Overview
Value Statement
Forian Inc. (“Forian”) provides innovative software solutions, proprietary data and predictive analytics to optimize the operational, clinical and financial performance of our customers. Given our
prior experience, our initial focus is on stakeholders within the healthcare and cannabis industries. However, we believe the application of our offerings across other verticals to enhance the transparency and efficacy
of our
customers’ relationships with their communities and customers is equally compelling.
Evolution
Forian was initially founded on October 15, 2020, as a wholly owned subsidiary of Medical Outcomes Research Analytics, LLC (“MOR”), which was founded in May 6, 2019, in connection with the
business combination
transactions described below. On October 16, 2020, Forian entered into a definitive agreement with Helix Technologies, Inc. (“Helix”) and MOR, pursuant to which
DNA
Merger Sub, Inc., a wholly owned subsidiary of Forian
(“Merger Sub”), merged with and into Helix, with Helix surviving the merger as a wholly owned subsidiary of Forian (the “merger”). On March 2, 2021, Forian
entered into a definitive agreement with the equity holders of MOR, pursuant to which the equity holders of MOR contributed their interests in MOR to Forian in exchange for shares of Forian common stock (the “contribution”
and together with the merger, the “business combination”). Following consummation of the
business combination on March 2, 2021, Forian became the parent company of both Helix and MOR.
On March 3, 2021, Forian’s common stock, par value $0.001 per share, commenced trading on the Nasdaq Capital Market (“Nasdaq”) under the ticker symbol “FORA.” For further discussion on the
business combination
refer to “Item 1A. Risk Factors,” and “Note
15 – Subsequent Events” in the Notes to Consolidated Financial Statements.
“Forian” in this Annual Report
MOR was determined to be the accounting acquirer in the merger. As a result, the historical financial statements of MOR for periods prior to the merger are considered to be the historical financial
statements of Forian. As used in this
Annual Report on Form 10-K, references to the “Company,” “we,” “us” and “our”
each refer to
Forian except with respect to
disclosure in this Annual Report on Form 10-K relating to (i) results of operations or financial performance for the twelve months ended December 31, 2020 and for the comparable period from the incorporation of MOR on May 6, 2019 through December 31,
2019 (
see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. Financial Statements and Supplemental Data”); (ii) controls and procedures (
see “Item 9A. Controls and Procedures”) and (iii) executive compensation (
see “Item 11. Executive Compensation”), where such references shall refer only to MOR. Each
reference in this Annual Report on Form 10-K to MOR or Helix shall refer to such entity as a standalone business prior to the completion of the business combination and as subsidiaries of Forian after completion of the business combination. We will
separately file our pro forma financial statements and Helix audited financial statements for the twelve-months ended December 31, 2020 on Form 8-K/A before May 13,
2021. Unless specified otherwise, the financial results in this Annual
Report
on Form 10-K are those of the Company and its subsidiaries on a consolidated basis.
Our principal executive offices are located at 41 University Drive, Suite 400, Newtown, Pennsylvania 18940 and our primary website address is www.forian.com. The reference to the Forian website address does not constitute incorporation by reference of the information contained at or available through our website.
Our Business
Forian is a leading provider of software and technology-enabled services for the healthcare and cannabis industries. Forian represents the unique convergence of proprietary
healthcare
and consumer data, innovative data management capabilities and intelligent data science with a leading cannabis technology platform yielding the combined power to drive innovation and transparency across the industries we serve. Forian’s business
today comprises the combination of Helix and MOR, which businesses are described in this Annual Report
on Form 10-K and when fully integrated present a suite of differentiated offerings within each of the healthcare and
cannabis segments. In MOR, there was early recognition of the opportunity to bring the sophistication of proven data science technology and analytics solutions to a prominent cannabis technology platform provider, creating innovation in both the
applications that are key to supporting customer success within the cannabis segment and to the data science powered insights that drive healthcare and other mature regulated growth industries. In Helix, there was realization that the capability set
of a technology solutions provider within more evolved sectors together with the track record of the MOR management team offered a unique opportunity to enhance the value that Helix brings to its cannabis customers and to the industry generally. The
product and service lines provided by both MOR and Helix are being integrated under the single Forian platform.
Our Markets
Healthcare Market Opportunity
U.S. healthcare
spending is roughly 18% of GDP and growing faster than overall GDP. The market has been expanding and evolving rapidly over the past decade due to an aging population,
innovations in treatments and a reimagining of service delivery. There has been a growing emphasis on digitizing medical records and providing access to those records to providers and patients in support of more efficient and effective care.
Disparate, unconnected systems, new diagnostics and treatment protocols are all generating new sources of data. In addition, data is being generated from retailers, social media and the internet. Collectively, the expansion of the volume and type of
data has created challenges in making information interoperable and actionable. New and existing sources of data are often unstructured, preventing the seamless ability to derive valuable insights. New systems and solutions are needed to provide
accessible and statistically significant data sets that offer the ability to conduct longitudinal analyses. The derived information and business intelligence is relevant to all healthcare stakeholders, and we believe there is an increasing need for
the aggregation and integration of the large clinical data sets, irrespective of the source (e.g. traditional healthcare systems or emerging technologies).
The global market for healthcare analytics was approximately $19 billion in 2019 and is expected to grow to an estimated $50.5 billion by 2024
according to publicly
available research. We view this market in three principal segments: clinical analytics, commercial analytics and technology platform solutions. The market for clinical analytics includes
Real World Evidence (“RWE
”), health economics and outcomes research databases and analytic platforms as well as clinical data capture, clinical analytics and research services
, investigator site and patient
recruitment, observation studies and pharmacoeconomics. The market for commercial analytics includes customer segmentation and targeting, campaign measurement, longitudinal patient analytics and payer market access analytics. The market for
technology platform solutions includes information technology, data management, data warehousing, IT outsourcing and software development.
We believe that RWE continues to drive value for all healthcare stakeholders. The proliferation of information technology and analytics extends well beyond
life
sciences. Information is critical to the ability for payers to manage and price risk effectively. The emergence of new data assets and technology have enabled better risk stratification, treatment protocol development and decision making relating to
coverage of existing and emerging therapies. The ability to enter into value-based contracts is predicated on access to RWE related data and analytics.
Similarly, the healthcare delivery system is changing rapidly with telehealth and remote based monitoring become critical. As such, providers require more information to inform treatment decisions.
This requires connectivity and access to their
patients’ information including the use of
over-the-counter (“OTC
”) and unapproved pharmaceutical treatments.
Absent standards and the ability to capture and integrate these data into their medical records, they will lack the information required to guide the most effective treatments.
Institutional healthcare providers are losing large numbers of patients and large amounts of revenue due to changes in where and how healthcare is delivered, reduced demand for elective procedures due
to COVID-19 and intense competition for customers and referrals. Provider profiling data, market supply and demand analytics and treatment protocol improvements all require information that Forian is well suited to deliver.
Life science companies need to fully understand how, when and why patients are treated with both traditional and alternative therapies. This understanding is incomplete without extending the
understanding of the patient journey to emerging therapeutics including cannabis-based treatments.
Cannabis Market Opportunity
The global legal cannabis market was valued at approximately $20 billion in
2020 and is expected to grow to an estimated $73.6 billion by 2027 according to publicly
available research. The market for our full suite of critical infrastructure services encompasses all licensed cannabis operators in locations where medical or recreational cannabis has been legalized. As more states and countries begin the
legalization process, new markets continue to emerge resulting in what we expect to be a natural expansion of our global reach. We
believe that the next logical step in the expansion of the market may involve federal
legalization in the U.S.
The discourse
around this topic has been prominent in the current political conversations in Washington D.C. and several measures have already been passed lowering the
threshold of federal government regulation on the industry. If legalization does occur at the federal level, this will in turn create an opportunity for the U.S. market to expand globally in much the same way it has domestically, but with the added
benefits of both interstate and international trade.
As with any emerging market, several companies within the industry achieve a higher level of success faster and are able to scale more rapidly than others. In the cannabis space, a handful of companies
hold licenses and operate throughout multiple legal markets and are referred to as Multi-State Operators (“MSOs”). Within newly formed markets, MSOs apply for and are granted licenses allowing these companies to penetrate states that are initially
rolling out their cannabis legalization plans. Another tactic used by MSOs to drive consolidation in the cannabis space is to purchase active licenses from established businesses or acquire the business itself (in some cases other MSOs). Mergers and
acquisitions inside the cannabis industry are commonplace and show no signs of slowing in the near future. Eight of the largest MSOs in the U.S. currently utilize our BioTrack platform, balanced by nearly 300
dispensaries, cultivators, manufacturers and distributors that depend on BioTrack to drive their businesses.
The rapid expansion of the cannabis market is driving the demand for better technologies, information standards and more sophisticated analytics. Competitive pressures have created a market for
cultivators, manufacturers and dispensaries to rely on data and analytics as a key development and commercialization strategy. Currently, there is little standardization to organize the vast amount of data being generated
from traceability and point of sale technologies. For example, product naming conventions are unique in the cannabis industry and can be very different for the same product. There is a need to create a standard product ontology that can be utilized
consistently to normalize and standardize disparate data sets to organize and aggregate the data for commercial analysis and RWE studies. Machine learning and artificial intelligence can be applied to complete, standardize and normalize the data,
thereby making the data interoperable and useful for analytics.
States continue to generate tax revenue by approving and expanding their cannabis programs. Their desire to expand these programs deliberately and responsibly with patient safety having the highest
priority necessitates the ability to track the products from seed to sale and develop robust patient registries to support RWE studies and tracking product utilization and outcomes. These patient registries allow for surveillance tracking and early
adverse event tracking, which will become a cornerstone of state cannabis programs.
We believe that the need for cannabis customers to maximize productivity and lower costs across their processes from research and development through commercial operations will cause them to look to
partners as they enter into outsourcing arrangements to improve efficiency. Further, we believe our customers are looking for new ways to simplify processes and drive operational efficiencies by using automation, consolidating vendors and adopting new
technology options such as hosted and cloud-based applications. This provides opportunities for us to capture and consolidate internal spending by providing lower-cost and variable-cost options that lower customers’ research and development, selling,
marketing and administrative costs.
Our platform puts the power of data to use for operators to gain more valued insights into their businesses resulting in the ability to make better informed decisions. Along with creating new
products internally, we currently provide infrastructure solutions for multiple MSOs and as a result
assist their expansion in new and existing markets.
Convergence of the Healthcare Market and the Cannabis Industry
The use of cannabis for medical purposes is gaining momentum worldwide due to recent legalization and emerging research into therapeutic value and efficacy. Medical cannabis is used for
the treatment of a growing array of diseases and chronic conditions, including but not limited to pain, inflammation, arthritis, anxiety, depression, epilepsy and Parkinson’s and Alzheimer’s diseases.
Life science companies need to fully understand how, when and why patients are treated with both traditional and alternative therapies. This understanding is incomplete
without extending the understanding of the patient journey to emerging therapeutics including cannabis-based treatments. Governments, manufacturers, cultivators and distributors as well as dispensaries need information on the safety and efficacy of
cannabis in both medical and adult use settings. As legalization and usage expands rapidly, providers, patients and caregivers want more assurance of the quality and consistency of the products and insight into therapeutic alternatives for treatment
of chronic conditions.
Physicians and patients want to more quickly understand the strains, terpene profiles, dosage and frequency that yield the best health outcomes for patients. There is too
much reliance today on anecdotal evidence and trial and error in treatment decisions leveraging alternative therapies. There is little to no understanding of the benefit of alternative therapeutic interventions used in place of or concomitantly with
traditional therapeutics. The life science industry is currently investing in over 100 clinical trials for cannabis-based products which is indicative of these treatment alternatives becoming
increasingly mainstream.
Forian Offerings
Forian’s mission is to provide our clients with the best-in-class critical technology services through a single integrated platform that enables our clients to operate their businesses more safely,
efficiently and profitably and to serve their communities and customers more comprehensively.
We have developed a proprietary, integrated Health Insurance Portability and Accountability Act of 1996, as amended (“HIPAA”), compliant repository of longitudinal
de-identified
patient health information in the United States. This database is updated weekly, includes billions of
de-identified patient events dating back to 2014 and represents the majority of the U.S. population. Our technology
processes, normalizes, standardizes and integrates complex and disparate transactional data, such as medical, hospital and pharmacy claims, healthcare payer remittances, electronic medical records, retail point of sale transactions and consumer
demographics. With deep domain knowledge, our team architected our technology platform to meet and exceed the strictest data privacy requirements in highly regulated industries. These integrated data are used to power multiple revenue streams
including point of sale and
state traceability compliance tracking solutions,
Information Products, Software as a Service (SaaS) commercial analytics platforms, Data as a Service (DaaS)
solutions as well as custom
commercial analytics, health economics and RWE outcomes research studies.
Our products will
assist these constituents to better understand the value and efficacy of healthcare and cannabis products and services while providing critical
business insights into our customers’ products, services, customers and the dynamics of a rapidly changing marketplace. Management, administrators, physicians and caregivers can, in turn, use the information to make informed healthcare decisions and
guide the selection of healthcare products and therapeutics.
Technology & Information Products
Our
BioTrack vertically integrated seed-to-sale compliance tracking and point of sale software solution was first introduced in
2010 and is among the most tenured and largest
commercial platforms in the cannabis industry, serving over
2,300 dispensaries, cultivators, manufacturers and distributors
within 38 states and Puerto Rico. Our
BioTrack solution has been used to administer over
approximately $20 billion of legal cannabis transactions
since 2010 and reaches into Europe
, Australia and Latin America.
Our Cannalytics SaaS-based analytics solution is a proprietary platform built upon machine learning algorithms that provides clients with a comprehensive,
customized and flexible presentation of business performance from within BioTrack. Cannalytics enables customers across the legal cannabis industry to better attract
and retain customers, purchase, distribute and invest in products and understand marketplace dynamics that impact business performance. Our technologies enable more participants to comply and perform efficiently in highly regulated markets, and we
provide leading solutions for state government-mandated inventory management and compliance tracking software as access to medical and adult-use cannabis continues to expand legally in the U.S.
Our Information Products provide insights across the healthcare continuum and provide a more complete patient journey within a diverse health ecosystem. By leveraging HIPAA-compliant processes,
proprietary algorithms and technology, we have created a suite of product offerings integrating data from siloed, disparate sources and platforms. We believe these offerings deliver key insights and value to our customers. We have contracted with
several third-party data providers to obtain the data that we believe is necessary to provide our information offerings. MOR has entered into a license agreement dated June 30, 2019 with a third-party data provider pursuant to which MOR currently
receives a majority of its healthcare data (the “License Agreement”). The License Agreement has an initial term of three years and MOR has the sole right to extend the term of the License Agreement for three successive two-year periods. Pursuant to the
License Agreement, MOR is required to pay to the third-party provider fees for the data MOR is provided and for certain data a percentage of the revenue generated by MOR from such data. MOR believes the fees payable are reasonable and are typical of
the fees charged by other third-party data providers. In accordance with the License Agreement, the third-party data provider provides MOR with weekly data reports containing prescription data, medical data and electronic medical record data.
Services
BioTrack’s seed-to-sale compliance traceability platform is used by
9 state regulatory agencies
(including
Puerto Rico
) to manage the tracking and tracing of all cannabis products from cultivation to sale. As legalization at the state level in the United States continues, seed-to-sale tracking will be the foundational
compliance tool used by governments to regulate the extensive legal cannabis market.
BioTrack’s State Traceability & Enforcement Monitoring System (“STEMS”) includes all the
components needed to ensure transparency and accountability throughout the entire cannabis supply chain while promoting public safety. STEMS includes a full Seed-to-Sale tracking module with integrated plant and product laboratory testing, a licensed
business enforcement application and a fully integrated Patient, Caregiver, and Physician Registration application to provide cannabis regulatory agencies with a comprehensive and all-in-one solution for cannabis program management. STEMS is easily
scalable and configurable to meet the evolving regulatory requirements necessary to ensure proper program implementation and oversight. The primary function of a cannabis traceability system is to assist in the prevention of legal cannabis products
going to the black market. Since cannabis is not yet legal in all states and countries, the products that are grown and manufactured in the industry are highly desirable in illicit markets. Besides diversion prevention, traceability systems provide
lawmakers and regulators with vital information they can use to better understand the trends and tendencies in their market so they in turn can make informed decisions to help both the industry and the state/country.
Our RWE solutions under development seek to assist customers seeking to understand the safety, efficacy, and therapeutics of traditional and emerging therapies. Our solutions integrate otherwise
unconnected and disparate data to enable near real-time surveillance of adverse events and to study the clinical economic and social impacts of various therapeutic alternatives, including those derived from cannabinoids. First of its kind,
clinical-grade observational research can be conducted to evaluate the impact of emerging therapies on patient outcomes and as alternatives to existing therapies. The solutions will support:
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the delivery of evidence-based insight into the safety and efficacy of ethical pharmaceuticals and emerging therapies to equipment manufacturers, physicians, caregivers, payers and patients with credible evidence
to improve patient care and health outcomes;
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the empowerment of regulators to more granularly assess the safety, health, social and economic outcomes associated with all therapeutic options as the cannabis market scales and emerging therapies are adopted as
mainstream therapeutic alternatives; and
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the creation of new standards for product and treatment classification in emerging therapeutic markets where no existing or widely adopted standards exist today.
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Our DaaS solutions will enable our customers to leverage their own proprietary data independently or integrated with Forian proprietary data assets. We have the ability to clean, standardize, normalize
and integrate information in a privacy compliant way. We are also developing proprietary reference data assets including product ontologies as the standard to which customer data can be mapped and standardized for analytic purposes.
As of the date of hereof,
Forian has 1,060 active customers
, which reflects the combined customer bases of MOR and Helix.
Our Competitive Strengths
We believe our key competitive strengths include:
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Scalable approach to privacy-focused analytics software. Our solutions are purpose built to address the analytic needs of healthcare and cannabis stakeholders
across the product or patient journey. We are developing scalable, data driven analytics solutions in cannabis to drive evidence-based decisions where none exist today.
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Deep domain expertise. Our knowledge base in large transactional database platforms, commercial analytics, consumer marketing and pharmacoeconomics
in healthcare enables us to develop solutions that address the unique demands of the healthcare and cannabis industries. Through the incorporation of industry best practices into solutions that are curated for stakeholders within healthcare and cannabis, our customers enjoy enhanced analytical solutions to drive their informed business decisions. Across various disciplines our team has deep industry expertise in life sciences and
cannabis that translates into solutions by design that enable our clients to solve problems unique to their sector.
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Diverse customer base. Our customer base extends throughout the complete cannabis
vertical, including dispensaries, cultivators, manufacturers, distributors and governments, across to a broad range of stakeholders within the healthcare industry carrying the mission to better understand and improve the patient journey.
This diverse customer set offers us a uniquely-informed point of view from each customer vantage point of how our solutions can best assist in optimizing performance. Through BioTrack we enjoy the
established reputation of delivering stable and reliable solutions to leading cannabis stakeholders. Through MOR we are defined by the innovative spirit of allowing the problems our healthcare customers face
to shape the solutions that are best for our customers.
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Large integrated longitudinal database. Our proprietary database processes, integrates, deidentifies and standardizes
medical, hospital and pharmacy claims datasets along with cannabis point of sale data, consumer behavior and demographic-level data and other datasets to produce a longitudinal database that encompass the vast majority of the U.S.
population.
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First mover in cannabis value proposition. Our large proprietary integrated database and HIPAA-certified analytic solutions provide us the opportunity to create the standard for cannabis data product classification, to integrate cannabis user data at scale and be the center of the analytics’
infrastructure in cannabis as cannabinoid products become mainstream therapeutics in healthcare. Additionally, our cultivator, manufacturing and retail dispensary customers can
leverage our analytics to obtain a granular understanding of their customers, prospective customers, competitors and target markets while regulators gain insights on tax revenue potential, cannabis related health outcomes, adverse events,
product safety, efficacy and quality.
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Our Growth Strategies
We strive to improve our customers’ business performance and
in turn the efficiencies and safety of therapeutic products through
our
customers’ adoption of our platforms and information solutions. We intend to continue investing in commercial sales, research and development and our strategic partnerships. We believe that we are well positioned to achieve our growth objectives
across multiple industry verticals, beginning with the healthcare and cannabis markets. Key elements of our strategy include:
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Innovate and advance our platform and services. We have a history of
technological innovation, and plan to release new features and upgrades on a regular basis. We intend to continue making significant investments in all platform products, architecture and teams to further differentiate our products and
increase sales.
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Drive growth by acquiring new commercial and government customers. We believe that nearly all organizations that discover, develop, produce and
market therapeutic and cannabis products must embrace data driven analytics to compete effectively. As such, the opportunity to continue growing our customer base is significant.
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Increase usage and upsell within our existing customer base. We plan to continue investing in sales and marketing, with a focus on driving greater
use of our newer SaaS, DaaS and RWE offerings to deliver more value to and expand our relationships with our customers, leading to scale and operating leverage for our business.
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Leverage our scalable platform into new markets. Our platform provides innovative benefits to the life science, payer, provider,
government and legal cannabis markets. We believe there is significant opportunity to deploy the use of our platform in adjacent industries.
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Expand our data and strategic partner network. Our business intelligence is derived partly from data generated through our
commercial products as well as acquired from strategic data partners. As part of our growth strategy, we may seek to acquire assets or companies that are synergistic with our business and add to our data assets and offering sets.
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Our Technology Platform
Our unique software, data and analytics platform is built upon scalable open source software running in the public cloud. This architecture allows us to capitalize on
the security, reliability and scalability of mainstream cloud providers while building uniquely differentiated algorithms and data handling methodologies. Our use of elastic computing allows us to allocate computer clusters on-demand at scale to
process terabytes of data in minutes. We are able to answer complex consumer behavior or life sciences questions quickly without having to maintain servers or pay for idle compute resources.
Our event-driven architecture ingests, cleans, anonymizes and transforms hundreds of millions of health, consumer and retail records as available rather
than on a fixed schedule. As data updates are observed from disparate sources they are propagated through all pipeline stages, ensuring customers have the latest data in near real time. Through the use of open-source technologies like Apache Spark
and Delta Lake, our big data processing pipelines are streamlined and can more easily handle changes in data schema, “data drift”, and the updating and deleting of existing records to support policies such as HIPAA, the California Consumer
Privacy Act and General Data Protection Regulation.
Capabilities like “time-travel” enabled by Delta Lake storage formats allow for full versioning of all data over time so that we observe a record throughout its
entire lifecycle. Our architecture natively supports “schema evolution” allowing for flexibility to bring in new fields of data as they’re available as well as handle backward-compatible changes in data types over time. Forian supports the
ingestion of data from and provision to the most common modern data systems.
Our proprietary solutions provide fully de-identified records in isolated clearinghouses using leading technologies paired with statistical certification
by industry-vertical experts. Our solutions join records longitudinally over time, as well as across data sources. This allows for superior flexibility for analysis and use case development while maintaining security and mitigating reidentification
risk. We deliver data and analytics products that match anonymized person records across multiple medical, consumer and retail events as a service or in common commercially managed data clouds.
Competition
We face competition in each of the revenue segments in which we operate.
While the healthcare industry includes well-capitalized, experienced competitors, we believe our unique data assets, synergies, intellectual property and experienced leadership offer us competitive
advantages. In general, our competitors include a variety of entities such as information and clinical analytics providers like
ICON plc, information and commercial analytics providers like
IQVIA
and technology and services providers like
Veeva Systems, Inc. as well as client in-house developed technologies.
The legal cannabis industry
, though fragmented
, is consolidating. While our cannabis industry offerings have multiple competitors, with
some focused solely on government traceability system, such as Metrc,
LLC, others focused solely on point-of-sale software
, such as Greenbits Inc., and others providing all aspects of
commercial software
, such as Akerna, few if any compete with us in
our ability to address the needs of dispensaries, cultivators, manufacturers, distributors and governments. As the
industry continues to grow, and as more geographies legalize cannabis, we expect more competitors will emerge, while some of the smaller ones will likely cease doing business or be acquired.
Government Regulation
Privacy & Customer Data
Our information management services relate to the processing of information regarding
de-identified patient diagnosis and treatment of disease and are, therefore,
subject to substantial governmental regulation. In addition, the confidentiality of patient-specific information and the circumstances under which such patient-specific records may be released for inclusion in our databases or used in other aspects
of our business is heavily regulated. Federal, state and foreign governments are contemplating or have proposed or adopted additional legislation governing the possession, use and dissemination of personal data, such as personal health information
and personal financial data, as well as security breach notification rules for loss or theft of such data. Additional legislation or regulation of this type might, among other things, require us to implement additional security measures and processes
or bring within the legislation or regulation de-identified health or other data, each of which may require substantial expenditures or limit our ability to offer some of our services.
In particular, personal health information is recognized in many countries and regions such as the United States, the European Union, or EU, and several countries in Asia, as a special, sensitive
category of personal information, subject to additional mandatory protections. Violations of data protection regulations are subject to administrative penalties, civil money penalties and criminal prosecution, including corporate fines and personal
liability.
Our technology processes, normalizes, standardizes, and integrates complex and disparate transactional data, such as medical, hospital and pharmacy claims data, EMR data, retail point of sale
transactions, media impressions and consumer demographic data. We have developed our platform with strict, HIPAA-compliant privacy controls enabling linkages between the transactional data sources while maintaining patient, consumer, and customer
privacy. All data are de-identified at the person level, enabling longitudinal, credible, evidence-based assessments relating to product safety, efficacy, and clinical outcomes as well as commercial analytics.
Cannabis and Cannabis-derived Products
We do not grow, handle, process or sell cannabis or cannabis-derived products, nor do we ever possess any such material or process any transactions related to the sale of the same. We provide
technology and information products and services for our clients to understand the safety and efficacy of their products and to provide information on products, consumers and market intelligence. We do not receive any
commissions from sales by our customers and our revenue generation is not based on the sales of cannabis products by our customers, but rather we generate revenues through a fee-based subscription revenue model. Neither we nor our information
products are directly subject to state or federal government drug regulation.
Our customers are subject to state and federal law as it relates to cannabis growth, processing, and sale.
36 U.S. states have legalized cannabis in some form. The
federal government regulates drugs through the Controlled Substances Act (21 U.S.C. § 811, et. seq. (“CSA”)), which does not recognize the difference between medical and recreational use of cannabis. State laws regulating cannabis are in direct
conflict with the CSA, which prohibits cannabis use and possession. Although certain states and territories authorize medical or recreational cannabis cultivation, manufacturing, production, distribution, and sales by licensed or registered entities,
under federal law, the cultivation, manufacture, distribution, possession, use, and transfer of cannabis and any related drug paraphernalia, unless specifically exempt, is illegal and any such acts are criminal acts under the CSA.
While the United States Department of Justice has used prosecutorial discretion to not prioritize enforcement actions against state-legal cannabis businesses that are compliant with state, county,
municipal and other local laws and regulations and which do not trigger any other federal enforcement priorities, the Department of Justice reserves the right to enforce federal law and there can be no assurance that the federal government will not
enforce the CSA and related federal laws in the future. Any shift in enforcement priority at the Department of Justice or with the individual United States Attorneys with jurisdiction over our customers, could have a drastic and adverse impact upon our
customers and our business.
Any violations of federal laws and regulations could result in significant fines, penalties, administrative sanctions, convictions or settlements arising from civil proceedings conducted by either the
federal government or private citizens or criminal charges, including but not limited to, seizure of assets, disgorgement of profits, cessation of business activities or divestiture. In the event that any of our operations, or any proceeds thereof, any
dividends or distributions therefrom, or any profits or revenues accruing from such operations 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
statutes noted above or any other applicable legislation. This could restrict or otherwise jeopardize our ability to declare or pay dividends or effect other distributions. Furthermore, while there are no current intentions to declare or pay dividends
in the foreseeable future, in the event that a determination was made that our proceeds from operations (or any future operations) could reasonably be shown to constitute proceeds of crime, we may decide or be required to suspend declaring or paying
dividends without advance notice and for an indefinite period of time.
Intellectual Property
In addition to our proprietary data sets described above, we develop and use a number of proprietary methodologies, analytics, systems, technologies, software and other intellectual property in the
conduct of our business. We rely upon a combination of legal, technical and administrative safeguards to protect our proprietary and confidential information and trade secrets, and patent, copyright and trademark laws to protect other intellectual
property rights. We consider our trademark and related names, marks and logos to be of material importance to our business, and we have registered or applied for registration for certain of these trademarks in the United States and will aggressively
seek to protect them. Trademarks and service marks generally may be renewed indefinitely so long as they are in use and/or their registrations are properly maintained, and so long as they have not been found to have become generic. The technology and
other intellectual property rights owned and licensed by us are of importance to our business, although our management believes that our business, as a whole, is not dependent upon any one intellectual property or group of such properties.
Human Capital Resources
The foundation of our software, data and analytics solutions is our people, and the level of our success in helping our customers solve problems in the service of their communities and customers is a
direct function of our commitment to our employees. We are the sum of the MOR and Helix cultures, and as a result: (i) our employees now have a more comprehensive platform on which to meet our customers’ needs across the industries we serve; (ii) the
professional and personal opportunities for their growth have increased; (iii) through collaboration with one another, additional experiences and skill set exposure will be available for them to learn and grow; and (iv) as a combined organization, we
have a fresh opportunity to create a diverse and inclusive culture in which we can thrive together. Our intent is to build a first-class organization premised on the importance of our contribution to customer success while remaining ever conscious of
our responsibility to our employees and the communities in which we operate.
We are committed to equity and fairness in honoring our commitment to our employees. As set forth in our Code of Business Conduct and Ethics, diversity across
gender, race, ethnicity, religion, politics, sexual orientation, age, experience and thought enhances our ability to support our customers, suppliers, partners and employees. In fostering a culture of inclusion, we enable each of us to present our
authentic selves in our dealings with the people with whom we interact, and in so doing allow us to be more effective and impactful in the performance of our responsibilities. We embrace the opportunity to enable our customers to better serve their
communities and customers and continually seek to improve the value we bring, all while maintaining a critical balance between our employees’ work with colleagues and customers and their lives outside of Forian.
In order to prioritize the health and safety of our employees, following the outset of the COVID-19 pandemic in March,
2020, we transitioned to remote work and continue
to work with and support our employees as they continue to serve one another and our customers remotely.
As of December 31, 2020, MOR had 18 full-time employees. As a result of the closing of the business combination transactions, as of March 2,
2021, we had
133 full-time employees. None of our employees are covered by a collective bargaining agreement or are represented by a labor union. We have not experienced any organized work stoppages, and we consider the relationships
with our employees to be positive.
Available Information
We make available, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports and other filings with
the Securities and Exchange Commission (“SEC”), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC through the investor relations section of our website at https://forian.com/investors/sec-filings. The information found on our website is not incorporated into this or any other report we file with or furnish to the SEC.
An investment in our securities involves a high degree of risk. You should carefully consider the risks and uncertainties described below
and the other information contained in the Annual Report on Form 10-K before making an investment in our common stock. Our business, financial condition, results of operations or prospects could be materially and adversely affected if any of
these risks occurs, and as a result, the market price of our common stock could decline, and you could lose all or part of your investment.
Risks Related to our Business Combination
Combining the businesses of MOR and Helix may be more difficult, costly or time-consuming than expected, which may adversely affect Forian’s results and negatively affect the value of our common stock
following the transactions.
We believe that combining the businesses of MOR and Helix will produce
significant benefits
to the industries we serve. MOR and Helix
have historically operated as independent companies. The integration and combination of the separate operations of the combined businesses is a complex and time-consuming process that has required and may continue to require substantial resources
and effort. We may face significant challenges in completing the consolidation of our combined operations, integrating technologies, procedures and policies, as well as addressing the different corporate cultures. If we are not successfully
integrated, the anticipated benefits may not be realized fully (or at all) or may take longer to realize than expected. The combination of two independent businesses is a complex, costly and time-consuming process and the management of the combined
company may face significant challenges in implementing such integration, many of which may be beyond the control of management, including, without limitation:
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latent impacts resulting from the diversion of our management team’s attention from ongoing business concerns as a result of the devotion of management’s attention to the transactions and performance shortfalls at one or both of the
companies;
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difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects;
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the possibility of faulty assumptions underlying expectations regarding the integration process, including with respect to the intended tax efficient transactions;
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unanticipated issues in integrating information technology, communications programs, financial procedures and operations and other systems, procedures and policies;
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difficulties in managing a larger combined company, addressing differences in business culture and retaining key personnel;
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unanticipated changes in applicable laws and regulations;
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managing tax costs or inefficiencies associated with integrating the operations of the combined company and any contemplated tax efficient separation transaction; and
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coordinating geographically separate organizations.
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Some of these factors will be outside of our control and any one of them could result in increased costs and diversion of management’s time and energy, as well as decreases in the amount of expected revenue which could
materially impact our business, financial conditions and results of operations. The integration process and other disruptions resulting from the transactions may also adversely affect our relationship with employees, suppliers, customers and others
with whom we have business or other dealings, and difficulties in integrating the businesses or regulatory functions of MOR and Helix could harm the reputation of the combined company.
We will incur significant costs in connection with the integration of MOR and Helix.
There are a large number of processes, policies, procedures, operations, technologies and systems that must be integrated in connection with the transactions. While we have assumed that a certain level of expenses would be
incurred in connection with the transactions, there are many factors beyond our control that could affect the total amount of, or the timing of, anticipated expenses with respect to the integration and implementation of the combined businesses.
There may also be additional unanticipated significant costs in connection with the transactions that the combined company may not recoup. These costs and expenses could reduce the benefits and additional income we expect
to achieve from the transactions. Although we expect that these benefits will offset the transaction expenses and implementation costs over time, this net benefit may not be achieved in the near term or at all.
Our future results will suffer if we do not effectively manage our expanded operations following the business combination transactions.
As a result of the business combination,
we anticipate that the size of our business will increase significantly beyond the size of either
of MOR or
Helix. Our future success depends, in part, upon our ability to manage this expanded business, which may pose substantial challenges for management, including challenges related
to the management and monitoring of new operations and associated increased costs and complexity. Additionally, our business strategy envisions a period of rapid growth that may put a strain on our administrative and operational resources and funding
requirements. Our ability to effectively manage growth will require us to continue to expand the capabilities of our operational and management systems and to attract, train, manage and retain qualified personnel. There can be no assurance that we
will be able to do so, particularly if losses continue and we are unable to obtain sufficient financing. If we are unable to successfully manage growth, our business, prospects, financial condition, and results of operations could be adversely
affected.
Risks Related to our Business Operations
We have a limited operating and financial history. Therefore, the actual financial condition and results of our operations after the business combination transactions may differ
materially.
We are in the development stage and
face all of the risks and uncertainties associated with a new and unproven business. Our future is based on an unproven business
plan with no historical facts to support projections and assumptions. We recently incorporated in anticipation of the business combination transactions and had no operating history or revenues prior to the closing of the business combination
transactions. Although we have combined with Helix, we nevertheless are faced with risks inherent in operating a new business, including difficulties often encountered in developing, producing and commercializing new technologies; developing the
markets for our products and technologies; and attracting and retaining qualified management, sales and/or marketing and technical staff, in addition to the risks described below.
We
are also faced with risks inherent in operating a new business, including: difficulties and delays often encountered in developing, producing and commercializing
new, complex technologies; developing the markets for our products and technologies; transitioning our development efforts to commercialization; and attracting and retaining qualified management, sales and/or marketing and technical staff.
We will need additional capital to fund our operations.
We will require additional capital to fund our current operations and anticipated expansion of our business and to pursue targeted revenue opportunities. There is no assurance that additional capital to fund our
operations can be raised. Additional capital may not be available, the terms of any such capital raising may be uncertain, and the terms of any prospective equity capital may not be acceptable. In addition, any future sale of equity securities would
dilute the ownership and control of the then-current stockholders and could be at prices substantially below prices at which our shares currently trade or may trade. The inability to raise capital could require us to significantly curtail or terminate
operations.
We may make additional acquisitions as a component of our growth strategy. We may not be able to identify suitable acquisition candidates or consummate acquisitions on acceptable
terms, or we may be unable to successfully integrate acquisitions, which could disrupt our operations and adversely impact our business and operating results.
A component of our growth strategy is to acquire complementary businesses in order to enhance the solutions we offer to our customers. In addition to the business combination
transactions, we intend to continue to pursue acquisitions of complementary technologies, products and businesses as a component of our growth strategy. Acquisitions involve certain known and unknown risks that could cause our actual growth or
operating results to differ from our expectations. For example, we may not be able to identify suitable acquisition candidates or to consummate acquisitions on acceptable terms; we may not be able to obtain the necessary financing, on favorable terms
or at all, to finance any or all of our potential acquisitions; and acquired technologies, products or businesses may not perform as we expect and we may fail to realize anticipated revenue and profits. In addition, our acquisition strategy may
divert management’s attention away from our existing business, resulting in the loss of key customers or employees, and expose us to unanticipated problems or legal liabilities, including responsibility as a successor for undisclosed or contingent
liabilities of acquired businesses or assets.
If we fail to conduct due diligence on our potential targets effectively, for example, we may not identify problems at target companies or fail to recognize incompatibilities or
other obstacles to successful integration. Our inability to successfully integrate future acquisitions could impede us from realizing all of the benefits of those acquisitions and could severely weaken our business operations. The integration process
may disrupt our business and, if new technologies, products or businesses are not implemented effectively, may preclude the realization of the full benefits expected by us and could harm our results of operations. In addition, the overall integration
of new technologies, products or businesses may result in unanticipated problems, expenses, liabilities and competitive responses.
Further, even if the operations of an acquisition are integrated successfully, we may not realize the full benefits of the acquisition, including the synergies, cost savings or growth opportunities
that we expect. These benefits may not be achieved within the anticipated time frame, or at all. Further, acquisitions may cause us to issue common stock that would dilute our current stockholders’ ownership percentage, use a substantial portion of our
cash resources, experience volatility in earnings due to changes in contingent consideration related to acquisition earn-out liability estimates or become subject to litigation.
If we do not successfully develop and deploy new technologies to address the needs of our customers, our business and results of operations could suffer.
Our success is based on our ability to design software and products that enable the integration of data into a common operating environment to facilitate advanced data analysis, knowledge management and collaboration. We
are also heavily reliant on our information technology infrastructure, processes and procedures and will devote significant resources to ensuring we have competitive informational technology systems. Information technology changes rapidly, however, and
we may not be able to stay ahead of such advances. If we are unable to introduce new or upgraded products, services or technology that users and collaborators recognize as valuable, we may fail to generate additional engagement on our platforms,
attract and retain customers or monetize the activity on our platforms. We have spent substantial amounts of time and money researching and developing new technologies and enhanced versions of existing features to meet customers’ and potential
customers’ rapidly evolving needs and our efforts to develop new and upgraded products, services or technology will require us to continue to incur significant costs. We cannot guarantee current or prospective users and customers will respond favorably
to new or improved products, services or technology.
Additionally, traditional pharmaceutical, data informatics and other well-established companies are expanding into the cannabis industry. This expansion could increase the number of competitors with similar platforms and
expertise to ours and could prevent us from realizing anticipated growth in customers and revenues.
The introduction of new products and services by competitors or the development of entirely new technologies to replace existing offerings could make our platforms obsolete or adversely affect our business, financial
condition and results of operations. We may experience difficulties with software development, design, or marketing that delay or prevent our development, introduction, or implementation of new platforms, features, or capabilities. Any delays could
result in adverse publicity, loss of revenue or market acceptance, or claims by customers, any of which could harm our business. Moreover, the design and development of new platforms or new features and capabilities to existing platforms may require
substantial investment, and there is no assurance that such investments will be successful. If customers do not widely adopt our new platforms, experiences, features, and capabilities, we may not be able to realize a return on our investment and our
business, financial condition, and results of operations may be adversely affected.
New and existing platforms and changes to existing platforms could fail to attain sufficient market acceptance for many reasons, including:
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The failure to predict market demand accurately in terms of product functionality and to supply offerings that meet this demand in a timely fashion;
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Product defects, errors or failures or our inability to satisfy customer service level requirements;
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Negative publicity or negative private statements about the security, performance or effectiveness of our platforms or product enhancements;
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Delays in releasing to the market new offerings or enhancements to existing offerings;
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Introduction or anticipated introduction of competing platforms or functionalities by competitors;
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Inability of our platforms or product enhancements to scale and perform to meet customer demands;
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Receiving qualified or adverse opinions in connection with security or penetration testing, certifications or audits, such as those related to IT controls and security standards and frameworks or compliance;
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Reluctance of customers to purchase proprietary software products; and
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Reluctance of customers to purchase products incorporating open source software.
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If we are not able to continue to identify challenges faced by our customers and develop, license or acquire new features and capabilities to our platforms in a timely and cost-effective manner, or if such enhancements do
not achieve market acceptance, our business, financial condition, results of operations, and prospects may suffer and anticipated revenue growth may not be achieved.
The effects of health epidemics, including the recent global coronavirus pandemic, have led to periods of significant volatility in various markets and industries and could harm our business and results
of operations.
Our business and results of operations could be adversely affected by health epidemics, including the recent coronavirus pandemic. In December 2019, a novel strain of coronavirus, SARS-CoV-2, causing a disease referred to
as COVID-19, was reported to have surfaced in Wuhan, China. Since then, coronavirus has spread to many countries worldwide, including the United States.
In March 2020, the World Health Organization declared the coronavirus to be a pandemic. Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the impact of the coronavirus outbreak on our
business, and there is no guarantee that our efforts to address the adverse impacts of the coronavirus will be effective. The impact to date has included periods of significant volatility in various markets and industries. This volatility could have an
adverse impact on our customers and on our business, financial condition and results of operations. In particular, automotive and consumer electronics industries, as well as other industries that include our customers, have and may continue to be
impacted by the coronavirus outbreak and/or other events beyond our control, and further volatility could have an additional negative impact on these industries and customers.
In addition, recent actions by United States federal, state and foreign governments to address the coronavirus outbreak, including intermittent and non-uniform (from city to city and state to state) travel bans and school,
business and entertainment venue closures, continue to have a significant adverse effect on the markets in which we conduct our business. The extent of impacts resulting from the coronavirus outbreak and other events beyond our control will depend on
future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus outbreak and actions taken to contain the coronavirus or its impact, among others.
In addition, the coronavirus outbreak could result in business disruption and if we cannot recover from such a business disruption on a timely basis, our business and financial conditions and results of operations could be
adversely affected.
There can be no assurance that the global coronavirus pandemic will not have a material and adverse impact on our business, operating results and financial condition. Even after the coronavirus outbreak has subsided, we
may continue to experience material and adverse impact on our business, operating results and financial condition as a result of its global economic impact, including any recession that has occurred or may occur in the future. The ultimate impact of
the coronavirus pandemic or a similar health epidemic is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our applicable business, operations or the global economy as a whole.
We depend on computing infrastructure operated by third parties to support some of our solutions and customers, and any errors, disruption, performance problems, or failure in their or our operational
infrastructure could adversely affect our business, financial condition and results of operations.
The software, internal applications and systems underlying our products and services are inherently complex and may contain defects or errors, particularly when first introduced or when new versions or enhancements are
released. The development, expansion, operation and maintenance of our technology and network infrastructure is expensive and complex and requires significant internal and external resources. If we do not successfully develop, expand, operate or
maintain our technology and network infrastructure, or if we experience operational failures, our reputation could be harmed, and we could lose current and prospective customers and service providers, which could adversely impact the business,
financial condition or results of operations.
We rely on third parties for certain services made available to users of our platforms, which could limit our control over the quality of the user experience and our cost of providing services.
Our ability to generate revenue will be affected by the amount of time it takes to complete and enhance our platform. Additionally, there are multiple third-party vendors and service providers that
must continue to provide us access to
their application programming interfaces and operating systems, and we will rely on cooperation from third parties to integrate with their systems. Should third-party vendors,
service providers and collaborators not perform as expected, cooperate with us or deliver their work as planned, we may not be able to release our products and services in a timely manner.
We utilize third-party software in our product and service offerings and
expect to continue to do so. The correction of these errors and defects will be dependent on
these third parties, so it may be difficult for us to correct them. Further, we cannot be certain that third-party licensors will continue to make their software available to us on acceptable terms, or invest the appropriate levels of resources in
their software to maintain and enhance our capabilities or remain in business.
We may not be able to successfully manage our intellectual property and we may be subject to infringement claims.
Part of our success will depend on our ability to protect our proprietary rights in the technologies used in our products. We will consider trade secrets, including confidential and unpatented technology, important to the
maintenance of our competitive position. However, trade secrets and know-how are difficult to protect. Further, if any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent that
competitor from using the technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position could be materially and adversely harmed. Additionally, if
we are unable to protect our proprietary rights adequately, our business could be harmed.
There has been substantial litigation in internet and software-related industries regarding patent, trademark and copyrights and other intellectual property rights and, from time to time, third parties may claim
infringement by us of their intellectual property rights. If we were found to be infringing on the intellectual property rights of any third party, we could be subject to liabilities for such infringement, which could have a material adverse impact on
our profitability. In addition, any such claims could distract management from conducting the business.
Real or perceived errors, failures, defects or bugs in our platforms, products or services could adversely affect our results of operations and growth prospects.
Because we offer very complex platforms, products and services, undetected errors, defects, failures or bugs may occur, especially when platforms or capabilities are first introduced or when new versions or other product
or infrastructure updates are released. These platforms are often installed and used in large-scale computing environments with different operating systems, software products and equipment, and data source and network configurations, which may cause
errors or failures in our platforms or may expose undetected errors, failures, or bugs in our platforms. Despite testing, errors, failures, or bugs may not be found in new software or releases until after commencement of commercial shipments. Errors
can also delay the development or release of new platforms or capabilities or new versions of platforms, adversely affect our reputation and our customers’ willingness to buy our platforms, and adversely affect market acceptance or perception of these
platforms. Many customers use these platforms, products and services in applications that are critical to their businesses or missions and may have a lower risk tolerance to defects in our platforms, products and services than to defects in other, less
critical, software products. Any errors or delays in releasing new software or new versions of platforms, products and services or allegations of unsatisfactory performance or errors, defects or failures in released software could cause us to lose
revenue or market share, increase our service costs, result in substantial costs in redesigning the software, result in the loss of significant customers, subject us to liability for damages and divert company resources from other tasks, any one of
which could materially and adversely affect our business, results of operations and financial condition. In addition, our platforms could be perceived to be ineffective for a variety of reasons outside of our control. Hackers or other malicious parties
could circumvent our or customers’ security measures, and customers may misuse our platforms resulting in a security breach or perceived product failure.
Real or perceived errors, failures, or bugs in our platforms, products and services, or dissatisfaction with those services or outcomes, could result in customer terminations and/or claims by customers for losses sustained
by them. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct any such errors, failures, or bugs.
In a dynamic industry like ours, our success and growth depend on our ability to attract, recruit, retain and develop qualified employees.
Our business functions at the intersection of rapidly changing technological, social, economic and regulatory developments that require a wide-ranging set of expertise and intellectual capital. To continue to successfully
compete and grow, we must attract, recruit, develop and retain the necessary personnel who can provide the needed expertise across the entire spectrum of our intellectual capital needs. While we have a number of key personnel who have substantial
experience with our operations, we must also develop our personnel to provide succession plans capable of maintaining continuity in the midst of the inevitable unpredictability of human capital. The market for qualified personnel is competitive, and we
may not succeed in recruiting additional personnel or may fail to effectively replace current personnel who depart with qualified or effective successors. Our effort to retain and develop personnel may also result in significant additional expenses,
which could adversely affect our profitability. There can be no assurances that qualified employees will continue to be employed or that we will be able to attract and retain qualified personnel in the future. Failure to retain or attract key personnel
could have a material adverse effect on our business, financial condition and results of operations.
We have identified material weaknesses in our internal control over financial reporting which, if not timely
remediated, may adversely affect the accuracy and reliability of our financial statements and our reputation, business and stock price, as well as lead to a loss of investor confidence in us.
As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal control. Section 404 of Sarbanes-Oxley Act of 2002,
as amended (the “Sarbanes-Oxley Act”), requires that we furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting beginning with the fiscal year ending
December
31, 2021. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. Our independent registered public accounting firm will not be required to attest to
the effectiveness of our internal control over financial reporting until our first annual report required to be filed with the SEC following the later of the date we are deemed to be an “accelerated filer” or a “large accelerated filer,” each as
defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or the date we are no longer an “emerging growth company,” as defined in the Jumpstart
Our
Business Startups Act enacted in April 2012 (“JOBS Act”). If we have a material weakness in our internal control over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated.
We are in the process of designing and implementing the internal control over financial reporting required to comply with this obligation, which process will be time-consuming, costly and complicated.
As described under Item 9A, Controls and Procedures, we concluded that MOR’s disclosure controls and procedures were not effective as of December 31, 2020 and that we
had, as of such date, material weaknesses in our internal control over financial reporting
related to (i) lack of properly designed controls, and deficiencies in the effectiveness of controls, to prevent and detect
fraud or material misstatement of financial statements as it relates to internal controls over financial reporting and transaction classes; (ii) inability to prepare complete and accurate financial statements in accordance with GAAP in a timely
manner;
and (iii) lack of segregation of duties over transaction classes, information technology, and financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over
financial reporting
such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements would not be prevented or detected on a timely basis.
We intend to remediate these material weaknesses. While we believe the steps we take to remediate these material weaknesses will improve the effectiveness of our
internal control over financial reporting
and will remediate the identified deficiencies, if our remediation efforts are insufficient to address the material weaknesses or we identify additional material weaknesses in
our
internal control over financial reporting in the future,
our ability to analyze, record and report financial information accurately, to prepare our financial statements
within the time periods specified
by the rules and forms of the SEC and to otherwise comply with our reporting obligations under the federal securities laws may be adversely affected. The
occurrence of, or failure to remediate, these material weaknesses and any future material weaknesses in our internal control over financial reporting may adversely affect the accuracy and
reliability of our financial
statements and have other consequences that could materially and adversely affect our business, including an adverse impact on the market price of our common stock. In addition, we could become subject to investigations
by Nasdaq, the SEC or other regulatory authorities, which could require additional financial and management resources.
If our internal control over financial reporting or our disclosure controls and procedures are not effective, we may not be able to accurately report our financial results, prevent fraud or file our
periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to a decline in our stock price.
We rely on financial reporting and data analytics that must be accurate in order to make real-time management decisions, accurately manage our cash position, and maintain adequate inventory levels while conserving adequate
cash to fund operations. In the event of a systems failure, a process breakdown, the departure of key management, or fraud, we would be unable to efficiently manage these items and may experience liquidity shortfalls that our cash position or revolving
credit facility may not be able to accommodate. In such a situation, we also may not be able to accurately report our financial results, prevent fraud or file our periodic reports in a timely manner, which may cause investors to lose confidence in our
reported financial information and may lead to a decline in our stock price.
We may be unable to accurately forecast our operating results and growth rate, which may adversely affect our reported results and stock price.
We may not be able to accurately forecast our operating results and growth rate. We use a variety of factors in our forecasting and planning processes, including historical results, recent history and assessments of
economic and market conditions. Our growth rates may not be sustainable, and our growth depends on the continued growth of demand for the products we offer. Lower demand caused by changes in customer preferences, a weakening of the economy or other
factors may result in decreased revenues or growth. Furthermore, many of our expenses and investments are fixed, and we may not be able to adjust our spending in a timely manner to compensate for any unexpected shortfall in our operating results.
Failure to accurately forecast our operating results and growth rate could cause our actual results to be materially lower than anticipated. If our growth rate declines as a result, investors’ perceptions of our business may be adversely affected, and
the market price of our common stock could decline.
Consolidation in the industries in which our customers operate may reduce the volume of services purchased by consolidated customers following an acquisition
or merger, which could materially harm our operating results and financial condition.
Mergers or consolidations among our customers could in the future reduce the number of our customers and potential customers. When companies consolidate, overlapping services
previously purchased separately are usually purchased only once by the combined entity, leading to loss of revenue. Other services that were previously purchased by one of the merged or consolidated entities may be deemed unnecessary or cancelled. If
our customers merge with or are acquired by other entities that are not our customers, or that use fewer of our services, they may discontinue or reduce their use of our services. There can be no assurance as to the degree to which we may be able to
address the revenue impact of such consolidation. Any of these developments could materially harm our operating results and financial condition.
Risks Related to Regulatory and Legal Matters
Our business is subject to complex and evolving U.S. and non-U.S. laws and regulations regarding privacy, data protection and security, technology protection and other matters. Many of these laws and
regulations are subject to change and uncertain interpretation and could result in claims, changes to our business practices, monetary penalties, increased cost of operations or otherwise harm our business.
We are subject to a variety of local, state, national and international laws and directives and regulations in the United States and abroad that involve matters central to our business, including privacy and data
protection, data security, data storage, retention, transfer and deletion, technology protection and personal information. Foreign data protection, data security, privacy and other laws and regulations can impose different obligations or be more
restrictive than those in the United States. These U.S. federal and state and foreign laws and regulations, which, depending on the regime, may be enforced by private parties or government entities, are constantly evolving and can be subject to
significant change, and they are likely to remain uncertain for the foreseeable future. In addition, the application, interpretation, and enforcement of these laws and regulations are often uncertain and may be interpreted and applied inconsistently
from country to country and inconsistently with our current policies and practices. A number of proposals are pending before U.S. federal, state, and foreign legislative and regulatory bodies that could significantly affect our business.
The overarching complexity of privacy and data protection laws and regulations around the world pose a compliance challenge that could manifest in costs, damages or liability in other forms as a result of failure to
implement proper programmatic controls, failure to adhere to those controls or the malicious or inadvertent breach of applicable privacy and data protection requirements by us, our employees, our business partners or our customers.
In addition to government regulation, self-regulatory standards and other industry standards may legally or contractually apply to us, be argued to apply to us, or we may elect to comply with such
standards or to facilitate our customers’ compliance with such standards. Because privacy, data protection and information security are critical competitive factors in our industry, we may make statements on our website, in marketing materials or
in other settings about our data security measures and our compliance with, or our ability to facilitate our customers’ compliance with, these standards. We also expect that there will continue to be new proposed laws and regulations concerning
privacy, data protection and information security and we cannot yet determine the impact such future laws, regulations and standards, or amendments to or re-interpretations of existing laws and regulations, industry standards, or other obligations
may have on our business. New laws, amendments to or re-interpretations of existing laws and regulations, industry standards and contractual and other obligations may require us to incur additional costs and restrict our business operations. As
these legal regimes relating to privacy, data protection and information security continue to evolve, they may result in ever-increasing public scrutiny and escalating levels of enforcement and sanctions. Furthermore, because the interpretation and
application of laws, standards contractual obligations and other obligations relating to privacy, data protection and information security are uncertain, these laws, standards and contractual and other obligations may be interpreted and applied in
a manner that is, or is alleged to be, inconsistent with our data management practices, our policies or procedures or the features of our solutions. If so, in addition to the possibility of fines, lawsuits, and other claims, we could be required to
fundamentally change our business activities and practices or modify our solutions, which could have an adverse effect on our business. We may be unable to make such changes and modifications in a commercially reasonable manner or at all and our
ability to fulfill existing obligations, make enhancements or develop new solutions and features could be limited. Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations and policies that are applicable to
the businesses of our customers may limit the use and adoption of, and reduce the overall demand for, our solutions.
These existing and proposed laws and regulations can be costly to comply with and can make our solutions and services less effective or valuable, delay or impede the development of new products,
result in negative publicity, increase our operating costs, require us to modify our data handling practices, limit our operations, impose substantial fines and penalties, require significant management time and attention, or put our data or
technology at risk. Any failure or perceived failure by us or our solutions to comply with U.S. or applicable foreign laws, regulations, directives, policies, industry standards or legal obligations relating to privacy, data protection or information
security, or any security incident that results in loss of or the unauthorized access to, or acquisition, use, release, or transfer of, personal information, personal data, or other customer or sensitive data sensitive data or information
, may result in governmental investigations, inquiries, enforcement actions and prosecutions, private claims and litigation, indemnification or other contractual obligations, other remedies, including fines or demands
that we modify or cease existing business practices, or adverse publicity, and related costs and liabilities, which could significantly and adversely affect our business and results of operations.
Privacy regulation is an evolving area and compliance with applicable privacy regulations may increase our operating costs or adversely impact our ability to service our
customers and market our products and services.
Federal and state governments and agencies have adopted, or are considering adopting, laws and regulations regarding the collection, use and disclosure of data. It is possible that these
laws may be interpreted and applied in a manner that is inconsistent with our data practices, which could cause us to incur additional cost. Moreover, complying with these various laws could cause us to incur substantial costs or require us to change
our business practices in a manner adverse to the business.
More specifically, the solutions we provide will involve the collection, storage and transmission of confidential personal and proprietary information regarding our customers and our
customers’ current and prospective patients and other users. For certain of our business verticals, we will also collect, store and transmit a variety of data regarding an individual’s medical history. Our web-based and mobile products in these
verticals may at least partially be subject to
HIPAA
. Among other concerns, HIPAA provisions also address the security and privacy of health data in order to improve the efficiency and
effectiveness of the nation’s health care system by encouraging the widespread use of electronic data interchange in the domestic health care system.
While we plan to meet or exceed the regulatory requirements, including HIPAA, using our internal resources in conjunction with third party services, we might fail to achieve or maintain
compliance to such requirements, and our third-party services suppliers might decide to modify or discontinue their services without adequate notice and this might cause additional expense in arranging new services and could harm our reputation,
business, operating results and financial condition.
Regulatory authorities around the world are considering a number of legislative proposals concerning privacy and data protection. Federal and state governments and agencies have adopted, or
are considering adopting, laws and regulations regarding the collection, use and disclosure of data. As our business expands, it may become subject to laws of additional jurisdictions, domestic and foreign. It is possible that these laws may be
interpreted and applied in a manner that is inconsistent with our data practices. If so, in addition to the possibility of fines, any increase in the costs of compliance with, and other burdens imposed by, applicable legislative and regulatory
initiatives may limit our ability to collect, aggregate or use data. Moreover, complying with these various laws could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business.
As a company whose clients operate in the cannabis industry, we face many unique and evolving risks.
One of our key verticals is to partner directly or indirectly with U.S. cannabis companies and businesses ancillary to cannabis. The legal marijuana industry is a new industry, is at an early stage
of development, represents a niche market, is evolving rapidly and is experiencing an increasing number of market entrants. Our business prospects in this vertical
are dependent on widespread acceptance and use of
cannabis products, which is subject to a high level of uncertainty and volatility.
Further, cannabis companies and companies providing ancillary products and services are subject to greater amounts of governmental uncertainty and
regulations that pose
additional risks relative to other businesses, and therefore transactions with these companies present greater overall risk. These companies typically have shorter operating histories, less predictable operating results and regulatory concerns which
tend to render them more vulnerable to market conditions, as well as general economic downturns. In addition, cannabis companies are engaged in rapidly changing businesses with products subject to substantial regulatory and operational risk.
Cannabis remains illegal under federal law, and our cannabis-related business is heavily dependent on state laws pertaining to the cannabis industry. Even though a number of states have legalized the sale of marijuana,
many of these states impose significant restrictions on marijuana-related businesses and, accordingly, their vendors and collaborators, as well as on the collection and use of data from these businesses. These state-level restrictions could have a
material adverse impact on our ability to identify suitable opportunities and the sales of our products and services. Laws and regulations affecting the cannabis industry are constantly changing, which could potentially have a detrimental effect on our
business. We cannot predict the impact that future legislative actions may have on our business.
There is a risk that we will not be able to find a bank that is willing to provide banking services to businesses contracting with cannabis companies or that a bank will continue to be willing to support cannabis and
ancillary businesses in the long term. Banks that do business with marijuana-related businesses run the risk of federal prosecution. In addition, regulatory guidance requires banks to engage in comprehensive due diligence, monitoring and reporting when
providing services to marijuana-related businesses. The risk of potential federal enforcement, and significant regulatory compliance obligations, may result in banks refraining from providing us banking services.
Since we provide products and services to companies in the cannabis industry, insurance that is otherwise readily available, such as general liability, worker’s compensation, and directors’ and officers’ insurance, will
likely be more difficult for us to find, and more expensive. There are no guarantees that we will be able to find this insurance in the future, or that the cost will be affordable. If we are forced to go without such insurance, it may prevent us from
entering into certain business sectors, may inhibit our growth, and may expose us to additional risk and financial liabilities.
If we fail to perform our services in accordance with contractual requirements, regulatory standards and ethical considerations, we could be subject to significant costs or liability and our reputation
could be harmed.
We collect, process and store a large amount of personal information. This data is often accessed through transmissions over public and private networks, including the internet. Despite our physical security measures,
implementation of technical controls and contractual precautions designed to identify, detect and prevent the unauthorized access, alteration, use or disclosure of our data, there is no guarantee that these measures or any other measures can provide
absolute security. Systems that access or control access to our services and databases may be compromised as a result of criminal activity, including cyber-attacks and other intentional business disruptions, negligence or otherwise. Unauthorized
disclosure or use, or loss or corruption, of our data or inability of our users to access our systems could disrupt the operations, subject us to substantial legal liability, result in a material loss of business, cause us to incur significant cost and
significantly harm our reputation.
Risks Related to Ownership of our Common Stock
The market price of our common stock may be volatile, and holders of our common stock could lose a significant portion of their investment due to drops in the market price of our common stock.
The market price of our common stock may be volatile and stockholders may not be able to resell their Forian common stock at or above the price at which they are deemed to have acquired the Forian
common stock pursuant to the business combination transactions or otherwise due to fluctuations in our market price, including changes in price caused by factors unrelated to our operating performance or prospects.
Specific factors that may have a significant effect on the market price for the combined company’s common stock include, among others, the following:
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changes in stock market analyst recommendations or earnings estimates regarding our common stock, other companies comparable to us or companies in the industries we serve;
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actual or anticipated fluctuations in our operating results or future prospects;
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reaction to our public announcements;
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strategic actions taken by us or our competitors, such as any contemplated business separation, acquisitions or restructurings;
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failure of the combined company to achieve the perceived benefits of the transactions, including financial results and anticipated synergies, as rapidly as or to the extent anticipated by financial or industry analysts;
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adverse conditions in the financial market or general U.S. or international economic conditions, including those resulting from war, incidents of terrorism and responses to such events; and
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sales of common stock by us, members of our management team or significant stockholders.
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We do not intend to pay dividends on our common stock, so any returns will be limited to the value of our stock.
We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. In addition,
we may enter into agreements that prohibit us from paying cash dividends without prior written consent from our contracting parties, or which other terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock.
Any return to stockholders will therefore be limited to the appreciation of their stock, which may never occur.
The directors and management of Forian will own a significant percentage of our common stock and will be able to exert significant control over matters subject to stockholder approval.
Our directors and officers, beneficially own approximately 36% of our outstanding common stock. These stockholders may be able to determine all matters requiring stockholder approval. For example, these stockholders may be
able to control elections of directors, amendments of our organizational documents or approval of any merger, sale of assets or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for Forian
common stock that you may feel are in your best interest as one of our stockholders. The interests of this group of stockholders may not always coincide with your interests or the interests of other stockholders and they may act in a manner that
advances their best interests and not necessarily those of other stockholders, including seeking a premium value for their common stock, and might affect the prevailing market price for our common stock.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.
We may seek additional capital through a combination of public and private equity offerings, debt financings, strategic partnerships and alliances and licensing arrangements. To the extent that we raise additional capital
through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. The incurrence of indebtedness would
result in increased fixed payment obligations and could involve certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other
operating restrictions that could adversely impact our ability to conduct our business. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights
to our technologies or product candidates, or grant licenses on terms unfavorable to us.
Sales of a substantial number of shares of our common stock by our existing stockholders in the public market could cause our stock price to fall.
If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market, the trading price of our common stock could decline.
Our bylaws contain forum limitations for certain disputes between us and our stockholders that could limit the ability of stockholders to bring claims against us or our directors, officers and employees
in jurisdictions preferred by stockholders.
Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for (i) any derivative lawsuit brought on our
behalf, (ii) any lawsuit against our current or former directors, officers, employees, stockholders or agents asserting a breach of a duty (including any fiduciary duty) owed by any such current or former director, officer, stockholder, employee or
agent to us or our stockholders, (iii) any lawsuit asserting a claim against us or any of our current or former director, officer, employee, stockholder or agent arising out of or relating to any provision of the DGCL, our charter or bylaws (each, as
in effect from time to time), or (iv) any lawsuit asserting a claim against us or any of our current or former directors, officers, employees, stockholders or agents governed by the internal affairs doctrine of the State of Delaware. The foregoing
forum provisions do not apply to suits brought to enforce a duty or liability created by the Securities Act, or the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Our bylaws also provide that, unless Forian
consents in writing to the selection of an alternative forum, the federal district courts of the United States of America are the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
The foregoing forum provisions may prevent or limit a stockholder’s ability to file a lawsuit in a judicial forum that it prefers for disputes with us or our directors, officers, employees, stockholders or agents, which may discourage such lawsuits,
make them more difficult or expensive to pursue, and result in outcomes that are less favorable to such stockholders than outcomes that may have been attainable in other jurisdictions, although though stockholders will not be deemed to have waived our
compliance with federal securities laws and the rules and regulations thereunder.
There is uncertainty as to whether a court would enforce such a forum selection provision as written in connection with claims arising under the Securities Act because Section 22 of the Securities Act creates concurrent
jurisdiction for federal and state courts over all such Securities Act claims.
In addition, notwithstanding the inclusion of the foregoing forum provisions in the bylaws, courts may find the foregoing forum provisions to be inapplicable or unenforceable in certain cases that the foregoing forum
provisions purport to address, including claims brought under the Securities Act. If this were to occur in any particular lawsuit, Forian may incur additional costs associated with resolving such lawsuit in other jurisdictions or resolving lawsuits
involving similar claims in multiple jurisdictions, all of which could harm our business, results of operations, and financial condition.
We are an emerging growth company and a smaller reporting company, and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies and smaller reporting companies
will make our common stock less attractive to investors.
We are an emerging growth company, as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements
that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding
executive compensation in this
Annual Report on Form 10-K and our periodic reports and proxy statements, and exemptions from the requirements of holding nonbinding advisory votes on executive compensation and
stockholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier. We will remain an emerging growth company
until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the closing of the business combination, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a
large accelerated filer, which requires the market value of our common stock that is held by non-affiliates to exceed $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1 billion in non-convertible debt during
the prior three-year period.
Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to not “opt out” of this exemption
from complying with new or revised accounting standards and, therefore, we will adopt new or revised accounting standards at the time private companies adopt the new or revised accounting standard and will do so until such time that we either (i)
irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company.
Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company,” which would allow us to continue to take advantage of many of the same exemptions
from disclosure requirements, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in this
Annual Report on Form 10-K and our periodic reports and proxy statements. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our
common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
We may be at an increased risk of securities class action litigation.
Historically, securities class action litigation has often been brought against a company following a decline in the market price of
its securities. This risk is
especially relevant for us because companies involved in the cannabis industry have experienced significant stock price volatility in recent years. If we were to be sued, it could result in substantial costs and a diversion of management’s attention
and resources, which could harm our business.