investigations, litigation, media attention and other publicity regarding the consumption of cannabis products. There can be no assurance that future scientific research or findings, regulatory
investigations, litigation, media attention or other publicity will be favorable to the cannabis market or any particular product, or consistent with earlier publicity.
Future research studies and clinical trials may reach negative conclusions regarding the medical benefits, viability, safety, efficacy,
dosing, social acceptance or other facts and perceptions related to cannabis, which could have a material adverse effect on the demand for our products with the potential to lead to a material adverse effect on our business, our financial condition
or our results of operations. There is no assurance that such adverse publicity reports or other media attention will not arise.
Cannabis
businesses are subject to unfavorable tax treatment.
Under Section 280E of the U.S. Internal Revenue Code of 1986 (the
Code), as amended, no deduction or credit is allowed for any amount paid or incurred during the taxable year in carrying on business if the business (or the activities which comprise the trade or business) consists of trafficking in
controlled substances (within the meaning of Schedules I and II of the Controlled Substances Act). The U.S. Internal Revenue Service has applied this provision to cannabis operations, prohibiting them from deducting expenses associated with cannabis
businesses except for deductions for cost of goods sold. Section 280E may have a lesser impact on cannabis cultivation and manufacturing operations. Accordingly, Section 280E has a significant impact on the operations of cannabis companies and an
otherwise profitable business may operate at a loss, after taking into account its U.S. income tax expenses.
Cannabis businesses are
subject to applicable anti-money laundering laws and regulations and have restricted access to banking and other financial services.
We
are subject to a variety of laws and regulations in the United States that involve money laundering, financial record-keeping and proceeds of crime, including the U.S. Currency and Foreign Transactions Reporting Act of 1970, (the Bank Secrecy
Act), as amended by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the USA Patriot Act), and any related or similar rules, regulations or
guidelines, issued, administered or enforced by governmental authorities in the United States. Accordingly, pursuant to the Bank Secrecy Act, banks or other financial institutions that provide a cannabis business with a checking account, debit or
credit card, small business loan or any other service could be found guilty of money laundering, aiding and abetting, or conspiracy.
As a
result, we may have limited or no access to banking or other financial services in the United States. In addition, federal money laundering statutes and Bank Secrecy Act regulations discourage financial institutions from working with any
organization that sells a controlled substance, regardless of whether the state it operates in permits cannabis sales. Our inability or limitation of our ability to open or maintain bank accounts, obtain other banking services and/or accept credit
card and debit card payments may make it difficult for us to operate and conduct our business as planned or to operate efficiently. Furthermore, if our operations, or proceeds thereof, dividend distributions or profits or revenues derived from our
operations were found to be in violation of money laundering legislation or otherwise, such transactions may be viewed as proceeds from a crime (the sale of a Schedule I drug) under the Bank Secrecy Acts money laundering provisions or other
laws discussed above, our ability to declare or pay dividends or other distributions might be affected.
We lack access to U.S. bankruptcy
protections.
Many courts have denied cannabis businesses bankruptcy protections because the use of cannabis is illegal under
federal law. In the event of a bankruptcy, it would be very difficult for lenders to recoup their investments in the cannabis industry. If the Company were to experience a bankruptcy, there is no guarantee that U.S. federal bankruptcy protections
would be available to us, which would have a material adverse effect on us.
We operate in a highly regulated sector and may not always succeed in
complying fully with applicable regulatory requirements in all jurisdictions where we carry on business.
Our business and
activities are heavily regulated in all jurisdictions where we carry on business. Our operations are subject to various laws, regulations and guidelines by state and local governmental authorities relating to the manufacture, marketing, management,
transportation, storage, sale, pricing and disposal of cannabis and cannabis oil, and also including laws and regulations relating to health and safety, insurance coverage, the conduct of operations and the protection of the environment. Laws and
regulations, applied generally, grant government agencies and self-regulatory bodies broad administrative discretion over our activities, including the power to limit or restrict business activities as well as impose additional disclosure
requirements on our products and services. Achievement of our business objectives is contingent, in part, upon compliance with regulatory requirements enacted by these governmental authorities and obtaining all necessary regulatory approvals for the
manufacture, production, storage,
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