may be prohibited or heavily restricted in some states, we may face uncertainty and risk in enforcing our contractual rights, both in federal courts and in certain state courts. Courts may refuse to enforce contracts, in whole or in part, where performance involves conduct that is illegal or contrary to public policy. In the context of marijuana-related businesses, some courts have declined to enforce cannabis-related agreements or to grant certain remedies, even where the contracts themselves are validly formed under applicable state law. As a result, there is a meaningful risk that a court could determine that one or more of our contracts, including those entered into in connection with the Pending Transactions, are unenforceable or only partially enforceable, or that certain remedies (such as specific performance, injunctive relief or damages tied to cannabis-related revenue streams) are unavailable. This uncertainty could adversely affect our ability to compel performance or payment by counterparties under our commercial agreements, including those entered into in connection with the Pending Transactions. As a result, there is a material risk that we could not realize anticipated economic benefits from the Pending Transactions, including contingent or earn-out consideration, performance-based fees, royalties or other cannabis-derived revenue streams reliant on agreements. Different courts and arbitrators may apply differing interpretations of federal preemption, public policy and illegality doctrines making it difficult to predict and obtain consistent outcomes across jurisdictions. In addition, even where a court is willing to enforce our agreements, the presence of marijuana-related activities may complicate and delay dispute resolution. Courts may be reluctant to exercise jurisdiction, may limit available remedies, or may require additional briefing or evidentiary showings regarding the legality of the underlying activities. Choice-of-law and forum-selection clauses may not be enforced as written if a court concludes that applying the chosen law or forum would require it to approve or facilitate federally illegal conduct. Arbitration provisions may likewise be subject to challenge, and enforcement of arbitration awards in court may be uncertain where the underlying subject matter involves cannabis-related activities. If we are unable to enforce, or face significant limitations in enforcing, our contractual rights, we could experience: (i) loss of expected cash flows and asset value, including the Pending Transactions and other material agreements; (ii) reduced willingness of counterparties to perform voluntarily, if they believe we have limited practical recourse; and (iii) increased legal, administrative and transaction costs, including costs associated with structuring around enforceability concerns, negotiating enhanced protections, and resolving disputed matters in more complex or less predictable forums. While this risk is present for almost every contract we have currently or will enter into, we do not perceive or expect any specific or heighted risk with respect to the underlying agreements related to the Pending Transactions or our present lending arrangements. Any inability to enforce our agreements, any material limitation on the remedies available to us, or any adverse outcomes in related litigation, arbitration or regulatory proceedings could have a material adverse effect on our business, financial condition, results of operations and the value of our securities.

We and financial institutions are subject to extensive U.S. anti-money laundering ("AML") and financial crime compliance obligations, including under the U.S. Currency and Foreign Transactions Reporting Act of 1970, commonly known as the Bank Secrecy Act (the "BSA"), as amended, the Canadian Proceeds of Crime (Money Laundering) and Terrorist Financing Act, as amended, and any related regulations or guidelines, issued, administered or enforced by governmental authorities in the U.S. and Canada including regulations administered by the Financial Crimes Enforcement Network ("FinCEN"). As a result, financial transactions involving proceeds generated by, or intended to promote, cannabis-related business activities in the U.S. may form the basis for prosecution under applicable U.S. federal money-laundering laws. Banks and other depository institutions are currently hindered by federal law from providing financial services to marijuana businesses, even in states where those businesses are regulated. As cannabis remains illegal under U.S. federal law, proceeds from state-legal cannabis activity are generally treated as proceeds of unlawful activity for federal purposes. On February 14, 2014, the FinCEN issued guidance titled "BSA Expectations Regarding Marijuana-Related Businesses" (FIN-2014-G001) (the "FinCEN Marijuana Guidance"), which was intended to clarify how financial institutions can provide services to marijuana-related businesses consistent with their BSA obligations. Among other things, the FinCEN Marijuana Guidance: (i)Emphasizes that, because marijuana remains illegal under federal law, financial transactions involving marijuana-related businesses "generally involve funds derived from illegal activity," and thus must be treated as suspicious under the BSA; and (ii)Requires financial institutions that choose to bank marijuana-related businesses to conduct enhanced customer due diligence, assess the business against federal enforcement priorities, and file Suspicious Activity Reports ("SARs") in all cases using specific categories, such as "Marijuana Limited," "Marijuana Priority" and "Marijuana Termination", with continuing activity reports generally required every 120 days and currency transaction reports for as long as the relationship continues. FinCEN has confirmed in subsequent guidance the FinCEN Marijuana Guidance remains in effect, and financial institutions are expected to apply its guidance when providing services to marijuana-related businesses. This framework has the practical effect of increasing the perceived compliance, enforcement and reputational risks for banks, credit unions and other financial intermediaries that serve cannabis businesses, and has caused many institutions to decline to provide, or to severely limit, services to the industry and the Company. As a result, we rely on a limited number of financial institutions and service providers that are willing to work with cannabis-related businesses under this heightened BSA/AML regime. These institutions can, and sometimes do, decide to terminate or restrict relationships with cannabis businesses with little or no notice if they conclude that the relationship presents unacceptable BSA or enforcement risk or is not commercially attractive given the cost of compliance. If any of our banks or payment processors were to close or freeze our accounts, decline to process our transactions, or otherwise materially alter the services they provide to us, we could be forced to operate on a more cash-intensive basis and experience disruptions in cash management, payroll, vendor payments, tax remittances and customer transactions. Operating with limited or no traditional banking services also increases the risks of theft, fraud, diversion and other security incidents, and may adversely affect our ability to maintain adequate internal controls over financial reporting. Looking ahead, we do not expect the potential rescheduling of cannabis to Schedule III to have a material effect on our access to banking services. Given that operating state-legal medical and adult-use cannabis businesses would still be federally illegal after rescheduling, we anticipate that the impact from a banking perspective will be limited. Our ability to obtain traditional bank financing is similarly constrained. Many banks remain unwilling to extend credit to cannabis businesses in light of the federal illegality of cannabis, the requirements of the BSA and related AML laws, and the ongoing obligation to treat cannabis-related funds as suspicious and to file SARs under the FinCEN Marijuana Guidance. Those institutions that do lend to the sector may impose higher interest rates, more restrictive covenants, enhanced reporting and audit requirements, and shorter maturities than would be customary in other industries. Our limited access to revolving credit facilities, term loans and other forms of traditional bank financing may restrict our ability to fund operations, invest in growth opportunities, pursue acquisitions, refinance existing obligations on favorable terms or withstand periods of operating stress. In addition, broader events in the banking industry, including heightened regulatory scrutiny of AML programs, enforcement actions related to BSA compliance, shifts in bank risk-management priorities, stress events or failures involving regional or cannabis-focused financial institutions, or changes in how regulators expect institutions to apply the FinCEN Marijuana Guidance, could cause our existing or prospective banking partners to further restrict or terminate services to us or to cannabis businesses generally. Any of these factors, individually or in the aggregate, could further limit our access to banking and other financial services, increase our cost of capital, constrain our ability to grow or operate our business as planned, and otherwise have a material adverse effect on our business, financial condition, results of operations and prospects. Further, if the operations of the Company or our subsidiaries, or any proceeds thereof, any dividend distributions or any profits or revenues derived from these operations in the United States were found to be in violation of money laundering legislation or otherwise, such transactions may be viewed as proceeds of crime under one or more of the acts noted above, or any other applicable legislation. This could have a material, adverse effect on the Company and, among other things, could restrict or otherwise jeopardize our ability to declare or pay dividends, affect other distributions, or subsequently repatriate such funds back to Canada.

?As a cultivator, manufacturer, processor and distributor of cannabis and cannabis-derived products that are designed to be ingested or otherwise consumed by humans, we face an inherent risk of exposure to product liability claims, regulatory action and litigation if our products are alleged to have caused injury, illness, property damage or other significant loss. Our operations involve handling, processing, packaging and distributing products that are ingested, inhaled or otherwise used by consumers, including potentially vulnerable populations. As a result, we may be subject to claims or proceedings based on, among other things, contamination, mislabeling, incorrect dosing, manufacturing or design defects, failure to meet specifications, failure to comply with applicable child-resistant or tamper-evident packaging requirements, or failure to provide adequate warnings or instructions regarding use, storage, side effects or interactions with other substances. The manufacture, processing and sale of our products also involves the risk of injury to consumers due to product tampering by unauthorized third parties, adulteration or contamination, improper storage or transportation, or the inclusion of unintended or undisclosed ingredients. Even if we implement and maintain rigorous quality control, testing, tracking and recall procedures, and even where our products meet applicable regulatory and internal standards, we may nonetheless be subject to product liability and related claims, including claims that: (i) our products or products we source from third-party licensed producers caused injury, illness or death; (ii) our products failed to perform as intended; (iii) our products included inadequate instructions for use; or (iv) our labeling and marketing materials contained inadequate warnings concerning potential side effects, contraindications or interactions with other substances. We are unable to control how our customers choose to store, administer or otherwise use our products after purchase, which exposes us to risks arising from misuse and abuse. For example, customers may use our products in excessive quantities; combine them with alcohol, prescription drugs, over-the-counter medications or other substances; allow access by minors; use them while pregnant or breastfeeding; or use them before or while operating motor vehicles or heavy machinery. Some customers may also use our products, or components of our products, in combination with materials obtained from informal or unregulated sources or for inhalation or other hazardous applications. Misuse or abuse of our products, including use in a manner that is inconsistent with our instructions, warnings or applicable law, could result in significant adverse health effects and could subject us to complaints, product liability claims and negative publicity, even where we did not recommend, authorize or foresee such uses. Public health authorities, including U.S. federal and state agencies, caution against the use of cannabis during pregnancy and by other vulnerable populations. We cannot assure investors that we would not be subject to claims, including claims relating to alleged birth defects or developmental issues, arising from consumption of our products by pregnant consumers or other high-risk individuals, notwithstanding any warnings or contraindications we may provide. Previously unknown or unanticipated adverse reactions resulting from consumption of our products alone, or when used in conjunction with other medications, supplements, alcohol, nicotine or illicit substances, could also occur. Applicable product liability or consumer protection laws in some jurisdictions may impose liability without regard to fault, negligence or intent. Any actual or alleged product-related injury, illness, contamination, defect, misuse, abuse or failure to warn could result in a wide range of claims and proceedings against us, including product liability actions (based on negligence, strict liability, warranty or other theories), consumer fraud or deceptive practices claims, false advertising claims, medical monitoring claims, class actions or multi-party proceedings, as well as civil, administrative or regulatory actions. Such claims or actions could lead to product recalls, market withdrawals, stop-sale orders, seizures, import or export holds, fines, penalties, injunctions, consent decrees, mandated label changes or other enforcement measures by governmental or regulatory authorities. Even if successfully defended or the claims were frivolous, these matters could be costly and time-consuming to investigate and resolve, divert management's attention and resources, damage our reputation with regulators, customers, patients and consumers, and result in loss of consumer confidence, reduced demand for our products, the termination of commercial relationships and increased scrutiny or stricter regulation of our business. We may not be able to obtain or maintain product liability, recall or other insurance on terms, in amounts or with coverage limits that we consider adequate, or at all, and such insurance may contain significant exclusions or limitations (including for certain cannabis-related risks). Insurance coverage, if obtained, may not be sufficient to cover all claims that may be brought against us, and we could be required to pay damages, defense costs, fines, penalties or settlement amounts that exceed our policy limits or are not covered by insurance. In addition, premiums for such insurance are often expensive and may increase significantly as our business grows, as the cannabis industry evolves or as we experience actual or perceived product-related issues. The inability to obtain or maintain sufficient insurance coverage on acceptable terms, or to otherwise mitigate or transfer the risks associated with product liability, health and safety and misuse-related claims, could constrain our ability to develop, commercialize and market our products and could have a material adverse effect on our business, financial condition, results of operations and prospects.

Pursuant to certain of the Pending Transactions, the counterparties agreed to indemnify the Company against damages incurred or suffered by the Company in connection with certain matters, including any inaccuracy in or breach of the representations and warranties made by, or any breach, violation, or non-fulfillment of any covenant, agreement, or obligation to be performed by the counterparties. However, there can be no assurance that the indemnities set forth in the agreements related to these Pending Transactions will be sufficient to protect the Company against the full amount of such damages incurred by the Company. Moreover, even if the Company ultimately succeeds in recovering any such indemnifiable amounts under the applicable transaction agreements, the Company may be temporarily required to bear these losses.  Each of these risks could negatively affect the Company's business, financial condition, results of operations or cash flows.

We are exposed to the risk that any of our employees, independent contractors and consultants could engage in fraudulent or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that violates one or more of the following: (i) government regulations; (ii) manufacturing standards; (iii) federal or state privacy laws and regulations; (iv) laws that require the true, complete, and accurate reporting of financial information or data; or (v) other laws or regulations. It may not always be possible for us to identify and prevent 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 losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. We cannot provide assurance that our internal controls and compliance systems will protect us from acts committed by our employees, agents, or business partners in violation of U.S. federal or state or local laws. If any such actions are instituted against us, and we are not successful in defending the Company or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could have a material, adverse effect on our business, financial condition or results of operations.

Under Section 280E of the U.S. Internal Revenue Code of 1986 (together with the Treasury regulations promulgated and the rulings issued thereunder, the "Code"), no deduction or credit is allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if the trade or business (or the activities which comprise the trade or business) consists of trafficking in controlled substances (within the meaning of Schedules I and II of the Controlled Substances Act), which is prohibited by federal law or the law of any state in which that trade or business is conducted. The IRS has applied this provision to cannabis operations, prohibiting them from deducting many expenses associated with cannabis businesses other than certain costs and expenses related to cannabis cultivation and manufacturing operations. Accordingly, Section 280E has a significantly adverse impact on the operations of cannabis companies, including the Company, and an otherwise profitable business may operate at a loss, after taking into account its U.S. income tax expenses. Changes in tax laws or interpretations may also adversely affect our effective tax rate and after-tax profitability. For example, any modification, expansion, or stricter interpretation of Section 280E (or analogous provisions at the state level), or changes in state conformity with federal tax rules, could increase our tax liability. Conversely, if federal law changes such that Section 280E no longer applies to our U.S. cannabis operations but new federal excise taxes are imposed, the net impact on our financial condition and results of operations could be uncertain and may not be favorable. Furthermore, legislative or regulatory changes could be adopted with limited notice and may apply retroactively or in ways that we did not anticipate, making it difficult to plan and price our products effectively. Any increase in cannabis-related taxes, imposition of new tax regimes, adverse interpretation or application of existing tax rules (including Section 280E), or expansion of tax-like fees and assessments could materially increase our cost of doing business, compress margins, and reduce consumer demand for our products. If we are unable to adjust our pricing, cost structure, or product mix to offset these impacts without losing market share, our sales, profitability, liquidity, and overall business could be materially and adversely affected. The Company filed amended tax returns for periods ending December 31, 2020 through December 31, 2022 to reflect the position that cannabis activities are not subject to Code Section 280E. Additionally, the Company's reporting of its United States federal net operating loss carryforward amount and state net operating loss carryforward amount on its Consolidated Financial Statements as of December 31, 2024 and 2025 assumes that such position will be respected by the IRS. Please see "Note 21, Income Taxes" of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for a discussion of such position and the Company's net operating losses. There can be no assurance that the IRS will not challenge such position or that a U.S. court would not sustain such a challenge. If the IRS successfully challenged such position, certain of the Company's tax deductions and credits may be disallowed, thereby reducing the Company's reporting United States federal net operating loss carryforward amount and state net operating loss carryforward amount.

The Company applied for and received an ERC under the CARES Act. Refer to Note 18  "Other Income (Expense)" of the Notes to the Consolidated Financial Statements for a description of the Company's receipt of the ERC. In July 2023, the IRS stated its intention to shift its focus to review ERC claims for compliance concerns, including intensifying audit work. The Company's eligibility to receive the ERC remains subject to audit by the IRS. If the IRS audits the Company during the applicable statute of limitations period and finds that the Company was not eligible to receive some or all of the ERC, the Company would be required to return some or all of the ERC to the IRS, with any applicable interest and penalties.

There can be no assurance that the Canadian and U.S. federal income tax treatment of the Company or an investment in the Company will not be modified, prospectively or retroactively, by legislative, judicial, or administrative action, in a manner adverse to us or holders of our Shares.

Our current and proposed operations are subject to extensive and evolving environmental laws and regulations in the jurisdictions in which we operate, including federal, state/provincial, and local requirements. These laws and regulations govern, among other things, air emissions, water discharges, wastewater and stormwater management, the use and conservation of water and other natural resources, noise and odor, the generation, handling, storage, transportation, treatment and disposal of solid and hazardous wastes, the use of pesticides and fertilizers, and the protection of environmentally sensitive areas and species. Environmental legislation, regulation, and policy are changing rapidly and tend to become more stringent over time. Future developments may: (i) impose stricter standards and enforcement; (ii) require more detailed and costly environmental assessments or impact studies for new or modified projects; (iii) increase monitoring, reporting, recordkeeping, and community engagement obligations; (iv) mandate reductions in energy use, greenhouse gas emissions, odors, or water consumption; and (v) heighten personal responsibility and potential liability for us or our officers, directors, and employees. Legislators and regulators have discussed and could still adopt requirements specifically targeting cannabis cultivation and production, including restrictions on water usage, pesticides, waste disposal, and odor control. We cannot predict the form or stringency of any future environmental laws or regulations, or the manner in which existing laws or regulations will be interpreted or enforced. Our operations require, and will continue to require, numerous environmental and related approvals, licenses, registrations, and permits from government authorities, including in connection with construction, expansion, modification, and ongoing operation of our cultivation, processing, and other facilities. These approvals and permits may contain conditions, limitations, and operational restrictions, may be subject to periodic review and renewal, and may be subject to change at any time. Governmental authorities have broad discretion in administering and enforcing environmental and land use requirements, and third parties (including neighboring landowners, community groups, and environmental organizations) may challenge the issuance or renewal of permits or seek to impose additional conditions. To the extent required approvals or permits are not obtained, renewed, or maintained on a timely basis, or are issued on terms that are more restrictive or costly than anticipated, we may be delayed, curtailed, or prohibited from proceeding with our proposed cannabis production or from developing, expanding, or operating our facilities as currently contemplated. Non-compliance with applicable environmental requirements or permit conditions, or the occurrence of releases of hazardous or regulated substances at or from our facilities (including historical contamination by prior owners or operators of properties we lease or acquire), could result in public notices of violation, administrative orders, fines, penalties, mandatory capital expenditures, requirements to modify or cease certain operations, injunctions, reputational harm, and, in extreme cases, civil or criminal liability which could involve significant and unanticipated, costs and divert management attention. Environmental requirements may also necessitate substantial ongoing investments in equipment, technology, and personnel, and may increase operating costs in a manner that we cannot fully pass through to customers. There can be no assurance that existing or future environmental laws, regulations, and policies, or changes in their interpretation or enforcement, will not have a material adverse effect on our business, financial condition, results of operations, or prospects, or on our ability to develop, operate, or expand our cannabis production facilities as planned.