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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

~~Washington~~WASHINGTON, DC 20549

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FORM 10-K

___________________________

(Mark One)

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2024~~2025.

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number 001-40397

___________________________

~~Flora~~ZeroStack ~~Growth~~ Corp.

(Exact Name of Registrant as Specified in Its Charter)

___________________________

Province of Ontario

Not Applicable

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

~~3230~~40 King St W. ~~Commercial~~Suite ~~Boulevard~~2400, ~~Suite~~Toronto, ~~180 Fort~~ON ~~Lauderdale~~M5H 3Y2, ~~FL 33309~~Canada

(Address of Principal Executive Offices) (Zip Code)

(954) 842-4989

(Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to section 12(b) of the Act:
Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Shares, no par value	~~FLGC~~ZSTK	Nasdaq Capital Market

Securities registered pursuant to section 12(g) of the Act:

None

___________________________

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive- based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of June 30, ~~2024~~2025, the last business day of the registrant's most recently completed second quarter, the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was approximately $911.62 million based on the closing price as reported on the Nasdaq Capital Market on that date. For purposes of determining this number, all named executive officers and directors of the registrant as of June 30, ~~2024~~2025 were considered affiliates of the registrant. This number is provided only for the purposes of this Annual Report on Form 10-K, and does not represent an admission by either the registrant or any such person as to the affiliate status of such person.

As of ~~March~~February 2223, ~~2025~~2026, the registrant had 192,~~435~~430,~~642~~808 shares of its common stock, no par value ("Common Shares") outstanding.

TABLE OF CONTENTS

		Page
Part I.
Item 1.	Business	5
Item 1A.	Risk Factors	14
Item 1B.	Unresolved Staff Comments	3538
Item 1C.	Cybersecurity	3538
Item 2.	Properties	3639
Item 3.	Legal Proceedings	3739
Item 4.	Mine Safety Disclosures	3839
Part II.
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	3840
Item 6.	[Reserved]	4849
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	4849
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	6566
Item 8.	Financial Statements and Supplementary Data	6667
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	~~119~~125
Item 9A.	Controls and Procedures	~~119~~125
Item 9B.	Other Information	~~119~~125
Item 9C.	Disclosure regarding Foreign Jurisdictions that Prevent Inspections.	~~120~~126
Part III.
Item 10.	Directors, Executive Officers and Corporate Governance	~~120~~126
Item 11.	Executive Compensation	~~127~~133
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	~~141~~146
Item 13.	Certain Relationships and Related Transactions and Director Independence	~~143~~150
Item 14.	Principal Accounting Fees and Services	~~144~~152
Part IV.
Item 15.	Exhibits, Financial Statement Schedules	~~144~~153
Item 16.	Form 10-K Summary	~~147~~158

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K (this "Annual Report") contains "forward-looking statements," as that term is defined under the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements may include projections and estimates concerning our possible or assumed future results of operations, financial condition, business strategies and plans, market opportunity, competitive position, industry environment, and potential growth opportunities. In some cases, you can identify forward- looking statements by terms such as "may", "will", "should", "believe", "expect", "could", "intend", "plan", "anticipate", "estimate", "continue", "predict", "project", "potential", "target," "goal" or other words that convey the uncertainty of future events or outcomes. You can also identify forward-looking statements by discussions of strategy, plans or intentions. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, because forward-looking statements relate to matters that have not yet occurred, they are inherently subject to significant business, competitive, economic, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These and other important factors, including, among others, those discussed in this Annual Report, may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by the forward-looking statements in this Annual Report. Risks and uncertainties, the occurrence of which could adversely affect our business, include, but are not limited to, the following:

• our limited operating history and net losses; • changes in cannabis laws, regulations and guidelines, including stop sale orders; • decrease in demand for cannabis and derivative products due to certain research findings, proceedings, or negative media attention; • our ability to continue as a going concern absent access to sources of liquidity; • damage to our reputation as a result of negative publicity; • exposure to product liability claims, actions and litigation; • risks associated with product recalls; • product viability; • continuing research and development efforts to respond to technological and regulatory changes; • shelf life of inventory; • our ability to successfully integrate businesses that we acquire; • our ability to achieve economies of scale; • our ability to fund overhead expenses, including costs associated with being a publicly-listed company; • maintenance of effective quality control systems; • changes to energy prices and supply; • risks associated with expansion into new jurisdictions; • regulatory compliance risks; • opposition to the cannabinoid industry; and • potential delisting resulting in reduced liquidity of our Common Shares.
fluctuations in the market price of 0G, the native token of the 0G Chain, a layer-1 blockchain designed to enable users to deploy and operate decentralized artificial intelligence ("AI") applications and data ("Tokens" or "0G Tokens", each a "0G Token" or "0G") or any other digital assets we might hold;
the possibility that any one of the 0G Tokens and any other assets we might hold (collectively, the "Cryptocurrencies") may be classified as a "security";
decrease in liquidity of 0G Tokens or any other digital assets we might hold;
our ability to continue as a going concern absent access to sources of liquidity;
damage to our reputation as a result of negative publicity;
exposure to product liability claims, actions and litigation;
risks associated with product recalls;
continuing research and development efforts to respond to technological and regulatory changes;
our ability to successfully integrate businesses that may acquire;
our ability to achieve economies of scale;
our ability to fund overhead expenses, including costs associated with being a publicly-listed company
maintenance of effective quality control systems;
risks associated with expansion into new jurisdictions;
regulatory compliance risks;
potential delisting resulting in reduced liquidity of our Common Shares;
risks associated with cybersecurity and the protection of confidential information;
the possibility that we are deemed to be an investment company under the Investment Company Act of 1940, as amended (the "Investment Company Act"), and become subject to applicable restrictions that make it impractical for us to continue segments of our business as currently contemplated;
risks associated with our use of AI;
competition from the emergence or growth of other digital assets accelerated by advancements in AI and blockchain technology;
the reliance of our AI technology on the use of third-party data;
the negative impact on the value the Cryptocurrencies caused by disruptions in the Cryptocurrencies' networks; and
risks related to the custody of the Cryptocurrencies, including the loss or destruction of private keys required to access our Cryptocurrencies and cyberattacks or other data loss relating to our Cryptocurrencies.

Given the foregoing risks and uncertainties, you are cautioned not to place undue reliance on the forward-looking statements in this Annual Report. The forward-looking statements contained in this Annual Report are not guarantees of future performance and our actual results of operations and financial condition may differ materially from such forward- looking statements. In addition, even if our results of operations and financial condition are consistent with the forward-looking statements in this Annual Report, they may not be predictive of results or developments in future periods.

Any forward-looking statement that we make in this Annual Report speaks only as of the date of this Annual Report. Except as required by law, we do not undertake any obligation to update or revise, or to publicly announce any update or revision to, any of the forward-looking statements in this Annual Report, whether as a result of new information, future events or otherwise, after the date of this Annual Report.

Market, Industry and Other Data

This Annual Report contains estimates, projections and other information concerning our industry, our business and the markets for our products. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from our own internal estimates and research, as well as from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry and general publications, government data, and similar sources.

Risk Factor Summary

There are a number of risks that you should carefully consider before making an investment in our business. These risks are discussed more fully in Item 1.A. of this Annual Report below. If any of these risks actually occur, our business, financial condition, operating results and cash flows could be materially adversely affected. These risk factors include, but are not limited to:

•our limited operating history and net losses; • changes in cannabis laws, regulations and guidelines, including stop sale orders; • decrease in demand for cannabis and derivative products due to certain research findings, proceedings, or negative media attention; • unfavorable tax treatment under U.S. federal income tax law for being a cannabis business; • adverse U.S. federal income tax consequences for U.S. shareholders should the Company be a "passive foreign investment company"; • management has performed an analysis of our ability to continue as a going concern, and has determined that, based on our current financial position, there is a substantial doubt about our ability to continue as a going concern; • damage to reputation as a result of negative publicity; • exposure to product liability claims, actions and litigation; • risks associated with product recalls; • product viability; • continuing research and development efforts to respond to technological and regulatory changes; • shelf life of inventory; • our ability to successfully integrate businesses that we acquire; • maintenance of effective quality control systems; • changes to energy prices and supply; • risks associated with expansion into new jurisdictions; • regulatory compliance risks; • opposition to the cannabinoid industry; and • potential delisting resulting in reduced liquidity of our Common Shares.
fluctuations in the market price of 0G Tokens or any other digital assets the Company might hold;
the possibility that any one of the Cryptocurrencies may be classified as a "security";
decrease in liquidity of 0G Tokens or any other digital assets the Company might hold;
our ability to continue as a going concern absent access to sources of liquidity;
damage to our reputation as a result of negative publicity;
exposure to product liability claims, actions and litigation;
risks associated with product recalls;
continuing research and development efforts to respond to technological and regulatory changes;
the ability to successfully integrate businesses we may acquire;
the ability to achieve economies of scale;
the ability to fund overhead expenses, including costs associated with being a publicly-listed company
maintenance of effective quality control systems;
risks associated with expanding into new jurisdictions;
regulatory compliance risks;
potential delisting resulting in reduced liquidity of our Common Shares;
risks associated with cybersecurity and the protection of confidential information;
the possibility that we are deemed to be an investment company under the Investment Company Act and become subject to applicable restrictions that make it impractical for us to continue segments of our business as currently contemplated;
risks associated with our use of AI;
competition from the emergence or growth of other digital assets accelerated by advancements in AI and blockchain technology;
the reliance of our AI technology on the use of third-party data;
the negative impact on the value of the Cryptocurrencies caused by disruptions in the Cryptocurrencies' networks;
risks related to the custody of the Cryptocurrencies, including the loss or destruction of private keys required to access our Cryptocurrencies and cyberattacks or other data loss relating to our Cryptocurrencies;
our use of capital not required to provide working capital for our ongoing operations to acquire 0G, which may adversely affect our financial results and the market price of our securities;
the concentration of our 0G holdings;
the enhanced regulatory oversight of our 0G treasury strategy;
advancements in AI; and
our ability to develop products and services to address the rapidly evolving market for digital assets.

PART I

Unless the context otherwise requires, all references in this Annual Report to the "Company," "~~Flora~~ZeroStack," "we," "us," "our," and similar references refer to ZeroStack Corp. (formerly Flora Growth Corp.) and our subsidiaries.

Our functional currency and reporting currency is the United States dollar, the legal currency of the United States of America (the "U.S.") (which we refer to as "USD", "US$" or "$").

ITEM 1. BUSINESS

ZeroStack Corp. (formerly Flora Growth Corp.) was incorporated as Flora Growth Corp. on March 13, 2019, under the laws of the Province of Ontario. On January 29, 2026, the Company changed its corporate name from "Flora Growth Corp." to "ZeroStack Corp." and changed its Nasdaq ticker from "FLGC" to "ZSTK". We are a ~~multi~~decentralized AI treasury and AI-~~national~~focused ~~cannabis~~asset management company that ~~manufactures~~is ~~and~~investing ~~distributes~~in ~~consumer~~the ~~packaged~~future ~~goods~~of ~~and~~AI. ~~distributes~~Our ~~medicinal~~first ~~cannabis~~AI-oriented ~~and~~project is through strategic ownership in 0G Tokens (as defined below). The Company is a global pharmaceutical ~~products~~distributor through its wholly owned subsidiary Phatebo GmbH ("Phatebo").

On August 4, 2025, the Company effected a 1-for-39 share consolidation of the Company's issued and outstanding Common Shares, by filing Articles of Amendment to the Company's amended and restated Articles of Incorporation with the Ontario Ministry of Public and Business Service Delivery and Procurement (the "Share Consolidation"). All share-related information presented in this section gives effect to the Share Consolidation.

Mission

~~Flora~~ZeroStack's mission is to ~~create~~become aone of the leading Nasdaq ~~small~~-~~cap~~listed, ~~international cannabis company. Flora develops products that not only elevate the cannabis experience but set new standards in wellness~~AI-focused, ~~through~~asset ~~advancing~~management ~~technology and sustainable practices to deliver unparalleled quality and results~~companies.

Development Overview

In May 2021, the Company completed its initial public offering ("IPO") of its Common Shares and commenced trading on the Nasdaq Capital Market ("Nasdaq") under the ticker symbol "FLGC." Prior to our IPO, the Company engaged in a series of transactions in Colombia which laid the foundation for our growth and development. These transactions included the acquisition of our previously owned interests in Flora ~~Labs~~Growth 1Corp Colombia S.A.S, 2Flora ~~and~~Lab 4S.A.S., Flora Med S.A.S, our previously owned Cosechemos Ya S.A.S. ("Cosechemos") cultivation and processing facility and a number of brands.

Since our IPO, ~~Flora~~ZeroStack has acquired 100% of the outstanding equity interests in each of:

•Franchise ~~Phatebo~~Global ~~GmbH~~Health ("Phatebo") is a multi-national operator in the pharmaceutical and medical cannabis industries, with principal operations in Germany; • Just Brands LLC ("Just Brands") and High Roller Private Label LLC ("High Roller") based in Fort Lauderdale, Florida. Just Brands is a leading distributor and retailer of cannabidiol ("CBD") derived products through its widely recognized "JustCBD" brand. High Roller manufactures several of the leading products sold by Just Brands; • Vessel Brand Inc. ("~~Vessel~~FGH"), awho ~~developer~~together ~~and~~with ~~retailer of high-end cannabis consumer technologies and accessories operating under~~ its ~~flagship~~principal ~~brand "Vessel". • TruHC Pharma GmbH ("TruHC") is an early-stage cannabis company based in Hamburg~~subsidiary, ~~Germany~~Phatebo, ~~that~~is ~~holds wholesale, processing and production licenses for medical cannabis as well as~~ a ~~facility offering flexible production space with European Union Good Manufacturing Practice ("EU~~multi-~~GMP")~~national ~~certified~~operator ~~modules; and • Australian Vaporizers Pty LTD ("AV") was founded~~ in ~~2010~~the ~~and~~pharmaceutical isdistribution ~~a wholesaler and an online retailer of vaporizers~~industry, ~~hardware,~~with ~~and~~principal ~~accessories~~operations in ~~Australia.~~Germany;
OnJust ~~July~~Brands 5,LLC ~~2023,~~("Just ~~the~~Brands") ~~Company~~and ~~entered~~High ~~into~~Roller aPrivate ~~share~~Label ~~purchase agreement with Lisan Farma Colombia~~ LLC ("~~Lisan~~High Roller") tobased ~~sell all of its ownership interests~~ in ~~Flora~~Fort ~~Growth Corp Colombia S.A.S.~~Lauderdale, ~~Flora Lab S~~Florida.~~A.S.,~~ ~~Flora~~Just ~~Med~~Brands ~~S.A.S.,~~is ~~Cosechemos~~a Yaleading ~~S.A.S.~~distributor ~~("Cosechemos"), Kasa Wholefoods Company S.A.S.~~ and ~~other~~retailer ~~related~~of ~~Flora~~cannabidiol ~~assets~~derived ~~related~~products tothrough its ~~Colombian~~widely ~~operations~~recognized "JustCBD" brand. ToHigh ~~date,~~Roller ~~the~~manufactures ~~sales~~several of ~~all~~the ~~these~~leading ~~Colombian~~products ~~entities~~sold ~~have~~by ~~closed.~~Just Brands;
~~Business~~Vessel ~~Strategy~~Brand Inc. ("Vessel"), a developer and retailer of high-end cannabis consumer technologies and accessories operating under its flagship brand "Vessel".
~~Our~~TruHC ~~business~~Pharma ~~strategy~~GmbH ("TruHC") is ~~built~~an onearly-stage ~~two~~cannabis ~~core~~company ~~pillars: House of Brands and Commercial & Wholesale. This strategy was devised to allow us access to markets around the globe~~ based ~~on the legal standing of cannabis~~ in ~~each~~Hamburg, ofGermany, ~~the~~that ~~geographical~~holds ~~locations~~wholesale, inprocessing ~~which~~and weproduction ~~operate.~~licenses ~~Our~~for ~~approach~~medical ~~has~~cannabis ~~enabled~~as uswell ~~to develop distribution networks, build customer bases, establish operations~~ as ~~the~~a ~~regulatory~~facility ~~framework~~offering ~~evolves~~flexible ~~and~~production ~~allow~~space ~~for~~with ~~expanded~~European ~~access~~Union toGood ~~cannabis~~Manufacturing ~~and~~Practice ~~its~~("EU-GMP") ~~derivatives.~~certified modules;
Australian Vaporizers Pty LTD ("AV") was founded in 2010 and is a wholesaler and an online retailer of vaporizers, hardware, and accessories in Australia; and
United Beverage Distribution Inc. ("United") was founded in South Dakota in 2024 and is a distributor of cannabis-infused drinks.

~~House~~Sale of ~~Brands~~Colombian Entities

~~Our~~On ~~brand~~July ~~portfolio~~5, ~~consists~~2023, ofthe aCompany ~~mix~~entered ofinto ~~products~~a ~~across~~share ~~multiple~~purchase ~~categories~~agreement ~~including~~with ~~food~~Lisan ~~and~~Farma ~~beverage,~~Colombia ~~nutraceuticals,~~LLC ~~cannabis~~to ~~accessories~~sell ~~and~~all ~~technology,~~of ~~personal~~its ~~care~~ownership ~~and~~interests ~~wellness.~~in ~~Consumer brands allow~~ Flora toGrowth ~~move~~Corp ~~assertively~~Colombia ~~into nascent markets~~S.A.S., ~~develop~~Flora ~~customer~~Lab ~~bases~~S.A.S., ~~and~~Flora ~~distribution~~Med ~~channels~~S.A.S., ~~and~~Cosechemos, ~~gather~~Kasa ~~consumer~~Wholefoods ~~insights~~Company ~~which~~S.A.S. ~~would~~and ~~not~~other berelated ~~possible~~ZeroStack ~~with~~assets ~~traditional~~related ~~cannabis~~to ~~sales~~its ~~alone~~Colombian operations. ~~Through~~To ~~this channel we seek to build loyalty~~date, ~~credibility~~the ~~and~~sales ~~enjoy~~of ~~healthy~~all ~~margins~~these ~~that~~Colombian ~~help~~entities tohave ~~support the rapid growth of our business~~closed.

~~JustCBD~~Cryptocurrency Treasury Strategy

~~Just~~In ~~Brands~~early ~~and~~2025 ~~High~~following ~~Roller (together with Just Brands, "JustCBD") are Flora's leading consumer packaged goods brand. JustCBD was launched in 2017 with~~ a ~~mission~~due todiligence ~~bring high-quality~~process, ~~trustworthy,~~we ~~and~~began ~~budget-friendly~~implementing ~~CBD~~an ~~products~~expansion tostrategy ~~market.~~focused ~~JustCBD~~on ~~products~~identifying ~~are available for purchase in smoke~~ and ~~vape~~pursuing ~~shops,~~complementary ~~clinics,~~growth ~~spas~~opportunities ~~and~~within ~~pet~~the ~~stores,~~global asdigital ~~well~~asset ~~as other independent non-traditional retail channels~~market. ~~JustCBD's products are both internally and third-party lab-tested to ensure quality.~~

~~Vessel~~Private Placement

~~Vessel~~On isMay ~~Flora's~~2, ~~cannabis~~2025, ~~accessory~~the ~~and~~Company ~~technology~~entered ~~brand~~into ~~currently~~a ~~servicing~~securities purchase agreement with certain investors (the ~~United~~"May ~~States~~2025 Investors") in connection with the issuance and ~~Canada~~sale ~~through~~by ~~direct-~~the Company to~~-consumer~~ ~~and~~the ~~retail~~May ~~sales.~~2025 ~~Vessel's~~Investors ~~products~~via ~~include~~a ~~cannabis~~private ~~consumption~~placement ~~accessories,~~("the ~~personal~~May ~~storage,~~2025 ~~and~~Private ~~travel~~Placement") ~~accessories~~of ~~for~~an aggregate of 80,340 Common Shares (the ~~vape~~"May ~~and~~2025 ~~dry~~Common ~~herb~~Shares") ~~categories,~~at ~~which~~a ~~are~~purchase ~~sold~~price toof ~~consumers,~~$11.70 ~~dispensaries~~per share and 18,642 ~~smoke~~pre-funded ~~shops~~warrants ~~and~~("Pre-Funded ~~cannabis~~Warrants") ~~brands~~of the Company at a purchase price of $11.6961 ~~Vessel~~per ~~has~~warrant ~~been~~each ~~fully~~to ~~integrated~~purchase ~~into~~one ~~JustCBD~~Common Share, which was immediately exercisable and ~~now~~expire ~~benefits~~when ~~from~~exercised ~~operational~~in full, ~~logistical~~at ~~and~~an ~~sales~~exercise ~~synergies~~price ~~with~~of ~~JustCBD~~$0.0039 per share.

AVThe net proceeds from the sale of the May 2025 Common Shares and Pre-Funded Warrants were approximately $1,100,000 after deducting estimated expenses relating to the May 2025 Private Placement. The Company used $0.4 million of the net proceeds from the May 2025 Private Placement to purchase Solana, $0.4 million of the net proceeds from the May 2025 Private Placement to purchase Ethereum, $0.1 million of the net proceeds from the May 2025 Private Placement to purchase Sui, $0.1 million of the net proceeds from the May 2025 Private Placement to purchase Ripple, and the balance of the net proceeds from the May 2025 Private Placement for general corporate and working capital purposes and to pay any fees and expenses in connection with the issuance of the May 2025 Common Shares and the Pre-Funded Warrants.

~~Australian~~Cash ~~Vaporizers~~Private was founded in 2010 and has become a prominent online retailers of vaporizers, hardware, and accessories in Australia. It is an online expert for aromatherapy products, specializing in dry herb vaporizers. It has been providing vapes, accessories and knowledge to enthusiasts and newcomers alike. Its website www.australianvaporizers.com.au is a popular designation in the country with a large database of satisfied customers.Placement

~~Commercial~~On &September ~~Wholesale~~19, 2025, we entered into a securities purchase agreement (the "Cash Securities Purchase Agreement") with certain investors (the "Cash Investors") in connection with the issuance and sale by us to the Cash Investors via a private placement (the "Cash Private Placement") of an aggregate of 116,340 Common Shares (the "Cash Common Shares") at a purchase price of $25.19 per share and 419,975 pre-funded warrants at a purchase price of $25.1899 per warrant (the "Cash Pre-funded Warrants") each to purchase one Common Share, which shall expire when exercised in full, at an exercise price of $0.0001 per share. Each Cash Common Share and Cash Pre-funded Warrant issued in the Cash Private Placement was bundled with 0.2 of a Common Share purchase warrant (each full warrant, a "Cash Common Warrant"). Each Cash Common Warrant is exercisable for one Common Share for 1,825 calendar days after shareholder approval at an exercise price of $25.19 (each, a "Cash Warrant Share").

~~The~~During ~~Company's~~the ~~Commercial~~year ~~and~~ended ~~Wholesale~~December ~~pillar~~31, ~~encompasses~~2025, ~~the~~an ~~distribution~~aggregate of ~~pharmaceutical~~116,340 ~~products~~Cash toCommon ~~international markets. This pillar is anchored by Flora's wholly owned subsidiary~~Shares, ~~Phatebo~~419,975 aCash ~~multi~~Pre-~~national~~funded ~~operator~~Warrants ~~in pharmaceutical~~ and ~~medical cannabis distribution~~107,252 ~~with~~Cash ~~principal~~Common ~~operations~~Warrants inwere ~~Germany~~issued.

~~Phatebo~~The net proceeds from the sale of the Cash Common Shares and Cash Pre-funded Warrants were approximately $13,500,000 after deducting estimated expenses relating to the Cash Private Placement. The Company used the net proceeds of the sale of the Cash Common Shares and Cash Pre-funded Warrants to further the Company's new digital asset treasury strategy linked to 0G, and to explore and expand the use of the native AI functionality of the 0G Token to enhance the business of the Company and the balance of the net proceeds will be used for general corporate and working capital purposes.

Based in Germany, Phatebo is a wholesale pharmaceutical distribution company with import and export capabilities of a wide range of pharmaceutical goods and medical cannabis products to treat a variety of health indications, including drugs related to cancer therapies, attention-deficit/hyperactivity disorder ("ADHD"), multiple sclerosis and anti-depressants, among others. Phatebo holds a license for the Trade in Narcotic Drugs (including the cannabis sales license amendment) and a wholesale trading license, both of which are issued by the Federal Institute for Drugs and Medical Devices (the "BfArM") (the largest drug approval authority in Europe). In November 2018, Phatebo also received a medical cannabis import and distribution license. Additionally, the Phatebo warehouse provides a logistics outpost for Flora's growing product portfolio and distribution network within the European Union.

TruHC

Based in Hamburg, Germany, TruHC holds a GDP wholesale, and an EU-GMP processing and production license for medical cannabis. It also owns and operates an EU-GMP certified laboratory ready for instant cannabis analysis as required for the new Cannabis Social Clubs. The facility of TruHC is a flexible production space with EU-GMP certified modules that can be extended and customized for any production process from processing to extraction. TruHC also holds a narcotic license with EU-GMP certified storage.

~~Our~~Token ~~Competitive~~Private ~~Strengths~~ Placement

~~Due~~On toSeptember ~~the~~19, ~~competitive~~2025, ~~and~~we ~~dynamic~~entered ~~nature~~into ofa securities purchase agreement with certain investors (the ~~emerging~~"Token ~~cannabis~~Investors") ~~products~~in ~~market~~connection with the issuance and ~~rapid~~sale ~~changes~~by inus to the ~~regulatory~~Token ~~environment,~~Investors ~~Flora~~via ~~does~~a ~~recognize~~private placement (the ~~need~~"Token toPrivate ~~remain~~Placement") ~~flexible,~~of soan weaggregate ~~can~~of ~~react~~8,546,955 topre-funded ~~opportunities~~warrants ~~and~~at ~~risks~~a aspurchase ~~they~~price ~~develop~~of $25.1899 ~~Management~~per ~~will~~warrant ~~continue~~(the to"Token rePre-~~evaluate~~funded ~~and~~Warrants") ~~re-prioritize~~each ~~strategies~~ to ~~respond~~purchase toone ~~these~~Common ~~developments.~~Share, Wewhich are ~~actively~~exercisable ~~fostering~~and aexpire ~~culture~~when exercised in full, at an exercise price of ~~continued~~$0.0001 ~~agility~~per ~~and~~share. ~~exploration~~The ~~since~~purchase price of each Token Pre-funded Warrant shall be paid in the ~~ability~~form toof ~~pivot~~Tokens. ~~depending~~The oninitial ~~market~~closing ~~dynamics~~of ~~can~~the ~~result~~Token inPrivate aPlacement ~~competitive~~occurred ~~advantage~~on September 26, 2025.

AIn ~~diversified~~connection with the Token Private Placement, we received 71,766,135 Tokens. We intend to use the Tokens received as consideration for the sale of the Token Pre-funded Warrants to further our new digital asset treasury strategy linked to the Tokens, and to explore and expand the use of the native AI functionality of the Token to enhance our business and the balance of the net proceeds will be used for general corporate and working capital purposes.

WeNote ~~believe~~Private that our growth strategy is our main competitive advantage. By creating our two-pillar approach that addresses the bell curve of the future cannabis industry; consumer packaged goods, commercial cannabis supply chain experience, and cannabis prescription medication, Flora creates a moat, playing brand, vendor, and distributor of a broad collection of cannabis products, owned and brokered, suitable for markets around the world.Placement

~~Supply~~On ~~chain~~September ~~experience~~19, 2025, we entered into a securities purchase agreement with DeFi Development Corp, a Delaware corporation (the "Note Investor") in connection with the issuance by us to the Note Investor via a private placement (the "Note Private Placement") of an unsecured convertible note in an aggregate original principal amount of 95,333 Solana (the "Note").

~~Flora~~The isNote ~~continually~~accrues ~~developing~~interest ~~the~~payable ~~ability~~in Solana at a rate of eight percent (8.0%) per annum, payable quarterly in arrears on March 31, June 30, September 30 and ~~expertise~~December 31, beginning September 30, 2025. At the option of the Company, with respect to ~~move~~any ~~cannabis~~interest ~~across~~payment date through and including September 30, 2026, accrued interest for the ~~global~~applicable ~~supply~~period ~~chain~~can be payable in-kind ~~multiple~~by ~~business~~capitalizing ~~categories~~and adding such accrued interest to the outstanding Solana principal amount. The ~~cannabis~~Note ~~supply~~and ~~chain~~accrued isand ~~complex~~unpaid ~~and~~interest ~~has~~are ~~high~~convertible ~~barriers~~into the Note Shares at a conversion ratio of ~~entry~~the U.S. ~~Our~~Dollar ~~team~~Value ~~has~~(as ~~been~~defined ~~able~~in tothe ~~develop~~Note) aof ~~strong~~Solana ~~understanding~~divided by $33.34. The Note matures in five years from issuance, but the holder can demand full prepayment during two 60-day windows after the 1st and 2nd anniversaries of ~~distribution~~issuance. ~~across~~The Solana is locked under the ~~globe~~Note and will unlock equally each month in November 2025 through January 2028. Once unlocked, it can be sold.

~~Regulatory~~On ~~expertise~~October 24, 2025, in connection with the Note Private Placement, the Company received 95,333 Solana.

~~Flora~~On ~~has~~December 29, 2025, we entered into a note settlement agreement (the ~~necessary~~"Note ~~regulatory~~Settlement ~~requirements~~Agreement") with the Note Investor pursuant to ~~fulfill~~which ~~needs~~the ~~across~~Note was settled. The Note Settlement Agreement provides that upon payment by us to the ~~global~~Note ~~supply~~Investor ~~chain~~on Dece,ber 30, 2025 of: (i) 96,162 Solana, (ii) $1,750,000 in cash and (iii) 111,550 Common Shares, with a value of $6.33 ~~Some~~per share, then the Company shall be deemed to have paid the entire Principal (as defined in the Note) and Interest (as defined in the Note) of ~~these~~the ~~requirements~~Note ~~take~~in ~~several~~full, ~~years~~the Company shall have no further obligations under the Note and the Note shall be deemed to ~~acquire~~be satisfied. This payment was made on December 30, 2025.

~~Experienced~~Zero ~~management~~Gravity ~~team~~Private Placement

~~With~~On aSeptember ~~management team with diverse backgrounds that include public company management~~19, ~~early-stage cannabis~~2025, ~~big~~we ~~box~~entered ~~and~~into ~~mainstream~~a ~~retail,~~loan ~~consumer~~agreement ~~packaged goods and technology services, Flora believes~~ (the ~~right~~"Loan ~~talent~~Agreement") ~~has~~between ~~been~~us ~~assembled~~and toZero ~~take~~Gravity ~~advantage~~Labs ~~of the opportunities presented in the cannabis industry~~Inc. ~~Management~~("Zero ~~expects~~Gravity"), ~~that~~pursuant ~~its~~to ~~experience~~which ~~and~~we ~~strong~~agreed ~~understanding~~to ofborrow ~~regulatory frameworks~~50,000,000 ~~the~~Tokens ~~agricultural~~from ~~and~~Zero ~~scientific~~Gravity ~~processes~~and ~~necessary~~agreed to ~~develop~~issue ~~high~~to ~~quality~~Zero ~~and~~Gravity ~~consistent medicinal cannabis products~~1,786,423 asCommon ~~well~~Share aspurchase warrants (the ~~knowledge~~"Loan ~~and~~Agreement ~~expertise~~Warrants") ineach go to ~~market~~purchase ~~strategy~~one ~~for~~Common ~~its~~Share ~~portfolio~~at ofan ~~brands,~~exercise ~~will~~price ~~continue~~of to$0.01 ~~set~~per ~~the Company up for success~~share.

~~Growth~~On ~~Tactics~~September 22, 2025, we entered into a convertible note with Zero Gravity (the "Zero Gravity Convertible Note") that will replace the Loan Agreement and Loan Agreement Warrants, subject to closing.

Flora's goal is to become a consumer products market leader in distribution of natural, medicinal-grade cannabis and high-quality cannabis derived medical and wellness products for large channel distributors, including pharmacies, medical clinics, and cosmetic companies, continuing to explore strategic partnerships and pursuing accretive acquisitions to supplement our organic growth.

M&A

Acquisition of businesses both domestically and internationally has played a critical role in the growth of the Company. We continue to seek out M&A targets that are accretive in nature and which provide access to previously untapped capabilities within Flora. Essential to this strategy and the evaluation process will be geography, cash flow, positive earnings, management and human capital.

~~Sales~~Closing ~~and~~of ~~Marketing~~the Zero Gravity Convertible Note occurred on October 23, 2025, at which date the 50,000,000 0G Tokens were received. The Company intends to use the Tokens from the issuance of the Zero Gravity Convertible Note to further the Company’s new digital asset treasury strategy.

~~Across~~The ~~our~~Zero ~~various~~Gravity ~~pillars~~Convertible Note accrues interest payable in 0G Tokens, weor ~~sell~~in ~~products~~cash ~~through~~at ~~three~~$3.00 ~~main~~per ~~channels:~~Token ~~direct-to-consumer~~at the holders option, ~~wholesale~~at a rate of eight percent (8.0%) per annum, payable quarterly in arrears on March 31, June 30, September 30 and ~~retail~~December 31, beginning September 30, 2025 (each such date, an “Interest Payment Date”). ~~Within~~At ~~JustCBD~~the option of the Company, with respect to any Interest Payment Date through and ~~Phatebo~~including September 30, ~~sales~~2026, ~~are~~accrued ~~primarily~~interest ~~focused~~for onthe ~~direct~~applicable period can be payable in-kind by capitalizing and adding such accrued interest to~~-consumer~~ ~~sales~~the ~~through~~outstanding ~~brand~~Token ~~websites~~principal amount. Shareholder approval of the issuance of the Common Shares underlying the Zero Gravity Convertible Note was obtained at the Shareholder Meeting, which occurred on December 19, 2025, and ~~wholesale~~the ~~retail~~Zero ~~partners~~Gravity Convertible Note and ~~are~~accrued ~~concentrated~~and unpaid interest became convertible into common shares (the "Zero Gravity Note Shares") at a conversion ratio of the U.S. Dollar Value (as defined in the ~~United~~Zero ~~States~~Gravity ~~and~~Convertible ~~Europe~~Note) of Tokens divided by $33.34, ~~Our~~subject ~~international~~to ~~sales~~updates ~~are~~in ~~conducted~~accordance ~~primarily~~with ~~through~~the ~~distribution~~terms ~~partners~~of ~~who~~the ~~sell~~Zero Gravity Convertible Note. This conversion is also limited to ~~third~~a ~~party~~4.99% ~~retailers~~maximum ownership percentage of the number of Common Shares outstanding immediately after giving effect of such issuance.

~~Distribution~~The Executive Chairman of the Company's board of directors ("Executive Chairman"), Michael Heinrich, is the Chief Executive Officer of Zero Gravity.

~~United~~The ~~States~~Company used the net proceeds from the Cryptocurrency Offering to further the Company's new digital asset treasury strategy linked to 0G Tokens, and to explore and expand the use of the native AI functionality of the 0G Token to enhance the business of the Company and the balance of the net proceeds will be used for general corporate and working capital purposes.

~~Distribution~~In ~~activities~~connection inwith the ~~United~~Cryptocurrency ~~States~~Offering, ~~are~~on ~~primarily~~October ~~run~~1, ~~from~~2025, ~~our~~Mr. ~~Fort~~Clifford ~~Lauderdale~~Starke resigned as a director and the Chief Executive Officer of the Company (but remained a consultant to the Company) and Mr. Sammy Dorf resigned as the Executive Chairman. On October 1, ~~Florida~~2025, ~~office~~the Company's board of directors (the "Board") appointed Mr. ~~Distribution~~Daniel ~~activities~~Reis-Faria ~~include~~and ~~storage~~Michael Heinrich as non-independent directors of the Board, ~~direct~~and in connection with their appointments to ~~consumer~~the ~~fulfillment~~Board, asMr. ~~well~~Reis-Faria, was also appointed as ~~wholesale~~the ~~direct~~Chief Executive Officer of the Company and ~~third-party~~Mr. ~~distributor~~Heinrich ~~shipments~~was also appointed as Executive Chairman effective October 1, 2025.

~~Germany~~On December 19, ~~United~~2025, ~~Kingdom~~we &entered ~~Europe~~into a Separation Agreement and General Release of Claims with Clifford Starke, the former Chief Executive Officer of the Company and consultant, pursuant to which the parties agree that Mr. Starke's employment was terminated effective December 19, 2025 and that the parties settled all claims Mr. Starke has or might have against the Company.

~~Flora~~On ~~has~~December ~~operations~~29, in2025, ~~Germany where~~ we ~~are~~entered aninto ~~importer,~~the ~~exporter~~Note ~~and~~Settlement ~~distributor~~Agreement ofwith ~~prescription~~the ~~drugs~~Note ~~and~~Investor ~~EU-GMP~~pursuant ~~(as~~to ~~defined~~which ~~below)~~the ~~medical~~Note ~~cannabis~~was settled. ~~Through~~The ~~leveraging~~Note ~~Flora's~~Settlement ~~facilities~~Agreement ~~and~~provided ~~existing~~that ~~infrastructure~~upon ~~and~~payment ~~extensive~~by ~~distribution~~us ~~network~~to the Note Investor on December 30, we2025 ~~expect~~of: to(i) be96,162 ~~able~~Solana, to(ii) ~~source~~$1,750,000 ~~store~~in cash and ~~distribute~~(iii) 111,550 Common Shares, with a ~~range~~value of ~~medical~~$6.33 ~~cannabis~~per ~~products~~share, ~~which~~then ~~will~~the ~~help~~Company ~~support~~was usdeemed ~~meet~~to have paid the ~~growing~~entire ~~demand~~Principal ~~for~~(as ~~medical~~defined ~~cannabis~~in ~~throughout~~the ~~Europe.~~Note) Weand ~~operate~~Interest a(as ~~distribution~~defined ~~facility~~in the Note) of the Note in ~~Hilzingen~~full, ~~Baden-Wurttemberg,~~the ~~Germany~~Company had no further obligations under the Note and the Note was deemed to be satisfied.

~~Flora~~On ~~operates~~January a6, ~~small~~2026, ~~sales~~the ~~office~~Board inunanimously ~~London,~~approved ~~England,~~by ~~which~~written ~~serves~~consent the appointment of Mr. Laurence Zeifman as a ~~homebase~~director ~~for~~of ~~all~~the ~~activities~~Company, ~~being~~as ~~conducted~~a inmember ~~Europe.~~(and ~~From~~Chair) ~~this~~of ~~office~~the audit committee of the Board (the "Audit Committee"), ~~Flora~~as ~~can~~a ~~support~~member of the ~~European~~compensation ~~distribution~~committee of the Board (the "Compensation Committee"), and ~~wholesale~~as ~~business~~a ~~for~~member ~~its~~of ~~products~~the nominating and corporate governance committee of the Board (the "Nominating and Corporate Governance Committee").

The Global Cannabis Industry

Revenue in the cannabis market worldwide is forecasted to reach $68 billion in 20251. The global legal cannabis market is growing at approximately a 2.3% compounded annual growth rate ("CAGR") and projected to reach approximately $75 billion by 2029 globally1.

United States

As Flora is listed on Nasdaq, we operate exclusively today in CBD-based or ancillary/accessory businesses in the U.S. market given the U.S. federal prohibition on cannabis products containing tetrahydrocannabinol ("THC"). This includes importing cosmetic and beauty products, accessory and non-cannabinoid products and CBD products. The North America hemp-derived cannabidiol market size was valued at USD 1.5 billion in 2024. It is expected to expand at a CAGR of 13.5% from 2025 to 20302. Hemp-derived CBD and its derivatives remain legal at the federal level under the Agriculture Improvement Act of 2018 (the "2018 Farm Bill").

Europe

The European cannabis landscape continues to advance largely with Germany, Malta, Switzerland, Poland and the United Kingdom being the furthest ahead by means of establishing a legal cannabis framework.

Prohibition Partners, a leading market intelligence firm on the global cannabis industry, estimated that the European cannabis market is expected to grow at a CAGR of 61.1% to reach $13 billion by 2028. Products like CBD edibles continue to be governed by the EU Novel Food Act and as a result provide near term upside for the Company.

In 2022, Germany, the largest cannabis market in the European Union, announced it would begin the process of moving towards recreational adult-use cannabis in the country in addition to continuing to expand its existing medical cannabis program. The Germany legal cannabis market size is expected to grow at a CAGR of approximately 15% between 2024 and 2030, resulting in a market volume of $85.6 million by 20303.

InSale ~~February 2024, the Budestag, Germany's lower house~~ of ~~parliament,~~Legacy ~~voted~~Hemp ~~to legalize cannabis for limited recreational use. Under the new legislation, adults over the age of 18 can cultivate up to three plants for private consumption~~ and ~~are~~Cannabis allowed to possess 50 grams at one time at home, and 25 grams in public, starting from April 1, 2024. Under the new legislation, from July 1, 2024, cannabis would also be available in licensed not-for-profit clubs with no more than 500 members, all of whom would have to be adults, and only club members would be allowed to consume their output. The legislation was ratified by the Bundesrat, Germany's upper parliamentary chamber, and signed by the President of Germany in March 2024, allowing its implementation on April 1, 2024.Business

~~_______________________~~On September 20, 2025, we entered into an Equity Transfer and Debt Repayment Agreement (the "Cannabis Sale Agreement") by and among the Company, Flora Growth US Holdings Corp., a Delaware Company and wholly-owned subsidiary of the Company ("US Holdings," and together with the Company, "Transferor"), Flora Growth US Holdings LLC, a Florida limited liability company ("Lender"), and each of the noteholders of Company set forth on the signatures pages of the Cannabis Sale Agreement under the heading "Noteholders" (each, a "Noteholder," and collectively, the "Noteholders").

1Under ~~Statista:~~the terms of the Cannabis Sale Agreement, the Transferor has agreed to transfer to the Lender, and the Lender has agreed to accept from the Transferor as satisfaction in full of its balance receivable under the promissory notes issued by the Company to such Noteholders on January 30, 2025 (the "Equity Transfer Notes"), 100% of the issued and outstanding equity interests of the following direct and indirect wholly-owned ~~Woldwide~~subsidiaries, |which ~~Statista~~collectively ~~Market~~comprise ~~Forecast~~the Company's legacy hemp and cannabis business: (i) AV, an Australian limited company; (ii) Vessel Brand Canada Inc., a Canadian corporation; (iii) Klokken Aarhus Inc., a Canadian corporation; (iv) Rangers Pharmaceuticals A/S, a Danish stock-based ~~Highlights~~corporation; (v) TruHC, a German limited company; (vi) Vessel, a Delaware corporation; (vii) High Roller, a Florida limited liability company; (viii) Just Brands; a Florida limited liability company; (ix) Just Brands FL LLC, a Florida limited liability company; (x) Just Brands International LTD, a United Kingdom limited company; and (xi) United, a South Dakota corporation (collectively, the "Transferred Interests").

2Under ~~Grand~~the ~~View~~terms ~~Research~~of -the ~~North~~Cannabis ~~America~~Sale ~~Hemp-derived~~Agreement, ~~Cannabidiol~~prior ~~Market~~to ~~Size~~the ~~Report~~transfer of the Transferred Interests, the Noteholders have agreed to contribute the Equity Transfer Notes to the Lender in exchange for membership interests in the Lender, with such membership interests to be issued to the Noteholders pro rata in accordance with their respective share of the outstanding balance under the Equity Transfer Notes.

3The ~~Yahoo~~closing ~~Finance~~of -the ~~Germany~~transfer ~~Legal~~of ~~Cannabis~~the ~~Market~~Transferred ~~Analysis~~Interests, ~~2024-2023~~and bythe ~~Source~~contemporaneous repayment of the outstanding balance of the Equity Transfer Notes, occurred on September 26, 2025.

~~Pharmaceutical~~Business ~~Market and Health Sector~~Strategy

~~Europe~~Our ~~has~~business astrategy ~~strong~~is ~~pharmaceutical~~built ~~history~~on ~~and~~two acore ~~thriving~~pillars: ~~industry~~Digital ~~with~~Assets ~~concentration~~and ofAI ~~pharmaceutical companies in the German-Switzerland border area. The industry has a projected CAGR of 6.2% between 2023~~ and ~~2027~~Commercial ~~resulting~~& ~~in total sales of $335 billion by 20274~~Wholesale. ~~In the European Union, Germany was the leading pharmaceutical market with a total revenue of $69 million in 20235.~~

~~Cannabidiol~~Digital ~~(CBD)~~Assets ~~Market~~and AI

~~CBD~~As isdescribed aabove, ~~non-psychoactive~~in ~~compound~~early ~~found~~2025 ~~naturally~~following ~~occurring within the cannabis plant with the majority of CBD consumed being derived from the hemp plant. The global CBD market is projected to reach $47.3 billion by 2028 at~~ a ~~CAGR~~due ofdiligence ~~21.3%~~process, ~~with~~we ~~the~~began ~~U.S.~~implementing ~~market alone making up~~ an ~~estimated~~expansion ~~$4.1~~strategy ~~billion~~focused inon ~~product~~identifying ~~sales~~and inpursuing ~~20226.~~complementary ~~The CBD market in the United States has seen steady~~ growth ~~with~~opportunities anwithin ~~inflection point occurring with~~ the ~~passage~~global ofdigital ~~the~~asset ~~2018 Farm Bill, clearing the way for CBD and other compounds derived from the hemp plant~~market. The majority of CBD consumers site seeking relief from pain, anxiety, and sleep issues as their primary reason for use. In the United States, CBD is readily found in brick-and-mortar stores as well as online. However, advertising remains difficult due to its association with its psychoactive cousin, THC, and the early proliferation of bad-actors making effects-based claims that were not backed by science to bolster sales.

~~Ancillary/Accessories~~Overview

The ~~ancillary~~treasury orsegment ~~accessory~~executes ~~category~~and ~~continues~~manages tothe ~~grow~~Company's astreasury wepolicy ~~see~~with the ~~expansion~~purpose of ~~legal~~purchasing, ~~access~~holding ~~to cannabis around the globe. The accessory space is broad~~ and ~~spans~~compounding ~~smoking~~our ~~accessories~~digital asasset ~~well~~holdings asthrough ~~ash~~revenue-accretive ~~trays~~staking ~~and storage pieces~~activities. ~~Looking ahead, the global accessory market will reach $96 billion by 2031, representing a CAGR of 4.3%7.~~

~~________________________~~The objective for our digital asset treasury strategy in the near-term is to accumulate 0G for the purpose of increasing our treasury holdings and increasing shareholder value. We intend to hold 0G for the long-term and expect to continue to accumulate 0G. As of December 31, 2025, our digital asset holdings consisted of 0G and Bitcoin.

4Our ~~Statista~~Treasury ~~- Pharmaceutical Industry in Europe - Statistics & Facts~~Strategy

5We ~~Statista~~have adopted a treasury strategy under which the principal holding in our treasury reserve on the balance sheet will be allocated to cryptocurrency, and specifically a long-term ~~Revenue~~strategy of ~~leading~~holding ~~pharmaceutical~~0G ~~markets~~and/or other blockchain-linked cryptocurrencies. Additionally, we intend to monitor ongoing developments in ~~Europe6~~the ~~Vantage~~regulatory ~~Market~~environment ~~Research~~around -cryptocurrencies, ~~Cannabidiol~~including ~~(CBD)~~pending ~~Market~~federal ~~Size~~legislation, ~~Share~~and &may ~~Trends~~modify ~~Analysis~~or ~~Report7~~expand ~~Business~~our ~~Wire~~treasury strategy to the extent we determine compliant with federal rules and regulations and not giving rise to a requirement that the Company register as an investment company under the Investment Company Act. Although we believe that 0G and the blockchain-linked ~~Smoking~~cryptocurrencies ~~Accessories~~in ~~Research~~which we have invested or may invest are based on proven blockchain technology and supported by established infrastructure pertaining to custody and transacting in such cryptocurrencies, our cryptocurrency treasury strategy will be subject to the risks described in the section of this Annual Report ~~2024~~titled "Item 1A. Risk Factors" under the heading "Risks Related to Artificial Intelligence and Investing in Cryptocurrency" pertaining to custody and transacting in such cryptocurrencies.

Regulatory

Flora has obtained the licenses to operate on a global scale including required governmental approvals, licenses and permits. A summary of such governmental approvals, licenses and permits are set forth below.

~~Regulation~~Our ofDecision ~~our~~to ~~Industry~~Adopt a Cryptocurrency Strategy

~~Regulatory~~Our ~~Framework~~Board and senior management have been examining potential uses of cash, including acquisitions of cryptocurrency. After studying various alternatives, we decided that investing in cryptocurrency is currently a better business strategy. Cryptocurrency, which are digital assets that are issued by and transmitted through an open source protocol, collectively maintained by a peer-to-peer network of decentralized user nodes, will be our principal treasury holding on an ongoing basis, subject to market conditions and our anticipated cash needs. Specifically, we expect that a significant amount of the ~~United~~holdings ~~States~~in our treasury reserve will consist of 0G and/or other cryptocurrencies that are intrinsically linked to a blockchain system, and the value of which is derived from or is reasonably expected to be derived from the use of the blockchain system. As we embark on our new acquisition strategy, our Board intends to proactively evaluate our use of cash, ensuring we maintain adequate working capital.

~~Packaging~~Other than acquiring cryptocurrency with our liquid assets that exceed working capital requirements, ~~Labeling~~our cryptocurrency treasury strategy may also involve issuing debt or equity securities or engaging in other capital raising transactions with the objective of using a significant portion of the proceeds to purchase cryptocurrency from time to time, subject to market conditions. We view cryptocurrency potentially as a core holding and ~~Advertising~~expect to accumulate cryptocurrency following this offering. We have not set any specific target for the amount of cryptocurrency we seek to hold, although under the treasury strategy we intend to adopt we will maintain a significant amount of our holdings in 0G and/or other blockchain-linked cryptocurrencies. We will continue to monitor market conditions in determining whether to engage in financings to purchase additional cryptocurrency. This overall strategy also contemplates that we may (i) periodically sell cryptocurrency for general corporate purposes, including to generate cash for treasury management (which may include debt repayment or the repurchase of our securities, if appropriate at such time), for acquisitions, or for strategies that generate tax benefits in accordance with applicable law, (ii) enter into additional capital raising transactions that are collateralized by our cryptocurrency holdings, and (iii) pursue strategies to create income streams or otherwise generate funds using our cryptocurrency holdings. While we intend to refine and formally adopt a treasury strategy as soon as practicable, at this time, we do not have a specific policy governing the percentage of our treasury holdings that will be any particular cryptocurrency.

The processing, formulation, manufacturing, packaging, labeling, advertising and distribution of our products are subject to federal laws and regulation by one or more federal agencies, including the United States Food and Drug Administration (the "FDA"), Federal Trade Commission, United States Department of Health and Human Services, the United States Department of Agriculture ("USDA"), and the United States Environmental Protection Agency. These activities are also regulated by various state, local and international laws and agencies of the states and localities in which our products are sold. Regulations may prevent or delay the introduction, or require the reformulation of our products, which could result in lost sales and increased costs to the Company. A regulatory agency may not accept the evidence of safety for any new ingredients that we may want to market or may determine that a particular product or product ingredient presents an unacceptable health risk. Regulatory agencies may also determine that a particular statement of nutritional support on our products, or a statement that we want to use on our products, is an unacceptable drug claim or an unauthorized version of a food "health claim", or that particular claims are not adequately supported by available scientific evidence. Any such regulatory determination could prevent us from marketing particular products or using certain statements on those products, which could adversely affect our sales and results of operations.Custody

~~Developments~~Our incryptocurrency ~~the~~will ~~laws~~be ~~and~~held ~~regulations~~offline ~~governing our products may result~~ in acold ~~more~~storage ~~stringent~~with ~~regulatory~~one ~~landscape, which could require reformulation of certain products to meet new standards, recalls~~ or ~~discontinuance~~more ~~of certain products that we are unable to reformulate, additional record~~third-~~keeping~~party ~~requirements,~~qualified ~~increased documentation of the properties of certain products, additional or different labeling requirements, additional scientific substantiation requirements, and other requirements or restrictions~~custodians. ~~Such~~Digital ~~developments~~assets ~~could~~like ~~increase~~cryptocurrency ~~our~~depend ~~costs significantly, which could have a material adverse effect~~ on ~~our~~private ~~business,~~keys ~~financial~~to ~~condition~~retrieve and ~~results~~transfer ~~of operations~~funds.

OnWe ~~October~~plan ~~31,~~to ~~2023,~~hold ~~the~~our ~~Florida~~cryptocurrency ~~Department~~in ofcustody ~~Agriculture~~accounts ~~and~~at ~~Consumer~~either ~~Services~~a ~~Division~~U.S.-based, ofinstitutional-grade ~~Food~~custodian ~~Safety~~that ~~(the~~has ~~"Department")~~demonstrated ~~issued~~a ~~340~~record ~~stop~~of ~~sale~~regulatory ~~orders~~compliance onand ~~hemp-extract~~information ~~products~~security ~~distributed~~or byoffshore ~~Just~~third-party ~~Brands~~managed ~~primarily~~custody onaccounts, which the ~~basis~~Company ~~that~~will ~~such~~control. ~~products~~As ~~were~~we ~~determined~~further toexecute beon ~~attractive~~our tostrategy, ~~children~~we ~~with~~may ~~the~~expand ~~product~~our ~~and/or~~holdings ~~labels~~to inmultiple similar custodians. However, as of the ~~shape~~date of anthis ~~animal,~~Annual ~~human~~Report, orwe ~~cartoon;~~have orentered ~~bears~~into ~~any~~custodian ~~reasonable~~agreements ~~resemblance~~with toBitGo, anInc. ~~existing~~In ~~candy~~the ~~product,~~event orthat ~~branded~~we ~~food~~are ~~product~~not ~~(the~~able ~~"Just~~to ~~Brands~~maintain ~~2023~~such ~~Stop-Sale~~a ~~Order").~~custodial Asarrangement aprior ~~result,~~to ~~Just~~or ~~Brands~~shortly ~~stopped~~following ~~distributing~~the ~~these~~consummation ~~products~~of inthe offering, the ~~State~~development and implementation of ~~Florida.~~our ~~There~~treasury isstrategy nowould ~~assurance~~be ~~that~~interrupted, ~~these~~which ~~products~~could ~~can~~cause bea ~~sold~~material inadverse ~~another~~effect ~~jurisdiction~~on our business, orprospects, atand ~~all~~market price of our Common Shares.

In late January 2024, and in early February 2024, the Department issued a stop sale order on 231 hemp extract and other products distributed by Just Brands primarily on the basis that such products were determined to be attractive to children with the product and/or labels in the shape of an animal, human, or cartoon; or bears any reasonable resemblance to an existing candy product, or branded food product (the "Just Brands 2024 Stop-Sale Order"). On May 7, 2024, the Department and Just Brands entered into a Settlement Agreement and General Release ("May Settlement Agreement"), whereby Just Brands agreed to remove the hemp-extract products that are subject to the Just Brands 2023 Stop-Sale Order and the Just Brands 2024 Stop-Sale Order from the State of Florida by transferring them to out-of-state facilities, no later than 30 days after the date of the May Settlement Agreement. Just Brands also agreed to accept a (5) year revocation of its food permit, effectively immediately, prohibiting it from owning, operating, or creating a new business entity that owns or operates any food establishment in the state of Florida that requires a permit or license from the Department. The May Settlement Agreement is a full and complete settlement of the claims raised in the administrative and legal proceedings relating to this matter. There is no assurance that these products can be sold in another jurisdiction, or at all.Competition

OnOur ~~April~~digital 2,asset ~~2024,~~treasury ~~the~~strategy ~~Department~~segment ~~issued~~operates in a ~~stop~~highly ~~sale~~competitive ~~order~~and ~~on certain hemp~~ever-~~extract~~changing ~~and~~cryptoeconomy ~~other products distributed by High Roller primarily on the basis that such products were determined to be attractive to children with the product~~ and~~/or~~ ~~labels~~faces insignificant ~~the shape of an animal~~competition, ~~human,~~ranging orfrom ~~cartoon;~~larger ordigital ~~bears~~asset ~~any~~treasury ~~reasonable resemblance to an existing candy product~~companies, ordigital ~~branded~~asset ~~food~~trading ~~product (the "April 2024 Stop Sale Order"). On June 27~~platforms, ~~2024, the Department~~ and ~~High~~validator ~~Roller~~peers. ~~entered~~The ~~into~~cryptoeconomy ais ~~Settlement~~continuously ~~Agreement~~expanding, and ~~General~~we ~~Release~~expect ~~("June Settlement Agreement"), whereby High Roller agreed~~ to ~~remove~~face ~~the~~competition ~~hemp-extract products that are subject to the April 2024 Stop Sale Order~~ from ~~the~~new ~~State~~entrants of Florida by transferring them to out-of-state facilities, no later than 30 days after the date of the June Settlement Agreement. High Roller also agreed that it will not manufacture, distribute, or sell any "gummy" hemp extract products in the ~~State~~future ofas ~~Florida for a period of two years from~~ the ~~date~~adoption of ~~the~~digital ~~June~~assets ~~Settlement~~continues ~~Agreement. During this period, High Roller may continue~~ to ~~produce, distribute and/or sell other hemp extract product in Florida provided the products comply with applicable Florida laws~~grow. The June Settlement Agreement is a full and complete settlement of the claims raised in the administrative and legal proceedings relating to this matter. There is no assurance that these products can be sold in another jurisdiction, or at all.

~~Cannabis~~Focus ~~for~~on ~~Medical Purposes~~AI

~~The~~ZeroStack ~~United~~believes ~~States~~that ~~healthcare~~the ~~industry~~rise isof ~~heavily~~AI ~~regulated~~represents ~~and~~the ~~closely~~next ~~scrutinized~~industrial byrevolution ~~federal,~~in ~~state~~the ~~and~~business ~~local governments~~world. ~~Comprehensive~~AI ~~statutes~~has ~~and~~begun ~~regulations~~transforming ~~govern~~many ~~the~~sectors ~~manner~~of inthe ~~which~~global weeconomy. ~~will~~We ~~provide~~see ~~and~~parallels ~~bill for telehealth services, our contractual relationships~~ with ~~our~~similar ~~providers,~~industrial ~~vendors~~revolutions ~~and~~in ~~clients,~~history ~~our marketing activities, and other aspects of our planned operations. Of particular importance are~~including:

~~• The~~steam ~~federal~~power ~~physician~~mechanized self-referral law, commonly known as the Stark Law, that generally prohibits physicians from referring Medicare or Medicaid patients to an entity for the provision of certain "designated health services" if the physician or a member of such physician's immediate family has a direct or indirect financial relationship (including an ownership interest or a compensation arrangement) with the entity, and prohibit the entity from billing Medicare or Medicaid for such designated health services.production
~~• The~~electricity ~~federal~~enabled ~~United~~mass States Anti-Kickback Statute (the "U.S. Anti-Kickback Statute") that prohibits the knowing and willful offer, payment, solicitation or receipt of any bribe, kickback, rebate or other remuneration for referring an individual, in return for ordering, leasing, purchasing or recommending or arranging for, or to induce the referral of an individual or the ordering, purchasing or leasing of items or services covered, in whole or in part, by any federal healthcare program, such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation. In addition, the government may assert that a claim including items or services resulting from a violation of the U.S. Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act.production
~~• The~~automation ~~criminal healthcare fraud provisions of the federal Health Insurance Portability~~ and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, and the implementing regulations, and related rules which prohibit knowingly and willfully executing a scheme or artifice to defraud any healthcare benefit program or falsifying, concealing or covering up a material fact or making any material false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the U.S. Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation.computerization

~~• The~~As ~~False~~part ~~Claims~~of ~~Act,~~our ~~which~~AI-focused ~~imposes~~asset ~~civil~~management ~~and criminal liability on individuals or entities that knowingly submit false or fraudulent claims for payment to the government or knowingly make~~strategy, orwe ~~cause~~intend to befocus ~~made,~~on athe ~~false~~following ~~statement~~business ~~in order to have a false claim paid, including qui tam or whistleblower suits.~~opportunities:

~~• Reassignment~~opportunities ofleveraging ~~payment~~0G's ~~rules~~decentralized ~~which~~operating ~~prohibit certain types of billing and collection practices in connection with claims payable by the Medicare or Medicaid programs.~~system
~~• Similar state law provisions pertaining to anti~~proof-~~kickback, self~~of-~~referral~~stake ~~and~~digital ~~false~~assets ~~claims~~focused ~~issues.~~on AI
~~• State~~compute ~~laws~~power ~~that~~technology ~~prohibit general business corporations, such as us, from practicing medicine, controlling physicians' medical decisions, or engaging in certain practices such as splitting fees with physicians.~~companies
~~• Laws~~fee-earning ~~that~~opportunities ~~regulate~~on ~~debt~~capital ~~collection practices as applied to our debt collection practices.~~deployed
~~• Certain~~private ~~provisions~~companies ofoperating in the ~~Social~~AI ~~Security Act of 1935 that impose criminal penalties on healthcare providers who fail to disclose, or refund known overpayments.~~ecosystem
~~• Federal~~staking ~~and~~validators ~~state laws that prohibit providers from billing~~ and ~~receiving~~complementary ~~payment~~businesses ~~from~~within ~~Medicare and Medicaid for services unless~~ the ~~services~~0G ~~are medically necessary, adequately and accurately documented, and billed using codes that accurately reflect the type and level of services rendered.~~ecosystem

~~• Federal~~Our ~~and~~focus ~~state~~on ~~laws~~AI is and ~~policies~~will ~~that~~be ~~require~~subject ~~healthcare providers~~ to ~~maintain~~significant ~~licensure, certification or accreditation to enroll~~ and ~~participate~~evolving inrisks. ~~the~~For ~~Medicare~~an ~~and~~overview ~~Medicaid~~of ~~programs~~such risks, ~~and~~see to"Item ~~report~~1A. ~~certain~~Risk ~~changes~~Factors in- ~~their~~Risks ~~operations~~Related to ~~the~~Artificial ~~agencies~~Intelligence ~~that~~and ~~administer~~Investing ~~these~~in ~~programs~~Cryptocurrency".

~~Failure~~Commercial to& comply with these laws and other laws can result in civil and criminal penalties such as fines, damages, overpayment, recoupment, imprisonment, loss of enrollment status and exclusion from the Medicare and Medicaid programs. The risk of our being found in violation of these laws and regulations is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are sometimes open to a variety of interpretations. Our failure to accurately anticipate the application of these laws and regulations to our business or any other failure to comply with applicable regulatory requirements could impose liability on us and negatively affect our business. Any action against us for violation of these laws or regulations could cause us to incur significant legal expenses, divert our management's attention from business operations, and result in adverse publicity.Wholesale

The Company's Commercial and Wholesale pillar encompasses the distribution of pharmaceutical products to international markets. This pillar is anchored by ZeroStack's wholly owned subsidiary, Phatebo, a multi-national operator in pharmaceutical distribution, with principal operations in Germany.

Phatebo

Based in Germany, Phatebo is a wholesale pharmaceutical distribution company with import and export capabilities of a wide range of pharmaceutical goods to treat a variety of health indications, including drugs related to cancer therapies, attention-deficit/hyperactivity disorder ("ADHD"), multiple sclerosis and anti-depressants, among others.

Overview of the Pharmaceutical Market

Europe has a strong pharmaceutical history and a thriving industry with concentration of pharmaceutical companies in the German-Switzerland border area. The industry has a projected CAGR of 6.3% between 2023 and 2028 resulting in total sales of $290 billion by 2028¹. In the European Union, Germany was the leading pharmaceutical market with a total revenue of $69 million in 2024².

________________________

¹ Statista - Pharmaceutical Industry in Europe - Statistics & Facts

² Statista - Revenue of leading pharmaceutical markets in Europe

Overview of the 0G Industry and Market

The 0G ecosystem represents an emerging segment within the broader blockchain and decentralized infrastructure industry. 0G is designed as a modular Layer 1 blockchain optimized for decentralized AI workloads, combining compute, storage, and data availability into a unified, verifiable system. This architecture addresses limitations of traditional centralized cloud and AI platforms by offering scalability, cost efficiency, and enhanced trust through cryptographic proofs.

The ~~laws~~0G protocol operates as a Decentralized AI Operating System ("dAIOS"), ~~regulations~~enabling developers and ~~standards~~enterprises ~~governing~~to ~~the~~deploy ~~provision~~AI ofmodels ~~healthcare~~and ~~services~~data-intensive ~~may~~applications ~~change~~without ~~significantly~~reliance inon ~~the~~centralized ~~future~~providers. WeIts ~~cannot~~design ~~assure~~incorporates ~~you~~advanced ~~that~~technologies ~~any~~such ~~new~~as orsharding, ~~changed~~erasure ~~healthcare laws~~coding, ~~regulations~~and orconsensus ~~standards~~mechanisms ~~will~~to ~~not~~achieve ~~materially~~high ~~adversely~~throughput ~~affect~~and ~~our~~near-infinite ~~planned~~horizontal ~~telehealth~~scalability, ~~services~~making ~~business~~decentralized AI practical for enterprise and consumer applications.

~~Regulatory~~The ~~Framework~~industry inis ~~Germany~~driven by several converging trends:

~~The~~AI ~~importation~~Adoption ~~and distribution of medical cannabis~~ in ~~Germany~~Web3: isGrowing ~~mainly~~demand ~~covered~~for bydecentralized ~~the~~AI ~~German~~infrastructure ~~Narcotics Law (Betäubungsmittelgesetz or "BtMG"), the AMG, and the German Narcotics Foreign Trade Ordinance (Betäubungsmittel-Außenhandelsverordnung or "BtMAHV")~~ as ~~well~~organizations asseek ~~the~~alternatives ~~Single~~to ~~Convention~~centralized oncloud ~~Narcotic~~services ~~Drugs~~for ~~(1961) (the "Single Convention"). The relevant competent authorities in Germany are the BfArM~~privacy, ~~the~~cost ~~Federal Opium Authority (a sub-unit of the BfArM)~~efficiency, and ~~German Federal authorities~~verifiability.
~~The~~Decentralized ~~Act~~Physical onInfrastructure ~~the~~Networks ~~Amendment of Narcotic Drugs and Other Regulations~~ (~~Gesetz zur Änderung betäubungsmittelrechtlicher und anderer Vorschriften~~DePIN),: ~~which~~Integration ~~came~~with ~~into~~decentralized ~~force~~GPU ~~on March 10~~networks, ~~2017,~~such ~~introduced~~as anio.net ~~exception to allow the prescription~~ and ~~trade of cannabis for medical purposes. Prior to March 2017~~Aethir, ~~the~~aggregates ~~import~~hundreds of ~~cannabis~~thousands ~~was~~of ~~not~~GPUs ~~permitted,~~globally ~~and pharmacies could request medical cannabis from abroad for specific patients only in exceptional circumstances (upon medical prescription), subject~~ to aprovide ~~special case~~cost-~~by-case~~effective ~~approval~~compute ~~issued~~resources ~~by BfArM. Since March 2017, cannabis cultivated~~ for ~~medical~~AI ~~purposes outside Germany can be imported~~ and ~~marketed~~blockchain ~~in Germany by private companies provided they have obtained the relevant licenses that must be in line with the Single Convention on Narcotic Drugs~~applications. When the German federal government legalized cannabis for medical purposes in March 2017, they also established a cannabis agency as part of BfArM. This agency controls cultivation, harvesting, processing, quality inspection, storage, packaging and distribution to wholesaler and pharmacists or manufacturers.
EUInstitutional Investment: Significant capital inflows from venture firms and strategic partners have accelerated development and adoption of 0G-~~GMP~~based ~~Certification~~solutions.
~~The~~Token ~~guidelines~~Economics: onThe ~~Good~~native ~~Manufacturing~~0G ~~Practices,~~Token ~~promulgated~~underpins bynetwork ~~European~~operations, ~~Medicines~~incentivizing ~~Agency~~node ~~(the~~operators ~~"EU~~and ~~GMP")~~securing ~~describe~~ the ~~minimum standard that a pharmaceutical manufacturer must meet in its production processes according to European standards~~ecosystem. ~~Any~~Liquidity ~~pharmaceutical~~and ~~manufacturer~~adoption ~~wishing~~have tobeen ~~import~~supported ~~medicinal~~by ~~products~~listings ~~into~~on ~~the~~major ~~European Union must comply with EU GMP~~exchanges.

AAs ~~prerequisite under EU GMP is that medicinal products must be~~ of ~~consistently high quality, suitable for their intended use and meet~~ the ~~requirements~~end of ~~the marketing authorization based on stability data. For this reason~~2025, anthe ~~EU-GMP~~0G ~~certification~~market ~~facilitates~~is ~~the~~characterized ~~movement~~by ofrapid ~~goods~~growth and ~~contributes~~volatility. toThe ~~the~~0G ~~credibility~~Token ofhas ~~the~~experienced ~~product.~~significant Inprice ~~general~~fluctuations, ~~Article~~reflecting 51speculative oftrading ~~Commission Directive 2001/83/EC requires that each~~ and ~~every~~token ~~batch~~unlock ~~imported from a European Union country outside the European Union is checked to ensure that it complies with EU-GMP standards~~schedules. IfMarket acapitalization ~~manufacturer~~and inadoption ametrics ~~non-EU~~indicate ~~country~~increasing ~~has~~interest anfrom ~~EU-GMP~~developers, ~~certification for its medicinal product~~enterprises, ~~this~~and ~~batch~~institutional ~~testing is not required pursuant to Article 51(2) of Commission Directive 2001/83/EC~~investors.

~~Under~~Competitive German law, the EU-GMP guidelines must be complied with respect to medicinal products and active substances that are manufactured, tested, stored, placed on the market in Germany, brought into or out of the German territory, imported or exported.Landscape

The 0G industry operates within a highly competitive environment that includes other blockchain protocols focused on AI and decentralized infrastructure. Success in this market depends on technological execution, ecosystem development, and regulatory compliance.

Regulatory

ZeroStack has obtained the licenses to operate on a global scale including required governmental approvals, licenses and permits. A summary of such governmental approvals, licenses and permits are set forth below.

Regulation of our Industry

Regulatory Framework for Digital Assets

The laws and regulations applicable to 0G and digital assets are evolving and subject to interpretation and change.

Governments around the world have reacted differently to digital assets; certain governments have deemed them illegal, and others have allowed their use and trade without restriction, while in some jurisdictions, such as the U.S., digital assets are subject to overlapping, uncertain and evolving regulatory requirements.

As digital assets have grown in both popularity and market size, the U.S. Executive Branch, Congress and a number of U.S. federal and state agencies, including the Financial Crimes Enforcement Network, the Commodity Futures Trading Commission ("CFTC"), the United States Securities and Exchange Commission ("SEC"), the Financial Industry Regulatory Authority, the Consumer Financial Protection Bureau, the Department of Justice, the Department of Homeland Security, the Federal Bureau of Investigation, the IRS and state financial regulators, have been examining the operations of digital asset networks, digital asset users and digital asset exchanges, with particular focus on the extent to which digital assets can be used to violate state or federal laws, including to facilitate the laundering of proceeds of illegal activities or the funding of criminal or terrorist enterprises, and the safety and soundness and consumer-protective safeguards of exchanges or other service-providers that hold, transfer, trade or exchange digital assets for users. Many of these state and federal agencies have issued consumer advisories regarding the risks posed by digital assets to investors. In addition, federal and state agencies, and other countries have issued rules or guidance regarding the treatment of digital asset transactions and requirements for businesses engaged in activities related to digital assets.

Regime	Treatment Under the Current German Regulatory Framework
Prescribing and Dispensing		•	The legal framework enables doctors to prescribe medical cannabis.
		•	Dispensed in the form of medicinal cannabis flowers, as a cannabis extract or as a finished product containing active THC.
		•	Pursuant to the BtMG, only pharmacies are permitted upon a special prescription to supply cannabis to patients in the form of cannabis flowers, cannabis extracts (magistral preparations) or dronabinol or as finished products containing natural or synthetic cannabinoids.
		•	The exact recipe instructions for such magistral preparations are laid down in the New Prescription Form, which is the standard work for drug production in pharmacies and is part of the German Drug Codex.
Reimbursement		•	Health insurance is statutorily mandated in Germany, and residents are covered by either statutory health insurance plans (covering approximately 90% of the population) or private health insurance. Currently, the costs of medical cannabis are covered by German health insurance.
		•	Since March 10, 2017, medical cannabis can be prescribed at the expense of the statutory health insurance companies in Germany upon their prior approval.
		•	Insured persons with a serious disease are entitled to be supplied with cannabis in the form of dried flowers or extracts in standardized quality (and pharmaceuticals containing the active substances dronabinol or nabilone) if a generally recognized treatment in accordance with medical standards is not available or cannot be used in the individual case and there is a prospect of positive effect on the course of the disease or person's symptoms according to Section 31 Paragraph 6 German Social Insurance Code (Fünftes Sozialgesetzbuch).
		•	The new Law for More Safety in the Supply of Pharmaceuticals (Gesetz für mehr Sicherheit in der Arzneimittelversorgung) which became effective in August 2019 enables patients who have been granted an approval to switch smoothly between cannabis products without having to wait for a new approval.
Licensing Requirements		•	In order to import and distribute medical cannabis in Germany, a private company needs a License for the Trade in Narcotic Drugs, and a Wholesale Trading License from local health authorities. The Company currently owns two subsidiaries, TruHC and Phatebo, that have these licenses.
		•	If cannabis is imported from non-EU/EEA countries, the company will also need an import/manufacture license for pharmaceuticals issued by the relevant health authority. For each individual shipment of cannabis an import permit will be required after the narcotics license is granted.
		•	A License for the Trade in Narcotic Drugs is required for all operations relating to the trading of narcotic drugs (such as cannabis), including, among others, cultivation, production, import and export. This license is issued by the Federal Opium Agency, a division of BfArM.
Importation		•	An Import Authorization for narcotics issued by the Federal Opium Agency is required for each import of narcotics into Germany.
		•	An Import Authorization for narcotics can only be obtained by a company with business activities in Germany. The authorities have broad rights with respect to issuing Import Authorizations and may refuse to grant an Import Authorization or, in certain circumstances, restrict the quantity of the narcotics being imported.
		•	An Import Authorization cannot be transferred to third parties and is limited to a maximum of three months (or six months for imports by sea). If the narcotics are not imported within this time frame, the import authorization must be returned to BfArM.
		•	A company applying for a License for the Trade in Narcotic Drugs and an Import Authorization for narcotics must meet various requirements, including among other, an appointment of a responsible person with relevant expertise responsible for compliance with the regulations governing narcotics, compliance with applicable security measures and certain recordkeeping and reporting requirements.
Wholesale Trading License		•	Medical cannabis falls under the definition of a medicinal product, as defined in the GMA, and requires a Wholesale Trading License if a private company engages in wholesale trading of medical cannabis.
		•	Wholesale trading is defined broadly and includes any professional or commercial activity involving the procuring, storing, supplying or exporting of medicinal products, with the exception of the dispensing of medicinal products to consumers other than physicians, dentists, veterinarians or hospitals.
		•	A company applying for an Import Authorization for narcotics with respect to the import of medical cannabis into Germany generally is also in possession of a Wholesale Trading License. Two of the Company's German subsidiaries, Phatebo and TruHC, hold these licenses.
Other Licenses		•	A company importing medical cannabis from non-EU/EEA countries is required to have an Import License for pharmaceuticals pursuant to Section 72 of the GMA.
		•	There are several other licenses that might also be required for certain types of medical cannabis products or activities (such as a manufacturing license, in case the medical cannabis is processed, packed, labeled or market released in Germany according to Section 13 of the GMA).

Depending on the regulatory characterization of 0G, the markets for 0G in general, and our activities in particular, our business and our 0G strategy may be subject to regulation by one or more regulators in the United States and globally. Ongoing and future regulatory actions may alter, to a materially adverse extent, the nature of digital assets markets, the participation of industry participants, including service providers and financial institutions in these markets, and our ability to pursue our 0G strategy. Additionally, U.S. state and federal and foreign regulators and legislatures have taken action against industry participants, including digital assets businesses, and enacted restrictive regimes in response to adverse publicity arising from hacks, consumer harm, or criminal activity stemming from digital assets activity. U.S. federal and state energy regulatory authorities are also monitoring the total electricity consumption of cryptocurrency mining, and the potential impacts of cryptocurrency mining to the supply and dispatch functionality of the wholesale grid and retail distribution systems. Many state legislative bodies have passed, or are actively considering, legislation to address the impact of cryptocurrency mining in their respective states.

The CFTC takes the position that some digital assets, including 0G, fall within the definition of a "commodity" under the Commodities Exchange Act of 1936, as amended (the "CEA"). Under the CEA, the CFTC has broad enforcement authority to police market manipulation and fraud in spot digital assets markets in which we may transact. Beyond instances of fraud or manipulation, the CFTC generally does not oversee cash or spot market exchanges or transactions involving digital asset commodities that do not utilize margin, leverage, or financing. In addition, CFTC regulations and CFTC oversight and enforcement authority apply with respect to futures, swaps, other derivative products and certain retail leveraged commodity transactions involving digital asset commodities, including the markets on which these products trade.

The SEC and its staff have taken the position that certain other digital assets fall within the definition of a "security" under the U.S. federal securities laws. Public statements made by senior officials and senior members of the staff at the SEC indicate that the SEC does not consider certain digital assets to be a security under the federal securities laws. However, such statements are not official policy statements by the SEC and reflect only the speakers' views, which are not binding on the SEC or any other agency or court and cannot be generalized to any other digital assets.

In addition, since transactions in 0G provide a degree of anonymity, they are susceptible to misuse for criminal activities, such as money laundering. This misuse, or the perception of such misuse, could lead to greater regulatory oversight of 0G and 0G platforms, and there is the possibility that law enforcement agencies could close or blacklist 0G platforms or other 0G-related infrastructure with little or no notice and prevent users from accessing or retrieving 0G held via such platforms or infrastructure. For example, the U.S. Treasury Department's Office of Foreign Assets Control has issued updated advisories regarding the use of virtual currencies, added a number of digital asset exchanges and service providers to the Specially Designated Nationals and Blocked Persons list and engaged in several enforcement actions, including a series of enforcement actions that have either shut down or significantly curtailed the operations of several smaller digital asset exchanges associated with Russian and/or North Korean nationals. Additionally, in January 2025, the Consumer Financial Protection Bureau announced that it is seeking public input on privacy protections and surveillance in digital payments, particularly those offered through large technology platforms

As noted above, activities involving 0G and other digital assets may fall within the jurisdiction of more than one financial regulator and various courts and such laws and regulations are rapidly evolving and increasing in scope. On January 23, 2025, the Strengthening American Leadership in Digital Financial Technology executive order was issued. While the executive order did not mandate the adoption of any specific regulations, the executive order identifies certain key objectives to guide agencies involved in crypto regulation, including (i) protecting the sovereignty of the United States dollar by promoting the development of United States dollar-backed stablecoins, (ii) providing regulatory clarity and certainty built on technology-neutral regulations for individuals and firms involved in digital assets, including through well-defined jurisdictional regulatory boundaries, and (iii) taking measures to protect Americans from the risks of Central Bank Digital Currencies. To achieve these objectives, the executive order established a working group on digital asset markets within the National Economic Council, comprised of representatives from key federal agencies, with a tight timeline for examining existing regulations and proposing a new regulatory framework. There have also been several bills introduced in Congress that propose to establish additional regulation and oversight of the digital asset markets.

AI Regulations

The legal and regulatory landscape surrounding AI technologies is rapidly evolving and uncertain, including areas such as consumer protection, intellectual property, cybersecurity, and privacy and data protection. In addition, there is uncertainty around the validity and enforceability of intellectual property rights related to the use, development, and deployment of AI systems, including issues arising from both the inputs they rely on and the outputs they generate. Compliance with new and emerging laws, regulations or industry standards relating to AI in the U.S. and internationally, such as U.S. state regulations and the Artificial Intelligence Act in the EU, may impose significant operational costs and limit or restrict our ability to develop, deploy or use existing or future AI technologies. As a result, our ability to adapt our existing products and services or develop future and new products and services using AI may be limited or restricted, which could adversely impact our business.

Human Capital Resources

As of December 31, ~~2024~~2025, we had a total of 7621 employees, 64all of which were full-time ~~and eleven were part-time~~. A total of 466 of our employees and consultants were based in ~~the~~North ~~United~~America ~~States~~ and 3015 of our employees and consultants were based internationally in Germany.

To our knowledge, none of our employees are represented by a labor organization or are a party to any collective bargaining arrangement. We have not experienced any work stoppages and we consider our relations with our employees to be good.

Additional Information

Our website is at www.~~floragrowth~~zerostack.~~com~~ai. 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 filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act, are available at www.sec.gov/edgar. Our website address is included in this Annual Report only as an inactive textual reference. Information contained on, or available through, our website is not incorporated by reference in, or made a part of, this Annual Report.

ITEM 1A. RISK FACTORS.

You should carefully consider the risks described below, as well as other information contained in this report, including the consolidated financial statements and the notes thereto and "Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations." The occurrence of any of the events discussed below could significantly and adversely affect our business, prospects, results of operations, financial condition, and cash flows.

RISKS RELATED TO OUR BUSINESS AND INDUSTRY

We are an early-stage company with limited operating history and may never become profitable.

We are ana ~~early-stage~~decentralized AI treasury company ~~focused~~that onis ~~supplying~~investing ~~natural,~~in ~~medicinal-grade~~the ~~cannabis~~future ~~flower~~of ~~and~~AI ~~high-quality~~infrastructure ~~cannabis~~through ~~derived~~strategic ~~medical~~ownership ~~and~~in ~~wellness~~0G ~~products~~Tokens. toThe ~~large~~Company ~~channel~~is ~~distributors~~a ~~and~~global ~~retailers~~pharmaceutical ~~globally~~distributor through its wholly owned subsidiary Phatebo. Formed in March 2019, we have a limited operating history. We have limited financial resources and minimal operating cash flow. For the years ended December 31, ~~2024~~2025 and ~~2023~~2024, we had losses of $15119.97 million and $5615.39 million, respectively, and as of December 31, ~~2024~~2025 an accumulated deficit of $~~158~~277.18 million.

Additionally, there can be no assurance that additional funding will be available to us for the development of our business, which will require the commitment of substantial resources. Accordingly, you should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies in the early stages of development. Potential investors should carefully consider the risks and uncertainties that a company with a limited operating history will face. In particular, potential investors should consider that we may be unable to:

• successfully implement or execute our business plan, or that our business plan is sound; • adjust to changing conditions or keep pace with increased demand; • attract and retain an experienced management team; • successfully integrate businesses that we acquire; or • raise sufficient funds in the capital markets to effectuate our business plan, including product development, licensing and approvals.

adjust to changing conditions or keep pace with increased demand;
attract and retain an experienced management team;
successfully integrate businesses that we acquire; or
raise sufficient funds in the capital markets to effectuate our business plan, including product development, licensing and approvals.

Recent and future acquisitions and strategic investments could be difficult to integrate, divert the attention of key management personnel, disrupt our business, dilute shareholder value, may subject us to liability, and harm our results of operations and financial condition.

We ~~acquired 100% equity interests in Just Brands, Franchise Global Health ("FGH"), AV, and TruHC. We~~ have a history of acquisitive activity, and we may in the future seek to acquire or invest in businesses, products, or technologies that we believe could complement our operations or expand our breadth, enhance our capabilities, or otherwise offer growth opportunities. Our diversity of product offerings may not be successful. While our growth strategy includes broadening our service and product offerings, implementing an aggressive marketing plan and employing product diversification, there can be no assurance that our systems, procedures and controls will be adequate to support our operations as they expand. We cannot assure you that our existing personnel, systems, procedures or controls will be adequate to support our operations in the future or that we will be able to successfully implement appropriate measures consistent with our growth strategy. As part of our planned growth and diversified product offerings, we may have to implement new operational and financial systems, procedures and controls to expand, train and manage our employee base, and maintain close coordination among our staff. We cannot guarantee that we will be able to do so, or that if we are able to do so, we will be able to effectively integrate them into our existing staff and systems. Additionally, the integration of our acquisitions and pursuit of potential future acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating, and pursuing suitable acquisitions, whether or not they are consummated. Any acquisition, investment or business relationship may result in unforeseen operating difficulties and expenditures. In addition, we have limited experience in acquiring other businesses. Specifically, we may not successfully evaluate or utilize the acquired products, assets or personnel, or accurately forecast the financial impact of an acquisition transaction, including accounting charges.

We may not be able to find and identify desirable acquisition targets or we may not be successful in entering into an agreement with any one target. Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could harm our results of operations. In addition, if an acquired business fails to meet our expectations, our business, results of operations, and financial condition may suffer. In some cases, minority shareholders may exist in certain of our non-wholly-owned acquisitions (for businesses we do not purchase as an 100% owned subsidiary) and may retain minority shareholder rights which could make a future change of control or corporate approvals for actions more difficult to achieve and/or more costly.

We also make strategic investments in early-stage companies developing products or technologies that we believe could complement our business or expand our breadth, enhance our technical capabilities, or otherwise offer growth opportunities. These investments may be in early-stage private companies for restricted stock. Such investments are generally illiquid and may never generate value. Further, the companies in which we invest may not succeed, and our investments would lose their value.

Moreover, the anticipated benefits of any acquisition, investment, or business relationship may not be realized, or we may be exposed to unknown risks or liabilities of our acquisitions. Furthermore, we may be subject to unknown liabilities of the businesses we acquire. In addition, we may become subject to legal proceedings in connection with the businesses of, or resulting from, our acquisitions. For example, we have become party to certain litigation as a result of our acquisition of FGH, which falls under certain indemnification protections obtained in the acquisition. For more information, see Item 3 "Legal Proceedings."

Certain conditions or events could disrupt the Company's supply chains, disrupt operations, and increase operating expenses.

Conditions or events including, but not limited to, the following could disrupt the Company's supply chains and in particular its ability to deliver its products, interrupt operations at its facilities, increase operating expenses, resulting in loss of sales, delayed performance of contractual obligations or require additional expenditures to be incurred: (i) extraordinary weather conditions or natural disasters such as hurricanes, tornadoes, floods, fires, extreme heat, earthquakes, etc.; (ii) a local, regional, national or international outbreak of a contagious disease, including the COVID-19 coronavirus, Middle East Respiratory Syndrome, Severe Acute Respiratory Syndrome, H1N1 influenza virus, avian flu, or any other similar illness could result in a general or acute decline in economic activity; (iii) political instability, social and labor unrest, war or terrorism, including the current conflict between Russia and Ukraine; or (iv) interruptions in the availability of basic commercial and social services and infrastructure including power and water shortages, and shipping and freight forwarding services including via air, sea, rail and road.

Cannabis laws, regulations, and guidelines are dynamic and subject to changes.

Cannabis laws and regulations are dynamic and subject to evolving interpretations which could require us to incur substantial costs associated with compliance or alter certain aspects of our business plan. It is also possible that regulations may be enacted in the future that will be directly applicable to certain of our products and/or aspects of our businesses. We cannot predict the nature of any future laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on our business. Management expects that the legislative and regulatory environment in the cannabis industry internationally will continue to be dynamic and will require innovative solutions to try to comply with this changing legal landscape in this nascent industry for the foreseeable future. Compliance with any such legislation may have a material adverse effect on our business, financial condition and results of operations.

Public opinion can also exert a significant influence over the regulation of the cannabis industry. A negative shift in the public's perception of the cannabis industry could affect future legislation or regulation in different jurisdictions.

Demand for cannabis and derivative products could be adversely affected and significantly influenced by scientific research or findings, regulatory proceedings, litigation, media attention or other research findings.

The legal cannabis industry is at a relatively early stage of its development. Consumer perceptions regarding legality, morality, consumption, safety, efficacy and quality of medicinal cannabis are mixed and evolving and can be significantly influenced by scientific research or findings, regulatory investigations, litigation, media attention and other publicity regarding the consumption of medicinal cannabis products. There can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media attention or other research findings or publicity will be favorable to the medicinal cannabis market or any particular product, or consistent with earlier publicity. Future research reports, findings, regulatory proceedings, litigation, media attention or other publicity that are perceived as less favorable than, or that question, earlier research reports, findings or publicity, could have a material adverse effect on the demand for medicinal cannabis and on our business, results of operations, financial condition and cash flows. Further, adverse publicity reports or other media attention regarding cannabis in general or associating the consumption of medicinal cannabis with illness or other negative effects or events, could have such a material adverse effect. Public opinion and support for medicinal cannabis use has traditionally been inconsistent and varies from jurisdiction to jurisdiction. Our ability to gain and increase market acceptance of our business may require substantial expenditures on investor relations, strategic relationships and marketing initiatives. There can be no assurance that such initiatives will be successful and their failure to materialize into significant demand may have an adverse effect on our financial condition.

Damage to the Company's reputation can be the result of the actual or perceived occurrence of any number of events, and could include any negative publicity, whether such publicity is accurate or not.

The increased usage of social media and other web-based tools used to generate, publish and discuss user-generated content and to connect with other users has made it increasingly easier for individuals and groups to communicate and share opinions and views regarding the Company and its activities, whether true or not. Although the Company believes that it operates in a manner that is respectful to all stakeholders and that it takes pride in protecting its image and reputation, it does not ultimately have direct control over how it is perceived by others. Reputational loss may result in decreased ability to enter into new customer, distributor or supplier relationships, retain existing customers, distributors or suppliers, reduced investor confidence and access to capital, increased challenges in developing and maintaining community relations and an impediment to our overall ability to advance our projects, thereby having a material adverse effect on our financial performance, financial condition, cash flows and growth prospects.

We are subject to the inherent risk of exposure to product liability claims, actions and litigation.

AsWe ~~a distributor of products designed to be ingested by humans, we~~ face an inherent risk of exposure to product liability claims, regulatory action and litigation if our products are alleged to have caused bodily harm or injury. In addition, the sale of our products involves the risk of injury to consumers due to tampering by unauthorized third parties or product contamination. Adverse reactions resulting from human consumption of our products alone or in combination with other medications or substances could occur. We may be subject to various product liability claims, including, among others, that our products caused injury or illness, include inadequate instructions for use or include inadequate warnings concerning health risks, possible side effects or interactions with other substances. Product liability claims or regulatory actions against us could result in increased costs, could adversely affect our reputation with our clients and consumers generally, and could have a material adverse effect on our results of operations and financial condition. There can be no assurances that we will be able to obtain or maintain product liability insurance on acceptable terms or with adequate coverage against potential liabilities. Such insurance is expensive and may not be available in the future on acceptable terms, or at all. The inability to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims could prevent or inhibit the commercialization of our potential products.

We are subject to the inherent risks involved with product recalls.

Manufacturers and distributors of products are sometimes subject to the recall or return of their products for a variety of reasons, including product defects, such as contamination, unintended harmful side effects or interactions with other substances, packaging safety and inadequate or inaccurate labeling disclosure. If any of our products are recalled due to an alleged product defect or for any other reason, we could be required to incur the unexpected expense of the recall and any legal proceedings that might arise in connection with the recall. We may lose a significant amount of sales and may not be able to replace those sales at an acceptable margin, or at all. In addition, a product recall may require significant management attention. There can be no assurance that any quality, potency or contamination problems will be detected in time to avoid unforeseen product recalls, regulatory action or lawsuits. Additionally, if our products are subject to recall, our reputation could be harmed. A recall for any of the foregoing reasons could lead to decreased demand for our products and could have a material adverse effect on our results of operations and financial condition. Additionally, product recalls may lead to increased scrutiny of our operations by regulatory agencies, requiring further management attention, potential loss of applicable licenses, and potential legal fees and other expenses.

The Company's products could have unknown side effects.

If the products the Company sells are not perceived to have the effects intended by the end user, its business may suffer and the business may be subject to products liability or other legal actions. Many of the Company's products contain innovative ingredients or combinations of ingredients. There is little long-term data available with respect to efficacy, unknown side effects and/or interaction with individual human biochemistry, or interaction with other drugs. Moreover, there is little long-term data available with respect to efficacy, unknown side effects and/or its interaction with individual animal biochemistry. As a result, the Company's products could have certain side effects if not taken as directed or if taken by an end user that has certain known or unknown medical conditions.

The Company may be unable to anticipate changes in its potential client requirements that could make the Company's existing products and services obsolete. The Company's success will depend, in part, on its ability to continue to enhance its product and service offerings so as to address the increasing sophistication and varied needs of the market and respond to technological and regulatory changes and emerging industry standards and practices on a timely and cost-effective basis.

Research regarding the medical benefits, viability, safety, efficacy, use and social acceptance of cannabis or isolated cannabinoids (such as CBD and THC) remains in early stages.

There have been relatively few clinical trials on the benefits of cannabis or isolated cannabinoids (such as CBD and THC). Although the Company believes that the articles, reports and studies support its beliefs regarding the medical benefits, viability, safety, efficacy, dosing and social acceptance of cannabis, future research and clinical trials may prove such statements to be incorrect, or could raise concerns regarding, and perceptions relating to, cannabis. Given these risks, uncertainties and assumptions, investors should not place undue reliance on such articles and reports. Future research studies and clinical trials may draw opposing conclusions to those stated herein or reach negative conclusions related to medical cannabis, which could have a material adverse effect on the demand for the Company's products, which could result in a material adverse effect on our business, financial condition and results of operations or prospects.

Our growth depends, in part, on expanding into additional consumer markets, and we may not be successful in doing so.

We believe that our future growth depends not only on continuing to provide our current customers with new products, but also continuing to enlarge our customer base. The growth of our business will depend, in part, on our ability to continue to expand in the United States, as well as into international markets. We are investing significant resources in these areas, and although we hope that our products will gain popularity, we may face challenges that are different from those we currently encounter, including competitive merchandising, distribution, hiring, and other difficulties. We may also encounter difficulties in attracting customers due to a lack of consumer familiarity with or acceptance of our brand, or a resistance to paying for premium products, particularly in international markets. In addition, although we are investing in sales and marketing activities to further penetrate newer regions, including expansion of our dedicated sales force, we may not be successful. If we are not successful, our business and results of operations may be harmed.

Fluctuations in the cost and availability of raw materials, equipment, labor, and transportation could cause manufacturing delays or increase our costs.

The price and availability of key components used to manufacture our products has been increasing and may continue to fluctuate significantly. In addition, the cost of labor within our company or at our third-party manufacturers could increase significantly due to regulation or inflationary pressures. Additionally, the cost of logistics and transportation fluctuates in large part due to the price of oil, and availability can be limited due to political and economic issues. Any fluctuations in the cost and availability of any of our raw materials, packaging, or other sourcing or transportation costs could harm our gross margins and our ability to meet customer demand. If we are unable to successfully mitigate a significant portion of these product cost increases or fluctuations, our results of operations could be harmed.

We rely on third-parties for raw materials and to manufacture and compound some of our products. We have no control over these third parties and if these relationships are disrupted our results of operations in future periods will be adversely impacted.

We currently hold short term supply contracts with unaffiliated third-party vendors for our critical raw materials. In addition, some of our products are manufactured or compounded by unaffiliated third parties and the use of these third-party co-packers changes from time to time due to customer demand and the composition of our product mix and product portfolio. We do not have any long-term contracts with any of these third parties, and we expect to compete with other companies for raw materials, production and imported packaging material capacity. If we experience significant increased demand or need to replace an existing raw material supplier or third-party manufacturer, there can be no assurances that replacements for these third-party vendors will be available when required on terms that are acceptable to us, or at all, or that any manufacturer or compounder would allocate sufficient capacity to us in order to meet our requirements. In addition, even if we are able to expand existing or find new sources, we may encounter delays in production and added costs as a result of the time it takes to engage third parties. Any delays, interruption or increased costs in raw materials and/or the manufacturing or compounding of our products could have an adverse effect on our ability to meet retail customer and consumer demand for our products and result in lower revenues and net income both in the short and long-term.

The Company's inventory has a shelf life and may reach its expiration and not be sold.

The Company holds finished goods in inventory and its inventory has a shelf life. ~~Finished goods in the Company's inventory may include cannabis flower, cannabis oil products and cosmeceuticals.~~ The Company's inventory may reach its expiration and not be sold. Although management regularly reviews the quantity and remaining shelf life of inventory on hand, and estimates manufacturing and sales lead times in order to manage its inventory, write-downs of inventory may still be required. Any such write-down of inventory could have a material adverse effect on the Company's business, financial condition, and results of operations.

The seasonal trends in our business create variability in our financial and operating results.

Our financial and operating results are subject to seasonal and quarterly variations in our net revenue and operating income and, as a result, our quarterly results may fluctuate and could be below expectations. Our business has realized a disproportionate amount of our net revenue and earnings for prior fiscal years in the third and fourth quarter as a result of the holiday season, and we expect this seasonal impact on our operations to continue in the future. If we experience lower than expected net revenue during any third or fourth quarter, it may have disproportionately large effects on our operating results and financial condition for that year. Any factors that harm our third or fourth quarter operating results, including disruptions in our brands or our supply chains or unfavorable economic conditions, could have a disproportionate effect on our results of operations and our financial condition for our entire fiscal year.

The Company may not be able to maintain effective quality control systems.

The Company may not be able to maintain an effective quality control system. The Company ascribes its early successes, in part, on its commitment to product quality and its effective quality control system. The effectiveness of the Company's quality control system and its ability to obtain or maintain good manufacturing practice ("GMP") certification with respect to its manufacturing, processing and testing facilities depend on a number of factors, including the design of its quality control procedures, training programs, and its ability to ensure that its employees adhere to the Company's policies and procedures. The Company also depends on service providers such as toll manufacturers and contract laboratories to manufacture, process or test its products that are subject to GMP certification requirements.

We expect that regulatory agencies will periodically inspect our and our service providers' facilities to evaluate compliance with applicable ~~GMP~~ requirements. Failure to comply with these requirements may subject us or our service providers to possible regulatory enforcement actions. Any failure or deterioration of the Company's or its service providers' quality control systems, ~~including loss of GMP certification,~~ may have a material adverse effect on the Company's business, results of operations and financial condition.

The cannabinoid industry faces strong opposition and may face similar opposition in other jurisdictions in which we operate.

Many political and social organizations oppose hemp and cannabis and their legalization, and many people, even those who support legalization, oppose the sale of hemp and cannabis in their geographies. Our business will need support from local governments, industry participants, consumers and residents to be successful. Additionally, there are large, well-funded businesses that may have a strong opposition to the cannabis industry. For example, the pharmaceutical and alcohol industries have traditionally opposed cannabis legalization. Any efforts by these or other industries to halt or impede the cannabis industry could have detrimental effects on our business.

The Company is subject to wholesale price volatility that could expose the Company to lower than anticipated revenues, gross margins, net income and cash flows.

The pharmaceutical distribution ~~and~~industry ~~cannabis~~is ~~industries~~a ~~are~~ margin-based ~~businesses~~business in which gross profits depend on the excess of sales prices over costs. Consequently, profitability is sensitive to fluctuations in wholesale and retail prices caused by changes in supply (which itself depends on other factors such as weather, fuel, equipment and labor costs, shipping costs, economic situation, government regulations and demand), taxes, government programs and policies for the pharmaceutical distribution ~~and~~industry ~~cannabis industries~~ (including price controls and wholesale price restrictions that may be imposed by government agencies responsible for the sale of pharmaceuticals ~~and cannabis~~), and other market conditions, all of which are factors beyond our control. The Company's operating income may be significantly and adversely affected by a decline in the price of pharmaceuticals and cannabis and will be sensitive to changes in the price of cannabis and the overall condition of the cannabis industry, as our profitability is directly related to the price of pharmaceuticals and cannabis. These prices are affected by numerous factors beyond our control. Any price decline may have a material adverse effect on the Company's business, financial condition and results of operations.

The Company could face competitive risks from the development and distribution of synthetic cannabis.

The pharmaceutical industry and others may attempt to enter the cannabis industry and, in particular, the medical cannabis industry through the development and distribution of synthetic products that emulate the effects of and treatment provided by naturally occurring cannabis. If synthetic cannabis products are widely adopted, the widespread popularity of such synthetic cannabis products could change the demand, volume and profitability of the botanical cannabinoid industry. This could adversely affect our ability to secure long-term profitability and success through the sustainable and profitable operation of our business.

The legalization of adult-use, recreational cannabis may reduce sales of medical cannabis.

Legalization of the sale to adults of recreational, non-medical cannabis in any country may increase competition in the medical cannabis market. We may not be able to achieve our business plan in a highly competitive market where recreational, adult-use cannabis is legal, or the market may experience a drop in the price of cannabis and cannabis products over time, decreasing our profit margins.

The Company is reliant on third party transportation services and importation services to deliver its products to customers.

The Company relies on third party transportation services and importation services to deliver its products to its customers. The Company is exposed to the inherent risks associated with relying on third party transportation service-providers, including logistical problems, delays, loss or theft of product and increased shipping and insurance costs. Any delay in transporting the product, breach of security or loss of product, could have a material adverse effect on the Company's business, financial performance and results of operations.

We may not be able to establish and maintain bank accounts in certain countries.

There is a risk that banking institutions in countries where we operate will not open accounts for us or will not accept payments or deposits from proceeds related to the ~~cannabis~~cryptocurrency industry. Such risks could increase our costs or prevent us from expanding into certain jurisdictions.

We may not be able to renew certain of our leases.

Several of the properties or facilities that we utilize in our operations are leased for a specific term. There is a risk that we may not be able to extend the term on some or all of such leases or, if we do so, that the terms of any such lease extension will be favorable. Likewise, there is a risk that some leases may expire and we will be required to relocate our operations to another location, thereby incurring costs.

~~The~~If ~~Company~~we ~~may~~or beour ~~subject~~third-party providers fail to ~~cyber-security~~protect confidential information and/or ~~privacy~~experience ~~risks~~cybersecurity ~~that~~incidents, ~~could~~there ~~disrupt~~may ~~its~~be ~~operations~~damage ~~and~~to ~~expose~~our ~~the~~brand ~~Company~~and toreputation, material financial ~~losses~~penalties, ~~contractual~~and ~~losses,~~legal liability, ~~reputational~~which ~~damage~~would materially adversely affect our business, results of operations, and ~~additional~~financial ~~expense~~condition.

~~The~~We ~~Company~~rely ~~may~~on becomputer ~~subject to risks related to our information technology~~ systems, ~~including cyber-attacks~~hardware, ~~malware~~software, ~~ransomware~~technology infrastructure and ~~phishing~~online ~~attacks~~sites ~~that~~and ~~could~~networks ~~target~~for ~~our~~both ~~intellectual~~internal ~~property,~~and ~~trade~~external ~~secrets,~~operations ~~financial~~that ~~information,~~are ~~personal~~critical ~~information~~to of our ~~employees~~business (collectively, ~~customers~~"IT ~~and~~Systems"). ~~patients,~~We ~~including~~rely ~~sensitive~~on ~~personal~~third ~~health~~parties ~~information.~~for ~~The~~a ~~occurrence~~range of ~~such~~IT anSystems ~~attack~~and ~~could~~related ~~disrupt~~products ~~our operations~~ and ~~expose the Company to financial losses~~services, ~~contractual~~including ~~damages,~~but ~~liability~~not ~~under~~limited ~~labor~~to ~~and~~cloud ~~privacy~~computing ~~laws, reputational damage and additional expenses~~services. We ~~have~~and ~~implemented~~certain ~~security~~of ~~measures~~our tothird-party ~~protect~~providers ~~our~~collect, ~~data~~maintain and ~~information~~process ~~technology~~data ~~systems;~~about ~~however~~customers, ~~such~~employees, ~~measures~~business ~~may~~partners ~~not~~and beothers, ~~effective~~including ininformation ~~preventing~~about ~~cyber-attacks.~~individuals Weand ~~may~~their befinancial ~~required~~assets to(such ~~allocate~~as ~~additional~~0G), ~~resources~~as towell ~~implement~~as ~~additional~~proprietary ~~preventative measures including significant investments in~~ information ~~technology~~belonging ~~systems.~~to ~~A serious cyber-security breach could have a material adverse effect on~~ our business, ~~financial~~such ~~condition~~as ~~and~~trade ~~results~~secrets of(collectively, ~~operations~~"Confidential Information").

20We face numerous and evolving cybersecurity risks that threaten the confidentiality, integrity and availability of our IT Systems and Confidential Information, including from diverse threat actors, such as state-sponsored organizations, opportunistic hackers and hacktivists, as well as through diverse attack vectors, such as social engineering/phishing, malware (including ransomware), malfeasance by insiders, human or technological error, and as a result of malicious code embedded in open-source software, or misconfigurations, bugs or other vulnerabilities in commercial software that is integrated into our (or our suppliers' or service providers') IT Systems, products or services. As knowledge and techniques in cryptography continue to advance, threat actors may exploit these advancements to develop more sophisticated and effective attack methods, increasing the frequency and severity of cyberattacks as well. Because we make extensive use of third party suppliers, service providers, and partners (including our partnerships with crypto wallet providers and financial institutions), successful cyberattacks that disrupt or result in unauthorized access to third party IT Systems can materially impact our operations and financial results.

~~The~~Moreover, ~~Company~~we may ~~collect~~acquire companies with cybersecurity vulnerabilities and/or ~~store~~unsophisticated ~~certain~~security ~~personal~~measures, ~~information~~which ~~about~~exposes ~~customers~~us to significant cybersecurity, operational, and isfinancial ~~responsible~~risks. ~~for~~Our ~~protecting~~remote ~~such~~and ~~information~~hybrid ~~from~~working ~~privacy~~arrangements ~~breaches~~(and at our third-party providers) also increase cybersecurity risks due to the challenges associated with managing remote computing assets and security vulnerabilities that are present in many non-corporate and home networks. AAdditionally, ~~privacy~~any ~~breach~~integration ~~may~~of ~~occur~~AI ~~through~~in ~~procedural~~our or ~~process~~any ~~failure~~service providers' operations, ~~information~~products ~~technology~~or ~~malfunction,~~services is expected to pose new or ~~deliberate~~unknown ~~unauthorized~~cybersecurity ~~intrusions~~risks and challenges. InBecause ~~addition~~our products and services are integrated with our customers' systems and processes, ~~theft~~any circumvention or failure of ~~data~~our iscybersecurity andefenses ~~ongoing~~or ~~risk~~measures ~~whether~~could ~~perpetrated~~compromise ~~via~~the ~~employee~~confidentiality, ~~collusion~~integrity, orand ~~negligence~~availability of our customers' own IT Systems and/or ~~through~~Confidential ~~deliberate~~Information ~~cyber-attack~~as well. ~~Any~~Moreover, ~~such~~certain ~~privacy~~threats ~~breach~~are designed to remain dormant or ~~theft~~undetectable ~~could~~until ~~have~~launched against a ~~material~~target ~~adverse~~and ~~effect~~we onmay ~~the~~not ~~Company's~~be ~~business,~~able ~~financial~~to ~~condition~~implement ~~and~~adequate ~~results~~preventative ~~of operations~~measures. If ~~the~~such ~~Company~~an event were ~~found~~ to beoccur and cause interruptions in ~~violation~~our ofoperations, ~~privacy~~result orin ~~security~~the ~~rules~~unauthorized oraccess, ~~other~~disclosure, ~~laws~~loss, ~~protecting~~processing, ~~the~~or ~~confidentiality~~other compromise of personal information or Confidential Information, or jeopardize the ~~Company~~confidentiality, ~~could~~integrity, beor ~~subject~~availability toof ~~sanctions~~our ~~and~~information ~~civil~~systems or ~~criminal~~any ~~penalties~~information residing therein, ~~which~~it could ~~increase~~result ~~its~~in ~~liabilities,~~a ~~harm~~material ~~its~~disruption ~~reputation~~of our development programs and ~~have~~our abusiness ~~material~~operations, ~~adverse~~whether ~~effect~~due onto ~~the~~a ~~Company's~~loss ~~business,~~of ~~financial~~our ~~condition~~trade ~~and~~secrets ~~results~~or ofother ~~operations~~similar disruptions.

~~The Company may incur significant costs to defend its intellectual property and other proprietary rights.~~18

~~The~~Some ~~ownership and protection~~ of ~~trademarks~~the federal, ~~patents~~state, ~~trade~~and ~~secrets~~foreign ~~and~~government ~~intellectual~~requirements ~~property~~include ~~rights~~obligations ~~are~~of ~~significant~~companies ~~aspects~~to notify individuals of ~~the~~certain ~~Company's~~cybersecurity ~~future~~breaches ~~success.~~involving ~~Unauthorized~~particular ~~parties~~personal ~~may~~information, ~~attempt~~which tocould ~~replicate~~result from breaches experienced by us or ~~otherwise~~by ~~obtain~~our ~~and~~vendors, ~~use~~contractors, ~~the~~or ~~Company's~~organizations ~~products~~with ~~and~~which ~~technology~~we have formed strategic relationships. ~~Policing~~Even ~~the~~though ~~unauthorized~~we ~~use~~may ofhave ~~the~~contractual ~~Company's~~protections ~~current~~with orsuch ~~future~~vendors, ~~trademarks~~contractors, ~~patents~~or other organizations, ~~trade~~notifications ~~secrets~~and orfollow-up ~~intellectual~~actions ~~property~~related ~~rights~~to a cybersecurity breach could beimpact ~~difficult~~our reputation, ~~expensive~~cause us to incur significant costs, ~~time-consuming~~including ~~and~~legal ~~unpredictable~~expenses, asharm ~~may~~customer beconfidence, ~~enforcing~~hurt ~~these~~our ~~rights~~expansion ~~against~~into ~~unauthorized~~new ~~use~~markets, bycause ~~others~~us to incur remediation costs, or cause us to lose existing customers.

~~In addition~~Further, ~~other~~the ~~parties~~cryptocurrency ~~may~~industry ~~claim~~is ~~that~~a ~~the~~frequent ~~Company's~~target ~~products~~for ~~infringe~~cyberattacks, onincluding ~~their~~hacks ~~proprietary~~of exchanges and ~~perhaps patent protected rights~~wallets. ~~Such~~The ~~claims,~~underlying ~~regardless~~technology of ~~their merit~~cryptocurrencies, ~~may~~including ~~result~~blockchain, inis ~~the~~complex ~~expenditure~~and ofstill ~~significant~~developing, ~~financial~~which ~~and~~means ~~managerial~~technical ~~resources~~issues, ~~legal fees~~bugs, ~~injunctions,~~or ~~temporary~~vulnerabilities ~~restraining~~could ~~orders~~impact ~~and/or~~our ~~require~~operations and the ~~payment~~security of ~~damages~~user funds. ~~As well~~Additionally, ~~the~~any ~~Company~~actual ~~may~~or ~~need~~perceived tobreach ~~obtain~~or ~~licenses~~cybersecurity ~~from~~attack ~~third~~directed ~~parties~~at ~~who~~other ~~allege~~financial ~~that~~institutions ~~the~~or ~~Company~~crypto ~~has~~companies, ~~infringed~~whether onor ~~their~~not ~~lawful~~we ~~rights.~~are ~~Such~~directly ~~licenses~~impacted, ~~may~~could ~~not~~lead beto ~~available~~a ongeneral ~~terms~~loss ~~acceptable~~of tocustomer confidence in the ~~Company~~cryptoeconomy or atin ~~all. In addition,~~ the ~~Company~~use ~~may~~of ~~not~~technology ~~be able~~ to ~~obtain~~conduct orfinancial ~~utilize~~transactions, onwhich ~~terms~~could ~~that~~negatively ~~are~~impact ~~favorable to it~~us, orincluding atthe ~~all,~~market ~~licenses~~perception orof ~~other~~the ~~rights~~effectiveness ~~with~~of ~~respect~~our tosecurity ~~intellectual~~measures ~~property~~and ~~that~~technology ~~it does not own~~infrastructure.

Cyberattacks are expected to accelerate on a global basis in frequency and magnitude as threat actors are becoming increasingly sophisticated in using techniques and tools - including AI - that circumvent security controls, evade detection and remove forensic evidence. As a result, we may be unable to detect, investigate, remediate or recover from future attacks or incidents, or to avoid a material adverse impact to our IT Systems, Confidential Information or business. There can also be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or effective in protecting our IT Systems and Confidential Information. Furthermore, given the nature of complex systems, software and services like ours, and the scanning tools that we deploy across our networks and products, we regularly identify and track security vulnerabilities. We are unable to comprehensively apply patches or confirm that measures are in place to mitigate all such vulnerabilities, or that patches will be applied before vulnerabilities are exploited by a threat actor. In other situations, vulnerabilities persist even after we have issued security patches because our customers may fail to apply patches or update their systems to newer software versions. If attackers are able to exploit critical vulnerabilities before patches are installed or mitigating measures are implemented, significant compromises could impact our and our customers' IT Systems and/or Confidential Information.

We and certain of our third-party providers regularly experience cyberattacks and other incidents, and we expect such attacks and incidents to continue in varying degrees. While to date no incidents have had a material impact on our operations or financial results, we cannot guarantee that material incidents will not occur in the future. Any adverse impact to the availability, integrity or confidentiality of our IT Systems or Confidential Information can result in legal claims or proceedings (such as class actions), regulatory investigations and enforcement actions, fines and penalties, negative reputational impacts that cause us to lose existing or future customers, and/or significant incident response, system restoration or remediation and future compliance costs. Any or all of the foregoing could materially adversely affect our business, results of operations, and financial condition. Finally, we cannot guarantee that any costs and liabilities incurred in relation to an attack or incident will be covered by our existing insurance policies or that applicable insurance will be available to us in the future on economically reasonable terms or at all.

The Company may incur additional liability as a result of the insolvency of a subsidiary.

The Company's subsidiaries are separate and distinct legal entities. Any right that the Company has to receive any assets of or distributions from any subsidiary upon its bankruptcy, dissolution, liquidation, or reorganization, or to realize proceeds from the sale of the assets of any subsidiary, will be junior to the claims of that subsidiary's creditors, including trade creditors. The Company may also be exposed to claims upon insolvency of a subsidiary in some jurisdictions where local laws or case law may provide for recourse against shareholders, especially when assets are insufficient to cover liabilities, including workforce redundancy costs.

~~RISKS RELATED TO OUR REGULATORY FRAMEWORK~~19

~~Marijuana~~We ~~remains~~may ~~illegal~~be ~~under~~subject ~~U.S.~~to ~~federal~~regulatory ~~law,~~developments ~~and~~related ~~the~~to ~~enforcement~~crypto ofassets ~~U.S.~~and ~~cannabis~~crypto ~~laws~~asset markets, which could ~~change~~adversely affect our business, financial condition and results of operations.

~~There~~As ~~are~~0G ~~significant~~Tokens ~~legal restrictions~~ and regulations that govern the cannabis industry in the United States. Marijuana remains a Schedule I drug under the Controlled Substances Act, making it illegal under federal law in the United States to, among other ~~things,~~digital ~~cultivate,~~assets ~~distribute~~are orrelatively ~~possess~~novel ~~cannabis~~and in the ~~United~~application ~~States. In those states in which the use~~ of ~~marijuana~~state ~~has~~and ~~been legalized, its use remains a violation of~~ federal ~~law~~securities ~~pursuant~~laws ~~to the Controlled Substances Act. The Controlled Substances Act classifies marijuana as a Schedule I controlled substance,~~ and asother ~~such,~~laws ~~medical~~ and ~~adult~~regulations ~~cannabis use is illegal under U.S. federal law. Unless and until the U.S. Congress amends the Controlled Substances Act with respect~~ to ~~marijuana~~digital ~~(and~~assets ~~the~~is ~~President~~unclear ~~approves~~in ~~such~~certain ~~amendment)~~respects, ~~there~~it is apossible ~~risk~~ that ~~federal~~regulators ~~authorities may enforce current federal law. Financial transactions involving proceeds generated by, or intended to promote, cannabis-related business activities~~ in the United States ~~may~~or ~~form~~foreign ~~the~~countries ~~basis~~may ~~for~~interpret ~~prosecution~~or ~~under~~apply ~~applicable~~existing ~~U.S. federal money laundering legislation. While the approach to enforcement of such~~ laws byand ~~the~~regulations ~~federal government~~ in ~~the~~a ~~United~~manner ~~States has trended toward non-enforcement against individuals and businesses~~ that ~~comply~~adversely ~~with~~affects ~~medical~~the orprice ~~adult-use cannabis regulatory programs in states where such programs are legal, strict compliance with state laws with respect to cannabis will neither absolve us~~ of ~~liability~~0G ~~under~~Tokens. The U.S. federal ~~law~~government, ~~nor~~states, ~~will~~regulatory itagencies ~~provide~~and aforeign ~~defense~~countries ~~to any federal proceeding which~~ may bealso ~~brought~~enact ~~against~~new ~~us. Since U.S. federal law criminalizing the use of marijuana pre-empts state~~ laws ~~that~~and ~~legalize its use~~regulations, ~~enforcement~~or ofpursue ~~federal law regarding marijuana is a significant risk and would greatly harm our business~~regulatory, ~~prospects~~legislative, ~~revenue,~~enforcement ~~results~~or ofjudicial ~~operation~~actions, ~~and~~that ~~financial~~could ~~condition.~~materially ~~The~~impact ~~enforcement~~the price of ~~federal~~0G ~~laws~~Tokens inor the ~~United~~ability ~~States~~of isindividuals aor ~~risk~~institutions tosuch ~~our~~as ~~business and any proceedings brought against~~ us ~~thereunder~~to ~~may~~own ~~materially,~~or ~~adversely~~transfer ~~affect~~0G ~~our operations and financial performance~~Tokens.

If 0G Tokens are determined to constitute a security for purposes of the federal securities laws, the additional regulatory restrictions imposed by such a determination could adversely affect the market price of 0G Tokens and in turn adversely affect the market price of our Common Shares. Moreover, the risks of us engaging in a 0G Tokens treasury strategy have created, and could continue to create complications due to the lack of experience that third parties have with companies engaging in such a strategy, such as increased costs of director and officer liability insurance or the potential inability to obtain such coverage on acceptable terms in the future.

There are risks relating to the sale of our legacy hemp and cannabis business.

On September 20, 2025, we entered into the Cannabis Sale Agreement to sell certain subsidiaries comprising our legacy hemp and cannabis business to our Noteholders, in exchange for the repayment of the Equity Transfer Notes held by such Noteholders. This disposition closed on September 26, 2025. While we have agreed to only limited indemnification and other obligations in connection with the disposition, there can be no assurance that we will not be subjected to indemnification claims or other liabilities in connection with the disposition.

Further, achieving the anticipated benefits of the disposition is subject to a number of uncertainties. There can be no assurance that we will realize the full benefits of strategic focus, cost savings and operating efficiencies that we currently expect from the transaction or that such benefits will be achieved within the anticipated time frames. Failure to achieve these anticipated benefits could result in increased costs and diversion of management's time and energy and could materially adversely affect our business, financial position, results of operations and cash flows.

The disposition may be subject to regulatory actions or private litigation that could expose us to costly and time-consuming proceedings. Failure to prevail in any such regulatory actions or private litigation could result in significant fines or monetary damages, which may require us to raise additional capital.

We may experience difficulties due to changes in management.

In connection with the Cryptocurrency Offering, on October 1, 2025, Mr. Clifford Starke resigned as a director and the Chief Executive Officer of the Company and Mr. Sammy Dorf resigned as the Executive Chairman. Further, on October 1, 2025, the Board appointed Mr. Daniel Reis-Faria and Michael Heinrich as non-independent directors of the Board, and in connection with their appointments to the Board, Mr. Reis-Faria was also appointed as the Chief Executive Officer of the Company and Mr. Heinrich was also appointed as Executive Chairman effective October 1, 2025. Neither new executive officer has previously served as an executive officer of a publicly traded company. In addition to devoting substantial time becoming integrated into our business and increasing their familiarity with our operations, each new executive officer may be required to devote substantial time fulfilling their public company compliance obligations. Such changes in our management could impair relationships with key business contacts, make it more difficult to retain employees or result in the loss of confidence in our investor base, any of which events could harm our performance. There can be no assurance that our reconstituted management will function effectively.

Our executive officers and directors hold or may have served certain management positions and directorships of other companies, including related parties, which may result in potential conflicts of interest and divert their time and attention from our business. This could have a negative impact on our ability to implement our plan of operation.

Our executive officers and directors currently serve, have previously held or may, from time to time, serve in positions as officers or directors of other companies, for which they may be entitled to substantial compensation, which may result in a conflict of interest in allocating their time between our operations and their other businesses. For example, Michael Heinrich, the Executive Chairman and a member of our Board, is the Chief Executive Officer of Zero Gravity. The 0G Token which we own is the native cryptocurrency of 0G Labs.

The existing external commitments and any future commitments of our executive officers and directors to other companies may potentially divert their significant time and attention away from the strategic and operational needs of our company. Their divided focus could lead to delays in decision-making, hinder effective communication within our Company, give rise to potential conflicts of interest, and introduce a divergence in priorities, consequently impacting the overall efficacy of leadership. Additionally, the potential for conflicting interests arising from commitments to multiple entities may pose challenges in aligning the officer's priorities with the long-term goals and interests of our company, thereby introducing an element of uncertainty and potential disruption to our operations.

RISKS RELATED TO ARTIFICIAL INTELLIGENCE AND INVESTING IN CRYPTOCURRENCY

0G is a highly volatile asset, and fluctuations in the price of 0G may influence our financial results and the market price of our listed securities.

Our financial results and the market price of our listed securities would be adversely affected, and our business and financial condition would be negatively impacted, if the price of 0G decreased substantially, including as a result of:

decreased user and investor confidence in 0G;
investment and trading activities such as (i) activities of highly active retail and institutional users, speculators and investors or (ii) actual or expected significant dispositions of 0G by large holders, including the expected liquidation of digital assets seized by governments or associated with entities that have filed for bankruptcy protection, or associated with tokens vested by the Zero Gravity core team;
a decrease in the price of other digital assets, to the extent the decrease in the price of such other digital assets may cause a decrease in the price of 0G or adversely affect investor confidence in digital assets generally;
changes in consumer preferences and the perceived value or prospects of 0G or the utility of Zero Gravity;
negative publicity, media or social media coverage, or sentiment due to events in or relating to, or perception of, 0G, Zero Gravity or the broader digital assets industry;
competition from other decentralized exchanges or digital assets that exhibit comparable or better speed, security, scalability or energy efficiency, or that feature other more favored characteristics that are backed by governments, including the U.S. government, or reserves of fiat currencies, or that represent ownership or security interests in physical assets;
developments relating to the Zero Gravity blockchain ("0G Blockchain"), including (i) changes to the 0G Blockchain that impact its security, speed, scalability, usability or value, such as changes to the cryptographic security protocol underpinning the 0G Blockchain, changes to the maximum number of 0G Tokens outstanding, changes to the mutability of transactions, changes relating to the size of blockchain blocks, and similar changes; (ii) failures to make upgrades to the 0G Blockchain and the 0G interface to adapt to security, technological, legal or other challenges; and (iii) changes to the 0G Blockchain that introduce software bugs, security risks or other elements that adversely affect 0G;
disruptions, failures, unavailability, or interruptions in services of venues for acquiring 0G;
the filing for bankruptcy protection by, liquidation of, or market concerns about the financial viability of digital asset custodians, trading venues, lending platforms, investment funds, or other digital asset industry participants;
regulatory, legislative, enforcement and judicial actions that adversely affect access to, functionality of or performance of Zero Gravity or associated products such as cryptocurrency perpetual futures, the price, ownership, transferability, trading volumes, legality or public perception of, 0G, Zero Gravity or other similar blockchains, or that adversely affect the operations of or otherwise prevent digital asset custodians, trading venues, lending platforms or other digital assets industry participants from (i) accessing 0G or Zero Gravity or associated products or (ii) operating in a manner that allows them to continue to deliver services to the digital assets industry;

~~Our~~transaction ~~activities~~congestion ~~are,~~ and ~~will~~fees ~~continue~~associated towith ~~be,~~processing ~~subject~~transactions toon ~~evolving regulation by governmental authorities. The legality of~~ the ~~production,~~Zero ~~cultivation,~~Gravity extraction, distribution, retail sales, transportation and use of cannabis differs among states in the United States. Due to the current regulatory environment in the United States, new risks may emergenetwork; ~~Management may not be able to predict all such risks.~~
~~Due~~macroeconomic tochanges, ~~the~~such ~~conflicting~~as ~~views~~changes ~~between~~in ~~state~~the ~~legislatures~~level ~~and~~of ~~the~~interest ~~federal~~rates ~~government~~and ~~regarding cannabis~~inflation, ~~cannabis~~fiscal ~~businesses are subject to inconsistent laws~~ and ~~regulations.~~monetary ~~There~~policies ~~can~~of begovernments, notrade ~~assurance~~restrictions ~~that the federal government will not enforce federal laws relating to marijuana~~ and ~~seek~~fiat tocurrency ~~prosecute~~devaluations; ~~cases involving marijuana businesses that are otherwise compliant with state laws in the future.~~and
~~The~~changes ~~uncertainty~~in ofnational ~~U.S.~~and international economic and political conditions, including, without limitation, federal ~~enforcement~~government ~~practices~~policies, ~~going~~trade ~~forward~~tariffs and trade disputes, and the ~~inconsistency~~adverse ~~between~~impacts ~~U.S.~~attributable ~~federal~~to ~~and~~global ~~state~~conflicts, ~~laws~~including ~~and~~those ~~regulations~~between ~~present~~Russia ~~major~~and ~~risks~~Ukraine ~~for~~and in the ~~Company~~Middle East.

~~Changes~~Moreover, tothe ~~federal~~price orof ~~state~~our ~~laws~~listed ~~pertaining~~securities has been and is likely to ~~industrial~~continue ~~hemp~~to ~~could~~be ~~slow~~volatile, and with the ~~use~~adoption of ~~industrial~~our ~~hemp~~new ~~which~~cryptocurrency ~~would~~treasury ~~materially~~strategy, ~~impact~~we expect to see additional volatility in our ~~revenues~~stock price. In addition, if investors view the value of our listed securities as dependent upon or linked to the value or change in ~~future~~the ~~periods~~value of our 0G holdings, the price of 0G may significantly influence the market price of our listed securities. The price of 0G has been, and is likely to continue to be, volatile.

AsWe ofplan ~~the date hereof, most states and the District of Columbia have authorized industrial hemp programs pursuant~~ to ~~the~~use 2018 Farm Bill, or under prior programs authorized under the 2014 Farm Bill or have plans under review by the USDA. Effective January 1, 2022, several states without an approved plan under the Farm Bill, or a ~~plan~~portion ~~under review, will default to the USDA Hemp Producer License. Continued development~~ of ~~the~~our ~~industrial~~capital ~~hemp~~that industry will be dependent upon new legislative authorization of industrial hemp at the state level, and further amendment or supplementation of legislation at the federal level. Any number of events or occurrences could slow or halt progress all together in this space. While progress within the industrial hemp industry is ~~currently encouraging, growth is~~ not ~~assured.~~required ~~While there appears~~ to beprovide ~~ample~~working ~~public~~capital ~~support~~ for ~~favorable~~our ~~legislative~~ongoing ~~action,~~operations ~~numerous~~to ~~factors~~acquire ~~may impact or negatively affect the legislative process(es) within the various states where we have business interests. Any one of these factors could slow or halt use of industrial hemp~~0G, which ~~could~~may ~~negatively~~adversely ~~impact~~affect ~~the business up to possibly causing us to discontinue operations as a whole. In addition, changes in Federal or state laws could require us to alter the way we conduct~~ our ~~business~~financial inresults ~~order to remain compliant with applicable state laws in ways we are presently unable to foresee. These possible changes, if necessary, could be costly~~ and ~~may~~the ~~adversely~~market ~~impact~~price ~~our results~~ of ~~operations~~our ~~in future periods~~securities.

~~Uncertainty~~We ~~caused~~plan byto ~~potential~~use ~~changes~~a portion of our capital that is not required to ~~legal~~provide working capital for our ongoing operations to acquire 0G. For example, we plan to further our new digital asset treasury strategy linked to 0G, and to explore and expand the use of the native AI functionality of the 0G to enhance the business of the Company. The price of 0G is newly established and highly volatile. Moreover, digital assets are relatively novel, and the application of securities laws and other regulations to such assets is unclear in many respects. It is possible that regulators may interpret laws in a manner that adversely affects the liquidity or value of our 0G holdings. Further, the acquisition of large amounts of 0G may become difficult or more costly, which would make it more difficult for us to implement our strategy. In addition, the application of generally accepted accounting principles in the United States with respect to digital assets remains uncertain in some respects, and any future changes in the manner in which we account for our 0G holdings could ~~impact~~have a material adverse effect on our financial results and the ~~use~~market price of ~~CBD~~our ~~products~~securities. In addition, if investors view the value of our securities as dependent upon or linked to the value or change in the value of our 0G holdings, the price of such digital assets may significantly influence the market price of our securities.

~~There~~Our ishistorical ~~substantial~~financial ~~uncertainty~~statements ~~and~~do different interpretations among federal, state and local regulatory agencies, legislators, academics and businesses as to the scope of operation of Farm Bill-compliant hemp programs relative to the emerging regulation of cannabinoids. These different opinions include, but are not ~~limited~~reflect ~~to,~~ the ~~regulation~~potential ofvariability ~~cannabinoids~~in byearnings ~~the~~that ~~FDA~~we ~~and the extent to which manufacturers of products containing Farm Bill-compliant cultivators and processors~~ may ~~engage~~experience in interstate commerce. The uncertainties cannot be resolved without further federal, and perhaps even state-level, legislation, regulation or a definitive judicial interpretation of existing legislation and rules. If these uncertainties continue, they may have an adverse effect upon the ~~introduction~~future ofrelating to our ~~products~~0G ~~in different markets~~holdings.

Since we only recently initiated our 0G treasury strategy, our historical financial statements do not reflect the potential variability in earnings that we may experience in the future from holding or selling significant amounts of 0G. The prices of digital assets have historically been subject to dramatic price fluctuations and is highly volatile. In December 2023, the Financial Accounting Standards Board issued Accounting Standards Update 2023-08, Intangibles-Goodwill and Other-Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets ("ASU 2023-08"), which we have adopted. ASU 2023-08 requires us to measure our 0G holdings at fair value in our statement of financial position, and to recognize gains and losses from changes in the fair value of our 0G in net income each reporting period. ASU 2023-08 also requires us to provide certain interim and annual disclosures with respect to our 0G holdings. As a result, volatility in our earnings may be significantly more than what we experienced in prior periods.

The concentration of our 0G holdings could enhance the risks inherent in our 0G treasury strategy.

The concentration of our 0G holdings limits the risk mitigation that we could achieve if we were to purchase a more diversified portfolio of treasury assets, and the absence of diversification enhances the risks inherent in our 0G treasury strategy. Any future significant declines in the price of 0G would have a more pronounced impact on our financial condition than if we used our cash to purchase a more diverse portfolio of assets.

~~Any~~Absent ~~failure~~federal onregulations, ~~our~~there ~~part~~is toa ~~comply~~possibility ~~with~~that ~~applicable~~0G ~~regulations~~may ~~could~~be ~~prevent~~classified usas ~~from~~a ~~being~~"security." ~~able~~Classification toof ~~carry~~0G onas ~~our~~a ~~business,~~"security" ~~and~~would ~~there~~subject ~~may~~us beto additional ~~costs~~regulation ~~associated~~and ~~with~~could ~~any~~materially ~~such~~impact ~~failure~~the operation of our business.

~~Our~~Neither ~~business~~the ~~activities~~SEC ~~are~~nor ~~heavily~~any ~~regulated~~other inU.S. ~~all~~federal ~~jurisdictions~~or ~~where~~state weregulator dohas ~~business.~~formally ~~Our~~stated ~~operations~~whether ~~are~~they ~~subject~~agree tothat ~~various~~any ~~laws,~~of ~~regulations~~the ~~and~~Cryptocurrencies ~~guidelines~~are bya ~~governmental~~"security." ~~authorities~~Despite ~~relating~~the toExecutive ~~the~~Order ~~cultivation,~~titled ~~processing,~~"Strengthening ~~manufacture,~~American ~~marketing,~~Leadership ~~management,~~in ~~distribution,~~Digital ~~transportation,~~Financial ~~storage,~~Technology" ~~sale,~~which ~~packaging,~~includes ~~labeling~~as an objective, ~~pricing~~"protecting and ~~disposal~~promoting the ability of ~~cannabis~~individual citizens and ~~cannabis~~private ~~products~~sector entities alike to access and ... Into ~~addition~~maintain self-custody of digital assets," weThe ~~are~~Cryptocurrencies ~~subject~~have tonot ~~laws~~yet ~~and~~been ~~regulations~~formally ~~relating~~classified with respect to ~~employee~~U.S. ~~health~~federal ~~and~~securities ~~safety~~laws. Therefore, ~~insurance~~while ~~coverage~~(for ~~and~~the reasons discussed below) we believe that none of the ~~environment~~Cryptocurrencies are a "security" within the meaning of the U.S. ~~Laws~~federal securities laws, and ~~regulations~~registration of the Company under the Investment Company Act, ~~applied~~is ~~generally~~therefore not required under the applicable securities laws, ~~grant~~we ~~government~~acknowledge ~~agencies~~that ~~and~~a ~~self-~~regulatory ~~bodies~~body ~~broad~~or ~~administrative~~federal ~~discretion~~court ~~over~~may ~~our~~determine ~~activities~~otherwise. Our belief, ~~including~~even if reasonable under the ~~power~~circumstances, towould ~~limit~~not preclude legal or ~~restrict~~regulatory ~~business~~action ~~activities~~based ason ~~well~~such asa ~~impose~~finding ~~additional~~that ~~disclosure~~any ~~requirements~~of onthe ~~our~~Cryptocurrencies, ~~products~~other ~~and~~than ~~services~~Solana, are a "security" which would require us to register as an investment company under the Investment Company Act.

~~Any~~We ~~failure~~have also adapted our process for analyzing the U.S. federal securities law status of the Cryptocurrencies and other cryptocurrencies over time, as guidance and case law have evolved. As part of our U.S. federal securities law analytical process, we take into account a number of factors, including the various definitions of "security" under U.S. federal securities laws and federal court decisions interpreting the elements of these definitions, such as the U.S. Supreme Court's decisions in the Howey and Reves cases, as well as court rulings, reports, orders, press releases, public statements, and speeches by usthe SEC Commissioners and SEC Staff providing guidance on when a digital asset or a transaction to ~~comply~~which ~~with~~a digital asset may relate may be a security for purposes of U.S. federal securities laws. Our position that none of the ~~applicable~~Cryptocurrencies, ~~regulatory~~other ~~requirements~~than ~~could~~Solana, are a "security" is premised, among other reasons, on our conclusion none of Cryptocurrencies meet the elements of the Howey test. Among the reasons for our conclusion none of Cryptocurrencies are a security, other than Solana, is that holders of the Cryptocurrencies do not have a reasonable expectation of profits from our efforts in respect of their holding of the Cryptocurrencies. Also, ownership of the Cryptocurrencies does not convey the right to receive any interest, rewards, or other returns.

~~• require~~We ~~extensive~~acknowledge, ~~changes~~however, that the SEC, a federal court or another relevant entity could take a different view. The regulatory treatment of the Cryptocurrencies is such that it has drawn significant attention from legislative and regulatory bodies, in particular the SEC which has previously stated it deemed the certain digital assets a security. Application of securities laws to the specific facts and circumstances of digital assets is complex and subject to change. Our conclusion, even if reasonable under the circumstances, would not preclude legal or regulatory action based on a finding that any of the Cryptocurrencies is a "security." As such, we are at risk of enforcement proceedings against us, which could result in potential injunctions, cease-and-desist orders, fines, and penalties if any of the Cryptocurrencies are determined to be a security by a regulatory body or a court. Such developments could subject us to fines, penalties, and other damages, and adversely affect our business, results of operations;, financial condition, and prospects.

~~• result~~If inwe ~~regulatory~~were ordeemed ~~agency~~to ~~proceedings~~be oran ~~investigations;~~investment company under the Investment Company Act, applicable restrictions likely would make it impractical for us to continue segments of our business as currently contemplated.

~~• result~~Under Sections 3(a)(1)(A) and (C) of the Investment Company Act, a company generally will be deemed to be an "investment company" if (i) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the ~~revocation~~business of ~~our~~investing, ~~licenses~~reinvesting, or trading in securities or (ii) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding, or trading in securities and ~~permits~~it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities, ~~increased~~shares ~~compliance~~of ~~costs;~~registered money market funds under Rule 2a-7 of the Investment Company Act, and cash items) on an unconsolidated basis.

~~• result~~Rule 3a-1 under the Investment Company Act generally provides that notwithstanding the Section 3(a)(1)(C) test described in ~~damage~~clause ~~awards~~(ii) above, ~~civil~~an orentity ~~criminal~~will ~~fines~~not be deemed to be an "investment company" for purposes of the Investment Company Act if no more than 45% of the value of its assets (exclusive of U.S. government securities, shares of registered money market funds under Rule 2a-7 of the Investment Company Act, and cash items) consists of, and no more than 45% of its net income after taxes (for the past four fiscal quarters combined) is derived from, securities other than U.S. government securities, shares of registered money market funds under Rule 2a-7 of the Investment Company Act, securities issued by employees' securities companies, securities issued by qualifying majority owned subsidiaries of such entity, and securities issued by qualifying companies that are controlled primarily by such entity. We do not believe that we are an "investment company" as such term is defined in either Section 3(a)(1)(A) or ~~penalties;~~Section 3(a)(1)(C) of the Investment Company Act.

• result in restrictions on our operations;

• harm our reputation; or

• give rise to material liabilities.

There can be no assurance that any future regulatory or agency proceedings, investigations or audits will not result in substantial costs, a diversion of management's attention and resources or other adverse consequences to our business.

Achievement of our business objectives is contingent, in part, upon compliance with regulatory requirements enacted by governmental authorities and obtaining all necessary regulatory approvals for the cultivation, processing, production, storage, distribution, transportation, sale, import and export, as applicable, of our products. Any failure to comply with the regulatory requirements applicable to our operations may lead to possible sanctions, including:

• the revocation or imposition of additional conditions on licenses to operate our business;

• the suspension or expulsion from a particular market or jurisdiction or of our key personnel;

• the imposition of additional or more stringent inspection, testing and reporting requirements;

• product recalls or seizures; and

• the imposition of fines and censures.

In addition, changes in regulations, government or judicial interpretation of regulations, or more vigorous enforcement thereof or other unanticipated events could require extensive changes to our operations, increase compliance costs or give rise to material liabilities or a revocation of our licenses and other permits. Furthermore, governmental authorities may change their administration, application or enforcement procedures at any time, which may adversely affect our ongoing regulatory compliance costs. There is no assurance that we will be able to comply or continue to comply with applicable regulations.

The FDA limits the ability to discuss the medical benefits of CBD.

Under FDA rules it is illegal for companies to make "health claims" or claim that a product has a specific medical benefit. The FDA has not recognized any medical benefits derived from CBD, which means that we are not legally permitted to advertise any potential health claims related to our CBD products. Because of the perception among many consumers that CBD is a health/medicinal product, the inability to make such health claims about its CBD products may limit our ability to market and sell products to consumers, which would negatively affect our revenues and profits.

The legal cannabis market is a relatively new industry. As a result, the size of our target market is difficult to quantify, and investors will be reliant on their own estimates on the accuracy of market data.

Because the cannabis industry is in a nascent stage, there is a lack of information about comparable companies available for potential investors to review and to decide whether to invest in us and, few, if any, established companies whose business model we can follow or upon whose success we can build. Accordingly, investors should rely on their own estimates regarding the potential size, economics and risks of the cannabis market in deciding whether to invest in our Common Shares. We are an early-stage company that has not generated net income. There can be no assurance that our growth estimates are accurate or that the cannabis market will be large enough for our business to grow as projected.

~~Although~~Recently, we ~~are~~have ~~committed~~begun focusing on pursuing opportunities to ~~researching~~expand ~~and~~our ~~developing~~portfolio ~~new~~into ~~markets~~digital ~~and~~assets. ~~products~~With ~~and~~respect ~~improving~~to ~~existing~~Section ~~products~~3(a)(1)(A), ~~there~~following ~~can~~the beCryptocurrency noOffering, ~~assurances~~approximately ~~that~~95% ~~such~~percent ~~research~~of ~~and~~the ~~market~~proceeds ~~development~~of ~~activities~~the Cryptocurrency Offering will ~~prove~~be ~~profitable~~used orto ~~that~~acquire ~~the~~Cryptocurrencies, ~~resulting~~which ~~markets~~is oran ~~products,~~amount ifin ~~any,~~excess ~~will~~of be40% ~~commercially~~of ~~viable~~our ortotal ~~successfully~~assets. ~~produced~~Since ~~and~~we ~~marketed.~~believe Wenone ~~must~~of ~~rely~~the ~~largely~~Cryptocurrencies onare ~~our~~an ~~own~~investment ~~market~~security, ~~research~~other tothan ~~forecast~~Solana, ~~sales~~our ~~and~~holdings ~~design~~of ~~products~~which aswill ~~detailed~~not ~~forecasts~~exceed ~~and~~40% ~~consumer~~of ~~research~~our ~~are~~total assets, we do not ~~generally~~hold ~~obtainable~~ourselves ~~from~~out ~~reliable~~as ~~third-party~~being ~~sources~~engaged primarily, or propose to engage primarily, in ~~Canada~~the ~~and~~business of investing, reinvesting, or trading in ~~other~~securities ~~international~~within ~~jurisdictions~~the meaning of Section 3(a)(1)(A) of the Investment Company Act.

InWith ~~addition,~~respect ~~there~~to isSection no3(a)(1)(C), ~~assurance~~we ~~that~~believe we satisfy the ~~industry~~elements of Rule 3a-1 and ~~market~~therefore ~~will~~are ~~continue~~deemed not to ~~exist~~be an investment company under, and ~~grow~~we asintend ~~currently~~to ~~estimated~~conduct orour ~~anticipated~~operations orsuch ~~function~~that ~~and~~we ~~evolve~~will innot be deemed an investment company under, Section 3(a)(1)(C). We believe that we are not an investment company pursuant to Rule 3a-1 under the ~~manner~~Investment ~~consistent~~Company Act because, on a consolidated basis with ~~management~~respect to wholly-owned subsidiaries but otherwise on an unconsolidated basis, no more than 45% of the value of the Company's ~~expectations~~total ~~and~~assets ~~assumptions.~~(exclusive Weof ~~could~~U.S. ~~also~~government besecurities, ~~subject~~shares toof ~~other~~registered ~~events~~money ormarket ~~circumstances~~funds ~~that~~under ~~adversely~~Rule ~~affect~~2a-7 of the ~~cannabis~~Investment ~~industry~~Company Act, ~~such~~and ascash items) consists of, and no more than 45% of the ~~imposition~~Company's net income after taxes (for the last four fiscal quarters combined) is derived from, securities other than U.S. government securities, shares of ~~further~~registered ~~restrictions~~money onmarket ~~sales~~funds ~~and~~under ~~marketing~~Rule or2a-7 ~~further~~of ~~restrictions~~the onInvestment ~~sales~~Company inAct, ~~certain~~securities ~~areas~~issued by employees' securities companies, securities issued by qualifying majority owned subsidiaries of the Company, and ~~markets~~securities issued by qualifying companies that are controlled primarily by the Company.

The Cryptocurrencies and other digital assets, as well as new business models and transactions enabled by blockchain technologies, present novel interpretive questions under the Investment Company Act. There is a risk that assets or arrangements that we have concluded are not securities could be deemed to be securities by the SEC or another authority for purposes of the Investment Company Act, which would increase the percentage of securities held by us for Investment Company Act purposes. The SEC has requested information from a number of participants in the digital assets ecosystem, regarding the potential application of the Investment Company Act to their businesses. For example, in an action unrelated to the Company, in February 2022, the SEC issued a cease-and-desist order under the Investment Company Act to BlockFi Lending LLC ("BlockFi"), in which the SEC alleged that BlockFi was operating as an unregistered investment company because it issued securities and also held more than 40% of its total assets, excluding cash, in investment securities, including the loans of digital assets made by BlockFi to institutional borrowers.

If we were deemed to be an investment company, Rule 3a-2 under the Investment Company Act is a safe harbor that provides a one-year grace period for transient investment companies that have a bona fide intent to be engaged primarily, as soon as is reasonably possible (in any event by the termination of such one-year period), in a business other than that of investing, reinvesting, owning, holding, or trading in securities, with such intent evidenced by the company's business activities and an appropriate resolution of its board of directors. The grace period is available not more than once every three years and runs from the earlier of (i) the date on which the issuer owns securities and/or cash having a value exceeding 50% of the issuer's total assets on either a consolidated or unconsolidated basis or (ii) the date on which the issuer owns or proposes to acquire investment securities having a value exceeding 40% of the value of such issuer's total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Accordingly, the grace period may not be available at the time that we seek to rely on Rule 3a-2; however, Rule 3a-2 is a safe harbor and we may rely on any exemption or exclusion from investment company status available to us under the Investment Company Act at any given time. Furthermore, reliance on Rule 3a-2, Section 3(a)(1)(C), or Rule 3a-1 could require us to take actions to dispose of securities, limit our ability to make certain investments or enter into joint ventures, or otherwise limit or change our service offerings and operations. If we were to be deemed an investment company in the future, restrictions imposed by the Investment Company Act - including limitations on our ability to issue different classes of stock and equity compensation to directors, officers, and employees and restrictions on management, operations, and transactions with affiliated persons - likely would make it impractical for us to continue our business as contemplated, and could have a material adverse effect on our business, results of operations, financial condition, and prospects.

The Cryptocurrencies are created and transmitted through the operations of the peer-to-peer networks, decentralized networks of computers running software following the respective protocols. If the networks of any of the Cryptocurrencies is disrupted or encounters any unanticipated difficulties, the value of the Cryptocurrencies could be negatively impacted.

If the network of any of the Cryptocurrencies is disrupted or encounters any unanticipated difficulties, then the processing of transactions on the such network may be disrupted, which in turn may prevent us from depositing or withdrawing the Cryptocurrencies from our accounts with our custodian or otherwise effecting transactions of the Cryptocurrencies. Such disruptions could include, for example: the price volatility of the Cryptocurrencies; the insolvency, business failure, interruption, default, failure to perform, security breach, or other problems of participants, custodians, or others; the closing of trading platforms of the Cryptocurrencies due to fraud, failures, security breaches, or otherwise; or network outages or congestion, power outages, or other problems or disruptions affecting the networks of the Cryptocurrencies.

In addition, although we do not currently intend to mine any of the Cryptocurrencies, digital asset validating operations can consume significant amounts of electricity, which may have a negative environmental impact and give rise to public opinion against allowing, or government regulations restricting, the use of electricity for validating operations. Additionally, validators may be forced to cease operations during an electricity shortage or power outage.

We face risks relating to the custody of the Cryptocurrencies, including the loss or destruction of private keys required to access our Cryptocurrencies and cyberattacks or other data loss relating to our Cryptocurrencies, including smart contract related losses and vulnerabilities.

We hold our Cryptocurrencies with regulated custodians that have duties to safeguard our private keys. Our custodial services contracts do not restrict our ability to reallocate our Cryptocurrencies among our custodians, and our holdings of the Cryptocurrencies may be concentrated with a single custodian from time to time. In light of the significant amount of the Cryptocurrencies we anticipate that we will hold, we continually seek to engage additional custodians to achieve a greater degree of diversification in the custody of our Cryptocurrencies as the extent of potential risk of loss is dependent, in part, on the degree of diversification. However, multiple custodians may utilize similar wallet infrastructure, cloud service providers or software systems, which could increase systemic technology risk.

If there is a decrease in the availability of digital asset custodians that we believe can safely custody our Cryptocurrencies, for example, due to regulatory developments or enforcement actions that cause custodians to discontinue or limit their services in the United States, we may need to enter into agreements that are less favorable than our current agreements or take other measures to custody our Cryptocurrencies, and our ability to seek a greater degree of diversification in the use of custodial services would be materially adversely affected. While we conduct due diligence on our custodians and any smart contract platforms we may use, there can be no assurance that such diligence will uncover all risks, including operational deficiencies, hidden vulnerabilities or legal noncompliance.

As of December 31, 2025, the insurance that covers losses of our holdings of the Cryptocurrencies may cover none or only a small fraction of the value of the entirety of our holdings of the Cryptocurrencies, and there can be no guarantee that such insurance will be maintained as part of the custodial services we have or that such coverage will cover losses with respect to our Cryptocurrencies. Moreover, our use of custodians exposes us to the risk that the Cryptocurrencies our custodians hold on our behalf could be subject to insolvency proceedings and we could be treated as a general unsecured creditor of the custodian, inhibiting our ability to exercise ownership rights with respect to such Cryptocurrencies. Any loss associated with such insolvency proceedings is unlikely to be covered by any insurance coverage we maintain related to our Cryptocurrencies. The legal framework governing digital asset ownership and rights in custodial or insolvency contexts remains uncertain and continues to evolve, which could result in unexpected losses, protracted recovery processes or adverse treatment in insolvency proceedings.

Each of the respective Cryptocurrencies is controllable only by the possessor of both the unique public key and private key(s) relating to the local or online digital wallet in which the respective Cryptocurrency is held. While the certain blockchain ledger requires a public key relating to a digital wallet to be published when used in a transaction, private keys must be safeguarded and kept private in order to prevent a third party from accessing the certain Cryptocurrencies held in such wallet. To the extent the private key(s) for a digital wallet are lost, destroyed, or otherwise compromised and no backup of the private key(s) is accessible, neither we nor our custodians will be able to access the Cryptocurrencies held in the related digital wallet. Furthermore, we cannot provide assurance that our digital wallets, nor the digital wallets of our custodians held on our behalf, will not be compromised as a result of a cyberattack. The Cryptocurrencies and blockchain ledger, as well as other digital assets and blockchain technologies, have been, and may in the future be, subject to security breaches, cyberattacks, or other malicious activities.

As part of our treasury management strategy, we may engage in staking, restaking, or other permitted activities that involve the use of "smart contracts" or decentralized applications. The use of smart contracts or decentralized applications entails certain risks including risks stemming from the existence of an "admin key" or coding flaws that could be exploited, potentially allowing a bad actor to issue or otherwise compromise the smart contract or decentralized application, potentially leading to a loss of our Cryptocurrencies. Like all software code, smart contracts are exposed to risk that the code contains a bug or other security vulnerability, which can lead to loss of assets that are held on or transacted through the contract or decentralized application. Smart contracts and decentralized applications may contain bugs, security vulnerabilities or poorly designed permission structures that could result in the irreversible loss of the Cryptocurrencies or other digital assets. Exploits, including those stemming from admin key misuse, admin key compromise, or protocol flaws, have occurred in the past and may occur in the future.

Our 0G treasury strategy subjects us to enhanced regulatory oversight.

There has been increasing focus on the extent to which digital assets can be used to launder the proceeds of illegal activities, fund criminal or terrorist activities, or circumvent sanctions regimes, including those sanctions imposed in response to the ongoing conflict between Russia and Ukraine. We intend to implement and maintain policies and procedures reasonably designed to promote compliance with applicable anti-money laundering ("AML") and sanctions laws and regulations and to only acquire our 0G through entities subject to anti-money laundering regulation and related compliance rules in the United States. Our initial 0G transactions will be executed by working together with reputable digital asset trading service providers that have what we believe to be comprehensive and robust AML policies and procedures. In addition, we plan to adopt policies and procedures to help ensure AML compliance with respect to any potential 0G transactions handled by us directly, including conducting comprehensive, enterprise-wide AML risk assessments, taking steps to identify investors and beneficial owners, performing ongoing sanctions screening, monitoring transactions for suspicious activities, providing training to employees and directors, and managing third-party service provider risks through due diligence and contractual requirements. Notwithstanding these planned efforts, if we are found to have purchased any of our 0G from bad actors that have used 0G to launder money or persons subject to sanctions, we may be subject to regulatory proceedings and any further transactions or dealings in 0G by us may be restricted or prohibited.

Increased enforcement activity and changes in the regulatory environment, including evolving or changing interpretations and the implementation of new or varying regulatory requirements by the government or any new legislation affecting 0G, as well as enforcement actions involving or impacting our trading venues, counterparties and custodians, may impose significant costs or significantly limit our ability to hold and transact in 0G.

In addition, private actors that are wary of 0G or the regulatory concerns associated with 0G have in the past taken and may in the future take further actions that may have an adverse effect on our business or the market price of our listed securities. For example, it is possible that a financial institution could restrict customers from buying our securities if it were to determine that the value of our securities is closely tied to the performance of 0G, signaling a reluctance to facilitate exposure to virtual currencies.

Competition from the emergence or growth of other digital assets, likely accelerated by advancements in AI and blockchain technology, could have a negative impact on the price of 0G and adversely affect the value of our 0G holdings.

The digital asset market is highly competitive and rapidly evolving, with numerous alternative cryptocurrencies, blockchains, and decentralized finance (DeFi) platforms vying for market share in areas such as perpetual futures trading, staking, and on-chain liquidity provision, which are core to the Zero Gravity ecosystem and its 0G token. Existing or emerging competitors could attract users and developers away from the Zero Gravity ecosystem by providing superior technology, lower fees, faster transaction speeds or broader ecosystem integrations, potentially eroding Zero Gravity's market position and leading to reduced trading volumes, staking participation, and overall demand. Many consortiums and financial institutions are also researching and investing resources into private or permissioned blockchain platforms rather than open platforms like the Zero Gravity network. 0G is newly minted and supported by fewer trading platforms than more established digital assets, such as Bitcoin and Ether, which could impact its liquidity. In addition, the Zero Gravity network is in direct competition with other smart contract platforms, such as the Ethereum, Solana, Polkadot, Avalanche and Cardano networks. Competition from the emergence or growth of alternative digital assets or other smart contract platforms could have a negative impact on the demand for, and price of, 0G, and thereby adversely affect the value of our 0G holdings. Advancements in AI and blockchain technology are likely to accelerate the development of such alternative digital assets or other smart contract platforms. If 0G is unable to evolve to address such increased competition or if market participants believe that 0G's core technology is outdated or less attractive compared with other alternative digital assets or other smart contract platforms, 0G may be considered technologically obsolete by the next generation digital assets or smart contract platforms. The decline in the 0G network would materially impact the market value of 0G and adversely affect the value of our 0G holdings and our stock price.

Investors may also invest in 0G through means other than our securities, including through direct investments in 0G and other financial vehicles, including securities backed by or linked to 0G and digital asset treasury companies similar to us. Market and financial conditions, and other conditions beyond our control, may make it more attractive to gain exposure to 0G through other vehicles, rather than our securities.

Our 0G holdings will be less liquid than our cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.

Historically, the cryptocurrency market has been characterized by significant volatility in price, limited liquidity and trading volumes compared to sovereign currencies markets, relative anonymity, a developing regulatory landscape, potential susceptibility to market abuse and manipulation, compliance and internal control failures at exchanges, and various other risks inherent in its entirely electronic, virtual form and decentralized network. During times of market instability, we may not be able to sell our 0G at favorable prices or at all. As a result, our 0G holdings may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.

Further, the 0G we hold with our custodians and transact with our trade execution partners does not enjoy the same protections as are available to cash or securities deposited with or transacted by institutions subject to regulation by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation.

Additionally, we may be unable to enter into term loans or other capital raising transactions collateralized by our unencumbered 0G or otherwise generate funds using our 0G holdings, including in particular during times of market instability or when the price of 0G has declined significantly. If we are unable to sell our 0G, enter into additional capital raising transactions, including capital raising transactions using 0G as collateral, or otherwise generate funds using our 0G holdings, or if we are forced to sell our 0G at a significant loss, in order to meet our working capital requirements, our business and financial condition could be negatively impacted.

Many countries and regulatory authorities are studying the impact of AI and may implement regulations on AI that may be difficult or impossible for the 0G Blockchain to implement and comply with.

The 0G Blockchain is designed to enable and support AI modules utilizing decentralized AI infrastructure. If there is regulation adopted in the U.S. or globally to regulate AI and machine learning modules, the 0G Blockchain, as a decentralized blockchain and protocol, may be unable to comply with such regulations which may adversely affect the 0G Blockchain and the 0G Token or could require the 0G Blockchain to terminate or suspect certain features, services and tools. Further, as a decentralized network, it is possible that the 0G Blockchain continues to operate without complying with applicable regulations, which could materially affect our business and our financial condition could be negatively impacted.

AI, including generative AI, advancements are progressing at an unprecedented pace, which brings risks that could subject us to loss through various technical, legal, and opportunistic-related risks.

We continue to advance in the development and integration of AI systems across our operations. AI systems may fail to perform as expected under certain conditions or become vulnerable to adversarial attacks that manipulate the AI's output. As AI becomes more integrated into our operations, the risks of system failure or malfunction increase, potentially disrupting our business processes. Additionally, use of AI may further expose computer systems to the risk of cyberattacks and may create the need for rapid modifications to our cybersecurity program.

AI systems rely heavily on vast amounts of data, which could include sensitive personal or proprietary information. If not managed and protected properly, AI systems could become targets for data breaches, exposing critical information to unauthorized access. Additionally, our service providers are also increasingly using and offering platforms powered by AI. While we advise our employees and contractors to refrain from providing confidential or sensitive information to any AI models or AI-powered platforms, we cannot predict how an AI model will process our data or if it will inadvertently provide our data to a third-party in its outputs. Any input of our confidential or sensitive data into an AI model for development or use purposes could result in inadvertent disclosure of this data at any time to an unknown third-party, which could subject us to litigation or regulatory actions or cause us to breach our contractual obligations. Additionally, datasets can inadvertently introduce bias if the data is not sufficiently diverse or representative leading to AI-driven decisions that may be unfair or discriminatory, potentially harming both individuals and our reputation.

Our long-term success depends on our ability to develop products and services to address the rapidly evolving market for digital assets, and, if we are not able to implement successful enhancements and new features for our products and services, our business could be materially and adversely affected

Rapid and significant technological changes continue to confront the industries in which we operate, including developments in blockchain and AI, including machine learning.

These new and evolving services and technologies may be superior to, impair, or render obsolete the products and services we currently offer or the technologies we currently use to provide them. Our ability to develop new products and services may be inhibited by industry-wide standards and existing and future laws and regulations. Incorporating new technologies into our products and services may require substantial expenditures and take considerable time, and we may not be successful in realizing a return on our efforts in a timely manner or at all.

Our success will depend on our ability to develop new technologies, to adapt to technology changes and evolving industry standards, to incorporate new technologies into our products and services, and to provide products and services that are tailored to specific needs and requirements of our customers. For example, generative AI has become more publicly available and enterprise adoption of generative AI has grown. If we are unable to provide enhancements and new features for our products and services or to develop new products and services that achieve market acceptance or that keep pace with rapid technological developments and evolving industry standards, our business would be materially and adversely affected.

We use AI in our services which may result in operational challenges, legal liability, reputational concerns and privacy and competitive risks.

We currently use and intend to leverage AI processes and algorithms in our Digital Assets and AI business strategy. Our use of AI may result in operational challenges, legal liability, reputational concerns, and privacy and competitive risks, which could result in adverse effects on our financial condition, results of operations, or reputation. The use of generative AI processes at scale is relatively new and may lead to challenges, concerns and risks that are significant or that we may not be able to predict, especially if our use of these technologies in the development or delivery of our services becomes more important to our operations over time.

Our AI technology relies in part on the use of third-party data, and if we lose the ability to use such data, or if such data contains gaps or inaccuracies, our business could be adversely affected.

Some of our products will rely on a variety of data sources, including market data collected from exchanges and other sources. If we are unable to access and use market data collected from these sources, or our access to such data is limited, the ability of our AI to properly analyze market data could be limited. Any of the foregoing could negatively impact the accuracy and effectiveness of our AI technology and the quality of our platform's analysis and our analysts' reports could be negatively impacted. In addition, if third-party data used to improve our AI technology or train the AI model is inaccurate, or access to such third-party data is limited or becomes unavailable to us, the efficacy of our AI technology and our ability to continue to improve our AI technology would be adversely affected.

RISKS RELATED TO FINANCIALS AND ACCOUNTING

~~Management~~There ~~has~~is ~~performed~~no anassurance ~~analysis of our ability to continue as a going concern, and has determined~~ that, ~~based~~we onwill ~~our~~be ~~current~~able ~~financial position, there is a substantial doubt about our ability~~ to continue as a going concern. ~~In addition, our independent registered public accounting firm has raised substantial doubt as to our ability to continue as a going concern.~~

~~Based~~In onprior ~~its assessment~~periods, management ~~has~~had raised substantial doubt about our ability to continue as a going concern. Management’s position changed as a result of the September 22, 2025 Cryptocurrency Offering. The Company had cash and cash equivalents of $65.16 million at December 31, ~~2024~~2025, a loss of $15119.97 million for the year ended December 31, ~~2024~~2025, and an accumulated deficit of $~~158~~277.18 million at December 31, ~~2024~~2025. The Company's ~~ability to continue as a going concern is dependent on its ability to obtain additional capital. The Company~~ believes that its current level of cash and cash equivalents are ~~not~~ sufficient to continue investing in growth, while at the same time meeting its obligations as they become due. ~~These~~However, ~~conditions~~there ~~raise~~is ~~substantial~~no ~~doubt~~assurance ~~regarding~~that ~~our~~we ~~ability~~will to continue as a going concern. In an effort to alleviate these conditions, management continues to evaluate various cost reduction, asset sales, and other alternatives and may seek to raise additional funds through the issuance of equity, mezzanine or debt securities, through arrangements with strategic partners, through obtaining credit from financial institutions or otherwise.

~~Our independent registered public accounting firm has raised substantial doubt as to our ability to continue as a going concern.~~ A going concern ~~opinion~~disclosure in ~~the report of~~ our ~~independent~~annual ~~registered~~report ~~public accounting firm~~ could impair our ability to finance our operations through public or private equity offerings or debt financings, or a combination of one or more of these funding sources. Any additional equity or equity-linked debt financing could be extremely dilutive to our current stockholders. Additional capital may not be available on reasonable terms, or at all, and we may be required to terminate or significantly curtail our operations or enter into arrangements with collaborative partners or others that may require us to relinquish rights to certain aspects of our product candidates, or potential markets that we would not otherwise relinquish. If we are unable to obtain capital, our business would be jeopardized, and we may not be able to continue operations.

We may increase our foreign sales in the future, and such sales may be subject to unexpected regulatory requirements, exchange rate fluctuations and other barriers.

Our functional currency is denominated in U.S. dollars. We currently expect that a portion of our sales will be denominated in European euros and we may, in the future, have sales denominated in the currencies of additional countries in which we establish operations or distribution. In addition, we incur a portion of our operating expenses in European euros. In the future, the proportion of our sales that are international may increase. Such sales may be subject to unexpected regulatory requirements and other barriers. Any fluctuation in the exchange rates of foreign currencies may negatively affect our business, financial condition and results of operations. We have not previously engaged in foreign currency hedging. If we decide to hedge our foreign currency exposure, we may not be able to hedge effectively due to lack of experience, unreasonable costs or illiquid markets. In addition, those activities may be limited in the protection they provide from foreign currency fluctuations and can themselves result in losses.

Assumptions, estimates and judgments related to critical accounting matters could significantly affect our reported financial results or financial condition.

The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles ("U.S. GAAP") requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We base our estimates on limited historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the notes to our financial statements, the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue and expenses that are not readily apparent from other sources. Our operating results may be adversely affected if the assumptions change or if actual circumstances differ from those in the assumptions, which could cause our operating results to fall below the expectations of securities analysts and investors, resulting in a decline in the price of our Common Shares. Significant assumptions and estimates used in preparing the financial statements include those related to the credit quality of accounts receivable, income tax credits receivable, share based payments, impairment of non-financial assets, as well as revenue and cost recognition.

There are tax risks the Company may be subject to in carrying on business in multiple jurisdictions.

We and our subsidiaries will operate and, accordingly, will be subject to income tax and other forms of taxation in multiple jurisdictions. We may be subject to income taxes and non-income taxes in a variety of jurisdictions and our tax structure may be subject to review by both domestic and foreign taxation authorities. Those tax authorities may disagree with our interpretation and/or application of relevant tax rules. A challenge by a tax authority in these circumstances might require us to incur costs in connection with litigation against the relevant tax authority or reaching a settlement with the tax authority and, if the tax authority's challenge is successful, could result in additional taxes (perhaps together with interest and penalties) being assessed on us, and as a result an increase in the amount of tax payable by us.

Taxation laws and rates which determine taxation expenses may vary significantly in different jurisdictions, and legislation governing taxation laws and rates are also subject to change. Therefore, our earnings may be affected by changes in the proportion of earnings taxed in different jurisdictions, changes in taxation rates, changes in estimates of liabilities and changes in the amount of other forms of taxation. The determination of our provision for income taxes and other tax liabilities will require significant judgment (including based on external advice) as to the interpretation and application of these rules. We may have exposure to greater than anticipated tax liabilities or expenses.

Additionally, dividends and other intra-group payments made by our subsidiaries or international branches may expose the recipients of such payments to taxes in their jurisdictions of organization and operation and such dividends and other intra-group payments may also be subject to withholding taxes imposed by the jurisdiction in which the entity making the payment is organized or tax resident. Unless such withholding taxes are fully creditable or refundable, dividends and other intra-group payments may increase the amount of tax paid by us. Although the Company and its subsidiaries arrange themselves and their affairs with a view to minimizing the incurrence of such taxes, there can be no assurance that we will succeed.

Restrictions on Deduction of Certain Expenses for U.S. Federal Income Tax Purposes.

Section 280E of the Internal Revenue Code of 1986, as amended (the "Code"), prohibits businesses from deducting certain expenses associated with trafficking-controlled substances for United States federal income tax purposes. The Internal Revenue Service (the "IRS") has invoked Code Section 280E in tax audits against various cannabis businesses in the U.S. that are permitted under applicable state laws. Section 280E of the Code prohibits cannabis businesses that are deemed to be trafficking in controlled substances from deducting certain ordinary and necessary business expenses, forcing them to pay higher effective federal tax rates than similar companies in other industries. The effective tax rate on a cannabis business depends on how large its ratio of non-deductible expenses is to its total revenues. Therefore, businesses in the U.S. legal cannabis industry may be less profitable than they would otherwise be.

Although the IRS issued a clarification allowing the deduction of certain expenses, the scope of such items is interpreted very narrowly and the bulk of operating costs and general administrative costs are not permitted to be deducted. While there are currently several pending cases before various administrative bodies and federal courts challenging these restrictions, there is no guarantee that these authorities will issue an interpretation of Code Section 280E favorable to cannabis businesses.

If our tax filing positions were to be challenged by federal, state and local or foreign tax jurisdictions, we may not be wholly successful in defending our tax filing positions. We record reserves for unrecognized tax benefits based on our assessment of the probability of successfully sustaining tax filing positions. We, therefore, analyze and consider the appropriateness of recording reserves for unrecognized tax benefits each quarter. Management exercises significant judgment when assessing the probability of successfully sustaining tax filing positions, and in determining whether a contingent tax liability should be recorded and, if so, estimating the amount. If our tax filing positions are successfully challenged, payments could be required that are in excess of reserved amounts or we may be required to reduce the carrying amount of our net deferred tax asset, either of which result could be significant to our financial condition or results of operations.

The Company may be at a higher risk of IRS audit.

The Company believes there is a greater likelihood that the IRS will audit the tax returns of its historical and now disposed cannabis-related businesses. Any such audit of our tax returns could result in us being required to pay additional tax, interest and penalties, as well as incremental accounting and legal expenses, which could be material.

The Company ~~will~~may ~~likely~~ be a "passive foreign investment company" for its current tax year, which may have adverse U.S. federal income tax consequences for U.S. investors.

The Company believes that it was not a "passive foreign investment company" ("PFIC") within the meaning of Section 1297(a) of the United States Internal Revenue Code of 1986, as amended (the "Code") for its most recently completed tax year,. ~~and~~The ~~based~~Company's onanticipated PFIC status for its current ~~business~~tax ~~plans~~year and ~~financial~~future ~~expectations~~tax years is uncertain and may depend on, itamong ~~believes~~other ~~that~~things, ithow ~~will~~quickly ~~likely~~the beCompany amay ~~PFIC~~raise ~~for~~cash pursuant to various offerings, the manner in which, and how quickly, the Company utilizes its ~~current~~cash ~~tax~~on ~~year~~hand and ~~may~~the becash aproceeds ~~PFIC~~received from such offerings, the business conducted by the Company going forward and the assets held by the Company in ~~subsequent~~connection ~~tax~~with ~~years~~such business, as well as on changes in the market value of Common Shares. If the Company is a PFIC for any year during a U.S. taxpayer's holding period of Common Shares, then such U.S. taxpayer generally will be required to treat any gain realized upon a disposition of the Common Shares or any so-called "excess distribution" received on its Common Shares as ordinary income, and to pay an interest charge on a portion of such gain or distribution. In certain circumstances, the sum of the tax and the interest charge may exceed the total amount of proceeds realized on the disposition, or the amount of excess distribution received, by the U.S. taxpayer. Subject to certain limitations, these tax consequences may be ~~mitigated~~altered if a U.S. taxpayer makes a timely and effective "QEF election" under ~~Code~~ Section 1295 of the Code ("QEF Election") or a "mark-to-market" election under Section 1296 of the Code ("Mark-to-Market Election"). U.S. taxpayers should be aware that there can be no assurances that the Company will satisfy the record keeping requirements that apply to a qualified electing fund (a "QEF"), or that the Company will supply U.S. taxpayers with information that such U.S. taxpayers are required to report under the QEF rules, in the event the Company is a PFIC. Thus, U.S. Holders may not be able to make a QEF Election with respect to ~~their~~the ~~Common~~Company ~~Shares~~or any of its subsidiaries. A U.S. taxpayer who makes a Mark-to-Market Election generally must include as ordinary income each year the excess of the fair market value of the Common Shares over the taxpayer's adjusted tax basis therein. This paragraph is qualified in its entirety by the discussion below under the heading ~~of "~~“Certain United States Federal Income Taxation Considerations -– Passive Foreign Investment Company Rules”." Each potential investor who is a U.S. taxpayer should consult its own tax advisor regarding the tax consequences of the PFIC rules and the acquisition, ownership, and disposition of the Common Shares.

The Company's ability to use its U.S. net operating loss carryforwards to offset its future U.S. taxable income may be subject to limitations.

The Company's U.S. federal net operating loss carryforwards ("NOLs") generated in taxable years beginning before January 1, 2018 may be carried forward for 20 years. The Company's U.S. federal NOLs generated in taxable years beginning after December 31, 2017 may be carried forward indefinitely, but the utilization of such NOLs is limited. In addition, under Section 382 of the Code, a corporation that undergoes an "ownership change" (generally defined as a greater than 50% change (by value) in its stock ownership over a three-year period) is subject to limitations on its ability to utilize its pre-change U.S. federal NOLs to offset its future U.S. taxable income. If the Company has undergone an ownership change in the past, or if future changes in its stock ownership, some of which are outside its control, results in an ownership change, its ability to utilize its U.S. federal NOLs may be limited by Section 382 of the Code. It is uncertain if and to what extent U.S. states will conform to U.S. federal income tax law with respect to the treatment of NOLs. As a result, the Company's ability to use its U.S. NOLs to offset its future U.S. taxable income may be subject to limitations, which could increase its tax liability and decrease its cash flow.

Changes in global and local tax laws and regulations in jurisdictions in which the Company operates may adversely impact the Company and the value of the Common Shares.

Changes to tax laws in the U.S. or in any jurisdiction in which the Company conducts business (which changes may have retroactive application) could adversely affect the Company or holders of the Common Shares. In recent years, many changes to U.S. federal income tax laws have been proposed and made, and additional changes to U.S. federal income tax laws are likely to continue to occur in the future.

The U.S. Congress is currently considering numerous items of legislation which may be enacted prospectively or with retroactive effect, which legislation could adversely impact the Company's financial performance and the value of the Common Shares. For ~~Additionally~~example, ~~states~~on inJuly ~~which~~4, 2025, the ~~Company~~President ~~operates~~of orthe ~~owns~~United ~~assets~~States ~~may~~signed ~~impose~~into law a new ortax ~~increased~~bill ~~taxes.~~commonly Ifreferred ~~enacted,~~to ~~most~~as of“One ~~the~~Big ~~proposals~~Beautiful ~~would~~Bill beAct” ~~effective~~which ~~for~~may affect the ~~current~~U.S. orfederal ~~later~~income ~~years~~tax considerations applicable to certain investors in Common Shares. The ~~proposed~~likelihood of other similar legislation ~~remains~~being ~~subject~~enacted tois ~~change~~uncertain, and ~~its~~the ~~impact~~provisions onof ~~the~~such ~~Company~~bill ~~and~~or ~~purchasers~~other similar legislation may change prior to enactment. Investors are urged to consult their own tax advisors regarding the potential application of the ~~Common~~proposed ~~Shares~~legislation iswith ~~uncertain~~respect to their ownership of Common Shares.

In addition, the Inflation Reduction Act of 2022 includes provisions that impact the U.S. federal income taxation of corporations. Among other items, this legislation includes provisions that impose a minimum tax on the book income of certain large corporations and an excise tax on certain corporate stock repurchases that is imposed on the corporation purchasing such stock. It is unclear how this legislation will be implemented by the U.S. Department of the Treasury and the Company cannot predict how this legislation or any future changes in tax laws might affect the Company or purchasers of the Common Shares.

A number of international legislative and regulatory bodies have proposed legislation and begun investigations of the tax practices of multinational companies and, in the European Union, the tax policies of certain European Union member states. One of these efforts has been led by the Organization for Economic Co-operation and Development (OECD), which has finalized recommendations to revise corporate tax, transfer pricing, and tax treaty provisions in member countries. On December 15, 2022, European Union member states unanimously adopted the Minimum Tax Directive ensuring a global minimum level of taxation for multinational companies. Member states had until December 31, 2023, to transpose the Minimum Tax Directive into national legislation. The enactment of this and the heightened interest in and taxation of large multinational companies increase tax uncertainty and could ultimately have a material effect on our effective tax rate, income tax expense, net income, or cash flows.

Failure to develop our internal controls over financial reporting as we grow could have an adverse effect on our operations.

As we mature we will need to continue to develop and improve our current internal control systems and procedures to manage our growth. We are required to establish and maintain appropriate internal controls over financial reporting. Failure to establish appropriate controls, or any failure of those controls once established, could adversely affect our public disclosures regarding our business, financial condition or results of operations. In addition, management's assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters that may raise concerns for investors. In connection with the audit of our financials for the year ended December 31, 2021, the Company's auditors noted material weaknesses and made certain recommendations to management regarding material weaknesses related to goodwill impairment testing and purchase price allocations, contract receivables and corresponding revenue and inventory procedures (the "2021 Material Weaknesses"). In connection with the 2021 Material Weaknesses, the Company allocated resources to its remediation plan, including (i) continuing to enhance our impairment testing procedures with the assistance of our third party experts (ii) implementing enhanced credit assessment over the creditworthiness of certain contract receivables and their corresponding revenue and (iii) implementing regularly scheduled physical inventory counts in all company locations and reconciling with internal accounting records. As of December 31, 2022, management believed the 2021 Material Weaknesses relating to its contract receivables and corresponding revenue and investor procedures have been fully remediated.

However, in connection with the audit of our financials for the year ended December 31, 2022, our auditors noted that the material weakness with respect to goodwill impairment testing and purchase price allocations remains un-remediated (the "2022 Material Weakness"). In connection with the 2022 Material Weakness, management has, and will continue to, allocate resources to its remediation plan, which include (i) the establishment of additional internal procedures with respect to the documentation of budget and forecasting process with respect to material assumptions or determinations, (ii) the implementation of a new validation process to bolster accuracy of underlying assumptions and (iii) the assessment of our third party experts engaged to assist in the accuracy of our impairment testing. As of December 31, 2023, management believed the 2022 Material Weaknesses relating to its goodwill impairment testing and purchase price allocations have been fully remediated.

Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting, disclosure of management's assessment of our internal controls over financial reporting or disclosure of our public accounting firm's attestation to or report on management's assessment of our internal controls over financial reporting may have an adverse effect on the price of our Common Shares.

RISKS RELATED TO OUR COMMON SHARES

We will need, but may be unable to, obtain additional funding on satisfactory terms, which could dilute our shareholders or impose burdensome financial restrictions on our business.

In the future, we hope to rely on revenues generated from operations to fund all of the cash requirements of our activities. However, there can be no assurance that we will be able to generate any significant cash from our operating activities in the future. Future financings may not be available on a timely basis, in sufficient amounts or on terms acceptable to us, if at all. Any debt financing or other financing of securities senior to the Common Shares will likely include financial and other covenants that will restrict our flexibility. Any failure to comply with these covenants would have a material adverse effect on our business, prospects, financial condition and results of operations because we could lose our existing sources of funding and impair our ability to secure new sources of funding. There can be no assurance that we will be able to generate any investor interest in our securities. If we do not obtain additional financing, our business may never commence, in which case you would likely lose the entirety of your investment in the Company.

Holders of our Common Shares are subject to dilution resulting from the issuance of equity-based compensation by us.

We have awarded stock options and restricted common shares to our management and key employees to incentivize their performance and retention. Any additional equity grants and any exercise of existing warrants will cause our shareholders to be diluted and may negatively affect the price of the Common Shares.

We continue to incur increased costs as a result of operating as a public company and our management is required to devote substantial time to new compliance initiatives.

As a public company, particularly after we are no longer an emerging growth company, we will continue to incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2022 ("Sarbanes-Oxley Act"), and rules implemented by the SEC and Nasdaq, impose various requirements on public companies, including requirements to file annual, quarterly and event-driven reports with respect to our business and financial condition and operations and establish and maintain effective disclosure and financial controls and corporate governance practices. Our existing management team will continue to devote a substantial amount of time to these compliance initiatives, and we may need to hire additional personnel to assist us with complying with these requirements. Moreover, these rules and regulations will continue to increase our legal and financial compliance costs and will make some activities more time consuming and costly.

Pursuant to Section 404 of the Sarbanes-Oxley Act ("Section 404"), we will be required to furnish a report by our management on our internal controls over financial reporting, which, after we are no longer an emerging growth company, must be accompanied by an attestation report on internal controls over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will document and evaluate our internal controls over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of our internal controls over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal controls over financial reporting.

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some public company required activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We continue to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and divert management's time and attention from revenue generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

If we fail to meet applicable listing requirements, Nasdaq may delist our Common Shares from trading, in which case the liquidity and market price of our Common Shares could decline.

We cannot assure you that we will be able to meet the continued listing standards of Nasdaq currently or in the future. Nasdaq imposes, among other requirements, continued listing standards including a minimum bid requirement and the requirement that the ~~audit~~Audit ~~committee of the Board of Directors of the Company include three independent members as required by Nasdaq Listing Rule 5605(c)(2)(A)~~Committee. If the Company fails to meet any of the applicable continued listing standards of the Nasdaq and we are unable to regain compliance, Nasdaq may make a determination to delist our Common Shares. Any delisting of our Common Shares would likely adversely affect the market liquidity and market price of our Common Shares and our ability to obtain financing for the continuation of our operations or result in the loss of confidence by investors.

On February 25, 2025, the Company was notified by Nasdaq that it was not in compliance with the minimum bid price requirement of $1.00 per share for 30 consecutive business days as set forth in Rule 5550(a)(2) of the Nasdaq Listing Rules. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), Nasdaq provided a 180-calendar day period following the date of the notice to regain compliance. For the Company, this date is August 25, 2025. To regain compliance with this minimum bid price requirement, the Company is required to maintain a minimum closing bid price of $1.00 or more for at least 10 consecutive trading days.

Ownership of our Common Shares may be considered unlawful in some jurisdictions and holders of our Common Shares may consequently be subject to liability in such jurisdictions.

Cannabis-related financial transactions, including investment in the securities of cannabis companies and receipt of any associated benefits, such as dividends, are currently subject to anti-money laundering and a variety of other laws that vary by jurisdiction, many of which are unsettled and still developing. While the interpretation of these laws is unclear, in some jurisdictions, financial benefit directly or indirectly arising from conduct that would be considered unlawful in such jurisdiction may be viewed to be within the purview of these laws, and persons receiving any such benefit, including investors in an applicable jurisdiction, may be subject to liability under such laws. Each prospective investor should therefore contact his, her or its own legal advisor regarding the ownership of our Common Shares and any related potential liability.

The Company's directors and officers may have a conflict of interest in conducting their duties.

We may be subject to various potential conflicts of interest because of the fact that some of our officers and directors may be engaged in a range of business activities. In addition, our executive officers and directors may devote time to their outside business interests, so long as such activities do not materially or adversely interfere with their duties to the Company. In some cases, our executive officers and directors may have fiduciary obligations associated with these business interests that interfere with their ability to devote time to our business and affairs and that could adversely affect our operations. These business interests could require significant time and attention of our executive officers and directors.

As of January 1, 2023, we were required to report as a U.S. domestic issuer and the benefits of a "foreign private issuer" are no longer available to us, which will likely result in additional costs and expenses for us.33

On January 1, 2023, we lost our status as a "foreign private issuer" (within the meaning of Rule 3b-4 of the Exchange Act). Complying with these additional requirements increases our legal and audit fees which in turn, could have a material adverse effect on our business, financial condition and results of operations. As a result of being considered a "domestic issuer" for reporting and disclosure requirements. We were required to adjust our disclosure and reporting to comply with the requirements for domestic U.S. companies, including that:

• we are required to prepare and report on forms that are applicable to U.S. domestic issuers, such as Forms 10-K, 10-Q and 8-K, rather than the forms formerly used by us, such as Forms 20-F and 6-K;

• we are required to prepare and file proxy statements in accordance with SEC rules;

• we are no longer exempt from certain requirements of U.S. securities laws such as (i) Regulation FD, which restricts the selective disclosure of material information, (ii) exemptions for filing beneficial ownership reports under Section 16(a) of the Exchange Act for executive officers, directors and 10% shareholders (Forms 3, 4, and 5), and (iii) the Section 16(b) short swing profit rules;

• we are no longer permitted to disclose compensation information for our executive officers on an aggregate rather than an individual basis, although such exemption may still be available to us as long as we remain an "emerging growth company"; and

• we have lost the ability to rely upon exemptions from U.S. stock exchange rules related to corporate governance requirements that are available to foreign private issuers.

Complying with the additional requirements of being considered a "domestic issuer" for reporting and disclosure requirements increases our legal and audit fees as a result of the following reporting and disclosure requirements:

• we are not exempt from certain requirements of U.S. securities laws such as (i) Regulation FD, which restricts the selective disclosure of material information, (ii) exemptions for filing beneficial ownership reports under Section 16(a) of the Exchange Act for executive officers, directors and 10% shareholders (Forms 3, 4, and 5), and (iii) the Section 16(b) short swing profit rules;

• we are not permitted to disclose compensation information for our executive officers on an aggregate rather than an individual basis, although such exemption may still be available to us for as long as we remain an "emerging growth company"; and

• we lost the ability to rely upon exemptions from Nasdaq corporate governance requirements that are available to foreign private issuers.

The regulated nature of our business may impede or discourage a takeover, which could reduce the market price of our Common Shares.

We require and hold various government licenses to operate our business. These licensing requirements could impede a merger, amalgamation, takeover or other business combination involving us or discourage a potential acquirer from making a tender offer for our Common Shares, which, under certain circumstances, could reduce the market price of our Common Shares.

We do not intend to pay dividends on our Common Shares in the near future, and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our Common Shares.

We have never declared or paid any cash dividend on our Common Shares and do not currently intend to do so in the foreseeable future. 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 in the foreseeable future. Therefore, the success of an investment in the Common Shares will depend upon any future appreciation in their value. There is no guarantee that the Common Shares will appreciate in value or even maintain the price at which you purchased them.

We are an emerging growth company and a smaller reporting company, and our compliance with the reduced reporting and disclosure requirements applicable to emerging growth companies and smaller reporting companies could make our Common Shares less attractive to investors and may make it more difficult to raise capital as and when we need it.

We are an "“emerging growth company"”, as defined in the Jumpstart our Business Startups Act of 2012, referred to as the JOBS Act, and we expect to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved and extended adoption period for accounting pronouncements.

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 and reduced disclosure obligations regarding executive compensation in this Annual Report and our periodic reports and proxy statements.

We cannot predict whether investors will find our Common Shares less attractive as a result of our reliance on these exemptions. If some investors find our Common Shares less attractive as a result, there may be a less active trading market for our Common Shares and our stock price may be more volatile.

Additionally, because of the exemptions from various reporting requirements provided to us as an emerging growth company, we may be less attractive to investors and it may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business with other companies in our industry if they believe that our reporting is not as transparent as the reporting of other companies in our industry. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected.

Future issuances of debt securities, which would rank senior to our Common Shares upon our bankruptcy or liquidation, and future issuances of preferred stock, which could rank senior to our Common Shares for the purposes of dividends and liquidating distributions, may adversely affect the level of return you may be able to achieve from an investment in our Common Shares.

In the future, we may attempt to increase our capital resources by offering debt securities. Upon bankruptcy or liquidation, holders of our debt securities, and lenders with respect to other borrowings we may make, would receive distributions of our available assets prior to any distributions being made to holders of our Common Shares. Moreover, if we issue preferred stock, the holders of such preferred stock could be entitled to preferences over holders of Common Shares in respect of the payment of dividends and the payment of liquidating distributions. Because our decision to issue debt or preferred stock in any future offering, or borrow money from lenders, will depend in part on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any such future offerings or borrowings. Holders of our Common Shares must bear the risk that any future offerings we conduct or borrowings we make may adversely affect the level of return, if any, they may be able to achieve from an investment in our Common Shares.

If the price of our Common Shares fluctuates, you could lose a significant part of your investment.

The market price of our Common Shares could be subject to wide fluctuations in response to, among other things, the risk factors described in this section of this Annual Report, and other factors beyond our control, such as fluctuations in the valuation of companies perceived by investors to be comparable to us. Furthermore, the stock markets have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political, and market conditions, such as recessions, interest rate changes or international currency fluctuations, may negatively affect the market price of our Common Shares. In the past, many companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management's attention from other business concerns, which could seriously harm our business.

Volatility in the market price of our Common Shares may prevent investors from being able to sell their shares at or above the public offering price. As a result, you may suffer a loss on your investment.

GENERAL RISK FACTORS

Changes to United States tariff and import/export regulations may have a negative effect on our Company and, in turn, harm us.

The United States has recently enacted and proposed to enact significant new tariffs. Additionally, President Trump has directed various federal agencies to further evaluate key aspects of U.S. trade policy and there has been ongoing discussion and commentary regarding potential significant changes to U.S. trade policies, treaties and tariffs. There continues to exist significant uncertainty about the future relationship between the U.S. and other countries with respect to such trade policies, treaties and tariffs. These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the U.S. Any of these factors could depress economic activity and restrict our access to suppliers or customers and have a material adverse effect on their business, financial condition and results of operations, which in turn would negatively impact us.

Political, social and geopolitical conditions can adversely affect our business.

Political, social and geopolitical conditions in the markets in which our products are sold have been and could continue to be difficult to predict, resulting in adverse effects on our business. The results of elections, referendums or other political conditions (including government shutdowns), geopolitical events and tensions, wars and other military conflicts in these markets have in the past impacted and could continue to impact how existing laws, regulations and government programs or policies are implemented or result in uncertainty as to how such laws, regulations, programs or policies may change, including with respect to the negotiation of new trade agreements, new, expanded or retaliatory tariffs against certain countries or covering certain products or ingredients (including recent U.S. tariffs imposed or threatened to be imposed on China, Canada and Mexico and other countries and any retaliatory actions taken by such countries), sanctions, environmental and climate change regulations, taxes, benefit programs, the movement of goods, services and people between countries, relationships between countries, customer or consumer perception of a particular country or its government and other matters. Such conditions have resulted in and could continue to result in exchange rate fluctuation, limitations on access to credit markets and other corporate banking services, including working capital facilities, volatility in global stock markets and global economic uncertainty and heightened risk to employee safety, any of which can adversely affect our business.

Political uncertainty may have an adverse impact on our operating performance and results of operations.

General political uncertainty may have an adverse impact on our operating performance and results of operations. In particular, the U.S. continues to experience significant political events that cast uncertainty on global financial and economic markets, especially following the recent presidential election. It is presently unclear exactly what actions the ~~second~~current ~~Trump administration in the~~ U.S. administration will implement, and if implemented, how these actions may impact the industries in which we operate in the U.S. Any actions taken by the ~~Trump~~current U.S. administration, including the many recent executive orders, may have a negative impact on the U.S. economy and on our business, financial condition, and results of operations.

3235

The Company may become involved in legal proceedings from time to time, which could adversely affect the Company.

From time to time, we may be a party to legal and regulatory proceedings, including matters involving governmental agencies, entities with whom it does business and other proceedings arising in the ordinary course of business. We will evaluate our exposure to these legal and regulatory proceedings and establish reserves for the estimated liabilities in accordance with generally accepted accounting principles. For more information, see "Item 3. "Legal Proceedings." Assessing and predicting the outcome of these matters involves substantial uncertainties. Unexpected outcomes in these legal proceedings, or changes in management's evaluations or predictions and accompanying changes in established reserves, could have an adverse impact on our financial results.

Our participation in the ~~cannabis~~digital asset treasury industry may lead to litigation, formal or informal complaints, enforcement actions, and inquiries by third parties, other companies and/or various governmental authorities against us. Litigation, complaints, and enforcement actions involving us could consume considerable amounts of financial and other corporate resources, which could have an adverse effect on our future cash flows, earnings, results of operations and financial condition.

The Company's success will depend, in part, on its ability to continue to enhance its product and service offerings to respond to technological and regulatory changes and emerging industry standards and practices.

Rapidly changing markets, technology, emerging industry and regulatory standards and frequent introduction of new products characterize the Company's business. The introduction of new products embodying new technologies and regulatory developments may render the Company's equipment obsolete and its products and services less competitive or less marketable. The process of developing the Company's products and services is complex and requires significant continuing costs, development efforts, third-party commitments and regulatory approvals. The Company may not be successful in developing or effectively commercializing such new products and services, or obtaining any required regulatory approvals, which, together with any capital expenditures made in the course of developing such products and services, may have a material adverse effect on the Company's business, financial condition and operating results.

We are dependent upon our management and key employees, and the loss of any member of our management team or key employees could have a material adverse effect on our operations.

The Company's success is dependent upon the ability, expertise, judgment, discretion and good faith of its senior management and key employees. The loss of any member of our management team or key employees could have a material adverse effect on our business and results of operations. While employment agreements and incentive programs are customarily used as primary methods of retaining the services of key employees, these agreements and incentive programs cannot assure the continued services of such employees. Any loss of the services of such individuals, or an inability to attract other suitably qualified persons when needed, could have a material adverse effect on the Company's business, operating results or financial condition. We do not currently maintain key-person insurance on the lives of any of our key employees. Competition for qualified technical, sales and marketing staff, as well as officers and directors can be intense, and no assurance can be provided that the Company will be able to attract or retain key employees in the future, which may adversely affect the Company's operations.

Our inability to retain and acquire skilled personnel could impair our business and operations.

The loss of any member of our management team could have a material adverse effect on our business and results of operations. In addition, the inability to hire or the increased costs of hiring new personnel, including members of executive management, could have a material adverse effect on our business and operating results. The expansion of marketing and sales of our products will require us to find, hire and retain additional capable employees who can understand, explain, market and sell our products. There is intense competition for capable personnel in all of these areas and we may not be successful in attracting, training, integrating, motivating, or retaining new personnel, vendors, or subcontractors for these required functions. New employees often require significant training and, in many cases, take a significant amount of time before they achieve full productivity. As a result, we may incur significant costs to attract and retain employees, including significant expenditures related to salaries and benefits and compensation expenses issued in connection to equity awards, and we may lose new employees to our competitors or other companies before we realize the benefit of our investment in recruiting and training them. In addition, as we move into new jurisdictions, we will need to attract and recruit skilled employees in those new areas.

3336

We will need to grow the size of our organization, and we may experience difficulties in managing any growth we may achieve.

As our development and commercialization plans and strategies develop, we expect to need additional research, development, managerial, operational, sales, marketing, financial, accounting, legal and other resources. Future growth would impose significant added responsibilities on members of management. In order to manage growth and changes in strategy effectively, the Company must: (a) maintain adequate systems to meet customer demand; (b) expand sales and marketing, distribution capabilities, and administrative functions; (c) expand the skills and capabilities of its current management team; and (d) attract and retain qualified employees. Our management may not be able to accommodate those added responsibilities, and our failure to do so could prevent us from effectively managing future growth and successfully growing our Company.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about us, our share price and trading volume could decline.

The trading market for our Common Shares will depend, in part, on the research and reports that securities or industry analysts publish about us or our operations. We do not have any control over these analysts and their research and reports. If one or more of the analysts who cover us downgrade our shares or publish inaccurate or unfavorable research about our business, our share price would likely decline. In addition, if our operating results fail to meet the forecast of analysts, our share price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our shares could decrease, which might cause our share price and trading volume to decline.

We expect to incur significant ongoing costs and obligations related to our investment in infrastructure, growth, regulatory compliance and operations.

We expect to incur significant ongoing costs and obligations related to our investment in infrastructure and growth and regulatory compliance, which could have a material adverse effect on our results of operations, financial condition and cash flows. In addition, future changes in regulations, more vigorous enforcement thereof or other unanticipated events could require extensive changes to our operations, increased compliance costs or give rise to material liabilities, which could have a material adverse effect on our business, results of operations and financial condition. Our efforts to grow our business may be costlier than we expect, and we may not be able to generate sufficient revenue to offset such higher operating expenses. We may incur significant losses in the future for a number of reasons, including unforeseen expenses, difficulties, complications and delays, and other unknown events.

There is no assurance that the Company's insurance coverage will be sufficient to cover all claims to which the Company may become subject.

Our ~~production~~business is, in general, subject to different risks and hazards, including adverse weather conditions, fires, plant diseases and pest infestations, other natural phenomena, industrial accidents, labor disputes, changes in the legal and regulatory framework applicable to us and environmental contingencies.

We may not be able to maintain or obtain insurance of the type and amount desired at a reasonable cost. If we were to incur significant liability for which we were not fully insured, it could have an adverse effect on our business, financial condition and results of operations.

We do not currently maintain key-person insurance on the lives of any of our key employees.

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We may be unable to implement our business strategy, which could have negative financial and reputational effects on our business.

The growth and expansion of our business is heavily dependent upon the successful implementation of our business strategy. There can be no assurance that we will be successful in the implementation of our business strategy. A failure to do so could have negative financial and reputational effects on us. Future clinical research studies may lead to conclusions that dispute or conflict with our understanding and belief regarding the medical benefits, viability, safety, efficacy, dosing and social acceptance of cannabis.

The Company could be subject to a security breach that could result in significant damage or theft of products and equipment.

Breaches of security at our facilities may occur and could result in damage to or theft of products and equipment. A security breach at our facilities could result in a significant loss of inventory or work in process, expose us to liability under applicable regulations and increase expenses relating to the investigation of the breach and implementation of additional preventative security measures, any of which could have an adverse effect on our business, financial condition and results of operations.

If we or our third-party service providers experience a security breach or cyberattack and unauthorized parties obtain access to our digital assets, we may lose some or all of our digital assets and our financial condition and results of operations could be materially adversely affected.

Security breaches and cyberattacks are of particular concern with respect to our investment in digital assets. While we use highly reviewed and audited custody solutions, a successful security breach or cyberattack could result in a partial or total loss of our digital assets in a manner that may not be covered by insurance or indemnity provisions of our custody agreements with those custodians. Such a loss could have a material adverse effect on our financial condition and results of operations.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 1C. CYBERSECURITY.

We have processes in place for assessing, identifying, and managing material risks from potential unauthorized occurrences on or through our electronic information systems that could adversely affect the confidentiality, integrity, or availability of our information systems or the information residing on those systems. These include a wide variety of mechanisms, controls, technologies, methods, systems, and other processes that are designed to prevent, detect, or mitigate data loss, theft, misuse, unauthorized access, or other security incidents or vulnerabilities affecting the data. The data includes confidential, proprietary, and business and personal information that we collect, process, store, and transmit as part of our business, including on behalf of third parties. We also maintain a third-party security program to identify, prioritize, assess, mitigate and remediate third-party risks; however, we rely on the third parties we use to implement security programs commensurate with their risk, and we cannot ensure in all circumstances that their efforts will be successful.

We have implemented numerous policies and procedures concerning cybersecurity matters, which include policies that directly or indirectly relate to encryption standards, antivirus protection, remote access, multi-factor authentication, confidential information and the use of the internet, social media, email and wireless and personal devices for both Company business and personal matters while utilizing Company resources, among other relevant topics. These policies go through an internal review process on a periodic basis and are, if needed, updated and re-approved by the appropriate members of management.

Our systems periodically experience directed attacks intended to lead to interruptions and delays in our operations as well as loss, misuse or theft of personal information (of third parties, employees, and our members) and other data, confidential information, or intellectual property. Risk from cybersecurity threats, including relating to past incidents, have not materially affected our systems or business. Any significant disruption to our operations or access to our systems could adversely affect our business and results of operations. Further, a penetration of our systems or a third party's systems or other misappropriation or misuse of personal information could subject us to business, regulatory, litigation, and reputation risk, which could have a negative effect on our business, financial condition and results of operations.

We established an interdisciplinary team to monitor and assess cybersecurity risks on an ongoing basis, which is led by our Chief Financial Officer ~~("CFO")~~. It is a cross-departmental team that consists of finance and operations personnel, as well as third party legal and ~~information technology ("~~IT") consultants, with all significant implementation efforts executed by our IT consultant, who has extensive experience in IT, enterprise security and cyber risk management. This team oversees developing, maintaining and measuring compliance with the cyber risk management program, and dedicates significant resources to cybersecurity and risk management processes to adapt to the ever-changing cybersecurity landscape and to respond to emerging threats in a timely and effective manner.

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When a potential incident is first detected, the matter is communicated to the ~~CFO~~Chief Financial Officer as soon as possible so that the Company may work quickly and diligently to re-secure its systems and work to minimize any damage and further risk to it as a result thereof. Upon receipt, the ~~CFO~~Chief Financial Officer is charged with immediately investigating the report to ensure the existence or possibility of a cyberattack and employs every effort toward thwarting or limiting a cyberattack, if ongoing, to the fullest extent possible to avoid further damage and exposure to the Company and its systems. As soon as an immediate threat or cyberattack is sufficiently contained to permit it, the ~~CFO~~Chief Financial Officer notifies the Chief Executive Officer of the situation, who is charged to direct the ~~CFO~~Chief Financial Officer on any additional or special measures to be taken, including but not limited to a Company-wide alert or directive, which the ~~CFO~~Chief Financial Officer must follow/implement without delay. Questions or concerns relating to a directive's validity may be confirmed only by the ~~CFO~~Chief Financial Officer, or a designated executive officer, through a known form of contact not questionably in breach. As soon as reasonably practicable after response efforts commence, the designated executive officers are required to notify the Chair of the Audit Committee of the situation and to thereafter keep the Chair apprised of all material developments, who may escalate the matter to the full Board in the Chair's discretion. Our emergency response plan also sets forth our procedures for a transition back into normal work practices, as well as security incident investigation, remediation procedures, security incident recovery and mandatory reporting.

Our Board ~~of Directors~~ oversees the Company's aggregate risk profile and risk management process. The Board ~~of Directors~~ administers this oversight function with respect to cybersecurity risks through the Audit Committee, which is responsible for overseeing the Company's cybersecurity risk management processes, including the steps our management has taken to monitor and control cybersecurity risks.

ITEM 2. PROPERTIES.

~~The~~In ~~Company~~March ~~leases~~2025, awe 14began leasing 10,~~280~~400 sq. ft. ~~facility~~of inwarehouse ~~Pompano Beach, Florida where High Roller’s manufacturing operations~~ and ~~Just~~office ~~CBD’s~~space ~~and~~in ~~Vessel’s distribution~~Hilzingen, ~~wholesale (B2B)~~Germany, ~~and direct-to-consumer (D2C) orders are fulfilled and shipped worldwide. We currently lease this facility~~ for $201,000 a month, pursuant to a lease agreement that expires in February ~~2029~~2030. ~~The lease contains an option to extend in one 5-year increment.~~

~~Just~~We ~~CBD~~lease ~~leases~~an ~~4,184~~800 sq. ft. ofstore ~~office~~located ~~space~~ in ~~Fort Lauderdale~~Miami, Florida. Wefor ~~currently~~$8,000 per month, pursuant to a lease agreement that expires in November 2026. During the fourth quarter of 2022, we made the decision to close this ~~facility~~location and this property has been sublet to a third-party for $8,000 aper month, pursuant to a ~~lease~~sublease agreement that expires in ~~March~~November ~~2028~~2026.

TruHC leases a 6,956 square foot EU-GMP certified facility for warehouse, laboratory and office space in Hamburg, Germany. The monthly lease payments are €8,800 per month, pursuant to a lease agreement that expires in April 2025. The lease contains options to extend the lease in 5-year increments. The Company is reasonably certain of renewing this lease for another 5 years.

AV leases a 7,169 square foot facility for warehouse and office space in Brisbane, Australia. The monthly lease payments are A$7,700 per month, pursuant to a lease agreement that expires in April 2027. The lease contains two options to extend for 5-year increments.

Phatebo leases a 7,300 square foot pharmaceutical storage and logistic center certified under Good Distribution Practices located in Hilzingen, Germany. The monthly lease payments are €3,600 per month and the lease expired on February 29, 2024. The Company extended the lease for one year through February 29, 2025 after which Phatebo entered into a similar lease agreement in the same city.

Our Vessel operations were previously headquartered in Carlsbad, California, where we lease 12,000 sq. ft. of office and warehouse space for $24,000 a month, pursuant to a lease agreement that expires in August 2027. During the fourth quarter of 2022, we made the decision to shift all operations relating to Vessel and its business to our facility in Fort Lauderdale. This property has been sublet to third parties for a total of $23,000 per month, pursuant to a sublease agreement that expires in June 2027.

We lease an 800 sq. ft store located in Miami, Florida for $8,000 per month, pursuant to a lease agreement that expires in November 2026, where we previously sold Stardog merchandise. During the fourth quarter of 2022, we made the decision to close this location and this property has been sublet to a third-party for $8,000 per month, pursuant to a sublease agreement that expires in November 2026.

We believe that our current offices and facilities are sufficient to meet our anticipated needs for the foreseeable future and are suitable for the conduct of our business. We believe that suitable additional space would be available if required in the future on commercially reasonable terms.

ITEM 3. LEGAL PROCEEDINGS.

~~Below~~From ~~is a summary of certain material legal matters relating to the Company. Other than the matters disclosed below, from~~ time to time, we are involved in various routine legal proceedings incidental to the ordinary course of our business. We do not currently believe that the outcome of these legal matters have had in the recent past, or will have (with respect to any pending matters), significant effects on our financial position or profitability.

FGH-related litigation

Prior to consummating the Arrangement with FGH, we entered into an agreement with Clifford Starke, our current CEO and the former Chairman and CEO of FGH, along with certain of his affiliated entities, pursuant to which they agreed to indemnify the Company against any financial losses we may incur with respect to certain matters, up to an aggregate amount of $5,000,000. Set forth below are two legal proceedings that have been brought against subsidiaries of the Company and for which we are entitled to be indemnified by Mr. Starke and his affiliated entities:

On February 3, 2023, an action was brought in the Ontario Superior Court by Nathan Shantz and Liberacion E Inversiones S.A. against various parties, including Clifford Starke, our current CEO and the former CEO of FGH, and FGH. The statement of claim alleges that prior to closing the Arrangement, an aggregate of 8,831,109 FGH shares purportedly owned by the plaintiffs were wrongfully transferred to third parties, in part through alleged unauthorized steps taken by Mr. Starke. Plaintiffs seek, among other things, a declaration that they are the rightful owners of the shares or, in the alternative, damages. Against FGH, they claim a declaration that, by virtue of the alleged unauthorized transfer of shares, FGH acted oppressively and seek damages in the amount of $3,979,999. The defendants have brought motions to stay the proceedings on the grounds that the Ontario court lacks jurisdiction over the claim.

In December 2022, an action was brought against Franchise Cannabis Corp. ("FCC"), a wholly-owned subsidiary of FGH, in the Constance Regional Court in Germany, by the former principal shareholder of ACA Muller ADAG Pharma Vertriebs GmbH ("ACA Muller"). Plaintiff claims that FCC breached a share purchase agreement between the parties pertaining to the sale of ACA Muller to FCC and is seeking damages in the amount of $3,600,000. In March 2024, the Constance Regional Court in Germany ordered the Company to pay the plaintiff $3,000,000 plus interest thereon at a rate of 5% above the prime rate since September 6, 2020 in addition to 83% of the legal fees. The Company believes that this claim is without merit and has since filed an appeal in June 2024.

JustCBD-related litigation

On November 1, 2023, Just Brands filed an Emergency Complaint for Declaratory Judgment and Injunctive Relief in the Southern District of Florida against the Department stemming from stop sale orders issued by the Department whereby the Department prohibited Just Brands from selling and moving most of its products. Relying on Florida Statute Section 581.217, which includes the definition of "attractive to children," the Department determined Just Brand's product could not be sold or moved because the products were manufactured in the shape of humans, cartoons, or animals; in a form that bears a reasonable resemblance to an existing candy product; and containing color additives. The court ruled in favor of the Department and that Order was being appealed to the Eleventh Circuit Court of Appeals. Since then, the Department has initiated an Administrative Action claiming Just Brands moved product outside the State of Florida in violation of the stop sale orders. The statute provides for a penalty of up to $5,000 per violation. The Department sought to assess penalties on what they claimed to be a total of 215,154 violations (one for each package). The Company disputed the Department's claim and vigorously defended against this action. The total cost of inventory impacted by the stop sale orders was $1,900,000. On May 7, 2024, Just Brands and the Department agreed to a settlement and general release, whereby Just Brands will remove the products subject to the stop sales orders from the state of Florida, pay the Department $60,500 to reimburse the Department's attorney's fees, and accept a five-year revocation of its food permit in the state of Florida. By signing the release, Just Brands waived, settled and released all claims it had or might have against the Department. Similarly, on June 27, 2024, Just Brands and the Department agreed to a settlement and general release, whereby High Roller will remove the products subject to the Stop Sales Orders from the state of Florida, destroy products containing controlled substances, pay the Department $5,000 to reimburse the Department's attorney's fees, and accept a two-year suspension of the manufacture, distribution and sale of gummy hemp extract products in the state of Florida. By signing the release, High Roller waived, settled and released all claims it had or might have against the Department.

On April 30, 2024, a group representing the sellers of Just Brands LLC to Flora in February 2022 brought an action against the Company in the United States District Court for the Southern District of New York claiming that the Company failed to promptly issue additional shares in accordance with a specific formula set forth in the securities purchase agreement after the two-year anniversary of the closing, which occurred on February 24, 2024. The plaintiffs claim that they are entitled to 182,889 common shares and $38,000,000 to complete the acquisition of Just Brands LLC. The Company disputes this claim and intends to vigorously defend against these actions.

Other matters

On May 31, 2023, Maria Beatriz Fernandez Otero and Sara Cristina Jacome De Torres brought an action against the Company in the Ontario Superior Court of Justice claiming that the Company is obligated to issue 500,000 Common Shares (before the June 9, 2023 1-for-20 reverse stock split) each for a purchase price of $0.05 per share. The plaintiffs claim that they are entitled to such shares as compensation for alleged consulting services performed.

On May 31, 2023, Ramon Ricardo Castellanos Saenz and Miriam Ortiz brought an action against the Company in the Ontario Superior Court of Justice claiming that the Company is obligated to issue 1,500,000 Common Shares (before the June 9, 2023 1-for-20 reverse stock split) each for a purchase price of $0.05 per share. The plaintiffs claim that they are entitled to such shares as compensation for alleged consulting services performed.

The Company disputes these claims and intends to vigorously defend against these actions.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

Our Common Shares are traded publicly on Nasdaq under the symbol "~~FLGC~~ZSTK".

As of ~~March~~February 2227, ~~2025~~2026, there were approximately 4,~~466~~430 holders of record of our Common Shares. s

We have not declared or paid any cash dividends on our Common Shares. No cash dividends have been previously paid on our Common Shares and none are anticipated in fiscal ~~2025~~2026. We repurchased no Common Shares during the fourth quarter of the year ended December 31, ~~2024~~2025.

Unregistered sale of Equity Securities

There were no unregistered sales of equity securities by us during the year ended December 31, ~~2024~~2025 that were not reported in our quarterly reports on Form 10-Q or our current reports on Form 8-K.

Certain Canadian Federal Income Taxation Considerations

The following is a general summary of the principal Canadian federal income tax considerations generally applicable under Income Tax Act (Canada) (the "Tax Act") to a holder of Common Shares, each of whom, at all relevant times, for the purposes of the Tax Act, holds such Common Shares as capital property, deals at arm's length with the Company, is not affiliated with the Company and, for purposes of the Tax Act, is not, is not deemed to be, a resident of Canada and has not and will not use or hold or be deemed to use or hold the Common Shares in the course of carrying on business in Canada (a "Non-Resident Holder"). Special rules, which are not discussed below, may apply to a non-resident of Canada that is an insurer which carries on business in Canada and elsewhere. Such Non-Resident Holders should consult their own tax advisors.

The Common Shares will generally be considered capital property to a Non-Resident Holder unless either (i) the Non-Resident Holder holds the Common Shares in the course of carrying on a business of buying and selling securities or (ii) the Non-Resident Holder has acquired the Common Shares in a transaction or transactions considered to be an adventure or concern in the nature of trade.

The term "U.S. Holder," for the purposes of this section, means a Non-Resident Holder who, for purposes of the Canada-United States Tax Convention (1980) as amended, (the "Convention"), is at all relevant times a resident of the United States and is a "qualifying person" within the meaning of the Convention. In some circumstances, fiscally transparent entities (including limited liability companies) will be entitled to benefits under the Convention. Non-Resident Holders are urged to consult with their own tax advisors to determine their entitlement to benefits under the Convention based on their particular circumstances.

This summary is based on the current provisions of the Tax Act, the regulations thereunder (the "Regulations"), the current provisions of the Convention, counsel's understanding of the current published administrative policies and assessing practices of the Canada Revenue Agency (the "CRA") publicly available prior to the date hereof. This summary also takes into account all specific proposals to amend the Tax Act and Regulations publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (collectively, the "Proposed Tax Amendments"). No assurances can be given that the Proposed Tax Amendments will be enacted or will be enacted as proposed. Other than the Proposed Tax Amendments, this summary does not take into account or anticipate any changes in law or the administration policies or assessing practice of CRA, whether by judicial, legislative, governmental or administrative decision or action, nor does it take into account provincial, territorial or foreign income tax legislation or considerations, which may differ significantly from those discussed herein.

This summary is of a general nature only and is not intended to be, nor should it be construed to be, legal or tax advice to any particular Non-Resident Holder and no representations with respect to the income tax consequences to any particular Non-Resident Holder are made. This summary is not exhaustive of all Canadian federal income tax considerations. Accordingly, Non-Resident Holders should consult their own tax advisors with respect to their own particular circumstances. The discussion below is qualified accordingly.

Currency Conversion

Subject to certain exceptions that are not discussed herein, for purposes of the Tax Act, all amounts relating to the acquisition, holding or disposition of Common Shares, including dividends, adjusted cost base and proceeds of dispositions must be determined in Canadian dollars using the daily exchange rate of the Bank of Canada on the particular date the particular amount arose or such other rate of exchange as acceptable to the CRA.

Disposition of Common Shares

A Non-Resident Holder will not be subject to tax under the Tax Act in respect of any capital gain realized by such Non-Resident Holder on a disposition of the Common Shares, nor will capital losses arising from the disposition be recognized under the Tax Act, unless the Common Shares constitute "taxable Canadian property" (as defined in the Tax Act) of the Non-Resident Holder at the time of disposition and the Non-Resident Holder is not entitled to relief under an applicable income tax treaty or convention. As long as the shares are then listed on a "designated stock exchange" (as defined in the Tax Act) (which currently includes the TSX and the NYSE American) at the time of disposition, the Common Shares generally will not constitute taxable Canadian property of a Non-Resident Holder, unless at any time during the 60-month period immediately preceding the disposition the following two conditions are met concurrently: (i) the Non-Resident Holder, persons with whom the Non-Resident Holder did not deal at arm's length, partnerships in which the Non-Resident Holder or persons with whom the Non-Resident Holder did not deal at arm's length holds a membership interest directly or indirectly through one or more partnerships, or the Non-Resident Holder together with all such persons, owned or was considered to own 25% or more of the issued shares of any class or series of shares of the capital stock of the Company; and (ii) more than 50% of the fair market value of the Common Shares was derived directly or indirectly from one or any combination of real or immovable property situated in Canada, "Canadian resource properties" (as defined in the Tax Act), "timber resource properties" (as defined in the Tax Act) or a options in respect of, or interests in, or civil law rights in, such properties, whether or not it exists.

If the Common Shares are taxable Canadian property to a Non-Resident Holder, any capital gain realized on the disposition or deemed disposition of such shares, may not be subject to Canadian federal income tax pursuant to the terms of an applicable income tax treaty or convention between Canada and the country of residence of a Non-Resident Holder, including the Convention.

A Non-Resident Holder whose shares are taxable Canadian property should consult their own advisors.

Dividends on Common Shares

Under the Tax Act, dividends on Common Shares paid or credited to a Non-Resident Holder will be subject to Canadian withholding tax at the rate of 25% of the gross amount of the dividends. This withholding tax may be reduced pursuant to the terms of an applicable income tax treaty or convention between Canada and the country of residence of a Non-Resident Holder. Under the Convention, a U.S. Holder will generally be subject to Canadian withholding tax at a rate of 15% of the gross amount of such dividends (or 5% in the case of a U.S. Holder that is a company beneficially owning at least 10% of the Company's voting shares). In addition, under the Convention, dividends may be exempt from Canadian non-resident withholding tax if paid to certain U.S. Holders that are qualifying religious, scientific, literary, educational or charitable tax-exempt organizations and qualifying trusts, companies, organizations or arrangements operated exclusively to administer or provide pension, retirement or employee benefits that are exempt from tax in the United States and that have complied with specific administrative procedures.]

Certain United States Federal Income Taxation Considerations

The following is a general summary of certain material U.S. federal income tax considerations applicable to a U.S. Holder (as defined below) arising from and relating to the acquisition, ownership and disposition of Common Shares. This summary is for general information purposes only and does not purport to be a complete analysis or listing of all potential U.S. federal income tax considerations that may apply to a U.S. Holder arising from or relating to the acquisition, ownership and disposition of Common Shares. In addition, this summary does not take into account the individual facts and circumstances of any particular U.S. Holder that may affect the U.S. federal income tax consequences to such U.S. Holder, including, without limitation, specific tax consequences to a U.S. Holder under an applicable income tax treaty. Accordingly, this summary is not intended to be, and should not be construed as, legal or U.S. federal income tax advice with respect to any U.S. Holder. This summary does not address the U.S. federal alternative minimum, U.S. federal net investment income, U.S. federal estate and gift, U.S. state and local, and non-U.S. tax consequences to U.S. Holders of the acquisition, ownership and disposition of Common Shares. In addition, except as specifically set forth below, this summary does not discuss applicable income tax reporting requirements. Each prospective U.S. Holder should consult its own tax advisors regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal net investment income, U.S. federal estate and gift, U.S. state and local, and non-U.S. tax consequences relating to the acquisition, ownership and disposition of Common Shares.

NoThis ~~ruling~~summary ~~from~~is ~~the~~for ~~Internal~~general ~~Revenue~~information ~~Service~~purposes ~~(the~~only ~~"IRS")~~and ordoes ~~legal~~not ~~opinion~~purport ~~from~~to ~~legal~~be ~~counsel~~a ~~has~~complete ~~been~~analysis ~~requested,~~ or ~~will~~listing beof ~~obtained,~~all ~~regarding~~potential ~~the~~ U.S. federal income tax ~~consequences~~considerations ofthat may apply to a U.S. Holder arising from or relating to the acquisition, ownership ~~and~~or disposition of Common Shares. ~~This~~In addition, this summary isdoes not ~~binding~~take oninto account the ~~IRS,~~individual facts and circumstances of any particular U.S. Holder that may affect the ~~IRS~~U.S. isfederal ~~not~~income ~~precluded~~tax ~~from~~consequences ~~taking~~to such U.S. Holder, including, without limitation, specific tax consequences to a ~~position~~U.S. ~~that~~Holder under an applicable income tax treaty. Accordingly, this summary is ~~different~~not ~~from~~intended to be, and should not be construed as, legal or ~~contrary~~U.S. federal income tax advice with respect to any particular U.S. Holder. This summary does not address the U.S. federal alternative minimum tax, U.S. federal net investment income tax, U.S. federal estate and gift tax, U.S. state and local tax, or non-U.S. tax consequences to U.S. Holders of the ~~positions~~acquisition, ~~taken~~ownership inor ~~this~~disposition ~~summary~~of Common Shares. In addition, ~~because~~except ~~the~~as ~~authorities~~specifically onset ~~which~~forth below, this summary isdoes ~~based~~not ~~are~~discuss ~~subject~~applicable toincome ~~various~~tax ~~interpretations,~~reporting ~~the~~requirements. ~~IRS~~Each ~~and~~prospective U.S. Holder should consult its own tax advisors regarding the U.S. ~~courts~~federal, ~~could~~U.S. ~~disagree~~state ~~with~~and ~~one~~local, orand ~~more~~non-U.S. oftax consequences relating to the ~~conclusions~~acquisition, ~~described~~ownership inand ~~this~~disposition ~~summary~~of Common Shares.

4041

~~Scope~~No ruling from the Internal Revenue Service (the “IRS”) or legal opinion from legal counsel has been requested, or will be obtained, regarding the U.S. federal income tax consequences of the acquisition, ownership or disposition of Common Shares. This summary is not binding on the IRS, and the IRS is not precluded from taking a position that is different from, or contrary to, the positions taken in this ~~Summary~~summary. In addition, because the authorities on which this summary is based are subject to various interpretations, the IRS and the U.S. courts could disagree with one or more of the conclusions described in this summary.

~~Authorities~~This summary is based on the U.S. Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations (whether final, temporary, or proposed) promulgated thereunder, published rulings of the IRS, published administrative positions of the IRS, the current provisions of the Convention between Canada and the United States with respect to Taxes on Income and on Capital of 1980, as amended (the “Canada-U.S. Tax Convention”), and U.S. court decisions that are applicable, and, in each case, as in effect and available, as of the date of this document. Any of the authorities on which this summary is based could be changed in a material and adverse manner at any time, and any such change could be applied on a retroactive or prospective basis, which could affect the U.S. federal income tax considerations described in this summary. Except as provided herein, this summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation that, if enacted, could be applied on a retroactive or prospective basis.

This summary is based on the U.S. Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations (whether final, temporary, or proposed), published rulings of the IRS, published administrative positions of the IRS, the current provisions of the Convention between Canada and the United States with respect to Taxes on Income and on Capital of 1980, as amended (the "Canada-U.S. Tax Convention"), and U.S. court decisions that are applicable, and, in each case, as in effect and available, as of the date of this document. Any of the authorities on which this summary is based could be changed in a material and adverse manner at any time, and any such change could be applied on a retroactive or prospective basis, which could affect the U.S. federal income tax considerations described in this summary. Except as provided herein, this summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation that, if enacted, could be applied on a retroactive or prospective basis.

U.S. Holders

For purposes of this summary, the term "U.S. Holder" means a beneficial owner of Common Shares that is for U.S. federal income tax purposes:

Anan individual who is a citizen or resident of the United States;
a corporation ~~(or other entity treated as a corporation for U.S. federal income tax purposes)~~ organized under the laws of the United States, any state thereof or the District of Columbia;
an estate ~~whose~~the income of which is subject to U.S. federal income taxation regardless of its source; or
a trust that (1) is subject to the primary supervision of a court within the ~~U.S.~~United States and the control of one or more U.S. persons for all substantial decisions or (2) has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.

~~Non-U.S. Holders~~ 42

For purposes of this summary, a "non-U.S. Holder" is a beneficial owner of Common Shares that is not a U.S. Holder or an entity classified as a partnership for U.S. federal income tax purposes. This summary does not address the U.S. federal, state or local tax consequences to non-U.S. Holders arising from or relating to the acquisition, ownership and disposition of Common Shares. Accordingly, a non-U.S. Holder should consult its own tax advisors regarding the U.S. federal, state or local and non-U.S. tax consequences (including the potential application of and operation of any income tax treaties) relating to the acquisition, ownership and disposition of Common Shares.

U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed

This summary does not address the U.S. federal income tax considerations applicable to U.S. Holders that are subject to special provisions under the Code, including, but not limited to U.S. Holders that: (a) are tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other tax-deferred accounts; (b) are banks, financial institutions, underwriters, insurance companies, real estate investment trusts, or regulated investment companies; (c) are broker-dealers, dealers, or traders in securities or currencies that elect to apply a mark-to-market accounting method; (d) have a "“functional currency"” other than the U.S. dollar; (e) own Common Shares as part of a straddle, hedging transaction, conversion transaction, constructive sale, or other integrated transaction; (f) acquire Common Shares in connection with the exercise or cancellation of employee stock options or otherwise as compensation for services; (g) hold Common Shares other than as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment purposes); (h) are subject to ~~the alternative minimum tax; (i) are subject to~~ special tax accounting rules with respect to Common Shares; (ji) are partnerships or other "“pass-through"” entities (and partners or other owners thereof); (kj) are S corporations (and shareholders thereof); (lk) are U.S. expatriates or former long-term residents of the United States ~~subject to Sections 877 or 877A of the Code~~; (ml) hold Common Shares in connection with a trade or business, permanent establishment, or fixed base outside the United States; or (nm) own or have owned or will own (directly, indirectly, or by attribution) 10% or more of the total combined voting power or value of the Company'’s outstanding shares. U.S. Holders that are subject to special provisions under the Code, including, but not limited to, U.S. Holders described immediately above, should consult their own tax advisors regarding the U.S. federal, U.S. ~~federal alternative minimum, U.S. federal net investment income, U.S. federal estate and gift, U.S.~~ state and local, and non-U.S. tax consequences relating to the acquisition, ownership and disposition of Common Shares.

41If an entity or arrangement that is classified as a partnership (or other pass-through entity) for U.S. federal income tax purposes holds Common Shares, the U.S. federal income tax consequences to such entity or arrangement and the partners (or other owners or participants) of such entity or arrangement generally will depend on the activities of the entity or arrangement and the status of such partners (or owners or participants). This summary does not address the tax consequences to any such partner (or owner or participant). Partners (or other owners or participants) of entities or arrangements that are classified as partnerships or as other pass-through entities for U.S. federal income tax purposes should consult their own tax advisors regarding the U.S. federal income tax consequences arising from and relating to the acquisition, ownership and disposition of Common Shares.

If an entity or arrangement that is classified as a partnership (or other "pass-through" entity) for U.S. federal income tax purposes holds Common Shares, the U.S. federal income tax consequences to such entity or arrangement and the partners (or other owners or participants) of such entity or arrangement generally will depend on the activities of the entity or arrangement and the status of such partners (or owners or participants). This summary does not address the tax consequences to any such partner (or owner or participant). Partners (or other owners or participants) of entities or arrangements that are classified as partnerships or as "pass-through" entities for U.S. federal income tax purposes should consult their own tax advisors regarding the U.S. federal income tax consequences arising from and relating to the acquisition, ownership and disposition of Common Shares.

Passive Foreign Investment Company Rules

If the Company were to constitute a "“passive foreign investment company"” or "“PFIC"” within the meaning of Section 1297(a) of the Code (a “PFIC”) for any year during a U.S. Holder'’s holding period, then certain potentially adverse rules would affect the U.S. federal income tax ~~consequences~~considerations applicable to a such U.S. Holder resulting from the acquisition, ownership and disposition of Common Shares. The Company believes that it was not a PFIC for its most recently completed tax year,. ~~and~~The ~~based~~Company’s onanticipated PFIC status for its current ~~business~~tax ~~plans~~year and ~~financial~~future ~~expectations~~tax years is uncertain and may depend on, itamong ~~believes~~other ~~that~~things, ithow ~~will~~quickly ~~likely~~the beCompany amay ~~PFIC~~raise ~~for~~cash pursuant to various offerings, the manner in which, and how quickly, the Company utilizes its ~~current~~cash ~~tax~~on ~~year~~hand and ~~may~~the becash aproceeds ~~PFIC~~received from such offerings, the business conducted by the Company going forward and the assets held by the Company in ~~subsequent~~connection ~~tax~~with ~~years.~~such business, as well as on changes in the market value of the Common Shares. No opinion of legal counsel or ruling from the IRS concerning its status as a PFIC has been obtained or is currently planned to be requested. The determination of whether any corporation was, or will be, a PFIC for a tax year depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations. In addition, whether any corporation will be a PFIC for any tax year depends on the assets and income of such corporation over the course of each such tax year and, as a result, the Company’s PFIC status, and the PFIC status of any of the Company’s subsidiaries, for the current tax year or any future tax year cannot be predicted with certainty as of the date of this document. Accordingly, there can be no assurance that the IRS will not challenge any determination made by the Company or any of its subsidiaries concerning its PFIC status. If the Company is a PFIC for any tax year during which a U.S. Holder holds Common Shares, the Company will continue to be treated as a PFIC with respect to such U.S. Holder, regardless of whether the Company ceases to be a PFIC in one or more subsequent tax years. Each U.S. Holder should consult its own tax advisors regarding the PFIC status of the Company and each of its subsidiaries.

In addition, in any year in which the Company is classified as a PFIC, a U.S. Holder will be required to file an annual report with the IRS containing such information as Treasury Regulations and/or other IRS guidance may require. In addition to penalties, a failure to satisfy such reporting requirements may result in an extension of the time period during which the IRS can assess a tax. U.S. Holders should consult their own tax advisors regarding the requirements of filing such information returns under these rules, including the requirement to file an IRS Form 8621 annually.

The Company generally will be a PFIC if, for a tax year, (a) 75% or more of its gross income is passive income (the "PFIC income test") or (b) 50% or more of the value of its assets either produce passive income or are held for the production of passive income, based on the quarterly average of the fair market value of such assets (the "PFIC asset test"). "Gross income" generally includes all sales revenues less the cost of goods sold, plus income from investments and from incidental or outside operations or sources, and "passive income" generally includes, for example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions. Active business gains arising from the sale of commodities generally are excluded from passive income if substantially all of a foreign corporation's commodities are stock in trade or inventory, depreciable property used in a trade or business, or supplies regularly used or consumed in the ordinary course of its trade or business, and certain other requirements are satisfied.43

~~For~~The ~~purposes~~Company ofgenerally ~~the~~will be a PFIC ~~income~~if, ~~test~~for ~~and~~a ~~PFIC~~tax ~~asset~~year, ~~test~~(a) ~~described~~75% ~~above,~~or ifmore of its gross income is passive income (the ~~Company~~"PFIC ~~owns,~~income ~~directly~~test") or ~~indirectly,~~(b) 2550% or more of the ~~total~~ value of ~~the~~its ~~outstanding~~assets ~~shares~~either ofproduce ~~another~~passive ~~corporation,~~income ~~the~~or ~~Company~~are ~~will~~held befor ~~treated~~the asproduction ifof itpassive ~~(a)~~income, ~~held~~based aon ~~proportionate~~the ~~share~~quarterly average of the ~~assets~~fair market value of such ~~other~~assets ~~corporation~~(the ~~and~~"PFIC (basset test"). ~~received~~"Gross ~~directly~~income" agenerally ~~proportionate~~includes ~~share~~all ofsales revenues less the ~~income~~cost of ~~such~~goods ~~other~~sold, ~~corporation.~~plus Inincome ~~addition,~~from ~~for~~investments ~~purposes~~and offrom ~~the~~incidental ~~PFIC~~or ~~income~~outside ~~test~~operations or sources, and ~~PFIC~~"passive ~~asset~~income" ~~test~~generally ~~described~~includes, ~~above~~for example, ~~and~~dividends, ~~assuming~~interest, certain ~~other~~rents ~~requirements~~and ~~are met~~royalties, ~~"passive~~certain ~~income"~~gains ~~does~~from ~~not~~the ~~include~~sale ~~certain~~of ~~interest,~~stock ~~dividends,~~and ~~rents~~securities, orand ~~royalties~~certain ~~that~~gains ~~are~~from ~~received~~commodities ortransactions. ~~accrued~~Active bybusiness ~~the~~gains ~~Company~~arising from ~~certain~~the ~~"related~~sale ~~persons"~~of ~~(as~~commodities ~~defined~~generally inare ~~Section~~excluded ~~954(d)(3)~~from passive income if substantially all of ~~the~~a ~~Code)~~foreign ~~also~~corporation's ~~organized~~commodities are stock in ~~Canada~~trade or other inventory, todepreciable ~~the~~property ~~extent~~used ~~such~~in ~~items~~its ~~are~~trade ~~properly~~or ~~allocable~~business, toor supplies regularly used or consumed in the ~~income~~ordinary course of ~~such~~its ~~related~~trade ~~person~~or ~~that~~business, isand ~~not~~certain ~~passive~~other ~~income~~requirements are satisfied.

42For purposes of the PFIC income test and PFIC asset test described above, if the Company owns, directly or indirectly, 25% or more of the total value of the outstanding shares of another corporation, the Company will be treated as if it (a) held a proportionate share of the assets of such other corporation and (b) received directly a proportionate share of the income of such other corporation. In addition, for purposes of the PFIC income test and PFIC asset test described above, and assuming certain other requirements are met, “passive income” does not include certain interest, dividends, rents, or royalties that are received or accrued by the Company from certain “related persons” (as defined in Section 954(d)(3) of the Code), to the extent such items are properly allocable to the income of such related person that is not passive income.

Under certain attribution rules, if the Company is a PFIC, U.S. Holders will generally be deemed to own their proportionate share of the Company'’s direct or indirect equity interest in any company that is also a PFIC (a "“Subsidiary PFIC"”), and will generally be subject to U.S. federal income tax under the default rules of Section 1291 of the Code discussed below on their proportionate share of (a) any "“excess distributions,"” as described below, on the stock of a Subsidiary PFIC and (b) a disposition or deemed disposition of the stock of a Subsidiary PFIC by the Company or another Subsidiary PFIC, both as if such U.S. Holders directly held the shares of such Subsidiary PFIC. In addition, U.S. Holders may be subject to U.S. federal income tax on any indirect gain realized on the stock of a Subsidiary PFIC on the sale or disposition of Common Shares. Accordingly, U.S. Holders should be aware that they could be subject to tax under the PFIC rules even if no distributions are received and no redemptions or other dispositions of Common Shares are made.

Default PFIC Rules Under Section 1291 of the Code

If the Company is a PFIC for any tax year during which a U.S. Holder owns Common Shares, the U.S. federal income tax consequences to such U.S. Holder of the acquisition, ownership, and disposition of Common Shares will depend on whether and when such U.S. Holder makes anelections ~~election~~ to treat the Company and each Subsidiary PFIC, if any, as a "“qualified electing fund"” (a ~~or "~~“QEF"”) under Section 1295 of the Code (a "“QEF Election"”) or makes a mark-to-market election under Section 1296 of the Code (a "“Mark-to-Market Election"”) with respect to its Common Shares. A U.S. Holder that does not make either a QEF Election or a Mark-to-Market Election will be referred to in this summary as a "“Non-Electing U.S. Holder."”

A Non-Electing U.S. Holder will be subject to the default rules of Section 1291 of the Code (described below) with respect to: (a) any gain recognized on the sale or other taxable disposition of Common Shares; and (b) any "“excess distribution"” received on the Common Shares. A distribution generally will be an "“excess distribution"” to the extent that such distribution (together with all other distributions received in the current tax year) exceeds 125% of the average distributions received during the three preceding tax years (or during a U.S. Holder'’s holding period for the Common Shares, if shorter).

Under Section 1291 of the Code, if the Company were to constitute a PFIC during a Non-Electing U.S. Holder’s holding period of Common Shares, any gain recognized on the sale or other taxable disposition of Common Shares (including an indirect disposition of the stock of any Subsidiary PFIC), and any "“excess distribution"” received on Common Shares or ~~with~~a ~~respect~~distribution by a Subsidiary PFIC to ~~the~~its ~~stock~~shareholder ofthat is deemed to be received by a ~~Subsidiary~~U.S. ~~PFIC~~Holder, must be ratably allocated to each day in a Non-Electing U.S. Holder'’s holding period for the respective Common Shares. The amount of any such gain or excess distribution allocated to the tax year of disposition or distribution of the excess distribution and to years before the entity became a PFIC, if any, would be taxed as ordinary income (and not eligible for certain ~~preferred~~preferential rates). The amounts allocated to any other tax year would be subject to U.S. federal income tax at the highest tax rate applicable to ordinary income in each such year, and an interest charge would be imposed on the tax liability for each such year, calculated as if such tax liability had been due in each such year. A Non-Electing U.S. Holder that is not a corporation must treat any such interest paid as "“personal interest,"” which is not deductible.

If the Company is a PFIC for any tax year during which a Non-Electing U.S. Holder holds Common Shares, the Company will continue to be treated as a PFIC with respect to such Non-Electing U.S. Holder, regardless of whether the Company ceases to be a PFIC in one or more subsequent tax years. A Non-Electing U.S. Holder may terminate this deemed PFIC status by electing to recognize gain (which will be taxed under the rules of Section 1291 of the Code discussed above), but not loss, as if Common Shares were sold on the last day of the last tax year for which the Company was a PFIC.44

If the Company is a PFIC for any tax year during which a Non-Electing U.S. Holder owns Common Shares and, the Company ceases to be a PFIC, a Non-Electing U.S. Holder may terminate ongoing deemed PFIC status with respect to its Common Shares by electing to recognize gain (which will be taxed under the default rules of Section 1291 of the Code discussed above), but not loss, as if Common Shares were sold on the last day of the last tax year for which the Company was a PFIC.

QEF Election

A U.S. Holder that makes a timely and effective QEF Election for the first tax year in which ~~the~~its holding period of its Common Shares begins generally will not be subject to the default rules of Section 1291 of the Code discussed above with respect to its Common Shares. A U.S. Holder that makes a timely and effective QEF Election will be subject to U.S. federal income tax on such U.S. Holder'’s pro rata share of (a) the Company'’s net capital gain, which will be taxed as long-term capital gain to such U.S. Holder, and (b) the Company'’s ordinary earnings, which will be taxed as ordinary income to such U.S. Holder. Generally, "“net capital gain"” is the excess of (a) net long-term capital gain over (b) net short-term capital loss, and "“ordinary earnings"” are the excess of (a) "“earnings and profits"” over (b) net capital gain. A U.S. Holder that makes a QEF Election will be subject to U.S. federal income tax on such amounts for each tax year in which the Company is a PFIC, regardless of whether such amounts are actually distributed to such U.S. Holder by the Company. However, for any tax year in which the Company is a PFIC and has no net income or gain, U.S. Holders that have made a QEF Election would not have any income inclusions as a result of the QEF Election. If a U.S. Holder that made a QEF Election has an income inclusion, such a U.S. Holder may, subject to certain limitations, elect to defer payment of current U.S. federal income tax on such amounts, subject to an interest charge. If such U.S. Holder is not a corporation, any such interest paid will be treated as "“personal interest,"” which is not deductible.

43A U.S. Holder that makes a timely and effective QEF Election with respect to the Company generally (a) may receive a tax-free distribution from the Company to the extent that such distribution represents the Company’s “earnings and profits” as computed in accordance with U.S. federal income tax principles, that were previously included in income by the U.S. Holder because of such QEF Election and (b) will adjust such U.S. Holder’s tax basis in the Common Shares to reflect the amount included in income or allowed as a tax-free distribution because of such QEF Election. In addition, a U.S. Holder that makes a QEF Election generally will recognize capital gain or loss on the sale or other taxable disposition of Common Shares.

AThe procedure for making a QEF Election, and the U.S. ~~Holder~~federal ~~that~~income ~~makes~~tax consequences of making a ~~timely~~QEF ~~and~~Election, ~~effective~~will depend on whether such QEF Election ~~with~~is ~~respect~~timely. toA QEF Election will be treated as “timely” for purposes of avoiding the ~~Company~~default ~~generally~~PFIC ~~(a)~~rules ~~may~~discussed ~~receive~~above aif ~~tax-free~~such ~~distribution~~QEF ~~from~~Election is made for the ~~Company~~first toyear in the ~~extent~~U.S. ~~that~~Holder’s ~~such~~holding ~~distribution~~period ~~represents~~for the Common Shares in which the Company's ~~"earnings~~was ~~and~~a ~~profits"~~PFIC. ~~that~~A ~~were~~U.S. ~~previously~~Holder ~~included~~may inmake ~~income~~a timely QEF Election by filing the appropriate QEF Election documents at the time such U.S. Holder ~~because~~files ofa U.S. federal income tax return for such year. If a U.S. Holder does not make a timely and effective QEF Election ~~and~~for ~~(b)~~the ~~will~~first ~~adjust~~year ~~such~~in the U.S. Holder'’s ~~tax~~holding ~~basis~~period infor the Common Shares, the U.S. Holder may still be able to ~~reflect~~make ~~the~~a ~~amount~~timely ~~included~~and effective QEF Election in ~~income~~a orsubsequent ~~allowed~~year asif such U.S. Holder meets certain requirements and makes a ~~tax-free~~“purging” ~~distribution~~election ~~because~~to recognize gain (which will be taxed under the default rules of Section 1291 of the Code discussed above) as if such Common Shares were sold for their fair market value on the day the QEF Election. Inis ~~addition,~~effective. If a U.S. Holder ~~that~~ makes a QEF Election ~~generally~~but ~~will~~does ~~recognize~~not ~~capital~~make a “purging” election to recognize gain oras ~~loss~~discussed onin the ~~sale~~preceding orsentence, ~~other~~then ~~taxable~~such ~~disposition~~U.S. Holder will be subject to the QEF Election rules and will continue to be subject to tax under the default rules of Section 1291 discussed above with respect to its Common Shares. If a U.S. Holder owns PFIC stock indirectly through another PFIC, separate QEF Elections must be made for the PFIC in which the U.S. Holder is a direct shareholder and the Subsidiary PFIC for the QEF rules to apply to both PFICs.

~~The~~A ~~procedure for making a~~ QEF Election, ~~and~~will ~~the~~apply ~~U.S.~~to ~~federal~~the ~~income~~ tax ~~consequences~~year offor ~~making~~which ~~a QEF Election, will depend on whether~~ such QEF Election is timely. Amade ~~QEF~~and ~~Election~~to ~~will~~all besubsequent ~~treated~~tax asyears, ~~"timely"~~unless if such QEF Election is ~~made~~invalidated ~~for~~or ~~the~~terminated ~~first~~or ~~year in~~ the ~~U.S.~~IRS ~~Holder's~~consents ~~holding~~to ~~period~~revocation ~~for~~of ~~the~~such ~~Common Shares in which the Company is a PFIC. A U.S. Holder may make a timely~~ QEF Election ~~by filing the appropriate QEF Election documents at the time such U~~.S. ~~Holder files a U.S. federal income tax return for such year.~~ If a U.S. Holder ~~does~~makes ~~not make~~ a ~~timely and effective~~ QEF Election ~~for~~and, ~~the first year~~ in ~~the~~a ~~U.S.~~subsequent ~~Holder's~~tax ~~holding period for the Common Shares~~year, the ~~U.S.~~Company ~~Holder~~ceases ~~may~~to ~~still~~ be ~~able to make~~ a ~~timely~~PFIC, ~~and~~the ~~effective~~ QEF Election inwill aremain ~~subsequent~~in ~~year~~effect if(although ~~such~~it ~~U.S.~~will ~~Holder~~not ~~meets~~be ~~certain~~applicable) ~~requirements~~during ~~and~~those ~~makes~~tax ayears ~~"purging"~~in ~~election to recognize gain (~~which ~~will be taxed under~~ the ~~rules~~Company ofis ~~Section~~not ~~1291~~a ofPFIC. ~~the~~Accordingly, ~~Code discussed above) as~~ if ~~such Common Shares were sold for their fair market value on~~ the ~~day~~Company ~~the~~becomes ~~QEF~~a ~~Election~~PFIC isagain ~~effective.~~in If a ~~U.S.~~later ~~Holder~~tax ~~makes~~year, athe QEF Election ~~but~~will ~~does~~still ~~not~~be ~~make~~effective aand ~~"purging" election to recognize gain as discussed in~~ the ~~preceding sentence, then such~~ U.S. Holder ~~shall~~will be subject to the QEF ~~Election~~ rules ~~and~~described ~~shall~~above ~~continue~~during toany besubsequent ~~subject to~~ tax ~~under~~year ~~the rules of Section 1291 discussed above with respect to its Common Shares. If a U.S. Holder owns PFIC stock indirectly through another PFIC, separate QEF Elections must be made for the PFIC~~ in which the ~~U.S.~~Company ~~Holder~~qualifies isas a ~~direct shareholder and the Subsidiary~~ PFIC ~~for the QEF rules to apply to both PFICs~~.

A ~~QEF~~U.S. ~~Election~~Holder ~~will~~makes ~~apply~~a ~~to the tax year for which such~~ QEF Election isby ~~timely~~attaching ~~made~~a ~~and~~completed toIRS ~~all~~Form ~~subsequent tax years~~8621, ~~unless~~including ~~such~~a ~~QEF~~PFIC ~~Election~~Annual isInformation ~~invalidated~~Statement, orto ~~terminated~~a ortimely ~~the~~filed ~~IRS~~United ~~consents~~States tofederal ~~revocation~~income oftax ~~such QEF Election~~return. IfHowever, aif ~~U.S.~~the ~~Holder~~Company ~~makes~~does anot ~~QEF~~provide ~~Election~~the ~~and,~~required ininformation awith ~~subsequent~~regard ~~tax~~to ~~year,~~ the Company ~~ceases~~or toany beof aits ~~PFIC~~Subsidiary PFICs, ~~the~~U.S. ~~QEF~~Holders ~~Election~~ will ~~remain in effect (although it will~~ not be ~~applicable)~~able ~~during~~to ~~those~~make ~~tax~~a ~~years~~QEF inElection ~~which~~for ~~the~~such ~~Company~~entity isand ~~not~~will acontinue ~~PFIC.~~to ~~Accordingly,~~be ifsubject to the ~~Company~~default ~~becomes~~rules aof ~~PFIC~~Section in1291 ~~another~~of ~~subsequent tax year,~~ the ~~QEF~~Code ~~Election~~discussed ~~will~~above bethat ~~effective~~apply ~~and~~to ~~the~~Non-Electing U.S. ~~Holder~~Holders ~~will~~with berespect ~~subject~~ to the ~~QEF~~taxation ~~rules~~of ~~described~~gains ~~above~~and ~~during~~excess ~~any subsequent tax year in which the Company qualifies as a PFIC~~distributions.

U.S. Holders should be aware that there can be no assurances that the Company will satisfy the record keeping requirements that apply to a QEF, or that the Company will supply U.S. Holders with information that such U.S. Holders are required to report under the QEF rules, in the event the Company is a PFIC. Thus, U.S. Holders may not be able to make a QEF Election with respect to their Common Shares. Each U.S. Holder should consult its own tax advisors regarding the availability of, and procedure for making, a QEF Election.45

A U.S. ~~Holder~~Holders ~~makes~~should abe ~~QEF~~aware ~~Election~~that bythere ~~attaching~~can abe ~~completed~~no ~~IRS~~assurances ~~Form~~that ~~8621,~~the ~~including~~Company awill ~~PFIC~~satisfy ~~Annual~~the ~~Information~~record ~~Statement,~~keeping requirements that apply to a ~~timely~~QEF, ~~filed~~or ~~United~~that ~~States~~the ~~federal~~Company ~~income~~will ~~tax~~supply ~~return~~U.S. ~~However,~~Holders ifwith ~~the~~information ~~Company~~that ~~does~~such ~~not~~U.S. ~~provide~~Holders ~~the~~are required ~~information~~to ~~with~~report ~~regard~~under tothe QEF rules, in the ~~Company~~event orthe ~~any~~Company ofis ~~its~~a ~~Subsidiary~~PFIC. ~~PFICs~~Thus, U.S. Holders ~~will~~may not be able to make a QEF Election ~~for~~with ~~such~~respect ~~entity and will continue~~ to ~~be subject to~~ the ~~rules~~Company ofor ~~Section~~any ~~1291~~Subsidiary ofPFIC. ~~the~~Each ~~Code~~U.S. ~~discussed~~Holder ~~above~~should ~~that~~consult ~~apply~~its toown ~~Non-Electing~~tax ~~U.S.~~advisors ~~Holders~~regarding ~~with~~the ~~respect~~availability toof, ~~the~~and ~~taxation~~procedure offor ~~gains~~making, ~~and~~a ~~excess~~QEF ~~distributions~~Election.

Mark-to-Market Election

A U.S. Holder may make a Mark-to-Market Election with respect to its Common Shares only if the Common Shares are marketable stock. The Common Shares generally will be "“marketable stock"” if the Common Shares are regularly traded on (a) a national securities exchange that is registered with the SEC, (b) the national market system established pursuant to section 11A of the Exchange Act, or (c) a foreign securities exchange that is regulated or supervised by a governmental authority of the country in which the market is located, provided that (i) such foreign exchange has trading volume, listing, financial disclosure, and surveillance requirements, and meets other requirements and the laws of the country in which such foreign exchange is located, together with the rules of such foreign exchange, ensure that such requirements are actually enforced and (ii) the rules of such foreign exchange effectively promote active trading of listed stocks. If such stock is traded on such a qualified exchange or other market, such stock generally will be "considered “regularly traded"” for any calendar year during which such stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. Each U.S. Holder should consult its own tax advisor in this matter.

44A U.S. Holder that makes a timely and effective Mark-to-Market Election with respect to its Common Shares generally will not be subject to the default rules of Section 1291 of the Code discussed above with respect to such Common Shares. However, if a U.S. Holder does not make a Mark-to-Market Election beginning in the first tax year of such U.S. Holder’s holding period for the Common Shares for which the Company is a PFIC (and such U.S. Holder has not made a timely QEF Election), the default rules of Section 1291 of the Code discussed above will apply to certain dispositions of, and distributions on, the Common Shares.

A U.S. Holder that makes a timely and effective Mark-to-Market Election ~~with~~will ~~respect~~include toin ~~its~~ordinary ~~Common~~income, ~~Shares~~for ~~generally~~each ~~will~~tax ~~not~~year bein ~~subject~~which the Company is a PFIC, an amount equal to the ~~rules~~excess, if any, of ~~Section~~(a) ~~1291~~the fair market value of the ~~Code~~Common ~~discussed~~Shares, ~~above~~as ~~with~~of ~~respect~~the toclose of such ~~Common~~tax ~~Shares.~~year ~~However,~~over if(b) asuch U.S. Holder’s ~~does~~adjusted ~~not~~tax ~~make~~basis in such Common Shares. A U.S. Holder that makes a Mark-to-Market Election ~~beginning~~will be allowed a deduction in an amount equal to the ~~first~~excess, ~~tax~~if ~~year~~any, of (a) such U.S. Holder'’s ~~holding~~adjusted ~~period~~tax ~~for~~basis in the Common Shares, ~~for~~over ~~which~~(b) the ~~Company~~fair ismarket avalue ~~PFIC~~of ~~and~~ such ~~U.S.~~Common ~~Holder~~Shares ~~has~~(but ~~not~~only ~~made~~to ~~a timely QEF Election,~~ the ~~rules~~extent of ~~Section 1291 of~~ the ~~Code~~net ~~discussed~~amount ~~above~~of ~~will~~previously ~~apply~~included toincome ~~certain~~as ~~dispositions~~a result of, ~~and~~the ~~distributions~~Mark-to-Market ~~on,~~Election ~~the~~for ~~Common~~prior ~~Shares~~tax years).

A U.S. Holder that makes a timely and effective Mark-to-Market Election ~~will~~generally ~~include~~also inwill ~~ordinary~~adjust ~~income,~~such ~~for~~U.S. ~~each~~Holder’s tax ~~year~~basis in ~~which~~ the ~~Company~~Common isShares ~~a PFIC, an amount equal~~ to ~~the~~reflect ~~excess, if any, of (a)~~ the ~~fair~~amount ~~market~~included ~~value~~in ofgross ~~the~~income ~~Common~~or ~~Shares,~~allowed as ofa ~~the~~deduction ~~close~~because of such ~~tax~~Mark-to-Market ~~year~~Election. ~~over~~In ~~(b)~~addition, ~~such~~upon ~~U.S.~~a ~~Holder's~~sale ~~adjusted~~or ~~tax~~other ~~basis~~taxable indisposition ~~such~~of Common Shares., Aa U.S. Holder that makes a Mark-to-Market Election will berecognize ~~allowed~~ordinary aincome ~~deduction~~or inordinary anloss ~~amount~~(not ~~equal~~ to exceed the excess, if any, of (a) ~~such~~the ~~U.S.~~amount ~~Holder's~~included ~~adjusted~~in ~~tax~~ordinary ~~basis~~income inbecause ~~the~~of ~~Common~~such ~~Shares,~~Mark-to-Market Election for prior tax years over (b) the ~~fair~~amount ~~market~~allowed ~~value~~as a deduction because of such ~~Common~~Mark-to-Market ~~Shares~~Election ~~(but~~for ~~only~~prior totax ~~the~~years). ~~extent~~Losses ofthat ~~the~~exceed ~~net~~this ~~amount~~limitation ofare ~~previously~~subject ~~included~~to ~~income~~the asrules agenerally ~~result~~applicable ofto ~~the~~losses ~~Mark-to-Market~~provided ~~Election~~in ~~for~~the ~~prior~~Code ~~tax~~and ~~years)~~Treasury Regulations.

A U.S. Holder ~~that~~ makes a Mark-to-Market Election ~~generally~~by ~~also~~attaching ~~will~~a ~~adjust~~completed ~~such~~IRS ~~U.S.~~Form ~~Holder's~~8621 ~~tax basis in the Common Shares~~ to ~~reflect~~a ~~the~~timely ~~amount~~filed ~~included~~U.S. infederal ~~gross~~ income ortax ~~allowed~~return. asA atimely ~~deduction because of such~~ Mark-to-Market Election. Inapplies ~~addition,~~to ~~upon~~the atax ~~sale~~year orfor ~~other~~which ~~taxable~~such ~~disposition of Common Shares, a U.S. Holder that makes a~~ Mark-to-Market Election ~~will~~is ~~recognize~~made ~~ordinary~~and ~~income or ordinary loss (not~~ to ~~exceed~~each ~~the~~subsequent ~~excess,~~tax ~~if any~~year, ofunless ~~(a)~~ the ~~amount~~Common ~~included~~Shares incease ~~ordinary income because of such Mark-~~to~~-Market~~ ~~Election~~be ~~for~~“marketable ~~prior~~stock” ~~tax~~or ~~years over (b)~~ the ~~amount~~IRS ~~allowed~~consents asto arevocation ~~deduction because~~ of such ~~Mark-to-Market~~election. ~~Election~~Each ~~for prior tax years)~~U.S. ~~Losses~~Holder ~~that~~should ~~exceed~~consult ~~this~~its ~~limitation~~own ~~are~~tax ~~subject~~advisors toregarding the ~~rules~~availability ~~generally~~of, ~~applicable~~and toprocedure ~~losses~~for ~~provided~~making, ina ~~the~~Mark-to-Market ~~Code and Treasury Regulations~~Election.

A U.S. Holder makes a Mark-to-Market Election by attaching a completed IRS Form 8621 to a timely filed United States federal income tax return. A Mark-to-Market Election applies to the tax year in which such Mark-to-Market Election is made and to each subsequent tax year, unless the Common Shares cease to be "marketable stock" or the IRS consents to revocation of such election. Each U.S. Holder should consult its own tax advisors regarding the availability of, and procedure for making, a Mark-to-Market Election.46

Although a U.S. Holder may be eligible to make a Mark-to-Market Election with respect to the Common Shares, no such election may be made with respect to the stock of any Subsidiary PFIC that a U.S. Holder is treated as owning, ~~because~~if such stock is not itself marketable stock. Hence, the Mark-to-Market Election ~~will~~would not be effective to ~~avoid~~alter the ~~application of the~~ default PFIC rules of Section 1291 of the Code described above with respect to deemed dispositions of Subsidiary PFIC stock or excess distributions from a Subsidiary PFIC to its shareholder.

Other PFIC Rules

Under Section 1291(f) of the Code, the IRS has issued proposed Treasury Regulations that, subject to certain exceptions, would cause a U.S. Holder that ~~had~~has not made a timely QEF Election to recognize gain (but not loss) upon certain transfers of Common Shares that would otherwise be tax-deferred (e.g., gifts and exchanges pursuant to corporate reorganizations) in the event that the Company is a PFIC during such U.S. Holder'’s holding period for the relevant shares. However, the specific U.S. federal income tax consequences to a U.S. Holder may vary based on the manner in which Common Shares are transferred.

If finalized in their current form, the proposed Treasury Regulations applicable to PFICs would be effective for transactions occurring on or after April 1, 1992. Because the proposed Treasury Regulations have not yet been adopted in final form, they are not currently effective, and there is no assurance that they will be adopted in the form and with the effective date proposed. Nevertheless, the IRS has announced that, in the absence of final Treasury Regulations, taxpayers may apply reasonable interpretations of the Code provisions applicable to PFICs and that it considers the rules set forth in the proposed Treasury Regulations to be reasonable interpretations of those Code provisions. The PFIC rules are complex, and the implementation of certain aspects of the PFIC rules requires the issuance of Treasury Regulations which in many instances have not been promulgated and which, when promulgated, may have retroactive effect. U.S. Holders should consult their own tax advisors about the potential applicability of the proposed Treasury Regulations.

Certain additional adverse rules may apply with respect to a U.S. Holder if the Company is a PFIC, regardless of whether such U.S. Holder makes a QEF Election. For example, under Section 1298(b)(6) of the Code, a U.S. Holder that uses Common Shares as security for a loan will, except as may be provided in Treasury Regulations, be treated as having made a taxable disposition of such Common Shares.

45In addition, a U.S. Holder who acquires Common Shares from a decedent generally will not receive a “step up” in tax basis of such Common Shares to fair market value unless such decedent had a timely and effective QEF Election in place.

InSpecial ~~addition,~~rules also apply to the amount of foreign tax credit that a U.S. Holder ~~who~~may ~~acquires~~claim ~~Common~~on ~~Shares~~a distribution from a ~~decedent~~PFIC. ~~will~~Subject ~~not~~to ~~receive~~such aspecial ~~"step~~rules, ~~up"~~foreign intaxes ~~tax~~paid ~~basis~~with respect to any distribution in respect of ~~such~~stock ~~Common~~in ~~Shares~~a toPFIC ~~fair~~are ~~market~~generally ~~value~~eligible ~~unless~~for ~~such~~the ~~decedent~~foreign ~~had~~tax credit. The rules relating to distributions by a ~~timely~~PFIC and ~~effective~~their ~~QEF~~eligibility ~~Election~~for inthe ~~place~~foreign tax credit are complicated, and each U.S. Holder should consult with its own tax advisors regarding the availability of the foreign tax credit with respect to distributions by a PFIC.

~~Special~~The PFIC rules ~~also~~are ~~apply~~complex, toand ~~the~~each ~~amount of foreign tax credit that a~~ U.S. Holder ~~may~~should ~~claim~~consult onits aown ~~distribution~~tax ~~from~~advisors aregarding the PFIC. ~~Subject to such special~~ rules, ~~foreign~~(including ~~taxes~~the ~~paid~~applicability ~~with~~and ~~respect~~advisability ~~to any distribution in respect~~ of ~~stock in~~ a ~~PFIC~~QEF ~~are~~Election ~~generally~~or ~~eligible for the foreign tax credit. The rules relating~~ Mark-to-Market ~~distributions~~Election) ~~by a PFIC~~ and ~~their~~how ~~eligibility for~~ the ~~foreign~~PFIC ~~tax~~rules ~~credit~~may ~~are~~affect ~~complicated,~~the ~~and a~~ U.S. ~~Holder~~federal ~~should~~income ~~consult with its own~~ tax ~~advisors~~consequences ~~regarding the availability~~ of the ~~foreign~~acquisition, ~~tax~~ownership, ~~credit~~and ~~with~~disposition ~~respect~~of toCommon ~~distributions by a PFIC~~Shares.

The PFIC rules are complex, and each U.S. Holder should consult its own tax advisors regarding the PFIC rules and how the PFIC rules may affect the U.S. federal income tax consequences of the acquisition, ownership, and disposition of Common Shares.

General Rules Applicable to the Ownership and Disposition of Common Shares

The following discussion is subject, in its entirety, to the rules described above under the heading "Passive Foreign Investment Company Rules".

Distributions on Common Shares

A U.S. Holder that receives a distribution, including a constructive distribution, with respect to ana Common Share will be required to include the amount of such distribution in gross income as a dividend (without reduction for any Canadian income tax withheld from such distribution) to the extent of the Company'’s current orand accumulated "“earnings and profits"”, as computed ~~for~~in ~~U.S.~~accordance ~~federal~~with ~~income tax purposes. A dividend generally will be taxed to a~~ U.S. ~~Holder~~federal ~~at ordinary~~ income tax ~~rates if the Company is a PFIC for the tax year of such distribution or was a PFIC for the preceding tax year~~principles. To the extent that a distribution exceeds the Company'’s current and accumulated "“earnings and profits"”, such distribution will be treated first as a tax-free return of capital to the extent of athe U.S. Holder'’s adjusted tax basis in the Common Shares and thereafter as gain from the sale or exchange of such Common Shares. (See "“Sale or Other Taxable Disposition of Common Shares"” below). However, the Company does not intend to maintain ~~the~~ calculations of its earnings and profits in accordance with U.S. federal income tax principles, and each U.S. Holder therefore should assume that any distribution by the Company with respect to the Common Shares will constitute ordinary dividend income. Dividends received on Common Shares by corporate U.S. Holders generally will not be eligible for the "“dividends received deduction"”. Subject to applicable limitations and provided the Company is eligible for the benefits of the Canada-U.S. Tax Convention or the Common Shares are readily tradable on a United States securities market, dividends paid by the Company to non-corporate U.S. Holders, including individuals, ~~in respect of Common Shares~~ generally will be eligible for the preferential tax rates applicable to long-term capital gains for dividends, provided certain holding period and other conditions are satisfied, including that the Company not be classified as a PFIC in the tax year of distribution or in the preceding tax year. A dividend generally will be taxed to a U.S. Holder at ordinary income tax rates (rather than preferential rates for qualified dividend income to the extent otherwise applicable) if the Company is a PFIC for the tax year of such distribution or was a PFIC for the preceding tax year. The dividend rules are complex, and each U.S. Holder should consult its own tax advisors regarding the application of such rules.

Sale or Other Taxable Disposition of Common Shares

Upon the sale or other taxable disposition of Common Shares, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference, if any, between (a) the U.S. dollar value of any cash received plus the fair market value of any property received and (b) such U.S. Holder'’s adjusted tax basis in such Common Shares sold or otherwise disposed of. A U.S. Holder'’s initial tax basis in Common Shares generally will be such U.S. Holder'’s U.S. dollar cost for such Common Shares. Gain or loss recognized on such sale or other disposition generally will be long-term capital gain or loss if, at the time of the sale or other taxable disposition, the Common Shares have been held for ~~more~~longer than one year.

Preferential tax rates currently apply to long-term capital gain of a U.S. Holder that is an individual, estate, or trust. There are currently no preferential tax rates for long-term capital gain of a U.S. Holder that is a corporation. Deductions for capital losses are subject to significant limitations under the Code.

Additional Considerations

Receipt of Foreign Currency

The amount of any distribution paid to a U.S. Holder in foreign currency, or payment received in foreign currency on the sale, exchange or other taxable disposition of Common Shares, generally will be equal to the U.S. dollar value of such foreign currency based on the exchange rate applicable on the date of receipt or, if applicable, the date of settlement if the Common Shares are traded on an established securities market (regardless of whether such foreign currency is converted into U.S. dollars at that time). AIf the foreign currency received is not converted into U.S. dollars on the date of receipt, a U.S. Holder will have a tax basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Any U.S. Holder who converts or otherwise disposes of the foreign currency after the date of receipt may have a foreign currency exchange gain or loss that would be treated as ordinary income or loss, and generally will be U.S. source income or loss for foreign tax credit purposes. Different rules apply to U.S. Holders who use the accrual method of tax accounting. Each U.S. Holder should consult its own U.S. tax advisors regarding the U.S. federal income tax consequences of receiving, owning, and disposing of foreign currency.

Foreign Tax Credit

Dividends paid on the Common Shares will be treated as foreign-source income, and generally will be treated as "“passive category income"” or "“general category income"” for U.S. foreign tax credit purposes. Any gain or loss recognized on a sale or other disposition of Common Shares generally will be ~~United States~~ U.S.-source gain or loss. Certain U.S. Holders that are eligible for the benefits of the Canada-U.S. Tax Convention may elect to treat such gain or loss as Canadian -source gain or loss for U.S. foreign tax credit purposes. The Code applies various complex limitations on the amount of foreign taxes that may be claimed as a credit by U.S. taxpayers. In addition, Treasury Regulations that apply to foreign taxes paid or accrued (the "“Foreign Tax Credit Regulations"”) impose additional requirements for Canadian withholding taxes to be eligible for a foreign tax credit, and there can be no assurance that those requirements will be satisfied. The Treasury Department has ~~recently~~ released guidance temporarily pausing the application of certain of the Foreign Tax Credit Regulations.

Subject to the PFIC rules and the Foreign Tax Credit Regulations, each as discussed above, a U.S. Holder that pays (whether directly or through withholding) Canadian income tax with respect to dividends paid on the Common Shares generally will be entitled, at the election of such U.S. Holder, to receive either a deduction or a credit for such Canadian income tax. Generally, a credit will reduce a U.S. Holder's U.S. federal income tax liability on a dollar-for-dollar basis, whereas a deduction will reduce a U.S. Holder's income that is subject to U.S. federal income tax. This election is made on a year-by-year basis and applies to all foreign taxes paid (whether directly or through withholding) by a U.S. Holder during a year. The foreign tax credit rules are complex and involve the application of rules that depend on a U.S. Holder's particular circumstances. Accordingly, each U.S. Holder should consult its own U.S. tax advisor regarding the foreign tax credit rules.

~~Backup Withholding and Information Reporting~~ 48

Information Reporting and Backup Withholding

Under U.S. federal income tax law and Treasury Regulations, certain categories of U.S. Holders must file information returns with respect to their investment in, or involvement in, a foreign corporation. For example, U.S. return disclosure obligations (and related penalties) are imposed on individuals who are U.S. Holders that hold certain specified foreign financial assets in excess of certain threshold amounts. The definition of specified foreign financial assets includes not only financial accounts maintained in foreign financial institutions, but also, unless held in accounts maintained by a financial institution, any stock or security issued by a non-U.S. person, any financial instrument or contract held for investment that has an issuer or counterparty other than a U.S. person and any interest in a non-U.S. entity. U.S. Holders may be subject to these reporting requirements unless their Common Shares are held in an account at certain financial institutions. Penalties for failure to file certain of these information returns are substantial. U.S. Holders should consult their own tax advisors regarding the requirements of filing information returns, including the requirement to file an IRS Form 8938.

Payments made within the ~~U.S.~~United States or by a U.S. payor or U.S. middleman, of dividends on, and proceeds arising from the sale or other taxable disposition of Common Shares will generally be subject to information reporting and backup withholding tax, currently at a rate of 24%, if a U.S. Holder (a) fails to furnish such U.S. Holder'’s correct U.S. taxpayer identification number (generally on IRS Form W-9), (b) furnishes an incorrect U.S. taxpayer identification number, (c) is notified by the IRS that such U.S. Holder has previously failed to properly report items subject to backup withholding tax, or (d) fails to certify, under penalty of perjury, that such U.S. Holder has furnished its correct U.S. taxpayer identification number and that the IRS has not notified such U.S. Holder that it is subject to backup withholding tax. However, certain exempt persons, such as U.S. Holders that are corporations, generally are excluded from these information reporting and backup withholding rules. Backup withholding is not an additional tax. Any amounts withheld under the U.S. backup withholding tax rules generally will be allowed as a credit against a U.S. Holder'’s U.S. federal income tax liability, if any, or will be refunded, if such U.S. Holder furnishes required information to the IRS in a timely manner.

The discussion of reporting requirements set forth above is not intended to constitute a complete description of all reporting requirements that may apply to a U.S. Holder. A failure to satisfy certain reporting requirements may result in an extension of the time period during which the IRS can assess a tax, and under certain circumstances, such an extension may apply to assessments of amounts unrelated to any unsatisfied reporting requirement. Each U.S. Holder should consult its own tax advisors regarding the information reporting and backup withholding rules.

THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX CONSIDERATIONS APPLICABLE TO U.S. HOLDERS WITH RESPECT TO THE ACQUISITION, OWNERSHIP AND DISPOSITION OF COMMON SHARES. U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSIDERATIONS APPLICABLE TO THEM IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES.

ITEM 6. [Reserved].

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") of the Company should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, ~~2024~~2025, and the accompanying notes thereto (the "Financial Statements") included in this Annual Report, which have been prepared in accordance with U.S. GAAP. Amounts are expressed in United States dollars ("$" or "USD") unless otherwise stated to be in ~~Canadian dollars ("CAD"),~~ Euro ("€" ~~or "EUR"~~)~~, or Australian dollars ("AUD")~~. Amounts stated in foreign currencies include approximate USD amounts based on exchange rates on December 31, ~~2024~~2025. Variance, ratio, and percentage changes in this MD&A are based on unrounded numbers. This MD&A reports the Company's activities through December 31, ~~2024~~2025, unless otherwise indicated. All share-related information presented in this section gives effect to the Share Consolidation.

Forward-looking statements are based on the Company's current expectations and assumptions regarding its business, potential target businesses, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. The Company's actual results may differ materially from those contemplated by the forward-looking statements as a result of various factors, including, without limitation, changes in local, regional, national or global political, economic, business, competitive, market (supply and demand) and regulatory conditions. Please see "Cautionary Statement Regarding Forward-Looking Statements" in this Annual Report for more information regarding forward-looking statements.

Overview of our Business

WeThe ~~are~~Company ais ~~multi-national~~the ~~cannabis~~first ~~company that manufactures~~ and ~~distributes~~largest ~~consumer~~decentralized ~~packaged~~AI ~~goods~~treasury ~~and~~company ~~distributes~~that ~~medicinal cannabis and pharmaceutical products. Flora exists to create a world where the benefits of cannabis are accessible to everyone. Our business strategy~~ is ~~built~~investing onin ~~two core pillars: House of Brands and Commercial & Wholesale. This strategy was devised to allow us access to markets around~~ the ~~globe~~future ~~based on the legal standing~~ of ~~cannabis~~AI ininfrastructure ~~each~~through ofstrategic ~~the~~ownership ~~geographical locations~~ in ~~which~~0G ~~we operate~~Tokens. ~~Our~~The ~~approach~~Company ~~has~~is ~~enabled~~an usAI toinfrastructure ~~develop~~company ~~distribution~~that ~~networks,~~has ~~build~~created ~~customer~~an ~~bases,~~open ~~establish operations as the regulatory framework evolves~~ and ~~allow~~decentralized ~~for~~AI ~~expanded~~network ~~access~~fueled toby ~~cannabis~~the ~~and~~0G ~~its derivatives~~Token.

48The Company is a global pharmaceutical distributor through its wholly owned subsidiary Phatebo. Based in Germany, Phatebo is a wholesale pharmaceutical distribution company with import and export capabilities of a wide range of pharmaceutical goods and medical products to treat a variety of health indications, including drugs related to cancer therapies, ADHD, multiple sclerosis and anti-depressants, among others. Phatebo is focused on distributing pharmaceutical products within 28 countries globally, primarily in Europe, but also with sales to Asia, Latin America, and North America. Additionally, the Phatebo warehouse provides a logistics outpost for ZeroStack's growing product portfolio and distribution network within the European Union. On September 20, 2025, ZeroStack entered into an agreement for the disposition of certain components of our existing hemp and cannabis business, as described below under the header "Sale of Legacy Hemp and Cannabis Business."

~~Our~~Cryptocurrency ~~brand~~Treasury portfolio consists of a mix of products across multiple categories, including food and beverage, nutraceuticals, cannabis accessories and technology, personal care, and wellness. Consumer brands allow Flora to move assertively into nascent markets, develop customer bases and distribution channels, and gather consumer insights which would not be possible with traditional cannabis sales alone. Through this channel we seek to build loyalty, credibility and enjoy healthy margins that help to support the rapid growth of our business.Strategy

~~House~~On May 2, 2025, the Company entered into the May 2025 Securities Purchase Agreement with the May 2025 Investors in connection with the issuance and sale by the Company to the May 2025 Investors in the May 2025 Private Placement of ~~Brands~~an aggregate of 80,340 May 2025 Common Shares at a purchase price of $11.70 per share and 18,642 May 2025 Pre-funded Warrants at a purchase price of $11.6961 per warrant, each to purchase one May 2025 Pre-funded Warrant Share which were immediately exercisable and expire when exercised in full, at an exercise price of $0.0039 per share.

~~JustCBD~~The isnet ~~Flora's~~proceeds ~~leading~~from ~~consumer~~the ~~packaged~~sale ~~goods~~of ~~brand~~the May 2025 Common Shares and the May 2025 Pre-funded Warrants were approximately $1.1 ~~JustCBD~~million ~~was~~after ~~launched~~deducting inestimated ~~2017~~expenses ~~with~~relating ato ~~mission~~the May 2025 Private Placement. The Company used $0.4 million of the net proceeds from the May 2025 Private Placement to ~~bring~~purchase ~~high-quality~~Solana, ~~trustworthy,~~$0.4 ~~and~~million ~~budget-friendly~~of ~~CBD~~the ~~products~~net proceeds from the May 2025 Private Placement to ~~market~~purchase Ethereum, $0.1 ~~JustCBD~~million ~~products~~of ~~are~~the ~~available~~net ~~for~~proceeds ~~purchase~~from inthe ~~smoke~~May ~~and~~2025 ~~vape~~Private ~~shops,~~Placement ~~clinics~~to purchase Sui, ~~spas~~$0.1 ~~and~~million ~~pet~~of ~~stores~~the net proceeds from the May 2025 Private Placement to purchase Ripple, asand ~~well~~the asbalance ~~other~~of ~~independent~~the ~~non-traditional~~net ~~retail~~proceeds ~~channels.~~from ~~JustCBD's~~the ~~products~~May ~~are~~2025 ~~both~~Private ~~internally~~Placement for general corporate and ~~third-party~~working ~~lab-tested~~capital purposes and to ~~ensure~~pay ~~quality~~any fees and expenses in connection with the issuance of the May 2025 Common Shares and the May 2025 Pre-funded Warrants.

~~Vessel~~On isSeptember ~~Flora's~~19, ~~cannabis~~2025, ~~accessory~~the ~~and~~Company ~~technology~~entered ~~brand~~into ~~currently~~securities ~~servicing~~purchase ~~the~~agreements ~~United~~with ~~States~~certain ~~and~~investors ~~Canada~~pursuant ~~through~~to ~~direct-~~which the Company agreed to~~-consumer~~ sell and ~~retail~~issue ~~sales.~~the ~~Vessel's~~following ~~products~~securities ~~include~~in ~~cannabis~~private ~~consumption~~placement ~~accessories~~offerings (collectively, ~~personal~~the ~~storage~~"PIPE Offering"): (i) 116,340 ~~and~~common ~~travel~~share ~~accessories~~units ("PIPE Common Share Units") at a unit price of $25.19, payable in cash, for ~~the~~aggregate ~~vape~~gross proceeds of $2.9 million, with each unit consisting of one common share ("PIPE Common Share") and ~~dry~~0.2 ~~herb~~of ~~categories~~a warrant, ~~which~~with ~~are~~each ~~sold~~full warrant to ~~consumers~~purchase one common share at an exercise price of $25.19 ("PIPE Warrant"); (ii) 419,975 ~~dispensaries~~pre-funded warrant units ("PIPE Pre-Funded Warrant Units") at a unit price of $25.1899, ~~smoke~~payable ~~shops~~in ~~and~~cash, ~~cannabis~~for ~~brands~~aggregate gross proceeds of $10.6 ~~Vessel~~million, ~~has~~with ~~been~~each ~~fully~~unit ~~integrated~~consisting ~~into~~of ~~JustCBD~~one pre-funded warrant to purchase one common share at an exercise price of $0.0001 ("PIPE Pre-Funded Warrant") and ~~now~~0.2 ~~benefits~~of ~~from~~a ~~operational~~PIPE Warrant; (iii) 8,546,955 ~~logistical~~PIPE Pre-Funded Warrants at a unit price of $25.1899, payable in 71,766,135 0G Tokens; and ~~sales~~(iv) ~~synergies~~an ~~with~~unsecured ~~JustCBD~~convertible note in an aggregate original principal amount of 95,333 Solana (the "PIPE Note").

Australian Vaporizers was founded in 2010 and has become a prominent online retailers of vaporizers, hardware, and accessories in Australia. It is an online expert for aromatherapy products, specializing in dry herb vaporizers. It has been providing vapes, accessories and knowledge to enthusiasts and newcomers alike. Its website www.australianvaporizers.com.au is a popular designation in the country with a large database of satisfied customers.

Commercial & Wholesale

The Company's Commercial and Wholesale pillar encompasses the distribution of pharmaceutical products to international markets. This pillar is anchored by Flora's wholly owned subsidiary, Phatebo, a multi-national operator in pharmaceutical and medical cannabis distribution, with principal operations in Germany. Phatebo is a wholesale pharmaceutical distribution company with import and export capabilities of a wide range of pharmaceutical goods and medical cannabis products to treat a variety of health indications, including drugs related to cancer therapies, ADHD, multiple sclerosis and anti-depressants, among others. Phatebo holds a license for the Trade in Narcotic Drugs (including the cannabis sales license amendment) and a wholesale trading license, both of which are issued by BfArM (the largest drug approval authority in Europe). Phatebo is focused on distributing pharmaceutical products within 28 countries globally, primarily in Europe, but also with sales to Asia, Latin America, and North America. In November 2018, Phatebo also received a medical cannabis import and distribution license. We intend to leverage Phatebo's existing network of pharmacies as Flora begins to move medicinal cannabis from third parties into Germany. Additionally, the Phatebo warehouse provides a logistics outpost for Flora's growing product portfolio and distribution network within the European Union.

During 2024, we acquired TruHC, an early-stage cannabis company based in Hamburg, Germany. TruHC holds a GDP wholesale, and an EU-GMP processing and production license for medical cannabis. It also owns and operates an EU-GMP certified laboratory ready for instant cannabis analysis as required for the new Cannabis Social Clubs. The facility of TruHC is a flexible production space with EU-GMP certified modules that can be extended and customized for any production process from processing to extraction. TruHC also holds a narcotic license with EU-GMP certified storage.

Colombian Related Subsidiaries

On July 5, 2023, the Company entered into a share purchase agreement with Lisan, a Delaware limited liability company, to sell all its shares in certain of its Colombian subsidiaries and its Colombian assets for a purchase price of CAD $0.8 million (USD $0.6 million). The sale relates to Flora's operations in Colombia, including its interest in (i) its 361-acre Cosechemos farm located in Giron, Colombia and its related processing facilities and inventory and (ii) all other assets relating to Flora Lab 2, Flora Lab 4 and Flora's Colombian food and beverage and consumer products business (collectively "Colombia Assets"). The sale enables the Company to concentrate on its core business divisions, which are lifestyle brands in the United States and international pharmaceutical distribution. The sale was part of several strategic changes to cut costs and streamline operations. The Company received proceeds of CAD $0.5 million during the quarter ended September 30, 2023. The Company and Lisan completed the sale of Cosechemos Ya S.A.S on November 1, 2023.

Factors Impacting our Business

Challenges in realization of overhead reductions. Management has taken, and continues to implement, various cost-saving initiatives to lower overhead costs. However, the Company has not yet reached the critical balance in reducing overhead to meet both the existing and potential market demand in aggregate. The Company strives to attain sufficient growth to cover its overhead to reach profitability. If the Company fails to grow its business or reduce its operating expenses further in the long term, it will continue to face significant cash flow deficiencies in the future and continue to be reliant on debt and/or equity financing to fund operations.

Consistent profitability and positive operating cash flows. A key determinant of the Company's success is to deliver profitable results and positive cashflows from operating activities. The Company's results have not yet achieved the prerequisite consistency to achieve self-sufficiency. Since its inception, only the third quarter of 2023 yielded net income and positive cashflows from operating activities. There is no assurance that the Company would be able to produce adequate levels of sustained profitability and cash flow positive, or at all. These factors, amongst others, raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are described in Note 2 of the Company's audited consolidated financial statements for the year ended December 31, 2024. For more information, see Item 1A "Risk Factors."

Acquisition strategy disadvantages include significant transaction costs and liabilities of our acquirees. The Company has been opportunistic and pursues acquisitions from time to time that management believes will be complementary to or synergistic to the Company's existing business. However, any such acquisitions require the Company to incur heightened upfront transaction costs and require the Company to assume certain liabilities from the acquired companies. In addition, while the Company believes such acquisitions will provide enhanced value in the long term, it is possible that the anticipated synergies from the acquisition may never be realized. For example, the Company acquired TruHC in April 2024 and Australian Vaporizers in June 2024. In connection with the acquisition of TruHC, the Company incurred $0.2 million in transaction costs in 2024, which included legal and consulting fees incurred by the Company. In addition, we assumed $1.5 million in liabilities, which included $0.4 million of lease liabilities and other ordinary course operating liabilities. In connection with the acquisition of Australian Vaporizers, the Company incurred less than $0.1 million in transaction costs in 2024, which included legal and consulting fees incurred by the Company. In addition, we assumed $0.4 million in liabilities, which included $0.1 million of lease liabilities and other ordinary course operating liabilities.

Diversification of cashflows. Our sources of cash are diversified across geographic and product lines. Revenues are concentrated primarily in Germany and the United States, spanning pharmaceuticals, hemp and non-hemp consumer products and medicinal cannabis.

International cannabis developments. Flora's growth is embedded in the expansion, regulation and legalization of medicinal and recreational cannabis and cannabis derivative products across the world. While medicinal cannabis has been regulated at the federal level in multiple countries, the Company is focused on the most robust markets in Germany and the European Union. We remain tuned to international developments as potentially lucrative medicinal cannabis markets open.

Product evolution and brand acceptance. As the cannabis industry continues to change, divergent regulations and the corresponding resources required to introduce high-quality products are expected to impact our market share. Gaining access to continuously evolving and superior products remains a critical success factor. Our ultimate ability to produce and acquire products meeting stringent quality control standards drives the extent of consumer acceptance. Furthermore, the intrinsic value within our brands, including JustCBD and Vessel, is subject to evolving consumer sentiment.

Regulatory proficiency and adoption. The markets in which Flora operates are highly regulated and require extensive experience in navigating the associated complexities. We have assembled a team with deep knowledge of the regulatory and governance environments in which the Company operates. Fundamental expertise entails compliance with product approvals, import permits, export permits, distribution licenses and other pertinent licenses.

~~Integration~~On ofSeptember ~~acquired~~26, ~~companies. Our~~2025, ~~growth~~in ~~has~~connection ~~been~~with ~~fueled~~the ~~substantially~~closing byof the ~~acquisition~~PIPE ofOffering, ~~JustCBD~~the Company issued 116,340 ~~Vessel~~PIPE Common Share Units and ~~FGH~~419,975 PIPE Pre-Funded Warrant Units for aggregate gross cash proceeds of $13.5 ~~Our~~million, ~~continued~~and ~~ability~~2,592,212 toPIPE ~~extract~~Pre-Funded ~~incremental~~Warrants ~~synergies~~for ~~from~~21,766,135 a0G ~~group~~Tokens, ofvalued ~~diversified~~at ~~entities~~$54.7 ismillion aon ~~key~~the ~~determinant~~issuance ofdate. ~~our~~The ~~ability~~remaining to5,954,473 ~~expand~~PIPE ~~organically~~Pre-Funded Warrant Units were issued on October 9, 2025, for 50,000,000 0G Tokens. The PIPE Note was issued on October 24, 2025, at which date the original principal amount of 95,333 Solana was received.

On September 19, 2025, the Company entered into an agreement with Zero Gravity pursuant to which the Company agreed to (i) borrow 50,000,000 0G Tokens from Zero Gravity under the Loan Agreement, and (ii) issue to Zero Gravity in a private placement offering 1,786,423 Loan Agreement Warrants. On September 22, 2025, the Company entered into a securities purchase agreement with Zero Gravity for the issuance of the Zero Gravity Convertible Note that replaced the Loan Agreement and Loan Agreement Warrants, subject to closing. The Zero Gravity Convertible Note was issued on October 23, 2025, at which date the 50,000,000 0G Tokens were received by the Company.

The Company intends to use the net proceeds from the PIPE Offering and the Zero Gravity Convertible Note (collectively, the "Cryptocurrency Offering") to further the Company's new digital asset treasury strategy linked to 0G Tokens, and to explore and expand the use of the native AI functionality of the 0G Tokens to enhance the business of the Company. The balance of the net proceeds will be used for general corporate and working capital purposes.

On October 1, 2025, the Board appointed Mr. Daniel Reis-Faria and Michael Heinrich as non-independent directors of the Board, and in connection with their appointments to the Board, Mr. Reis-Faria, was also appointed as the Chief Executive Officer of the Company and Mr. Heinrich was also appointed as Executive Chairman effective October 1, 2025.

September 2025 ATM Offering

On September 23, 2025, the Company entered into an ATM sales agreement (the "Sales Agreement") with Revere Securities LLC (the "Agent") pursuant to which the Company may sell from time to time, at its option, common shares through the Agent in its capacity as sales agent. The sale of common shares, if any, will be made under the Company's Registration Statement, by any method that is deemed to be an "at the market offering" as defined in Rule 415(a)(4) under the Securities Act.

Subject to the terms and conditions of the Sales Agreement, the Agent will use its commercially reasonable efforts, consistent with its normal trading and sales practices and applicable state and federal laws, rules and regulations and the rules of Nasdaq, to sell on the Company's behalf all of the Common Shares requested to be sold by the Company. The Company may instruct the Agent not to sell Common Shares if the sales cannot be effected at or above the price designated by the Company in any such instruction. The Company or the Agent may suspend the offering of Common Shares being made through the Agent under the Sales Agreement upon proper notice to the other parties.

Unless otherwise agreed between the Company and the Agent, settlement for sales of the Common Shares will occur on the first trading day following the date on which any sales are made. Sales of the Common Shares will be settled through the facilities of The Depository Trust Company or by such other means as the Company and the Sales Agents may agree.

The aggregate compensation payable to the Agent, in cash, upon each sale of Common Shares through the Agent pursuant to the Sales Agreement, is an amount equal to: (i) 3.00% of the first $150 million in aggregate gross proceeds from the sale of Common Shares, (ii) 2.00% of the next $350 million in aggregate gross proceeds from the sale of the Common Shares, and (iii) 1.25% of any gross proceeds in excess of $500 million from the sale of the Common Shares. In addition, the Company has agreed in the Sales Agreement to provide indemnification and contribution to the Agent against certain liabilities, including liabilities under the Securities Act, in addition to certain other covenants, representations and warranties customary for an agreement of this type.

The Company is not obligated to make any sales of Common Shares under the Sales Agreement. The offering of Common Shares pursuant to the Sales Agreement will terminate upon the termination of the Sales Agreement by the Company or by the Agent, only with respect to itself, under the circumstances specified in the Sales Agreement.

The Company issued a total of 134,089 Common Shares at an average purchase price of $11.20 per share for gross proceeds of $1.5 million in the year ended December 31, 2025. See Note 26 of the Company's consolidated financial statements for the year ended December 31, 2025 for issuances subsequent to December 31, 2025.

November 2025 Share Purchase Agreement with White Lion

On November 28, 2025, the Company entered into a share purchase agreement (the "ELOC Agreement") with White Lion Capital LLC ("White Lion") pursuant to which White Lion has agreed to purchase from the Company up to an aggregate of $25.0 million of Common Shares from time to time over the term of the ELOC Agreement, which amount may be increased to up to an aggregate of $50.0 million of Common Shares upon mutual agreement by the parties and subject to the satisfaction of certain conditions (the "Total Commitment"). Also, on November 28, 2025, the Company entered into a registration rights agreement with White Lion (the "Registration Rights Agreement"). Pursuant to its obligations under the Registration Rights Agreement, the Company has filed with the SEC the registration statement that includes this prospectus to register the resale under the Securities Act of the Common Shares that may be issued to White Lion pursuant to the Total Commitment under the ELOC Agreement. On December 10, 2025, the Company issued 13,469 Common Shares to White Lion valued at $0.1 million as a commitment fee for the ELOC Agreement.

The Company issued 111,550 Common Shares valued at $0.7 million on December 30, 2025 in connection with the Note Settlement Agreement.

Sale of Legacy Hemp and Cannabis Business

On September 26, 2025, the Company transferred the Transferred Interests to Flora Growth US Holdings LLC, a Florida limited liability company and the Noteholders, in exchange for full satisfaction of the balance receivable under the promissory notes issued by the Company to such Noteholders as part of the Company's acquisition of United on February 4, 2025.

Factors Impacting our Business

Financial results associated with fluctuations in the value of 0G. 0G is a new type of digital asset, which tend to be highly volatile. Although ZeroStack continues to initially record its 0G purchases at cost, upon adoption of ASU 2023-08 on January 1, 2025, any subsequent increases or decreases in fair value are recognized as incurred in the Consolidated Statements of Loss and Comprehensive Loss, and the fair value of the 0G is reflected within the Consolidated Statement of Financial Position each reporting period-end. Due to the volatility of 0G, and the Company's substantial holdings of 0G, ZeroStack expects changes in the market value of 0G to materially impact our results.

Risks associated with 0G. 0G is a digital asset, which is a novel asset class that is subject to significant legal, commercial, regulatory and technical uncertainty. Holding 0G does not generate any cash flows and involves custodial fees and other costs. Additionally, the price of digital assets has historically experienced significant price volatility, and a significant decrease in the price of 0G would adversely affect the Company's financial condition and results of operations. ZeroStack's strategy of acquiring and holding 0G also exposes it to counterparty risks with respect to the custody of its 0G, cybersecurity risks, and other risks inherent to holding a digital asset. In particular, the Company is subject to the risk that, if its private keys with respect to its digital assets are lost or destroyed or other similar circumstances or events occur, the Company may lose some or all of its digital assets, which could materially adversely affect the Company's financial condition and results of operations. For more information, see "Item 1A. Risk Factors."

Diversification of cashflows. Our sources of cash are currently focused on its pharmaceutical distribution business. Revenues are concentrated primarily in Germany.

Regulatory proficiency and adoption. The markets in which ZeroStack operates are highly regulated and require extensive experience in navigating the associated complexities. We have assembled a team with deep knowledge of the regulatory and governance environments in which the Company operates. Fundamental expertise entails compliance with product approvals, import permits, export permits, distribution licenses and other pertinent licenses.

Public Company Costs

~~Following~~As ~~the~~a ~~consummation of our initial~~ public ~~offering,~~Company we became a public company, which has required the hiring of additional staff and implementation of processes and procedures to address public company regulatory requirements and customary practices. We expect to continue to incur substantial ~~additional~~ annual expenses for, among other things, directors' and officers' liability insurance and additional internal and external costs for investor relations, accounting, audit, legal, and other functions.

Minimum bid price requirement

On February 25, 2025, the Company was notified by Nasdaq that it was not in compliance with the minimum bid price requirement of $1.00 per share for 30 consecutive business days as set forth in Rule 5550(a)(2) of the Nasdaq Listing Rules (the "Minimum Bid Price Requirement"). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company had 180 calendar days, or until August 25, 2025, to regain compliance with the Minimum Bid Price Requirement. To regain compliance, the Company needed to maintain a minimum closing bid price of $1.00 or more for at least 10 consecutive trading days before August 25, 2025, unless Nasdaq Listing Qualifications Department exercised its discretion to extend this ten-day period pursuant to Nasdaq Listing Rule 5810(c)(3)(H).

On August 4, 2025, the Company effected a 1-for-39 share consolidation of the Company's issued and outstanding Common Shares, by filing Articles of Amendment to the Company's amended and restated Articles of Incorporation with the Ontario Ministry of Public and Business Service Delivery and Procurement. The Common Shares began trading on a post-share consolidation basis as of the opening of the Nasdaq on August 4, 2025.

From August 4, 2025 through August 18, 2025, a period of 10 consecutive trading days, the closing bid price of the Common Shares was greater than $1.00 per share. Accordingly, on August 19, 2025, the Company received formal notice from Nasdaq that it had regained compliance with the Minimum Bid Price Requirement and that the matter was closed. ZeroStack is now in compliance with all applicable continued listing standards and its Common Shares continue to be listed and traded on Nasdaq.

Minimum Independent Directors Requirement

On August 25, 2025, Harold Wolkin, a director of the Company passed away. Prior to his passing, Mr. Wolkin served as an "Independent Director", as defined in Nasdaq Listing Rule 5605(a)(2) (“Independent Director”), and as a member of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. On August 26, 2025, Nasdaq was informed that because of Mr. Wolkin's passing, the Company was no longer in compliance with certain Corporate Governance Requirements as set forth in Nasdaq Listing Rule 5605.

Pursuant to Nasdaq Listing Rule 5605(b)(1), a majority of the Board of a listed company must be comprised of Independent Directors. With Mr. Wolkin's passing, the Board was comprised of only four members, Daniel Reis-Faria, Michael Heinrich, Edward Woo and Manfred Leventhal. Only two of the four, Mr. Woo and Mr. Leventhal, qualified as Independent Directors. Therefore, the Company's Board was no longer comprised of a majority of Independent Directors as required by Nasdaq Listing Rule 5605(b)(1).

On January 6, 2026, the Board unanimously approved by written consent the appointment of Mr. Laurence Zeifman as a director of the Company. Following Mr. Zeifman's appointment, the Board is currently comprised of five members, Daniel Reis-Faria, Michael Heinrich, Edward Woo, Manfred Leventhal and Laurence Zeifman. Three of the five members, Mr. Woo, Mr. Leventhal and Mr. Zeifman, qualify as Independent Directors. Therefore, the Company's Board is now comprised of a majority of Independent Directors. As a result of the foregoing, the Company regained and has maintained compliance with the Board composition requirements of Nasdaq Listing Rule 5605(b)(1).

Audit Committee Requirement

OnPursuant ~~December~~to 6,Nasdaq ~~2023~~Listing Rule 5605(c)(2)(A), ~~the~~a ~~Company~~listed ~~received~~company amust ~~notification~~have ~~from~~an ~~Nasdaq,~~audit ~~confirming~~committee ~~that~~of at least three members, ~~due~~each toof ~~having~~whom ~~less~~must ~~than~~be ~~three~~an ~~independent~~Independent ~~audit~~Director ~~committee~~and ~~members,~~meet the ~~Company~~criteria nofor ~~longer~~independence ~~complies~~set ~~with~~forth ~~Nasdaq~~in Rule 10A-3(b)(1) under the Exchange Act. With Mr. Wolkin's ~~audit~~passing, ~~committee~~the Audit Committee was comprised of only two members, Edward Woo and Manfred Leventhal, each of whom meet the independence requirements ~~contained~~set forth in Nasdaq ~~Listing~~ Rule 5605(ca)(2) and Rule 10-A3(Ab)(1) of the Exchange Act. AsTherefore, ~~set~~the ~~forth~~Audit inCommittee ~~such~~was ~~notification,~~no ~~Nasdaq~~longer ~~advised~~comprised of at least three members meeting the ~~Company~~aforementioned ~~that,~~independence ~~under~~requirements as required by Nasdaq Listing Rule 5605(c)(42)(A). On January 6, 2026, the ~~Company~~Board ~~was~~unanimously ~~afforded~~approved aby ~~cure~~written ~~period~~consent inthe ~~order~~appointment toof ~~regain~~Mr. ~~compliance~~Laurence ~~(i)~~Zeifman ~~until~~as a member of the ~~earlier~~Audit Committee and the Chair of the ~~Company'~~Audit Committee. Following Mr. Zeifman’s ~~next~~appointment, ~~annual~~the ~~shareholders'~~Audit ~~meeting~~Committee oris ~~November~~currently ~~30,~~comprised ~~2024~~of three members, oreach ~~(ii)~~of ifwhom ~~the~~being ~~next~~an ~~annual~~Independent ~~shareholders'~~Director and meeting isthe ~~held~~criteria ~~before~~for ~~May~~independence ~~28,~~set ~~2024,~~forth ~~then~~in Rule 10A-3(b)(1) under the Exchange Act. As a result of the foregoing, the Company ~~must~~regained ~~evidence~~and has maintained compliance nowith ~~later~~the ~~than~~audit ~~May~~committee ~~28,~~composition ~~2024~~requirements of Nasdaq Listing Rule 5605(c)(2)(A).

OnCompensation ~~May~~Committee ~~2, 2024, the Board appointed Mr. Brendan Cahill as a director and member of each of the Company's audit committee, compensation committee and nominating and corporate governance committee.~~Requirement

~~After~~Pursuant ~~giving effect~~ to ~~Mr.~~Nasdaq ~~Cahill's~~Listing ~~appointment~~Rule 5605(d)(2), ~~the~~a ~~audit~~listed company must have a compensation committee of ~~the~~at ~~Board~~least ~~had~~two ~~three~~members, ~~independent~~each ~~members~~of aswhom ~~required~~must bybe an Independent Director and meet the criteria for independence set forth in Nasdaq Listing Rule 5605(cd)(2)(A). AsOn January 6, 2026, the Board unanimously approved by written consent the appointment of Mr. Laurence Zeifman as a ~~result~~member of the ~~foregoing~~Compensation Committee. Following Mr. Zeifman's appointment, the ~~Company~~Compensation ~~regained~~Committee ~~compliance~~is ~~with~~currently ~~the~~comprised ~~audit~~of ~~committee~~three ~~composition~~members, ~~requirements~~each of whom being an Independent Director and meeting the criteria for independence set forth in Nasdaq Listing Rule 5605(cd)(2)(A).

OnNominating ~~August~~and ~~26,~~Corporate ~~2024,~~Governance ~~Mr.~~Committee Kevin Taylor resigned as director of the Company. After giving effect to Mr. Taylor's resignation, the audit committee no longer had three independent members as required by Nasdaq Listing Rule 5605(c)(2)(A). The Company informed Nasdaq of the foregoing on August 27, 2024.Requirement

Pursuant to Nasdaq Listing Rule 5605(e)(1), director nominees of a listed company must either be selected or recommended for the board's selection by Independent Directors constituting a majority of a board's Independent Directors or a nominations committee comprised solely of independent directors. With Mr. Wolkin's passing, the Nominating and Corporate Governance Committee was comprised of only two members, Edward Woo and Manfred Leventhal, each of whom meet the independence requirements set forth in Nasdaq Rule 5605(a)(2). On ~~August~~January 296, ~~2024~~2026, the Board ~~appointed~~unanimously approved by written consent the appointment of Mr. ~~Harold~~Laurence ~~Wolkin~~Zeifman as ana ~~independent~~member ~~director~~of the Nominating and ~~member~~Corporate ofGovernance ~~each~~Committee. ofFollowing ~~the~~Mr. ~~Company~~Zeifman's ~~audit committee~~appointment, ~~compensation~~the ~~committee~~Nominating and ~~nominating~~Corporate ~~and~~Governance ~~corporate~~Committee ~~governance~~is ~~committee~~currently comprised of three members, each of whom being an Independent Director.

After giving effect to Mr. Wolkin's appointment, the audit committee of the Board had three independent members as required by Nasdaq Listing Rule 5605(c)(2)(A). As a result of the foregoing, the Company regained compliance with the audit committee composition requirements of Nasdaq Listing Rule 5605(c)(2)(A).

On December 5, 2024, Brendan Cahill resigned as director of the Company.

Also on December 5, 2024, the Board appointed Mr. Manfred Leventhal as an independent director and member of each of the Company's audit committee, compensation committee and nominating and corporate governance committee.

As a result of the foregoing, the Company regained and has maintained compliance with the audit committee composition requirements of Nasdaq Listing Rule 5605(c)(2)(A).

Key Components of Results of Operations

Revenue

The Company primarily generates revenue as a ~~distributor~~global of pharmaceutical ~~goods,~~distributor ~~and~~through aits ~~manufacturer~~wholly ~~and~~owned ~~reseller~~subsidiary ~~of a range of cannabis-based and complementary products~~Phatebo. ~~The Company has two major revenue groups, which are also its two reportable segments:~~

	(1)	House of Brands; and
	(2)	commercial and wholesale.

The Company operates its global pharmaceutical distribution business through its subsidiary in Germany.

These segments reflect how the Company's operations are managed, how the Company's Chief Executive Officer, who is the chief operating decision maker, allocates resources and evaluates performance, and how the Company's internal management financial reporting is structured.

The Company's operates its manufacturing and distribution business through its subsidiaries in the United States, Germany and Australia. Until the sale of the Colombia Assets, the Company also was engaged in the growth, cultivation, and development of medicinal cannabis and medicinal cannabis derivative products in Colombia.

The Company uses the following five-step contract-based analysis of transactions to determine if, when and how much revenue can be recognized:

1. ~~Identify~~identify the contract with a customer; 2. ~~Identify~~identify the performance obligations in the contract; 3. ~~Determine~~determine the transaction price; 4. ~~Allocate~~allocate the transaction price to the performance obligations in the contract; and 5. ~~Recognize~~recognize revenue when or as the Company satisfies the performance obligations.

Revenue is recognized at the transaction price, which is the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods to a customer. Gross revenue excludes duties and taxes collected on behalf of third parties. Revenue is presented net of expected price discounts, sales returns, customer rebates and other incentives. ~~The Company's cannabis consumption accessory products include a six-month warranty, which the Company accrues for the estimated liability based on historical and expected claim costs.~~

The Company's contracts with customers for the sales of products consist of one performance obligation. Revenue from product sales is recognized at the point in time when control is transferred to the customer, which is on shipment or delivery, depending on the contract terms. The Company's payment terms generally range from 0 to 30 days from the transfer of control, and sometimes up to six months.

Cost of ~~sales~~ Sales

The Company includes the cost of raw materials and supplies, purchased finished goods and changes in inventory reserves in cost of ~~sales for each of its three reportable segments~~sale. Raw materials include the purchase cost of the materials, freight-in and duty. Finished goods include the cost of ~~direct~~products ~~materials~~purchased ~~and~~from ~~labor and a proportion of manufacturing overhead allocated based on normal production capacity~~suppliers. Inventory reserves for excess and obsolete inventory are based upon quantities on hand, projected volumes from demand forecasts and net realizable value. The primary factors that can impact cost of goods sold on a period-to-period basis include the volume of products sold, the mix of products sold, third-party quality costs, transportation, overhead allocations and changes in inventory provisions.

Operating Expenses

The Company's operating expenses are apportioned based on the following categories:

•Loss ~~Consulting~~from ~~and~~changes ~~management fees include salary and benefit expenses for employees, directors and consultants for the Company's corporate activities, other than those included~~ in ~~one~~fair ofvalue general and administrative, share-based compensation, and research and development. • Professional fees include legal, audit and other expenses incurred by third-party service providers. • General and administrative include certain public company costs, merchant fees and temporary labor and subcontractor costs for the Company's operating subsidiaries. • Promotion and communication expenses consist primarily of ~~services~~digital ~~engaged~~assets ~~in marketing and promotion of our products and costs associated with initiatives and development programs and salary and benefit expenses for certain employees. • Travel expenses~~ relate to ~~flight,~~fluctuations lodging and incidental expenses for attending conferences, events and key business meetings. • Share-based compensation includes the cost of vesting of the Company's equity awards, including share options, restricted share awards and stock appreciation rights. • Research and development expenses primarily consist of salary and benefit expenses for employees engaged in ~~research~~fair ~~and~~value ~~development activities, as well as other general costs associated with R&D activities. • Operating lease expense represents the cost~~ of the Company's ~~operating~~digital ~~leases, primarily consisting of real estate and equipment. • Depreciation and amortization expense is provided on a straight-line basis over the corresponding~~ assets~~' estimated useful lives~~. • Bad debt expense consists of changes in the provision for the Company's expected credit losses. The Company utilizes a provision matrix to estimate lifetime expected credit losses. • Asset impairment includes the difference between the fair value and carrying amount of the asset group. An impairment loss is recognized when the sum of projected undiscounted cash flows is less than the carrying value of an asset group. • Other expenses (income), net include miscellaneous expenses that do not fit the criteria for recognition in another category.
~~Non~~Consulting and management fees include salary and benefit expenses for employees, directors and consultants for the Company's corporate activities, other than those included in one of general and administrative, share-~~Operating~~based ~~Expenses~~compensation, and research and development.
~~Non-operating~~Professional ~~expenses~~fees include ~~interest income and expenses~~legal, ~~foreign~~audit ~~exchange losses~~ and ~~changes~~other inexpenses ~~financial~~incurred ~~instruments~~by ~~fair~~third-party ~~value.~~service ~~Interest is primarily related to the Company's operating lines of credit~~providers. Foreign exchange is largely related to the revaluation of balances denominated in foreign currencies to U.S. dollars. Changes in financial instruments fair value pertains to fluctuations in the fair values of the Company's investments and liabilities.
Share-based compensation includes the cost of vesting of the Company's equity awards, including share options, restricted share awards, and stock appreciation rights ("SARs").
General and administrative include certain public company costs and temporary labor and subcontractor costs for the Company's operating subsidiaries.
Travel relate to flight, lodging and incidental expenses for attending conferences, events and key business meetings.
Operating lease represents the cost of the Company's operating leases, primarily consisting of real estate and equipment.
Depreciation and amortization expense is provided on a straight-line basis over the corresponding assets' estimated useful lives.
Bad debt expense consists of changes in the provision for the Company's expected credit losses. The Company utilizes a provision matrix to estimate lifetime expected credit losses.
Asset impairments includes the difference between the fair value and carrying amount of the asset group. An impairment loss is recognized when the sum of projected undiscounted cash flows is less than the carrying value of an asset group.
Other expenses (income), net include miscellaneous expenses that do not fit the criteria for recognition in another category.

Non-Operating (Income) Loss

Non-operating (income) loss includes interest income and expenses, foreign exchange (gains) losses, gain on the disposal of Insolvent Entities and changes in financial instrument fair value. Interest is primarily related to the Company's lease liabilities and operating lines of credit. Foreign exchange is largely related to the revaluation of balances denominated in foreign currencies to U.S. dollars. Gain on the disposal of Insolvent Entities includes the difference between the fair value of any consideration received and the carrying values of the net assets of subsidiaries that have been deconsolidated as a result of filing for bankruptcy. Changes in financial instruments fair value pertain to fluctuations in the fair values of the Company's contingent consideration and non-current debt.

Income Tax

Income tax consists primarily of income taxes related to U.S. federal and state income taxes and income taxes in foreign jurisdictions in which we conduct business.

Loss from Discontinued Operations

Loss from discontinued operations includes the net loss, net of tax, of the ~~Colombian~~Company's ~~subsidiaries~~legacy ~~sold~~hemp onand ~~July~~cannabis 5,business ~~2023~~sold ~~and~~ on ~~November~~September 126, ~~2023~~2025. It also includes an expected ~~loss~~gain on the disposal as the expected sale price exceeded the carrying value of the assets being sold ~~exceeded the expected sale price~~.

Results of Operations

The following table sets forth the Company'’s consolidated results of operations for the fiscal years ended December 31, ~~2024~~2025 and ~~2023~~2024 (in thousands). The period-to-period comparisons of the Company'’s historical results are not necessarily indicative of the results that may be expected in the future. The results of operations data have been derived from our audited consolidated financial statements included elsewhere in this Annual Report. The results from the year ended December 31, 2024 have been restated to reflect the sale of the Cannabis Business as discontinued operations.

		For the year ended December 31, 2025			For the year ended December 31, 2024
Revenue	$	35,676		$	35,865

Gross profit		1,649			2,196
Loss from changes in fair value of digital assets		142,997			-
Consulting and management fees		5,239			3,972
Professional fees		2,602			2,271
Share based compensation		1,208			2,779
General and administrative		1,391			1,929
Travel		274			226
Operating lease		151			102
Depreciation and amortization		23			25
Bad debt		323			-
Asset impairments		46			32
Other expenses (income), net		2,047			(215	)
Operating loss		(154,652	)		(8,925	)
Non-operating (income) expenses		(39,301	)		399
Net loss before taxes and discontinued operations		(115,351	)		(9,324	)
Income tax		59			22
Net loss from continuing operations		(115,410	)		(9,346	)
Loss from discontinued operations		(4,322	)		(6,561	)
Net loss for the period		$(119,732	)		$(15,907	)

		For theyearendedDecember31, 2024			For theyearendedDecember31, 2023
Revenue	$	59,505		$	76,071
Gross profit		12,497			17,738
Consulting and management fees		9,661			11,876
Professional fees		2,684			2,301
General and administrative		1,938			1,646
Promotion and communication		5,298			4,710
Travel expenses		505			413
Share based compensation		2,779			1,591
Research and development		418			62
Operating lease expense		718			1,211
Depreciation and amortization		768			2,335
Bad debt expense		411			236
Other expenses, net		725			2,204
Goodwill and other asset impairments		2,237			39,507
Operating loss		(15,645	)		(50,354	)
Non-operating expenses		439			(2,057	)
Net loss before taxes and discontinued operations		(16,084	)		(48,297	)
Income tax benefit		(177	)		(1,628	)
Net loss from continuing operations		(15,907	)		(46,669	)
Loss from discontinued operations		-			(9,678	)
Net loss for the period	$	(15,907	)	$	(56,347	)

Stop Sale Order by Florida Department of Agriculture and Consumer Services Division of Food Safety

On October 31, 2023, the Department issued 340 stop sale orders on hemp extract products distributed by Just Brands primarily on the basis that such products were determined to be attractive to children with the product and/or labels in the shape of an animal, human, or cartoon; or bears any reasonable resemblance to an existing candy product, or branded food product. As a result, Just Brands has stopped distributing these products in the State of Florida. There is no assurance that these products can be sold in another jurisdiction, or at all.

On January 22, 2024, the Department issued a stop sale order on 231 hemp extract and other products distributed by Just Brands primarily on the basis that such products were determined to be attractive to children with the product and/or labels in the shape of an animal, human, or cartoon; or bears any reasonable resemblance to an existing candy product, or branded food product. As a result, Just Brands has stopped distributing these products in the State of Florida. There is no assurance that these products can be sold in another jurisdiction, or at all.

On April 2, 2024, the Department issued a stop sale order on 84 hemp extract and other products distributed by High Roller primarily on the basis that such products were determined to be attractive to children with the product and/or labels in the shape of an animal, human, or cartoon; or bears any reasonable resemblance to an existing candy product, or branded food product. As a result, Higher Roller has stopped distributing these products in the State of Florida. There is no assurance that these products can be sold in another jurisdiction, or at all.

On May 7, 2024, Just Brands and the Department agreed to a settlement and general release, whereby Just Brands will remove the products subject to the Stop Sales Orders from the state of Florida, pay the Department $60,500 to reimburse the Department's attorney's fees, and accept a five-year revocation of its food permit in the state of Florida. By signing the release, Just Brands waived, settled and released all claims it had or might have against the Department.

On June 27, 2024, Just Brands and the Department agreed to a settlement and general release, whereby High Roller will remove the products subject to the Stop Sales Orders from the state of Florida, destroy products containing controlled substances, pay the Department $5,000 to reimburse the Department's attorney's fees, and accept a two-year suspension of the manufacture, distribution and sale of gummy hemp extract products in the state of Florida. By signing the release, High Roller waived, settled and released all claims it had or might have against the Department.

The Company estimates that the disruption from these stop sale orders had an unfavorable impact of $0.7 million on revenue during the year ended December 31, 2024. The total cost of inventory impacted by the stop sale orders was $1.9 million. As per the agreement with the Department, all the impacted inventory has been moved and is being sold outside the state of Florida.

Revenue

Revenue totaled $5935.57 million and $7635.19 million for the ~~years~~year ended December 31, ~~2024~~2025 and ~~2023~~2024, respectively. The ~~decrease~~revenue for both the years ended December 31, 2025 and 2024 was ~~primarily~~generated ~~driven~~entirely by the ~~following:~~Company's Phatebo subsidiary.

• Phatebo contributed $35.9 million for the year ended December 31, 2024 compared to $38.3 million for the year ended December 31, 2023. • JustCBD contributed $17.7 million for the year ended December 31, 2024 compared to $31.1 million for the year ended December 31, 2023. • Vessel contributed $5.2 million for the year ended December 31, 2024, compared to $6.7 million for the year ended December 31, 2023. • AV was acquired in June 2024 and contributed $0.7 million during the year ended December 31, 2024.

Revenues generated for the year ended December 31, 2023 by the Company`s Colombian entities are included separately within Loss from Discontinued Operations.

Revenues generated for the year ended December 31, 2024 by the House of Brands segment were $23.6 million compared to revenues generated for the year ended December 31, 2023 of $37.8 million. The decrease was driven by the Company's decision to discontinue several unprofitable product lines during 2023, increased competition and market saturation, as well as the stop sales orders discussed above.

Revenues generated for the year ended December 31, 2024 by the commercial and wholesale segment were $35.9 million compared to revenues generated for the year ended December 31, 2023 of $38.3 million. The decrease in revenue, which was entirely generated by Phatebo, was driven by a change in management and customer transition.

Gross Profit

Gross profit totaled $121.56 million and $172.72 million for the years ended December 31, ~~2024~~2025 and ~~2023~~2024, respectively. The decrease was primarily driven by the decreased ~~sales~~margins at ~~JustCBD, which contributed $7.6 million in~~ the year ended December 31, 2024 compared to $12.7 million in the year ended December 31, 2023. In addition, $0.7 million of inventory impairment was recorded at JustCBD in the year ended December 31, 2024 related to inventory theft and recoveries of stolen inventory that is no longer saleable. Moreover, gross profit at Vessel decreased from $3.0 million in the year ended December 31, 2023 to $2.7 million in the year ended December 31, 2024. The gross margins at Phatebo ~~remained~~subsidiary ~~flat at $2.2 million for both years ended December 31, 2024 and December 31, 2023. TruHC and AV were acquired~~ in ~~2024 and contributed a total of less than $0.1 million during~~ the year ended December 31, ~~2024~~2025. As a percentage of net sales, or gross margin, the Company reported 215% and 236% for the years ended December 31, ~~2024~~2025 and ~~2023~~2024, respectively. ~~The decrease is primarily due to an unfavorable mix, with increased sales of lower margin pharmaceuticals.~~

Operating Expenses

Operating expenses totaled $28156.13 million and $6811.1 million for the years ended December 31, ~~2024~~2025 and ~~2023~~2024, respectively. The ~~decrease~~increase isin ~~seen~~the ~~across~~year ~~multiple~~ended ~~expense~~December ~~categories~~31, ~~and~~2025 iswas due to ~~management's~~$143.0 ~~cost-cutting~~million ~~initiatives~~in ~~implemented~~losses ~~during the second half of 2023 as well as asset impairments~~ recorded ~~during~~from ~~the~~changes ~~year~~in ~~ending~~fair ~~December~~value ~~31,~~of ~~2023~~digital assets.

55Loss from Changes in Fair Value of Digital Assets

Loss from changes in fair value of digital assets totaled $143.0 million and $nil for the years ended December 31, 2025 and 2024, respectively. The loss in the year ended December 31, 2025 is driven by a $138.9 million decrease in the value of the Company’s 0G holdings during the fourth quarter, as well as a $4.8 million decrease in the value of the Solana held by the Company prior to its settlement of the PIPE Note.

Consulting and Management Fees

Consulting and management fees were $95.72 million for the year ended December 31, ~~2024~~2025 compared to $114.90 million for the year ended December 31, ~~2023~~2024. These fees are related to employment and consulting contracts with most of the Company's management, as well as directors. The ~~decrease~~increase isin ~~primarily~~the year ended December 31, 2025 was due to aseverance ~~substantial~~payments ~~reduction~~to in the Company's ~~total~~former ~~headcount~~Chief ~~across~~Executive ~~all its business units~~Officer.

Professional Fees

Professional fees totaled $2.76 million for the year ended December 31, ~~2024~~2025 compared to $2.3 ~~million~~ for the year ended December 31, ~~2023~~2024. These expenses are associated with legal, accounting and audit services. The increase is due to costs related to share offerings as well as to the acquisitions of TruHC and AV during the year ended December 31, 2024, as well as credit memos received during the year ended December 31, 2023.

Share-based Compensation Expenses

Share based compensation expenses totaled $1.2 million for the year ended December 31, 2025 compared to $2.8 million for the year ended December 31, 2024. These expenses represent the amortization of the fair value of share-based payments. The decrease is due to the grants of RSAs to key employees in December 31, 2024 that vested immediately.

General and Administrative Expenses

General and administrative expenses totaled $1.94 million for the year ended December 31, ~~2024~~2025 compared to $1.69 million for the year ended December 31, ~~2023~~2024. The primary expenses included in both periods were filing services and shareholder communications, as well as professional dues and subscriptions. The decrease in the year ended December 31, 2025 was due to reduced marketing expenses.

Promotion and Communication Expenses

Promotion and communication expenses totaled $5.3 million for the year ended December 31, 2024 compared to $4.7 million for the year ended December 31, 2023. The increase is due to increased promotion expenses during 2024. Promotion expenses incurred in both periods also largely relate to the nature of JustCBD's business model, which is centered around promoting its products as a method for stimulating revenue.

Travel Expenses

Travel expenses totaled $0.53 million for the year ended December 31, ~~2024~~2025 compared to $0.42 million for the year ended December 31, ~~2023~~2024. These expenses were for various trips related to the subsidiaries' and the Company's promotional activities.

Share-based Compensation Expenses

Share based compensation expenses totaled $2.8 million for the year ended December 31, 2024 compared to $1.6 million for the year ended December 31, 2023. These expenses represent the amortization of the fair value of share-based payments. The increase is due to the grant of Stock Appreciation Rights to key employees during the year ended December 31, 2024.

Research and Development Expenses

Research and development expenses totaled $0.4 million for the year ended December 31, 2024 compared to $0.1 million for the year ended December 31, 2023. Research and development expenses consist primarily of contract research fees, manufacturing, consultant fees, and costs related to the launch of new brands for the Vessel business.

Operating Lease Expenses

Operating lease expenses totaled $0.72 million for the year ended December 31, ~~2024~~2025 compared to $10.21 million for the year ended December 31, ~~2023. The decrease is due to the impairment of the right-of-use operating lease assets during 2023, causing reduced operating lease expense in~~ 2024.

5657

Depreciation and Amortization Expense

Depreciation and amortization expenses totaled ~~$0.8~~less ~~million~~than ~~for the year ended December 31, 2024 compared to~~ $20.31 million for both the ~~year~~years ended December 31, ~~2023.~~2025 ~~The decrease is primarily due to the impairment recorded on the Company's long-lived assets during 2023, causing reduced depreciation~~ and ~~amortization in~~ 2024~~, partially offset by the acquisitions of TruHC and AV during the year ended December 31, 2024~~.

Bad Debt Expense

Bad debt expense totaled $0.43 million for the year ended December 31, ~~2024~~2025 compared to $~~0.2~~nil ~~million~~ for the year ended December 31, ~~2023~~2024. The amounts reflect the Company's estimate of lifetime expected losses related to outstanding trade receivables. The increase in 2025 was due to a credit loss from a customer in China.

~~Other~~Asset ~~Expenses~~impairments

~~Other~~Asset ~~expenses~~impairments totaled less than $0.71 million for both the ~~year~~years ended December 31, ~~2024~~2025 ~~compared~~and ~~to $2~~2024.2 ~~million~~The ~~for~~Company ~~the~~tests ~~year~~its ~~ended~~goodwill ~~December~~and ~~31,~~indefinite-lived ~~2023.~~intangibles ~~These~~for ~~expenses~~impairment ~~consist~~as ~~mainly~~part of ~~insurance,~~its ~~repairs~~annual ~~and~~fourth ~~maintenance~~quarter ~~and~~impairment ~~royalties partially offset by miscellaneous incomes. The decrease is primarily due to lower insurance expenses~~test, asand ~~well~~at asinterim ~~sublease~~periods ~~income~~when ~~collected~~impairment ~~during~~indicators ~~the year ended December 31, 2024~~exist.

~~Goodwill~~For ~~and~~asset ~~other~~groups that had indicators of impairment, the Company performed a quantitative analysis as of each interim period to determine if impairment existed by comparing the carrying amount of each asset ~~impairments~~group to the future undiscounted cash flows the asset group is expected to generate over their remaining lives. This analysis resulted in an impairment of operating lease right of use assets of less than $0.1 million for the year ended December 31, 2025, and an impairment of property, plant and equipment of less than $0.1 million for the year ended December 31, 2024.

~~Goodwill~~Other ~~and~~Expenses ~~other asset impairments totaled $2.2 million and $39.5 million in asset impairments for the years ended December 31~~(Income), 2024 and 2023, respectively. The Company tests its goodwill and indefinite-lived intangibles for impairment as part of its annual fourth quarter impairment test, and at interim periods when impairment indicators exist. For the year ended December 31, 2024, the Company tested its goodwill for impairment as at September 30, 2024 and December 31, 2024 due to external indicators such as new limitations imposed by the Australian government which will negatively impact the AV reporting unit sales. In addition, the Company assessed its other long-lived assets for impairment as at March 31, 2024, June 30, 2024 and September 30, 2024. The Company concluded that the carrying value of its AV reporting unit was higher than its estimated fair value, and a goodwill impairment loss totaling $0.2 million was recognized in the year ended December 31, 2024.Net

~~For~~Other ~~asset~~expenses ~~groups~~totaled ~~that~~$2.0 ~~had~~million ~~indicators~~for ofthe ~~impairment,~~year ~~the~~ended ~~Company~~December ~~performed~~31, a2025 ~~quantitative~~compared ~~analysis~~to asother income of ~~each~~$0.2 ~~interim~~million ~~period~~for inthe year ended December 31, 2024. toThis ~~determine~~expense if(income) ~~impairment~~consists ~~existed~~mainly byof ~~comparing~~insurance, ~~the~~repairs ~~carrying~~and ~~amount~~maintenance ofand ~~each~~royalties ~~asset~~partially ~~group~~offset toby ~~the~~miscellaneous ~~future~~incomes. ~~undiscounted~~Other ~~cash~~expenses ~~flows~~in the ~~asset~~year ~~group~~ended isDecember ~~expected~~31, to2025 ~~generate~~was ~~over~~driven ~~their~~by ~~remaining~~a ~~lives~~$1.2 ~~This~~million ~~analysis~~contingency ~~resulted~~loss inrecorded ~~impairments~~for ofa ~~property,~~legal ~~plant~~proceeding ~~and~~brought ~~equipment~~against Vessel, ~~operating~~a ~~lease~~former ~~right~~subsidiary of ~~use~~the ~~assets~~Company, and ~~certain~~the ~~intangibles~~Company ~~assets~~on ~~totaling~~June $2.0, ~~million~~2025, ~~for~~as ~~the~~well ~~year~~as ~~ended~~increased ~~December~~insurance ~~31,~~and ~~2024~~repairs and maintenance expenses.

At June 30, 2023 and December 31, 2023, Flora determined that the decline in the share price of the Company's publicly traded Common Shares, the declining share price of comparable public companies and challenging economic factors making it difficult to access capital were indicators of impairment. Flora then concluded that the carrying values of its JustCBD and FGH reporting units were higher than their respective estimated fair values, and a cumulative goodwill impairment loss totaling $23.4 million was recognized for the year ended December 31, 2023.

For asset groups that had indicators of impairment, the Company performed a quantitative analysis as of each interim period in 2023 to determine if impairment existed by comparing the carrying amount of each asset group to the future undiscounted cash flows the asset group is expected to generate over their remaining lives. This analysis resulted in impairments of property, plant and equipment, operating lease right of use assets and certain intangibles assets totaling $16.1 million for the year ended December 31, 2023.

Non-operating Expenses (Income)

~~Flora~~The Company realized $039.43 million in non-operating ~~expense~~income for the year ended December 31, ~~2024~~2025 compared to ~~non-operating income of~~ $20.14 million in non-operating expense for the year ended December 31, ~~2023~~2024. This expense (income) consists of unrealized losses (gains) from changes in fair value, interest (income) expense and foreign exchange loss. The ~~reduced~~increased income isin ~~primarily~~the year ended December 31, 2025 was due to a $037.39 million gain onfrom the ~~value~~revaluation of the ~~contingent~~Zero ~~consideration~~Gravity ~~related~~Convertible toand ~~the~~PIPE ~~JustCBD~~Notes, ~~and~~a ~~Original~~$1.6 ~~Hemp~~million ~~acquisitions~~gain ~~during~~on the ~~year~~settlement ~~ended~~of ~~December~~the ~~31,~~PIPE ~~2024~~Note, ~~compared~~and to a $2gain on the disposal of Insolvent Entities.0 ~~million~~This ~~gain~~was ~~during~~partially offset by increased interest expense and losses related to contingent consideration in the year ended December 31, ~~2023~~2025.

57Income Tax

~~Income~~The ~~Tax~~Company ~~Benefit~~recognized $0.1 million in income tax expense for the year ended December 31, 2025 compared to less than $0.1 million in income tax expense for the year ended December 31, 2024. Our effective tax rate during the year ended December 31, 2025 and 2024 was -0.1% and -0.2%, respectively. The Company maintains valuation allowances when it is more likely than not that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in the tax provision in the period of change. In determining whether a valuation allowance is required, the Company considers such factors as prior earnings history, expected future earnings, carry-back and carry-forward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. The Company continues to believe its deferred tax assets are not more-likely-than-not to be realized and a full valuation allowance remains recorded against net deferred taxes as of December 31, 2025 and 2024.

The Company recognized $0.2 million and $1.6 million in income tax benefit for the years ended December 31, 2024 and 2023, respectively. Our effective tax rate during the year ended December 31, 2024 and 2023 was 1.1% and 3.4%, respectively. The Company maintains valuation allowances when it is more likely than not that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in the tax provision in the period of change. In determining whether a valuation allowance is required, the Company considers such factors as prior earnings history, expected future earnings, carry-back and carry-forward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. Flora continues to believe its deferred tax assets are not more-likely-than-not to be realized and a full valuation allowance remains recorded against net deferred taxes as of December 31, 2024 and 2023.58

Loss from Discontinued Operations

Loss from discontinued operations totaled $~~nil~~4.3 million in the year ended December 31, ~~2024~~2025 compared to $96.76 million in the year ended December 31, ~~2023~~2024. The sale of the ~~Colombian~~legacy ~~subsidiaries~~hemp ~~was~~and ~~completed~~cannabis ~~during~~businesses ~~the~~was ~~third~~finalized ~~and~~on ~~fourth~~September ~~quarters~~26, ~~of 2023~~2025.

Net loss

The Company incurred a net loss of $15119.97 million and $5615.39 million for the years ended December 31, ~~2024~~2025 and ~~2023~~2024, respectively. ~~This~~The ~~decrease~~increased in net loss isin ~~driven~~the byyear ~~lower~~ended ~~operating~~December ~~expenses~~31, ~~and~~2025 ~~the~~was ~~loss~~due ~~from~~to ~~the~~$143.0 ~~disposed~~million ~~Colombia~~in ~~operations~~losses recorded from changes in ~~2023~~fair value of digital assets partially offset by ~~lower~~$37.9 ~~gross~~million ~~profit~~in ~~and~~gains ~~income~~from ~~tax~~the ~~benefit,~~revaluation asof ~~well~~the asZero ~~higher~~Gravity ~~non-operating~~Convertible ~~losses~~and inPIPE ~~2024~~Notes.

EBITDA and Adjusted EBITDA

EBITDA and Adjusted EBITDA are non-U.S. GAAP financial measures that do not have any standardized meaning prescribed by U.S. GAAP and may not be comparable to similar measures presented by other companies. Flora calculates EBITDA as total net (loss) income from continuing operations, plus (minus) income taxes (recovery), plus (minus) interest expense (income), plus depreciation and amortization. Flora calculates Adjusted EBITDA as EBITDA plus (minus) non-operating expense (income), plus share based compensation expense, plus asset impairment charges, plus (minus) changes in financial instruments fair value, plus charges related to the flow-through of inventory step-up on business combinations, plus other acquisition and transaction costs. Management believes that EBITDA and Adjusted EBITDA provide meaningful and useful financial information as these measures demonstrate the operating performance of the business.

The reconciliation of the Company's EBITDA and Adjusted EBITDA, non-U.S. GAAP financial measures, to net loss from continuing operations, the most directly comparable U.S. GAAP financial measure, for the year ended December 31, 2024 is presented in the table below:

(In thousands of United States dollars)		JustCBD			Vessel			Germany(3)			AustralianVaporizers			Corporate& Other			Consolidated
Net loss from continuing operations	$	(3,007	)	$	(2,129	)	$	(1,004	)	$	(643	)	$	(9,124	)	$	(15,907	)
Income tax expense (recovery)		2			1			(186	)		(46	)		52			(177	)
Interest expense		59			8			142			1			3			213
Depreciation and amortization		168			62			488			15			35			768
EBITDA		(2,778	)		(2,058	)		(560	)		(673	)		(9,034	)		(15,103	)
Non-operating loss (1)		3			-			-			21			461			485
Share based compensation		-			-			-			-			2,779			2,779
Asset impairment		585			1,206			-			414			32			2,237
Changes in financial instruments fair value (2)		(57	)		-			-			-			(202	)		(259	)
Charges related to the flow-through of inventory step-up on business combinations		-			-			-			79			-			79
Other acquisition and transaction costs		-			-			-			-			266			266
Adjusted EBITDA	$	(2,247	)	$	(852	)	$	(560	)	$	(159	)	$	(5,698	)	$	(9,516	)

The reconciliation of the Company's EBITDA and Adjusted EBITDA, non-U.S. GAAP financial measures, to net (loss) income from continuing operations, the most directly comparable U.S. GAAP financial measure, for the year ended December 31, 2023 is presented in the table below:

(In thousands of United States dollars)		JustCBD			Vessel			Germany(3)		Corporate &Other			Consolidated
Net (loss) income from continuing operations	$	(22,790	)	$	(8,372	)	$	274	$	(15,781	)	$	(46,669	)
Income tax expense (recovery)		-			3			101		(1,732	)		(1,628	)
Interest expense (income)		9			2			92		(11	)		92
Depreciation and amortization		742			736			28		829			2,335
EBITDA		(22,039	)		(7,631	)		495		(16,695	)		(45,870	)
Non-operating loss (income) (1)		2			14			-		(174	)		(158	)
Share based compensation		-			-			-		1,591			1,591
Asset impairment		22,892			7,402			-		9,213			39,507
Changes in financial instruments fair value (2)		(964	)		-			-		(1,027	)		(1,991	)
Charges related to the flow-through of inventory step-up on business combinations		-			-			-		45			45
Adjusted EBITDA	$	(109	)	$	(215	)	$	495	$	(7,047	)	$	(6,876	)

	(1)	Non-operating loss (income) includes foreign exchange (loss) gain.
	(2)	Changes in financial instruments fair value includes changes in the value of the Company's long-term investment in an early-stage European cannabis company and the value of the Company's contingent consideration associated with its acquisitions of JustCBD and Original Hemp.
	(3)	Germany includes the Company's main operating entities in Germany, Phatebo and TruHC.

Liquidity and Capital Resources

Since the Company's inception, we have funded our operations and capital spending through cash flows from product sales and proceeds from the sale of our capital stock. The Company is generating cash from sales and is deploying its capital reserves to acquire and develop assets capable of producing additional revenues and earnings over both the immediate and near term to support our business growth and expansion. WeWhile we have generated significant operating losses and negative cash flows from operations as reflected in our accumulated deficit and unaudited condensed interim consolidated statements of cash flows. Wemainly ~~expect~~through toour ~~continue~~legacy tohemp ~~incur~~and ~~operating~~cannabis ~~losses~~businesses, we began implementing an expansion strategy focused on identifying and ~~negative~~pursuing ~~cash~~complementary ~~flows~~growth ~~for~~opportunities within the ~~foreseeable~~global ~~future~~digital asset market in early 2025. This has resulted in $121.0 million in digital assets on the Company's condensed consolidated balance sheet as of December 31, 2025. Our current, principal sources of liquidity are cash and cash equivalents provided by our operations and prior equity offerings. Cash ~~and~~consists ~~cash equivalents consist~~ primarily of cash on deposit with banks. Cash ~~and~~was ~~cash equivalents were~~ $65.16 million and $45.42 million as of December 31, ~~2024~~2025 and ~~2023~~2024, respectively. As ofa ~~December~~result ~~31,~~of ~~2024,~~ the ~~Company's~~PIPE ~~current~~Offering ~~working~~that ~~capital,~~closed ~~anticipated~~on ~~operating~~September ~~expenses~~26, ~~and net losses~~2025, ~~and~~ the ~~uncertainties~~Company ~~surrounding~~believes that its ~~ability~~existing tosources ~~raise~~of ~~additional~~liquidity ~~capital~~are ~~as needed, raise substantial doubt as to whether existing cash~~ and ~~cash equivalents~~ will be sufficient toin ~~meet~~both ~~its obligations as they come due within twelve months from~~ the ~~date~~short ~~the~~and ~~consolidated~~long ~~financial~~term ~~statements~~to ~~were~~meet ~~issued.~~our ~~The~~working ~~consolidated~~capital ~~financial~~requirements ~~statements do not include any adjustments for the recovery~~ and ~~classification~~future ~~of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern~~obligations.

59The Company's primary uses of cash are for working capital requirements and capital expenditures. Additionally, from time to time, it may use capital for acquisitions and other investing and financing activities. Working capital is used principally for the Company's personnel as well as costs related to the distribution of pharmaceutical products. The Company's capital expenditures consist primarily of additional facilities, improvements in existing facilities and product development.

The Company's ability to execute its operating plans through 2025 and beyond depends on its ability to obtain additional funding through equity offerings, debt financing, or other forms of financing to meet planned growth requirements and to fund future operations, which may not be available on acceptable terms, or at all. If we are unable to raise the requisite funds, we will need to curtail or cease operations. See Note 2 to the audited consolidated financial statements for more information and Item 1A "Risk Factors - Management has performed an analysis of our ability to continue as a going concern, and has determined that, based on our current financial position, there is a substantial doubt about our ability to continue as a going concern. In addition, our independent registered public accounting firm has raised substantial doubt as to our ability to continue as a going concern" in this Annual Report. We have based our estimates as to how long we expect we will be able to fund our operations on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. In the long-term, we may be required to obtain additional financing to fund our current planned operations, which may consist of incurrence of additional indebtedness, additional equity financings or a combination of these potential sources of funds. There can be no assurance that the Company will be able to obtain additional funds on terms acceptable to it, on a timely basis or at all. The failure to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on the results of operations, and financial condition. If we do raise additional capital through public or private equity offerings, the ownership interest of our existing shareholders will be diluted. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

The Company's primary uses of cash are for working capital requirements and capital expenditures. Additionally, from time to time, it may use capital for acquisitions and other investing and financing activities. Working capital is used principally for the Company's personnel as well as costs related to the growth, manufacture, and production of its products. The Company's capital expenditures consist primarily of additional facilities, improvements in existing facilities and product development.

Cash Flows

The following table sets forth the major components of the Company's condensed consolidated statements of cash flows for the periods presented.

(In thousands of United States dollars)		For theyear endedDecember31, ~~2024~~2025			For theyear endedDecember31, ~~2023~~2024
Cash used in operating activities	$	~~(5,032~~$	)(8,676	$)	~~(8,396~~$	)(5,032	)
Cash from financing activities		~~6,494~~	11,348		~~3,150~~	6,494
Cash from (used) in investing activities		203			(234	)
Cash (used) from investing activities			(3,458	)		203
Effect of exchange rate change		2	1,159		~~930~~	2
Change in cash during the period		~~1,667~~	373		~~(4,550~~	)1,667
Cash, beginning of period		~~4,385~~	5,248		~~8,935~~	4,385
Cash, end of period	$	6,052		$	4,385
Cash included in assets held for sale			-			(804	)
Cash, end of period		$	5,621		$	5,248

Cash used in Operating Activities

Net cash used in operating activities for the years ended December 31, ~~2024~~2025 and ~~2023~~2024 totaled $58.07 million and $85.40 million, respectively. Cash flows used in operating activities for the year ended December 31, ~~2024~~2025 were due primarily to operating expenses exceeding the gross profit for the year.

Cash flows used in operating activities for the year ended December 31, ~~2023~~2024 were ~~also~~ due primarily to operating expenses exceeding the gross profit for the year.

Cash from Financing Activities

Net cash provided from financing activities for the years ended December 31, ~~2024~~2025 and ~~2023~~2024 totaled $611.53 million and $36.25 million, respectively. Cash flows provided from financing activities for the year ended December 31, ~~2024~~2025 were ~~related~~due to the ~~Company's~~sale ~~April~~of ~~2024~~Common ~~and~~Shares ~~December~~in ~~2024~~May ~~unit~~2025 ~~offerings~~and ~~(as~~September ~~described~~2025 ~~below)~~ as well as net borrowings on the credit facilities in Germany through the Company's Phatebo subsidiary ~~(as described below)~~.

60Cash flows provided from financing activities for the year ended December 31, 2024 were related to the Company's April 2024 and December 2024 unit offerings (as described below) as well as net borrowings on the credit facilities in Germany through the Company's Phatebo subsidiary (as described below).

Cash ~~flows provided from financing activities for the year ended December 31, 2023 were primarily related to the Company's September 2023 unit offering~~ (~~as described below~~used) ~~and~~from ~~borrowings~~Investing ~~on a credit facility through its FGH subsidiary (as described below), partially offset by amounts used for equity issuances costs and loan repayments.~~Activities

Net cash used in investing activities for the year ended December 31, 2025 totaled $3.5 million. Cash ~~from~~flows (used) in ~~Investing~~investing ~~Activities~~activities for the year ended December 31, 2025 were primarily due to the net purchases of digital assets.

Net cash from investing activities for the year ended December 31, 2024 totaled $0.2 million. Cash flows from investing activities for the year ended December 31, ~~2024~~2023 were primarily proceeds from the sale of property, plant and equipment.

Net cash used in investing activities for the year ended December 31, 2023 totaled $0.2 million. Cash flows used in investing activities for the year ended December 31, 2023 were primarily related to capital expenditures related to equipment in the House of Brands segment.

Working Capital

As of December 31, ~~2024~~2025, we had working capital of $0.91 million. The Company's primary cash flow needs are for the development of its ~~cannabis~~operating ~~and pharmaceutical~~ activities, administrative expenses and for general working capital to support growing sales ~~and production~~ with related receivables and payables.

Funding Requirements

Our continued existence is dependent on our ability to generate positive cash flows through synergies within our operations, expanding our production capacity and geographic footprint, exploring strategic partnerships, and pursuing accretive acquisitions to supplement our organic growth. We are committed to attaining a level of sustained growth that will effectively offset our overhead costs, thereby paving the path to achieving profitability. We will be required in the future to raise additional capital through either equity or debt financings. To date, we have raised capital through multiple equity offerings. Our equity offerings in ~~2023~~2024 and ~~2024~~2025 are described below.

September 2025 ATM Offering

On September 23, 2025, the Company entered into a Sales Agreement with the Agent pursuant to which the Company may sell from time to time, at its option, Common Shares through the Agent in its capacity as sales agent. The sale of Common Shares, if any, will be made under the Company's Registration Statement, by any method that is deemed to be an "at the market offering" as defined in Rule 415(a)(4) under the Securities Act.

November 2025 Share Purchase Agreement with White Lion

On November 28, 2025, the Company entered into the ELOC Agreement with White Lion pursuant to which White Lion has agreed to purchase from the Company up to an aggregate of $25.0 million of Common Shares from time to time over the term of the ELOC Agreement, which amount may be increased to up to an aggregate of $50.0 million of Common Shares upon mutual agreement by the parties and subject to the satisfaction of certain conditions. Also, on November 28, 2025, the Company entered a Registration Rights Agreement with White Lion. Pursuant to its obligations under the Registration Rights Agreement, the Company has filed with the SEC the registration statement that includes this prospectus to register the resale under the Securities Act of the Common Shares that may be issued to White Lion pursuant to the Total Commitment under the ELOC Agreement. On December 10, 2025, the Company issued 13,469 Common Shares to White Lion valued at $0.1 million as a commitment fee for the ELOC Agreement.

The Company issued 111,550 Common Shares valued at $0.7 million on December 30, 2025 in connection with the Note Settlement Agreement.

September 2025 Private Placement

On September 19, 2025, the Company entered into the PIPE Offering pursuant to which the Company agreed to sell and issue the following securities in private placement offerings: (i) 116,340 PIPE Common Share Units at a unit price of $25.19, payable in cash, for aggregate gross proceeds of $2.9 million, with each unit consisting of one PIPE Common Share and 0.2 PIPE Warrants, with each full warrant to purchase one Common Share at an exercise price of $25.19; (ii) 419,975 PIPE Pre-Funded Warrant Units at a unit price of $25.1899, payable in cash, for aggregate gross proceeds of $10.6 million, with each unit consisting of one PIPE Pre-Funded Warrant to purchase one Common Share at an exercise price of $0.0001 and 0.2 of a PIPE Warrant; (iii) 8,546,955 PIPE Pre-Funded Warrants at a unit price of $25.1899, payable in 71,766,135 0G Tokens; and (iv) the PIPE Note in an aggregate original principal amount of 95,333 Solana.

On September 26, 2025, in connection with the closing of the PIPE Offering, the Company issued 116,340 PIPE Common Share Units and 419,975 PIPE Pre-Funded Warrant Units for aggregate gross cash proceeds of $13.5 million, and 2,592,212 PIPE Pre-Funded Warrants for 21,766,135 0G Tokens, valued at $54.7 million on the issuance date. The remaining 5,954,743 PIPE Pre-Funded Warrant Units were issued on October 9, 2025, for 50,000,000 0G Tokens. The PIPE Note was issued on October 24, 2025, at which date the original principal amount of 95,333 Solana was received.

On September 19, 2025, the Company entered into an agreement with Zero Gravity pursuant to which the Company agreed to (i) borrow 50,000,000 0G Tokens from Zero Gravity under the Loan Agreement, and (ii) issue to Zero Gravity in a private placement offering 1,786,423 Loan Agreement Warrants. On September 22, 2025, the Company entered into an agreement with Zero Gravity for the issuance of the Zero Gravity Convertible Note in an aggregate original principal amount of 50,000,000 0G Tokens that replaced the Loan Agreement and Loan Agreement Warrants, subject to closing. The Zero Gravity Convertible Note was issued on October 23, 2025, at which date the 50,000,000 0G Tokens were received by the Company.

May 2025 Private Placement

On May 2, 2025, the Company closed a private placement offering of 80,340 Common Shares at a price of $11.70 per Common Share and 18,642 pre-funded warrants at a price of $11.6961 per warrant for gross proceeds of $1.1 million, of which the Company immediately invested $1.0 million in digital assets.

December 2024 Unit Offerings

In December 2024, we closed a registered direct offering of 273,~~850,000~~077 units of the Company at a price of $148.2575 per unit for gross proceeds of $3.6 million. Each unit is comprised of one Common Share ~~of the Company~~. We paid $0.8 million in issuance costs relating to this December 2024 unit offering.

Also in December 2024, we sold an aggregate of ~~425~~10,~~000~~899 units of the Company at a price of $165.6713 per unit for gross proceeds of $0.7 million pursuant to separate subscription agreements entered into between the Company and certain institutional investors. The ~~common~~Common ~~shares~~Shares to be issued were offered pursuant to the Company's Offering Statement on Form 1-A, initially filed by the Company with the SEC under the Securities Act, on July 16, 2024, as subsequently amended with the SEC on each of August 7, 2024, October 15, 2024, and November 22, 2024, and most recently qualified by the SEC on November 29, 2024. Each unit is comprised of one Common Share ~~of the Company~~. The Company paid $0.1 million in issuance costs relating to this December 2024 unit offering.

April 2024 Unit Offering

In April 2024, we closed a registered direct offering of 143,~~700,000~~590 units of the Company at a price of $174.9010 per unit for gross proceeds of $3.2 million. Each unit is comprised of one Common Share of the Company. We paid $0.4 million in issuance costs relating to the April 2024 unit offering.

September 2023 Unit Offering

In September 2023, we closed a registered direct offering of 1,369,000 units of the Company at a price of $2.00 per unit for gross proceeds of $2.7 million. Each unit is comprised of one Common Share of the Company and one Common Share purchase warrant (1,369,000 total warrants) to purchase one additional Common Share at an exercise price of $2.50 per share. The warrants expire on March 21, 2029. We paid $0.3 million in issuance costs relating to the September 2023 unit offering and issued 54,760 warrants issued to the placement agent. As of December 31, 2024, all of the warrants issued in connection with the September 2023 unit offering remain outstanding.

Debt

In addition to the equity offerings described above, the Company also has access to credit facilities through its Phatebo subsidiary. The credit facilities total €2.4 million ~~Euros~~ with three different German banks, ~~Hypoverinsbank, Arztebank~~ and ~~Volksbank,~~are secured by default guarantees. On December 31, ~~2024~~2025, the outstanding amount was €2.03 million ~~Euros~~ ($2.17 million ~~USD~~) and was due within ~~six~~the next 12 months. The credit facilities have interest rates ranging from 5.1508% to 510.2950% per year and does not have a set maturity date. The interest rate is reset every time a new amount is drawn.

Off-Balance Sheet Arrangements

As of December 31, ~~2024~~2025, the Company did not have any off-balance-sheet arrangements that have, or are reasonably likely to have, a current or future effect on its results of operations or financial condition, including, and without limitation, such considerations as liquidity and capital resources.

Contractual Obligations

At December 31, ~~2024~~2025, the Company had the following contractual obligations to make future payments, representing contracts and other commitments that are known and committed:

(In thousands of United States dollars)		Total		Less than1 Year		1 - 3Years		More than3 Years
Legal disputes (1)		4,241		4,241		-		-
Sales tax (1)		2,695		2,695		-		-
Contingent purchase consideration (2)		835		835		-		-
Operating lease obligations (3)		3,409		1,048		1,721		640
Long term debt (4)		2,080		2,080		-		-
Total	$	13,260	$	10,899	$	1,721	$	640

	(1)	See Note 19 of the Company's consolidated financial statements for the year ended December 31, 2024.
(In thousands of United States dollars)		Total		Less than1 Year		1 - 3Years		Morethan 3Years
	(2)	Contingent purchase consideration related to the February 2022 acquisition of JustCBD and the March 2023 acquisition of Original Hemp.
Legal disputes (1)	$	1,167	$	1,167	$	-	$	-
	(3)	See Note 14 of the Company's consolidated financial statements for the year ended December 31, 2024.
Operating lease obligations (2)		513		195		214		104
	(4)	See Note 13 of the Company's consolidated financial statements for the year ended December 31, 2024.
Debt (3)		53,489		2,722		37		50,730
Total	$	55,169	$	4,084	$	251	$	50,834

	(1)	See Note 20 of the Company's consolidated financial statements for the year ended December 31, 2025.
	(2)	See Note 15 of the Company's consolidated financial statements for the year ended December 31, 2025.
	(3)	See Note 14 of the Company's consolidated financial statements for the year ended December 31, 2025.

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP and the Company's discussion and analysis of its financial condition and operating results require management to make judgments, assumptions and estimates that affect the amounts reported in the Company's consolidated financial statements and accompanying notes. Note 3, Significant Accounting Policies, of the Company's notes to the consolidated financial statements describes the significant accounting policies and methods used in the preparation of its consolidated financial statements. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates, and such differences may be material.

The Company believes that the following critical accounting policies involve the more significant judgments and estimates used in the preparation of its consolidated financial statements and are the most critical to aid the reader in fully understanding and evaluating the Company's reported financial results. Management considers these policies critical because they are both important to the portrayal of the Company's financial condition and operating results, and they require management to make judgments and estimates about inherently uncertain matters.

Inventories

Inventories are comprised of raw materials and supplies, internally produced work in progress, and finished goods. Inventories are initially valued at cost and subsequently at the lower of cost and net realizable value. Inventory cost is determined either on a weighted average cost or specific identification basis and any trade discounts and rebates are deducted from the purchase price. Raw material costs include the purchase cost of the materials, freight-in and duty. Finished goods include the cost of direct materials and labor and a proportion of manufacturing overhead allocated based on normal production capacity.

Net realizable value represents the estimated selling price for inventories in the ordinary course of business, less all estimated costs of completion and costs necessary to make the sale. The determination of net realizable value requires significant judgment, including consideration of factors such as shrinkage, the aging of and future demand for inventory and contractual arrangements with customers. Reserves for excess and obsolete inventory are based upon quantities on hand, projected volumes from demand forecasts and net realizable value. The impact of changes in inventory reserves is reflected in cost of sales.

Digital assets

The Company's accounting for digital assets involves significant management judgment and estimation uncertainty. In applying ASC 350-60, Intangibles-Goodwill and Other-Crypto Assets, management evaluates whether digital assets meet the definition of in-scope crypto assets and determines the appropriate accounting treatment. In accordance with ASU 2023-08, qualifying digital assets are measured at fair value, with changes in fair value recognized in earnings each reporting period. Management exercises judgment in identifying the principal market and determining fair value based on observable quoted prices in active markets, including the assessment of market accessibility and liquidity. When observable inputs are not directly available, management evaluates the appropriateness of valuation techniques and assumptions consistent with ASC 820. Additional judgment is required in assessing risks associated with custodial arrangements, including reliance on third-party service providers, as well as in monitoring regulatory, legal, and technological developments that may affect the Company's ability to access or transfer its digital assets.

Debt

The Company applies significant judgment and estimates in determining the fair value of the Zero Gravity Convertible Note. The fair value of the note is not directly observable in the market and, as a result, was determined using a Monte Carlo simulation incorporating Brownian motion. This valuation technique simulates a range of potential outcomes for the Company's common stock price and the price of the 0G Token over the contractual term of the note. The fair value measurement is highly sensitive to key assumptions, including the expected term to maturity of 9.7 years, the closing price of the Company's common stock of $6.26 and the closing price of the 0G Token of $0.98 as of December 31, 2025, the contractual conversion price of $33.34, a discount rate of 21.5%, an assumed risk-free interest rate of 3.84%, an interest rate on the note of 8.0%, and an expected volatility of 101%, which was derived from the historical daily returns of Solana due to limited observable trading history for the 0G Token. Changes in any of these assumptions could result in a materially different fair value measurement. Based on the observability of the inputs used in the valuation, the Zero Gravity Convertible Note was classified as a Level 3 financial instrument within the fair value hierarchy as of December 31, 2025.

The Company applies significant judgment and estimates in determining the fair value of the PIPE Note. As of December 30, 2025, the settlement date, the fair value of the PIPE Note was $13.9 million. Since the fair value of the PIPE Note is not directly observable, the Company estimated fair value using a Monte Carlo simulation incorporating Brownian motion. This valuation technique simulates a range of potential outcomes for the Company’s common stock price and the price of Solana over the contractual term of the note. Significant assumptions used in the valuation include an expected term to maturity of 4.8 years, the closing price of the Company’s common stock of $6.33 and the closing price of Solana of $124.88 as of December 30, 2025, the contractual conversion price of $33.34, a discount rate of 112.9%, an assumed risk-free interest rate of 3.47%, an interest rate on the note of 8.0%, and an expected volatility of 101%, which was derived from the historical daily returns of Solana. Because of a prepayment feature in the PIPE Note, the simulation analysis further considers if the holder would require the Company to prepay the note on either the 1st anniversary or the 2nd anniversary of the issuance date (the "Put Date"). The calculation is based on the higher of: i) the put value at each Put Date (calculated based on the higher of the Solana price or USD equivalent at $240) or ii) the present value of the Note at maturity (either conversion or repayment) plus the present value of forgone interest to the maturity date. The amount for the PIPE Note is measured as a Level 3 fair value financial instrument within the fair value hierarchy as at December 30, 2025.

Business combinations

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition date fair values of the assets transferred by the Company, liabilities incurred by the Company to the former owners of the acquiree and the equity interests issued by the Company in exchange for control of the acquiree. Acquisition related costs are generally recognized in profit or loss as incurred. At the acquisition date, the identifiable assets acquired, and the liabilities assumed, are recognized at their fair value.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any noncontrolling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the amounts of identifiable assets acquired and liabilities assumed on the acquisition date. If, after assessment, the net of the amounts of identifiable assets acquired and liabilities assumed on the acquisition date exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognized immediately in profit or loss as a bargain purchase gain.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation may be initially measured at the fair value of the acquiree's identifiable net assets.

Contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or liability is remeasured at subsequent reporting dates, with the corresponding gain or loss recognized in the consolidated statements of operations and comprehensive income.

When a business combination is achieved in stages, the Company's previously held equity interest in the acquiree is remeasured to its acquisition date fair value and the resulting gain or loss, if any, is recognized in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognized in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of.

Purchase price allocations may be preliminary and, during the measurement period not to exceed one year from the date of acquisition, changes in assumptions and estimates that result in adjustments to the fair value of assets acquired and liabilities assumed are recorded in the period the adjustments are determined.

Intangible Assets

Intangible assets are recorded at cost less accumulated amortization and impairment losses, if any. Intangible assets acquired in a business combination are measured at fair value at the acquisition date. Amortization is provided on a straight-line basis over the assets' estimated useful lives, which do not exceed the contractual period, if any.

The estimated useful lives, residual values, and amortization methods are reviewed at each year end, and any changes in estimates are accounted for prospectively. Amortization expense is recorded within depreciation and amortization on the consolidated statements of loss and comprehensive loss.

Intangible assets that have indefinite useful lives are not subject to amortization and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired.

Impairment of goodwill and indefinite-lived intangible assets

Goodwill is allocated to the reporting unit in which the business that created the goodwill resides. A reporting unit is an operating segment, or a business unit one level below that operating segment, for which discrete financial information is prepared and regularly reviewed by segment management. The Company reviews goodwill and indefinite lived intangible assets annually for impairment in the fourth quarter, or sooner, if events or circumstances indicate that the carrying amount of an asset may not be recoverable. The Company may elect to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If factors indicate this is the case, then a quantitative test is performed and an impairment is recorded for any excess carrying value above the reporting unit's fair value, not to exceed the amount of goodwill. The Company performs a one-step test to calculate the fair value of the asset and record goodwill impairment to the extent the fair value of the reporting unit exceeds its carrying amount. Several factors, including historical results, business plans, forecasts, market data and the weighting of valuation model results when multiple are developed, are used to determine the fair value.

Income taxes

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive loss.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis, or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

6465

An unrealized tax benefit may arise in connection with a period that has not yet been reviewed by the relevant tax authority. A change in the recognition or measurement of an unrealized tax benefit is reflected in the period during which the change occurs.

Interest and penalties in respect of income taxes are not recognized in the consolidated statement of operations as a component of income taxes but as a component of interest expense.

Recently Adopted Accounting Principles

See Note 3, "Significant Accounting Policies", of the notes to the consolidated financial statements for a discussion of recently issued accounting standards.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required for smaller reporting companies.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (Davidson & Company LLP; Vancouver, Canada; PCAOB ID 731)	67
Consolidated Statements of Financial Position	68
Consolidated Statements of Loss and Comprehensive Loss	69
Consolidated Statement of Changes in Shareholders' Equity	70
Consolidated Statements of Cash Flows	71
Notes to Financial Statements	72

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (Davidson & Company LLP; Vancouver, Canada; PCAOB ID 731)		68
Consolidated Statements of Financial Position		69
Consolidated Statements of Loss and Comprehensive Loss		70
Consolidated Statement of Changes in Shareholders' Equity		71
Consolidated Statements of Cash Flows		72
Notes to Financial Statements		73

Report of Independent Registered Public Accounting Firm

To the Shareholders and Directors of

~~Flora~~ZeroStack ~~Growth~~ Corp.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of financial position of ZeroStack Corp. (formerly Flora Growth Corp.) (the “Company”), as of December 31, ~~2024~~2025 and ~~2023~~2024, and the related consolidated statements of loss and comprehensive loss, changes in shareholders’ equity, and cash flows for the years ~~then~~ ended December 31, 2025, and 2024 and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of ~~the~~ZeroStack ~~Company~~Corp. (formerly Flora Growth Corp.) as of December 31, ~~2024~~2025 and ~~2023~~2024, and the results of its operations and its cash flows for the years ended December 31, ~~2024~~2025, and ~~2023~~2024 in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s current level of cash is not sufficient to continue investing in growth, while at the same time meeting its obligations as they become due. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’'s management. Our responsibility is to express an opinion on the Company’'s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the ~~entity’~~Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material ~~misstatement~~misstatements of the ~~consolidated~~ financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the Company's auditor since 2020.

Flora Growth Corp.Consolidated Statements of Financial Position(in thousands of United States dollars, except share amounts which are in thousands of shares)

As at:		December 31, 2024			December 31, 2023
ASSETS
Current
Cash	$	6,017		$	4,350
Restricted cash		35			35
Trade and amounts receivable, net of $611 allowance ($315 at 2023)		3,061			3,950
Prepaid expenses and other current assets		638			1,368
Indemnification receivables		4,241			3,153
Inventory		5,771			8,508
Total current assets		19,763			21,364
Non-current
Property, plant and equipment		312			847
Operating lease right of use assets		1,297			389
Intangible assets		2,746			946
Goodwill		2,006			-
Investments		-			-
Other assets		103			80
Total assets	$	26,227		$	23,626
LIABILITIES
Current
Trade payables	$	5,464		$	5,111
Contingencies		6,936			5,500
Current portion of debt		2,080			1,931
Current portion of operating lease liability		791			799
Current portion of contingent purchase considerations		835			1,095
Other accrued liabilities		2,726			1,844
Total current liabilities		18,832			16,280
Non-current
Non-current operating lease liability		2,029			942
Deferred tax		856			-
Total liabilities		21,717			17,222
SHAREHOLDERS' EQUITY
Share capital, no par value, unlimited authorized, 18,512 issued and outstanding (8,935 at 2023)		-			-
Additional paid-in capital		162,871			149,093
Accumulated other comprehensive loss		(221	)		(140	)
Deficit		(158,140	)		(142,549	)
Total shareholders' equity		4,510			6,404
Total liabilities and shareholders' equity	$	26,227		$	23,626

The accompanying notes are an integral part of these consolidated financial statements. Commitments and contingencies - see Note 19.

Flora Growth Corp.Consolidated Statements of Loss and Comprehensive Loss(in thousands of United States dollars, except per share amounts which are in thousands of shares)

ZeroStack Corp. (formerly Flora Growth Corp.)
Consolidated Statements of Financial Position
(in thousands of United States dollars, except share amounts which are in thousands of shares)
As at:		December 31, 2025		December 31, 2024
ASSETS
Current
Cash	$	5,596	$	5,223
Restricted cash		25		25
Trade and amounts receivable, net of $327 allowance ($nil at 2024)		799		1,567
Prepaid expenses and other current assets		323		13
Indemnification receivables		-		4,241
Inventory		1,897		2,239
Current digital assets		76		-
Current assets held for sale		-		6,455
Total current assets		8,716		19,763
Non-current
Property, plant and equipment		128		81
Operating lease right of use assets		386		174
Restricted digital assets		49,000		-
Digital assets		71,950		-
Other assets		55		35
Noncurrent assets held for sale		-		6,174
Total assets	$	130,235	$	26,227
LIABILITIES
Current
Trade payables	$	2,328	$	3,572
Contingencies		1,167		4,241
Current portion of debt		2,722		2,080
Current portion of operating lease liability		163		130
Current portion of contingent purchase considerations		-		651
Other accrued liabilities		2,248		1,169
Current liabilities held for sale		-		6,989
Total current liabilities		8,628		18,832
Non-current
Long-term debt		50,767		-
Non-current operating lease liability		279		122
Deferred tax		9		-
Noncurrent liabilities held for sale		-		2,763
Total liabilities		59,683		21,717
SHAREHOLDERS' EQUITY
Share capital, no par value, unlimited authorized, 1,046 issued and outstanding (478 at 2024)		-		-
Additional paid-in capital		348,160		162,871
Accumulated other comprehensive income (loss)		180		(221)
Deficit		(277,788)		(158,140)
Total shareholders' equity		70,552		4,510
Total liabilities and shareholders' equity	$	130,235	$	26,227

		For the year endedDecember 31, 2024			For the year endedDecember 31, 2023
Revenue	$	59,505		$	76,071
Cost of sales		47,008			58,333
Gross profit		12,497			17,738
Operating expenses
Consulting and management fees		9,661			11,876
Professional fees		2,684			2,301
General and administrative		1,938			1,646
Promotion and communication		5,298			4,710
Travel expenses		505			413
Share based compensation		2,779			1,591
Research and development		418			62
Operating lease expense		718			1,211
Depreciation and amortization		768			2,335
Bad debt expense		411			236
Goodwill impairment		236			23,372
Other asset impairments		2,001			16,135
Other expenses, net		725			2,204
Total operating expenses		28,142			68,092
Operating loss		(15,645	)		(50,354	)
Interest expense, net		213			92
Foreign exchange loss (income)		485			(158	)
Changes in financial instruments fair value		(259	)		(1,991	)
Net loss before income taxes and discontinued operations		(16,084	)		(48,297	)
Income tax benefit		(177	)		(1,628	)
Net loss from continuing operations		(15,907	)		(46,669	)
Loss from discontinued operations, net of taxes		-			(9,678	)
Net loss for the period		(15,907	)		(56,347	)
Net income (loss) attributable to noncontrolling interest		-			689
Net loss attributable to Flora Growth Corp	$	(15,907	)	$	(57,036	)
Basic loss per share from continuing operations	$	(1.30	)	$	(6.34	)
Diluted loss per share from continuing operations	$	(1.30	)	$	(6.34	)
Basic loss per share attributable to Flora Growth Corp.	$	(1.30	)	$	(7.75	)
Diluted loss per share attributable to Flora Growth Corp.	$	(1.30	)	$	(7.75	)
Weighted average number of common shares outstanding - basic		12,267			7,356
Weighted average number of common shares outstanding - diluted		12,267			7,356
Comprehensive loss:
Net loss	$	(15,907	)	$	(56,347	)
Foreign currency translation, net of income taxes of $nil ($nil in 2023)		81			(2,592	)
Comprehensive loss for the period		(15,988	)		(53,755	)
Comprehensive income (loss) attributable to noncontrolling interests		-			689
Comprehensive loss attributable to Flora Growth Corp.	$	(15,988	)	$	(54,444	)

The accompanying notes are an integral part of these consolidated financial statements. Commitments and contingencies - see Note 20.

The accompanying notes are an integral part of these consolidated financial statements.

Flora Growth Corp.Consolidated Statement of Shareholders' Equity(in thousands of United States dollars, except share amounts which are in thousands of shares)

ZeroStack Corp. (formerly Flora Growth Corp.)
Consolidated Statements of Loss and Comprehensive Loss
(in thousands of United States dollars, except per share amounts which are in thousands of shares)
		For the year ended December 31, 2025			For the year ended December 31, 2024
Revenue	$	35,676		$	35,865
Cost of sales		34,027			33,669
Gross profit		1,649			2,196
Operating expenses
Loss from changes in fair value of digital assets		142,997			-
Consulting and management fees		5,239			3,972
Professional fees		2,602			2,271
Share based compensation		1,208			2,779
General and administrative		1,391			1,929
Travel		274			226
Bad debt		323			-
Operating lease		151			102
Depreciation and amortization		23			25
Asset impairments		46			32
Other expenses (income), net		2,047			(215	)
Total operating expenses		156,301			11,121
Operating loss		(154,652	)		(8,925	)
Interest expense, net		199			139
Foreign exchange (income) loss		(41	)		462
Gain on disposal of Insolvent Entities		(1,119	)		-
Changes in financial instruments fair value		(38,340	)		(202	)
Net loss before income taxes and discontinued operations		(115,351	)		(9,324	)
Income tax expense		59			22
Net loss from continuing operations		(115,410	)		(9,346	)
Loss from discontinued operations, net of taxes		(4,322	)		(6,561	)
Net loss for the year	$	(119,732	)	$	(15,907	)
Basic loss per share from continuing operations	$	(41.92	)	$	(29.39	)
Diluted loss per share from continuing operations	$	(41.92	)	$	(29.39	)
Basic loss per share attributable to ZeroStack Corp.	$	(43.49	)	$	(50.02	)
Diluted loss per share attributable to ZeroStack Corp.	$	(43.49	)	$	(50.02	)

Weighted average number of common shares outstanding - basic		2,753			318
Weighted average number of common shares outstanding - diluted		2,753			318

Comprehensive loss:
Net loss	$	(119,732	)	$	(15,907	)
Derecognition of equity related to Insolvent Entities, net of income taxes of $nil ($nil in 2024)		(595	)		-
Derecognition of equity related to discontinued operations, net of income taxes of $nil ($nil in 2024)		489			-
Foreign currency translation, net of income taxes of $nil ($nil in 2024)		507			(81	)
Comprehensive loss attributable to ZeroStack Corp.	$	(119,331	)	$	(15,988	)

	Common Shares					Additionalpaid-incapital			Accumulatedothercomprehensive(loss) income			AccumulatedDeficit			Non-Controllinginterests insubsidiaries(Deficiency)			Shareholders'Equity
	#
Balance, December 31, 2022	6,776		$	-	$	150,420		$	(2,732	)	$	(90,865	)	$	(411	)	$	56,412
September unit offering	1,369			-		2,738			-			-			-			2,738
September unit offering issuance costs	-			-		(254	)		-			-			-			(254	)
Equity issued for other agreements	126			-		590			-			-			-			590
Options issued	-			-		226			-			-			-			226
Options forfeited	-			-		(5,627	)		-			5,352			-			(275	)
Restricted stock granted	838			-		1,989			-			-			-			1,989
Restricted stock cancelled	(174	)		-		(844	)		-			-			-			(844	)
Share issuance costs	-			-		(145	)		-			-			-			(145	)
Derecognition of equity related to Colombia assets	-			-		-			1,310			-			(278	)		1,032
Other comprehensive loss - exchange differences on foreign operations (net of income taxes of $nil)	-			-		-			1,282			-			-			1,282
Current year net loss attributable to Flora Growth Corp.	-			-		-			-			(57,036	)		689			(56,347	)
Balance, December 31, 2023	8,935		$	-	$	149,093		$	(140	)	$	(142,549	)	$	-		$	6,404
Common stock offerings	4,975			-		7,502			-			-			-			7,502
Common stock offering issuance costs	-			-		(1,205	)		-			-			-			(1,205	)
Equity issued for business combinations	3,321			-		4,960												4,960
Equity issued for other agreements	50			-		55			-			-			-			55
Options issued	-			-		5			-			-			-			5
Options forfeited	-			-		(316	)		-			316			-			-
Restricted stock granted	1,235			-		1,648			-			-			-			1,648
Restricted stock cancelled	(4	)		-		(9	)		-			-			-			(9	)
SARs issued				-		1,138												1,138
Other comprehensive loss - exchange differences on foreign operations (net of income taxes of $nil)	-			-		-			(81	)		-			-			(81	)
Current year net loss attributable to Flora Growth Corp.	-			-		-			-			(15,907	)		-			(15,907	)
Balance, December 31, 2024	18,512		$	-	$	162,871		$	(221	)	$	(158,140	)	$	-		$	4,510

The accompanying notes are an integral part of these consolidated financial statements.

Flora Growth Corp.Consolidated Statements of Cash Flows(in thousands of United States dollars)

ZeroStack Corp. (formerly Flora Growth Corp.)
Consolidated Statement of Shareholders' Equity
For the Years Ended December 31, 2025 and 2024
(in thousands of United States dollars, except share amounts which are in thousands of shares)
	Common shares				Additional paid-in capital			Accumulated other comprehensive income (loss)			Deficit			Shareholders' equity
	#
Balance, December 31, 2023	232	$	-	$	149,093		$	(140	)	$	(142,549	)	$	6,404

Common stock offerings	128		-		7,502			-			-			7,502
Common stock offering issuance costs	-		-		(1,205	)		-			-			(1,205	)
Equity issued for business combinations	85		-		4,960									4,960
Equity issued for other agreements	1		-		55			-			-			55
Options issued	-		-		5			-			-			5
Options cancelled	-		-		(316	)		-			316			-
Restricted stock granted	32		-		1,648			-			-			1,648
Restricted stock cancelled	-		-		(9	)		-			-			(9	)
SARs issued	-		-		1,138									1,138
Other comprehensive loss - exchange differences on foreign operations (net of income taxes of $nil)	-		-		-			(81	)		-			(81	)
Current year net loss	-		-		-			-			(15,907	)		(15,907	)
Balance, December 31, 2024	478	$	-	$	162,871		$	(221	)	$	(158,140	)	$	4,510

Equity offerings	331		-		184,125			-			-			184,125
Equity offering issuance costs	-		-		(1,607	)		-			-			(1,607	)
Equity issued for business combinations	24		-		813									813
Equity issued for other agreements	125		-		834									834
Exercise of pre-funded warrants	88		-		-			-			-			-
Options issued	-		-		304			-			-			304
Options cancelled	-		-		(84	)		-			84			-
Restricted stock vested	-		-		28			-			-			28
SARs vested	-		-		876			-			-			876
Derecognition of equity related to Insolvent Entities	-		-		-			(595	)		-			(595	)
Derecognition of equity related to discontinued operations	-		-		-			489			-			489
Other comprehensive loss - exchange differences on foreign operations (net of income taxes of $nil)	-		-		-			507			-			507
Current year net loss	-		-		-			-			(119,732	)		(119,732	)
Balance, December 31, 2025	1,046	$	-	$	348,160		$	180		$	(277,788	)	$	70,552

		For the year endedDecember 31, 2024			For the year endedDecember 31, 2023
Cash flows from operating activities:
Net loss	$	(15,907	)	$	(56,347	)
Adjustments to net loss:
Depreciation and amortization		768			2,484
Stock-based compensation		2,779			1,591
Goodwill impairment		236			23,372
Inventory impairments through costs of sales		1,842			2,688
Other asset impairments		2,001			20,840
Changes in financial instruments at fair value		(259	)		(1,991	)
Bad debt expense		411			801
Loss on fixed asset disposals		129			-
Loss on disposal of discontinued operations		-			3,132
Interest expense (income)		213			94
Interest paid		(213	)		(94	)
Income tax benefit		(177	)		(1,617	)
		(8,177	)		(5,047	)
Net change in non-cash working capital:
Trade and other receivables		(685	)		1,522
Inventory		1,317			(2,112	)
Prepaid expenses and other assets		722			(419	)
Trade payables and accrued liabilities		1,791			(2,340	)
Net cash used in operating activities		(5,032	)		(8,396	)
Cash flows from financing activities:
Units issued		7,502			2,738
Equity issue costs		(1,267	)		(396	)
Loan borrowings		8,405			995
Loan repayments		(8,146	)		(187	)
Net cash provided by financing activities		6,494			3,150
Cash flows from investing activities:
Purchases of property, plant and equipment and intangible assets		(134	)		(163	)
Net cash on asset disposals		273			(71	)
Business and asset acquisitions, net of cash acquired		64			-
Net cash provided (used) in investing activities		203			(234	)
Effect of exchange rate on changes on cash		2			930
Change in cash during the period		1,667			(4,550	)
Cash and restricted cash at beginning of period		4,385			8,935
Cash included in assets held for sale		-			-
Cash and restricted cash at end of period	$	6,052		$	4,385
Supplemental disclosure of non-cash investing and financing activities
Common shares issued for business combinations	$	4,960		$	-
Common shares issued for other agreements		55			95
Option cancellations reclassified to equity		316			5,352
Operating lease additions to right of use assets		2,208			245
Intangible assets acquired for contingent consideration		-			194

The accompanying notes are an integral part of these consolidated financial statements.

Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2024 and 2023(United States dollars, except shares and per share amounts)

ZeroStack Corp. (formerly Flora Growth Corp.)
Consolidated Statements of Cash Flows
(in thousands of United States dollars)
		For the year ended December 31, 2025			For the year ended December 31, 2024
Cash flows from operating activities:
Net loss	$	(119,732	)	$	(15,907	)
Adjustments to net loss:
Depreciation and amortization		582			768
Stock-based compensation		1,208			2,779
Goodwill impairment		1,208			236
Inventory impairments through costs of sales		455			1,842
Other asset impairments		245			2,001
Changes in fair value of digital assets		142,997			-
Changes in financial instruments at fair value		(38,230	)		(259	)
Settlement of contingent consideration		1,434			-
Realized gain on settlement of convertible note		(1,612	)		-
Bad debt expense		823			411
Loss on fixed asset disposals		56			129
Gain on disposal of Insolvent Entities		(1,162	)		-
Derecognition of equity related to insolvent subsidiaries		595			-
Interest expense, net		243			213
Interest paid		(156	)		(213	)
Income tax benefit		(47	)		(177	)
		(11,093	)		(8,177	)
Net change in non-cash working capital:
Trade and other receivables		(346	)		(685	)
Inventory		(51	)		1,317
Prepaid expenses and other assets		(346	)		722
Trade payables and accrued liabilities		3,160			1,791
Net cash used in operating activities		(8,676	)		(5,032	)

Cash flows from financing activities:
Equity issued		16,070			7,502
Equity issue costs		(1,607	)		(1,267	)
Payment for settlement of contingent consideration		(1,800	)		-
Settlement of convertible note		(1,750	)		-
Loan borrowings		2,801			8,405
Loan repayments		(2,366	)		(8,146	)
Net cash provided by financing activities		11,348			6,494

Cash flows from investing activities:
Purchase of digital assets		(5,007	)		-
Sale of digital assets		1,707			-
Net cash on cannabis business disposal		(425	)		-
Purchases of property, plant and equipment and intangible assets		(127	)		(134	)
Net cash on insolvency		(67	)		-
Net cash on asset disposals		-			273
Business and asset acquisitions, net of cash acquired		461			64
Net cash (used) provided in investing activities		(3,458	)		203

Effect of exchange rate changes on cash		1,159			2
Change in cash for the year		373			1,667
Cash and restricted cash at beginning of period		5,248			4,385
Cash included in assets held for sale		-			(804	)
Cash and restricted cash at end of year	$	5,621		$	5,248
Supplemental disclosure of non-cash investing and financing activities
Equity issued for digital assets	$	168,055		$	-
Debt issued for digital assets		102,521			-
Digital assets used to settle convertible note		9,853			-
Debt issued for business combinations		2,135			-
Operating lease additions to right of use assets		1,375			2,208
Common shares issued for business combinations		813			4,960
Shares issued to settle convertible note		706			-
ELOC commitment fee		128			-
Option cancellations reclassified to equity		84			316

The accompanying notes are an integral part of these consolidated financial statements.

ZeroStack Corp. (formerly Flora Growth Corp.)
Notes to the consolidated financial statements
For the years ended December 31, 2025 and 2024
(in thousands of United States dollars, except number of shares and units and per share and per unit amounts, or as indicated)

1. NATURE OF OPERATIONS

~~Flora~~ZeroStack ~~Growth~~ Corp. (the "“Company"” or "“ZeroStack”) (formerly Flora" Growth Corp.) (with its subsidiaries, the ”Group”) was incorporated as Flora Growth Corp. under the laws of the Province of Ontario, Canada on March 13, 2019. The Company, iswhich afiled ~~manufacturer~~articles ~~and~~of ~~distributor~~amendment ofto ~~global~~change ~~cannabis~~its ~~and~~name ~~pharmaceutical~~to ~~products~~ZeroStack ~~and~~Corp. ~~brands~~on January 29, ~~building~~2026, is a ~~connected,~~decentralized ~~design-led~~AI ~~collective~~treasury company that is investing in the future of ~~plant-based~~AI ~~wellness~~infrastructure through strategic ownership in 0G Tokens (as defined below), and ~~lifestyle~~an ~~brands~~AI-focused asset management company. The Company's ~~registered~~is ~~office~~also isa ~~located~~global atpharmaceutical 40distributor ~~King~~through ~~Street,~~its Wwholly ~~Suite~~owned ~~5800,~~subsidiary ~~Toronto,~~Phatebo ~~Ontario,~~GmbH ~~M5H~~(“Phatebo”). ~~3S1,~~The ~~Canada~~Company's ~~and~~registered ~~our~~office and principal place of business ~~in the United States~~ is located at ~~3230~~40 W.King ~~Commercial Boulevard~~Street, W Suite ~~180~~2400, ~~Fort~~Toronto, ~~Lauderdale~~Ontario, ~~Florida~~M5H ~~33309~~3S1, Canada.

On November 27, 2024, Flora completed its acquisition of all the issued and outstanding common shares of TruHC Pharma GmbH (“TruHC”). The acquisition was achieved in two closings, the first occurring on April 22, 2024 and the second occurring on November 27, 2024. TruHC is an early-stage cannabis company with principal operations in Germany, that holds wholesale, processing and production licenses for medical cannabis as well as a facility offering flexible production space with EU_GMP certified modules. See Note 10 for further discussion.

On June 4, 2024, Flora completed the acquisition of 100% of the outstanding common shares of Australian Vaporizers Pty LTD ("AV"). AV is an online retailer of vaporizers, hardware and accessories with principal operations in Australia. See Note 10 for further discussion.

These consolidated financial statements have been prepared on a going concern basis, meaning that the Company will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations.

Digital Asset Treasury Strategy. In early 2025 following a due diligence process, the Company began implementing an expansion strategy focused on identifying and pursuing complementary growth opportunities within the global digital asset market. On May 2, 2025 and September 19, 2025, the Company entered into various securities purchase agreements with certain investors pursuant to which the Company agreed to sell and issue various securities in private placement offerings. The Company used the net proceeds from these private offerings to further its new digital asset treasury strategy, mainly the one linked to 0G, the native tokens of the Zero Gravity (0G) blockchain ("0G Tokens" or "0G"), and to explore and expand the use of the native AI functionality of the 0G Tokens to enhance the business of the Company. See Note 9 and Note 16.

Sale of legacy hemp and cannabis business. On September 26, 2025, the Company transferred 100% of the issued and outstanding equity interests of the following direct and indirect wholly-owned subsidiaries, which collectively comprise the Company's legacy hemp and cannabis business: (i) Australian Vaporizers Pty LTD, an Australian limited company; (ii) Vessel Brand Canada Inc., a Canadian corporation; (iii) Klokken Aarhus Inc., a Canadian corporation; (iv) Rangers Pharmaceuticals A/S, a Danish stock-based corporation; (v) TruHC Pharma GmbH ("TruHC"), a German limited company; (vi) Vessel Brand Inc., a Delaware corporation; (vii) High Roller Private Label LLC, a Florida limited liability company; (viii) Just Brands LLC; a Florida limited liability company; (ix) Just Brands FL LLC, a Florida limited liability company; (x) Just Brands International LTD, a United Kingdom limited company; and (xi) United Beverage Distribution Inc., a South Dakota corporation and the Company's investment in an early-stage European cannabis company (collectively the "Cannabis Business") to Flora Growth US Holdings LLC, a Florida limited liability company and certain noteholders ("Noteholders") of the Company, in exchange for full satisfaction of the balance receivable under the promissory notes issued by the Company to such Noteholders as part of the Company's acquisition of United Beverage Distribution Inc. on February 4, 2025 (Note 12). See discussion in Note 5.

2. BASIS OF PRESENTATION

These consolidated financial statements have been presented in United States dollars and are prepared in accordance with United States generally accepted accounting principles ("“U.S. GAAP"”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission ("“SEC"”). The Company has determined that the United States dollar is the most relevant and appropriate reporting currency as, despite continuing shifts in the relative size of ~~our~~its operations across multiple geographies, the majority of ~~our~~the Company’s operations are conducted in United States dollars and ~~our~~the Company’s financial results are prepared and reviewed internally by management in United States dollars.

Prior to January 1, 2023, Flora was a foreign private issuer reporting its financial statements under International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standard Boards. These consolidated financial statements, for all periods, are presented in accordance with U.S. GAAP.

Going concern

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The going concern basis of presentation assumes that the Company will continue one year after the date these consolidated financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business.

Pursuant to the requirements of ASC Topic 205-40, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for one year from the date these financial statements are issued. This evaluation does not take into consideration the potential mitigating effects of management's plans that have not been fully implemented or are not within control of the Company as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company's ability to continue as a going concern. The mitigating effect of management's plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued.73

~~The~~ZeroStack ~~Company~~Corp. ~~had~~(formerly ~~cash~~Flora ofGrowth $6Corp.0)Notes ~~million~~to atthe ~~December~~consolidated ~~31,~~financial ~~2024,~~statementsFor ~~net loss of $15.9 million for~~ the ~~year~~years ended December 31, ~~2024,~~2025 and ~~an accumulated deficit of $158.1 million at December 31,~~ 2024.(in ~~Current~~thousands economic and market conditions have put pressure on the Company's growth plans. The Company's ability to continue as a going concern is dependent on its ability to obtain additional capital. The Company believes that its current level of ~~cash~~United isStates ~~not sufficient to continue investing in growth~~dollars, ~~while~~except atnumber ~~the same time meeting its obligations as they become due. These conditions raise substantial doubt regarding the Company's ability to continue as a going concern for a period~~ of atshares ~~least one year from the date of issuance of these consolidated financial statements. To alleviate these conditions, management is currently evaluating various cost reductions~~ and ~~other~~units ~~alternatives~~ and ~~may~~per ~~seek~~share to raise additional funds through the issuance of equity, debt securities, through arrangements with strategic partners, through obtaining credit from financial institutions, through the disposition of assets or otherwise. The actual amount that the Company may be able to raise under these alternatives will depend on market conditions and ~~other~~per ~~factors.~~unit ~~As it seeks additional sources of financing~~amounts, ~~there can be no assurance that such financing would be available to the Company on favorable terms~~ or at all. The Company's ability to obtain additional financing in the debt and equity capital markets is subject to several factors, including but not limited to market and economic conditions, the Company's performance and investor sentiment with respect to it and its industry. These consolidated financial statements do not include any adjustments for the recovery and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as ~~a going concern.~~indicated)

72Pursuant to the requirements of ASC Topic 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date these consolidated financial statements are issued. This evaluation does not take into consideration the potential mitigating effects of management’s plans that have not been fully implemented or are not within control of the Company as of the date the consolidated financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the consolidated financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.

~~Flora~~The ~~Growth~~Group ~~Corp~~had cash of $5.~~Notes~~6 million and an accumulated deficit of $277.8 million at December 31, 2025 and incurred a net loss of $119.7 million for the year then ended. In prior years, the Company believed that its level of cash was not sufficient to continue investing in growth, while at the same time meeting its obligations as they became due, and these conditions raised substantial doubt regarding the Group’s ability to continue as a going concern for a period of at least one year from the date of issuance of those consolidated financial ~~statementsFor~~statements. With the ~~years~~closing ~~ended~~of ~~December~~the ~~31,~~private ~~2024~~equity offerings in the third and ~~2023(United~~fourth ~~States~~quarters ~~dollars~~of 2025, ~~except~~the ~~shares~~Company believes that its existing cash and ~~per~~the ~~share~~staking ~~amounts)~~rewards from its unrestricted digital assets are and will be sufficient to meet its working capital requirements and future obligations for at least one year after the issuance date of these consolidated financial statements.

Presentation of comparative financial statements

On ~~June~~August 94, ~~2023~~2025, the Company consolidated its issued and outstanding common shares based on one new common share of the Company for every ~~twenty~~thirty-nine existing common shares of the Company. All common shares and per share amounts have been restated to give retroactive effect to the share consolidation. See discussion in Note 1516.

Basis of consolidation

These consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions were eliminated on consolidation. Subsidiaries are entities the Company controls when it is exposed, or has rights, to variable returns from its involvement in the entity and can affect those returns through its power to direct the relevant activities of the entity. Subsidiaries are included in the consolidated financial results of the Company from the date of acquisition up to the date of disposition or loss of control. As at December 31, ~~2024~~2025, the Company had the following subsidiaries:

Subsidiaries	Country ofIncorporation	Ownership %	Functional Currency
Vessel Brand Inc.	United States	100%	United States Dollar (USD)
Vessel Brand Canada Inc.	Canada	100%	United States Dollar (USD)
Just Brands LLC	United States	100%	United States Dollar (USD)
Just Brands FL LLC	United States	100%	United States Dollar (USD)
Just Brands International LTD	United Kingdom	100%	British Pound (GBP)
High Roller Private Label LLC	United States	100%	United States Dollar (USD)
Flora Growth US Holdings Corp.	United States	100%	United States Dollar (USD)
Franchise Global Health Inc.	Canada	100%	Canadian Dollar (CAD)
Harmony Health One Inc.	Canada	100%	Canadian Dollar (CAD)
ACA Mueller ADAG Pharma Vertriebs GmbH	Germany	100%	Euro (EUR)
Sativa Verwaltungs GmbH	Germany	100%	Euro (EUR)
Sativa Verwaltungs GmbH and Co. KG	Germany	100%	Euro (EUR)
CBD Med Therapeutics Inc.	Canada	100%	Canadian Dollar (CAD)
Fayber Technologies Canada Inc.	Canada	100%	Canadian Dollar (CAD)
Catalunia SAS	Colombia	100%	Colombia Peso (COP)
Green CannaHealth SAS	Colombia	100%	Colombia Peso (COP)
Klokken Aarhus Inc.	Canada	100%	Canadian Dollar (CAD)
Rangers Pharmaceuticals A/S	Denmark	100%	Danish Krone (DAK)
1200325 B.C. LTD.	Canada	100%	Canadian Dollar (CAD)
Phatebo	Germany	100%	Euro (EUR)
Franchise Cannabis Corp.	Canada	100%	Canadian Dollar (CAD)
TruHC Pharma GmbH	Germany	100%	Euro (EUR)
Australian Vaporizers	Australia	100%	Australian Dollar (AUD)

Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2024 and 2023(United States dollars, except shares and per share amounts)

On July 5, 2023, the Company entered into a Share Purchase Agreement with Lisan Farma Colombia LLC ("Lisan"), a Delaware limited liability company, to sell all of its shares in certain Colombian companies and other Flora assets related to its Colombian operations for a purchase price of CAD $0.8 million (USD $0.6 million).

The Company sold all of its shares and assets related to the following Colombian companies and branches:

• Flora Growth Corp Colombia S.A.S. (formerly Hemp Textiles & Co. S.A.S.)

• Flora Lab S.A.S. (formerly Grupo Farmaceutico Cronomed S.A.S.)

• Flora Med S.A.S. (formerly Breeze Laboratory S.A.S.)

• Labcofarm Laboratorios S.A.S

• Cosechemos Ya S.A.S.

• Kasa Wholefoods Company S.A.S.

• Flora Growth Corp. Sucursal Colombia

• Flora Beauty LLC Sucursal Colombia

The applicable capital stock of the Colombian entities was transferred to Lisan at the date of closing. All assets underlying this sale were transferred to Lisan on an "as is where is" basis. The results of these subsidiaries are included in discontinued operations in the accompanying consolidated financial statements. See discussion in Note 5.

During the year ending December 31, 2023, the Company voluntarily dissolved the following U.S. companies:

• Hemp Textiles & Co. LLC

• Keel Brand Corp.

• Flora Growth F&B Corp

• Flora Growth Management Corp.

• Masaya Holding Corp.

During the year ending December 31, 2024, the Company voluntarily dissolved the following U.S. companies:

• Cardiff Brand Corp.
• Kasa Wholefoods LLC
• Flora Beauty LLC

On February 4, 2025, the Company completed the closing of the acquisition of 100% of the issued and outstanding shares of United Beverage Distribution Inc., a United States corporation with a functional currency of the United States dollar. See discussion of the acquisition in Note 12.

During the year ended December 31, 2025, each of Franchise Global Health Inc. ("FGH"), Franchise Cannabis Corp. ("FCC"), CBDMed Therapeutics Inc., Harmony Health One Inc., 1200325 B.C. Ltd., Fayber Technologies Inc., ACA Mueller ADAG Pharma Vertriebs GmbH, Sativa Verwaltungs GmbH, and Sativa Verwaltungs GmbH and Co. KG (together, the "Insolvent Entities") made insolvency filings in the appropriate jurisdictions. Each of the Insolvent Entities was a direct or indirect subsidiary of the Company and was part of the Company's acquisition of FGH in December 2022. See discussion in Note 6.

On September 26, 2025, the Company sold the Cannabis Business to Flora Growth US Holdings LLC, a Florida limited liability company and Noteholders, in exchange for full satisfaction of the balance receivable under the promissory notes issued by the Company to such Noteholders as part of the Company's acquisition of United Beverage Distribution Inc. on February 4, 2025 (Note 12). See discussion in Note 5.

Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis, except for certain financial instruments that are measured at fair value as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The carrying values of trade and amounts receivable, indemnification receivables, prepaids and other current assets, and trade and other payables, accrued liabilities, current portion of long -term debt, and current portion of lease liability approximate their fair values due to their short periods to maturity. The Company calculates the estimated fair value of financial instruments, including investments, and contingent consideration, using quoted market prices when available. When quoted market prices are not available, fair value is determined based on valuation techniques using the best information available and may include quoted market prices, market comparable, and discounted cash flow projections.

The consolidated financial statements are presented in United States dollars ("USD" or "$") unless otherwise noted.

Use of estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

743. SIGNIFICANT ACCOUNTING POLICIES

Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2024 and 2023(United States dollars, except shares and per share amounts)

3.SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies used by the Company are as follows:

Cash and restricted cash

Cash in the consolidated statement of financial position includes cash on hand and deposits held with banks and other financial intermediaries that have a maturity of less than three months at the date they are acquired. Restricted cash in the consolidated statement of financial position includes cash required to be held in deposit accounts related to credit card accounts and merchant accounts.

Financial assets

Initial recognition and measurement

The Company aggregates its financial assets into classes at the time of initial recognition based on the Company's business model and the contractual terms of the cash flows. Non-derivative financial assets are classified and measured as "financial assets at fair value", as either fair value through profit or loss ("FVPL"), or "financial assets at amortized cost", as appropriate.

All financial assets are recognized initially at fair value plus, in the case of financial assets not at FVPL, directly attributable transaction costs on the trade date at which the Company becomes a party to the contractual provisions of the instrument.

Financial assets with embedded derivatives are considered in their entirety when determining their classification.

Subsequent measurement - Financial assets at amortized cost

After initial recognition, financial assets measured at amortized cost are subsequently measured at the end of each reporting period at amortized cost using the Effective Interest Rate ("EIR") method. Amortized cost is calculated by considering any discount or premium on acquisition and any fees or costs that are an integral part of the EIR. In these consolidated financial statements, cash, trade and amounts receivables, and indemnification receivables are classified in this category.

Subsequent measurement - Financial assets at FVPL

Financial assets measured at FVPL include financial assets such as the Company's equity investments in other entities, and any derivative financial instrument that is not designated as a hedging instrument in a hedge relationship. Financial assets measured at FVPL are carried at fair value in the consolidated statement of financial position with changes in fair value recognized in a separate caption in the consolidated statements of loss and comprehensive loss.

Derecognition

A financial asset is derecognized when the contractual rights to the cash flows from the asset expire, or the ~~Company~~Group no longer retains substantially all the risks and rewards of ownership.

Impairment of financial assets

Financial assets classified subsequently as amortized cost are subject to impairment based on the expected credit losses ("“ECL'’s"”). The ~~Company'~~Group’s financial assets subject to impairment are cash and trade and amounts receivables.

Trade and note receivables are recognized initially at fair value and subsequently measured at amortized cost, less any provisions for impairment. Impairment provisions are estimated using the ECL impairment model where any expected future credit losses are provided for, irrespective of whether a loss event has occurred at the reporting date. Estimates of expected credit losses consider the ~~Company'~~Group’s collection history by country and customer, deterioration of collection rates during the average credit period, as well as observable changes in and forecasts of future economic conditions that affect default risk. The Company utilizes a provision matrix to estimate lifetime ECL'’s for trade receivables, supplemented by specific allowance based on customer-specific data. Changes in the allowance are recognized as bad debt expense in the consolidated statements of loss and comprehensive loss. When the Company determines that no recovery of the amount owed is possible, the amount is deemed irrecoverable, and the financial asset is written off. This is determined with judgment or otherwise when discharged by bankruptcy or other legal proceedings.

Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2024 and 2023(United States dollars, except shares and per share amounts)

Inventory

Inventories are comprised of raw materials and supplies and finished goods. Inventories are initially valued at cost and subsequently at the lower of cost and net realizable value. Inventory cost is determined either on a weighted average cost or specific identification basis and any trade discounts and rebates are deducted from the purchase price. Raw material costs include the purchase cost of the materials, freight-in and duty. Costs incurred during the production process are capitalized as incurred to the extent that cost is less than net realizable value. These costs include materials, labor and manufacturing overhead used in the production processes. Finished goods include the cost of direct materials and labor and a proportion of manufacturing overhead allocated based on normal production capacity.

~~Property, plant and equipment~~76

~~Property,~~ZeroStack ~~plant~~Corp. ~~and~~(formerly ~~equipment~~Flora ~~are~~Growth ~~measured~~Corp.)Notes atto ~~cost~~the ~~less~~consolidated ~~accumulated~~financial ~~depreciation~~statementsFor ~~and~~the ~~impairment~~years ~~losses~~ended December 31, if2025 ~~any.~~and ~~Depreciation~~2024(in isthousands ~~provided~~of ~~for~~United onStates adollars, ~~straight-line~~except ~~basis~~number ~~over~~of ~~the~~shares ~~assets'~~and ~~estimated~~units ~~useful~~and ~~lives,~~per ~~which~~share ~~management~~and ~~has~~per ~~determined~~unit toamounts, beor as ~~follows:~~indicated)

~~Machinery~~Property and ~~office~~ equipment ~~5-10 years~~

~~Vehicle 5~~Property ~~years~~and equipment are measured at cost less accumulated depreciation and impairment losses, if any. Depreciation is provided for on a straight-line basis over the assets’ estimated useful lives, which management has determined to be as follows:

Building 30 years

Machinery and office equipment	5-10 years
Vehicle	5 years
Building	30 years
Right-of-use assets	Lesser of useful life and remaining term of the lease

Right-of-use assets Lesser of useful life and remaining term of the lease

The Company assesses an asset's residual value, useful life and depreciation method at each financial year end and adjusts if appropriate. During their construction, property, plant and equipment are not subject to depreciation. The Company capitalizes all costs necessary to get the asset to its intended use, including interest on borrowings when significant. When the asset is available for use, depreciation commences. Depreciation expense is recorded within depreciation and amortization on the consolidated statements of loss and comprehensive loss.

Gains and losses on disposal of property, ~~plant~~ and equipment are determined by comparing the proceeds from disposal with the carrying amount of the property, ~~plant~~ and equipment and are recognized in the consolidated statements of loss and comprehensive loss of the related year.

Digital assets

Pursuant to ASU 2023-08, Intangibles - Goodwill and Other - Crypto Assets: Accounting for and Disclosure of Crypto Assets, codified into ASC subtopic 350-60, in-scope crypto assets are required to be measured at fair value in the statement of financial position, with gains and losses from changes in the fair value of such crypto assets recognized in net income each reporting period. ASU 2023-08 also requires certain interim and annual disclosures for crypto assets within the scope of the standard.

The Company adopted this guidance effective January 1, 2025 as this was the first year that the Group held digital assets. The Company’s digital assets are measured using Level 1 inputs under ASC 820, based on quoted prices from the principal market. ASC 820 defines “principal market” as the market with the greatest volume and level of activity for the asset or liability. The determination of the principal market (and, as a result, the market participants in the principal market) is made from the perspective of the reporting entity. The digital assets held by the Company are traded on a number of active markets globally. The Company determined that Kraken was the principal market for its digital assets, as it has high volumes for each of its digital assets and the Company has access to it. The Company recognizes gain or loss by utilizing daily close prices obtained from Kraken. The Company utilizes a first-in, first-out method to determine the cost basis for each type of digital asset in computing gains and losses.

Intangible assets

Intangible assets are recorded at cost less accumulated amortization and impairment losses, if any. Intangible assets acquired in a business combination are measured at fair value at the acquisition date. Amortization is provided on a straight-line basis over the assets'’ estimated useful lives, which do not exceed the contractual period, if any. The ~~Company'~~Group’s finite-lived intangible assets are amortized as follows:

Patents and developed technology 9 years

Patents and developed technology	9 years
Customer and supplier relationships	5-10 years
Trademarks and brands	8-10 years
Licenses	5 years
Non-compete agreements	3 years

Customer and supplier relationships 5-10 years

Trademarks and brands 8-10 years

Licenses 5 years

Non-compete agreements 3 years

Investments

Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2024 and 2023(United States dollars, except shares and per share amounts)

Investments include investments in equity securities of entities over which the Company does not have a controlling financial interest or significant influence and are accounted for at fair value. Equity investments without readily determinable fair values are measured at cost with adjustments for observable changes in price or impairments (referred to as the "measurement alternative"). In applying the measurement alternative, the Company performs a qualitative assessment on a quarterly basis and recognizes an impairment if there are sufficient indicators that the fair value of the equity investments is less than carrying values. Changes in value are recorded in changes in financial instruments fair value on the consolidated statements of loss and comprehensive loss.

Impairment of long-lived assets

The Company reviews long-lived assets, including property and equipment and definite life intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss is recognized when the sum of projected undiscounted cash flows is less than the carrying value of the asset group. The measurement of the impairment loss to be recognized is based on the difference between the fair value and the carrying amount of the asset group.

Business combinations

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition date fair values of the assets transferred by the ~~Company~~Group, liabilities incurred by the ~~Company~~Group to the former owners of the acquiree and the equity interests issued by the Company in exchange for control of the acquiree. Acquisition related costs are generally recognized in the consolidated statements of loss and comprehensive loss as incurred. At the acquisition date, the identifiable assets acquired, and the liabilities assumed, are recognized at their fair value.

When a business combination is achieved in stages, the Company's previously held equity interest in the acquiree is remeasured to its acquisition date fair value and the resulting gain or loss, if any, is recognized in the consolidated statements of loss and comprehensive loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognized in other comprehensive income are reclassified to the consolidated statements of loss and comprehensive loss where such treatment would be appropriate if that interest were disposed of.

Impairment of goodwill and indefinite-lived intangible assets

Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2024 and 2023(United States dollars, except shares and per share amounts)

Financial liabilities

Initial recognition and measurement

Financial liabilities are measured at amortized cost, unless they are required to be measured at FVPL as is the case for held for trading or derivative instruments, or the Company has opted to measure the financial liability at FVPL. The Company's financial liabilities include trade and other payables and other accrued liabilities and long-term debt, which are measured at amortized cost. All financial liabilities are recognized initially at fair value.

Subsequent measurement - Financial liabilities at amortized cost

After initial recognition, financial liabilities measured at amortized cost are subsequently measured at the end of each reporting period at amortized cost using the EIR method. Amortized cost is calculated by considering any discount or premium on acquisition and any fees or costs that are an integral part of the EIR. In these consolidated financial statements, trade payables and other accrued liabilities, lease liability and long-term debt are measured at amortized cost.

Subsequent measurement - Financial liabilities at FVPL

Financial liabilities measured at FVPL include any derivative financial instrument that is not designated as a hedging instrument in a hedge relationship. Financial liabilities measured at FVPL are carried at fair value in the consolidated statement of financial position with changes in fair value recognized in other income or expense in the consolidated statements of loss and comprehensive loss. In these consolidated financial statements, ~~trade~~the ~~and~~convertible ~~other~~notes ~~payables~~included ~~and~~in ~~other~~long ~~accrued~~term ~~liabilities,~~debt ~~lease~~have ~~liability~~been ~~and~~subsequently ~~loans payable are~~ measured at ~~amortized~~fair ~~cost~~value.

Derecognition

A financial liability is derecognized when the obligation under the liability is discharged, cancelled, or expires with any associated gain or loss recognized in other income or expense in the consolidated statements of loss and comprehensive loss.

Provisions

Provisions are recognized when (a) the ~~Company~~Group has a present obligation (legal or constructive) due to a past event, and (b) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Company expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is probable. The Company expenses legal costs as incurred related to such matters.

The expense relating to any provision is presented in the consolidated statements of loss and comprehensive loss, net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost in the consolidated statements of loss and comprehensive loss.

Share capital

Issued common shares are recorded as equity at par value. Additional proceeds from the issuance of common shares are classified as equity in additional paid in capital. Incremental costs directly attributable to the issue of common shares, stock options and warrants are recognized as a deduction from equity, net of any tax effects. Common shares are considered issued when consideration has been received. ~~The~~When ~~fair~~warrants ~~value~~are ofsold ~~warrants~~bundled iswith ~~determined~~common ~~using~~shares as units, the ~~Black~~various ~~Scholes~~components ~~model~~are allocated using their relative fair values.

~~Share based compensation~~79

~~Share~~ZeroStack ~~based~~Corp. ~~compensation~~(formerly toFlora ~~employees~~Growth ~~is measured at the fair value of the instruments issued and amortized over the vesting periods~~Corp.)Notes ~~Share based compensation~~ to ~~non-employees are measured at~~ the ~~fair~~consolidated ~~value~~financial ofstatementsFor ~~goods or services received or~~ the ~~fair~~years ~~value~~ended ofDecember ~~the~~31, ~~equity~~2025 ~~instruments issued if it is determined the fair value of the goods or services cannot be reliably measured~~ and ~~are recorded at the date the goods or services are received. The Company operates an equity based compensation plan. The corresponding amount is recorded to the additional paid-~~2024(in ~~capital~~thousands ~~caption within shareholders' equity, and the expense to the consolidated statements~~ of ~~loss~~United ~~and~~States comprehensive loss over the vesting period. The fair value of options is determined using the Black-Scholes pricing model which incorporates all market vesting conditions. For awards with graded vesting schedulesdollars, ~~the~~except ~~Company has elected to calculate the fair value as a single award and recognize expense over the total expected vesting period rather than in tranches. The~~ number of shares and ~~options~~units ~~expected to vest is reviewed~~ and ~~adjusted~~per at the end of each reporting period such that the amount recognized for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest. Upon exercise of a stock option, any amount related to the initial value of the stock option, along with the proceeds from exercise are recorded to share ~~capital.~~and ~~Upon~~per ~~expiration~~unit ~~of a stock option~~amounts, ~~any~~or amount related to the initial value of the stock option is recorded to accumulated deficit. The Company also grants employees and non-employees restricted stock awards ("RSAs"). The fair value of the RSAs is determined using the fair value of the common shares on the date of the grant. The Company has elected to recognize forfeitures as ~~they occur. The Company also grants employees and non-employees stock appreciation rights ("SARs"~~indicated). The fair value of the SARs is determined using the Black-Scholes pricing model which incorporates all market vesting conditions. For SARs awards with multiple vesting schedules, fair value was determined using a Monte Carlo simulation incorporating Brownian motion with 100,000 trials through a binomial model.

78Share based compensationShare based compensation to employees is measured at the fair value of the instruments issued and amortized over the vesting periods. Share based compensation to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued if it is determined the fair value of the goods or services cannot be reliably measured and are recorded at the date the goods or services are received. The Company operates an equity-based compensation plan. The corresponding amount is recorded to the additional paid-in capital caption within shareholders’ equity, and the expense to the consolidated statements of loss and comprehensive loss over the vesting period. The fair value of stock options issued in years prior to December 31, 2024 were determined at the time of issuance using the Black-Scholes option pricing model. The stock options issued in the year ended December 31, 2025 were determined at the time of issuance using a Monte Carlo simulation incorporating Brownian motion, which simulates a distribution of stock prices for the Company throughout the term of the stock options, based on certain assumptions of stock price behavior. For awards with graded vesting schedules based on achieving a specified share price, the Company has elected to calculate the fair value as a single award and recognize expense over the total expected vesting period rather than in tranches. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognized for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest. Upon exercise of a stock option, any amount related to the initial value of the stock option, along with the proceeds from exercise are recorded to share capital. Upon expiration of a stock option, any amount related to the initial value of the stock option is recorded to accumulated deficit. The Company also grants employees and non-employees restricted stock awards (“RSAs”). The fair value of the RSAs is determined using the fair value of the common shares on the date of the grant. The Company has elected to recognize forfeitures as they occur. The Company also grants employees and non-employees stock appreciation rights (“SARs”). The fair value of the SARs is determined using the Black–Scholes pricing model which incorporates all market vesting conditions. For SARs awards with multiple vesting schedules, fair value was determined using a Monte Carlo simulation incorporating Brownian motion.

Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2024 and 2023(United States dollars, except shares and per share amounts)

Foreign currency translation

These consolidated financial statements are presented in ~~U.S. dollars ("~~USD"), which is the ~~Company~~Group's reporting currency; however, the functional currency of the entities in these financial statements are their respective local currencies, including ~~Canadian dollar, Australian dollar,~~ USD, ~~British pound~~ and euro.

Translation into functional currency

Transactions in foreign currencies are recorded in the functional currency at exchange rates prevailing on the dates of the transactions. At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are translated at the period end exchange rates. Non-monetary items are translated at the exchange rates in effect on the date of the transactions. Foreign exchange gains and losses arising on translation are presented in the consolidated statements of loss and comprehensive loss.

Translation into presentation currency

The assets and liabilities of foreign operations are translated into USD at year-end exchange rates. Revenue, expenses, and cash flows of foreign operations are translated into USD using average exchange rates of the reporting period. Exchange differences resulting from translating foreign operations are recognized in other comprehensive income and accumulated in shareholders' equity. The cumulative exchange differences are reclassified to the consolidated statements of loss and comprehensive loss upon the disposal of the foreign operation.

Research expenses

Research expenses are expensed as they are incurred, net of any related investment tax credits, unless the criteria for capitalization of development expenses are met.

Revenue recognition

The ~~Company~~Group primarily generates revenue as a ~~distributor~~global ~~of pharmaceuticals and a~~ distributor ~~and retailer~~ of ~~cannabidiol oil derived products~~pharmaceuticals. See disaggregation of the ~~Company~~Group's revenue by operating segments and sales by country in Note 2425.

The Company uses the following five-step contract-based analysis of transactions to determine if, when and how much revenue can be recognized:

~~The~~ZeroStack ~~Company's~~Corp. ~~contracts~~(formerly ~~with~~Flora ~~customers~~Growth ~~for the sales of products consist of one performance obligation~~Corp.)Notes ~~Revenue~~to ~~from product sales is recognized at~~ the ~~point~~consolidated infinancial ~~time~~statementsFor ~~when control is transferred to~~ the ~~customer,~~years ~~which~~ended isDecember ~~on shipment or delivery~~31, ~~depending~~2025 onand ~~the~~2024(in ~~contract~~thousands ~~terms.~~of ~~The~~United ~~Company's~~States ~~payment~~dollars, ~~terms~~except ~~generally~~number ~~range~~of ~~from~~shares 0and tounits 30and ~~days~~per ~~from~~share ~~the~~and ~~transfer~~per ofunit ~~control~~amounts, ~~and~~or ~~sometimes~~as ~~up to two months.~~indicated)

79Revenue is recognized at the transaction price, which is the amount of consideration to which the Group expects to be entitled in exchange for transferring promised goods to a customer. Gross revenue excludes duties and taxes collected on behalf of third parties. Revenue is presented net of expected price discounts, sales returns, sales taxes, customer rebates and other incentives.

~~Flora~~The ~~Growth~~Group's ~~Corp.Notes~~contracts towith customers for the ~~consolidated~~sales ~~financial~~of ~~statementsFor~~products consist of one performance obligation. Revenue from product sales is recognized at the ~~years~~point ~~ended~~in ~~December~~time 31when control is transferred to the customer, ~~2024~~which ~~and~~is ~~2023(United~~on ~~States~~shipment ~~dollars~~or delivery, ~~except~~depending ~~shares~~on the contract terms. The Group's payment terms generally range from 0 to 30 days from the transfer of control, and ~~per~~sometimes ~~share~~up ~~amounts)~~to two months.

The Company elected as a permitted practical expedient to not adjust the customer contract consideration for significant financing components when the period between the transfer of the ~~Company~~Group's goods and services and customer payment is one year or less.

The Company elected as a permitted practical expedient to expense, as incurred, the costs of obtaining a customer contract such as sales commissions and other selling transaction costs when the amortization period of the assets otherwise would be one year or less. Accordingly, the ~~Company~~Group has no assets recorded for costs to obtain a customer contract as at December 31, ~~2024~~2025 and ~~2023~~2024 as there are no contracts where the underlying asset would have a life exceeding one year.

The Company elected as a permitted practical expedient for shipping and handling not to be a separate performance obligation.

Advertising costs

Advertising costs are expensed as incurred and recorded within the ~~promotion~~general and ~~communication~~administrative caption on the consolidated statements of loss and comprehensive loss. Advertising costs were less than $20.81 million in ~~2024~~2025 ($~~3.4~~nil ~~million~~ in ~~2023~~2024).

Leases

At the inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified ~~asset~~ass et for a period in exchange for consideration. The Company recognizes a right-of-use asset and a lease liability at the commencement date of the lease. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset, less any lease incentives received. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company's estimated incremental borrowing rate.

The lease term at the lease commencement date is determined based on the noncancellable period for which the ~~Company~~Group has the right to use the underlying asset, together with any periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option, periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option and periods covered by an option to extend (or not to terminate) the lease in which the exercise of the option is controlled by the lessor. The Company considers several factors when evaluating whether the options in its lease contracts are reasonably certain of exercise, such as length of time before an option exercise, expected value of the leased asset at the end of the initial lease term, importance of the lease to the ~~Company~~Group's operations, costs to negotiate a new lease, any contractual or economic penalties, and the economic value of leasehold improvements.

For finance leases, from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term, the right-of-use asset is amortized on a straight-line basis and the interest expense is recognized on the lease liability using the effective interest method. For operating leases, lease expense is recognized on a straight-line basis over the term of the lease and presented as a single charge in the consolidated statements of operations and comprehensive income. The lease liability is subsequently measured at amortized cost using the effective interest method.

Right-of-use assets are adjusted for impairment losses, if any. The estimated useful lives and recoverable amounts of right-of-use assets are determined on the same basis as those of property, plant and equipment.

The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases (lease term of 12 months or less) and leases for which the underlying asset is of low value. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term. The Company has elected not to separate non-lease components from lease components for real estate leases.

Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2024 and 2023(United States dollars, except shares and per share amounts)

Income taxes

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in the consolidated statements of loss and comprehensive loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive loss.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable income or loss, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis, or their tax assets and liabilities will be realized simultaneously.

Interest and penalties in respect of income taxes are not recognized in the consolidated statement of operations as a component of income taxes but as a component of interest expense.

Loss per share

Basic loss per share is calculated using the weighted average number of shares outstanding during the year. Pre-funded Warrants are included in the computing earnings per share because the exercise price of the Pre-funded Warrants is nominal and there are no conditions that must be satisfied prior to their exercise. Diluted loss per share reflects the potential dilution of common share equivalents, such as outstanding options and warrants, in the weighted average number of common shares outstanding during the period, if dilutive. The diluted loss per share calculation excludes any potential conversion of options and warrants that would be anti-dilutive.

Non-controlling interests

Non-controlling interests of subsidiaries ("NCI") are recognized either at fair value or at the NCI's proportionate share of the net assets, determined on an acquisition-by-acquisition basis at the date of acquisition. Subsequently, the NCI's share of net loss and comprehensive loss is attributed to the NCI.

During ~~2023~~2024, the Company completed the ~~sale~~acquisition of ~~Cosechemos~~TruHC YAthrough Stwo closings.~~A.S.~~ ~~and~~At ~~Kasa~~the ~~Wholefoods~~first closing on April 22, 2024, the Company ~~S.A.S~~acquired toa ~~Lisan~~controlling 77% interest in TruHC. ~~These~~The ~~entities~~Company ~~each~~acquired ~~had~~the 10remining 23% ~~NCI~~of TruHC at the second closing on November 27, 2024, at which time the NCI was derecognized. ~~when~~See ~~the~~discussion ~~Company~~in ~~lost~~Note ~~control~~12. ~~during~~TruHC was sold as part of the ~~year~~Cannabis ~~ended~~Businesses ~~December~~on 31September 26, ~~2023~~2025. See discussion in Note 5.

During 2024, the Company completed the acquisition of TruHC through two closings. At the first closing on April 22, 2024, the Company acquired a controlling 77% interest in TruHC. The Company acquired the remining 23% of TruHC at the second closing on November 27, 2024, at which time the NCI was derecognized. See discussion in Note 10.

Discontinued operations and assets and liabilities held for sale

On ~~July~~September 526, ~~2023,~~2025 the Company ~~entered~~closed ~~into~~the asale ~~Share~~of ~~Purchase~~the ~~Agreement~~Cannabis ~~with~~Business ~~Lisan~~in toexchange ~~sell~~for ~~all~~full satisfaction of ~~its~~the ~~shares~~balance inreceivable ~~certain~~under ~~Colombian~~the ~~companies~~promissory ~~and~~notes ~~other~~issued ~~Flora~~by ~~assets~~the ~~related~~Company to ~~its~~the ~~Colombian~~Noteholders ~~operations~~as ~~for~~part aof ~~purchase~~the ~~price~~Company's acquisition of ~~CAD~~United ~~$0.8~~on ~~million~~February ~~(USD~~4, $02025.6 ~~million).~~ The assets and liabilities of ~~these~~the ~~Colombian~~Cannabis ~~companies~~Business are reflected in the accompanying consolidated balance sheets as assets and liabilities held for sale, respectively. The results of operations of ~~these~~the ~~Colombian~~Cannabis ~~companies~~Business are included in loss from discontinued operations, net of tax in the accompanying consolidated statements of operations and comprehensive loss. See discussion in Note 5.

Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2024 and 2023(United States dollars, except shares and per share amounts)

Adoption of accounting standards and amendments

In ~~October~~June ~~2021~~2022, the FASB issued ~~ASU~~Accounting ~~No.~~Standards ~~2021~~Update 2022-~~08,~~03—Fair ~~Business~~Value ~~Combinations~~Measurement (Topic ~~805~~820): ~~Accounting~~Fair ~~for~~Value ~~Contract~~Measurement ~~Assets~~of ~~and~~Equity ~~Contract~~Securities ~~Liabilities~~Subject ~~from~~to ~~Contracts~~Contractual ~~with~~Sale ~~Customers~~Restrictions ("“ASU ~~2021~~2022-~~08"~~03”), which requires that a contractual restriction on the sale of an ~~acquirer~~equity tosecurity ~~recognize~~is ~~and~~not ~~measure~~considered ~~contract~~part ~~assets~~of the unit of account of the equity security and, ~~liabilities~~therefore, ~~acquired~~is not considered in ameasuring ~~business~~fair ~~combination~~value. inThe ~~accordance~~amendments ~~with~~also ~~Revenue~~clarify ~~from~~that ~~Contracts~~an ~~with~~entity ~~Customers~~cannot, ~~("ASC~~as ~~606")~~a ~~rather~~separate ~~than~~unit ~~adjust~~of ~~them~~account, torecognize ~~fair~~and ~~value~~measure ata ~~the~~contractual ~~acquisition~~sale ~~date~~restriction. The effects of adoption are ~~applied~~accounted for prospectively towith ~~business~~any ~~combinations~~adjustments ~~occurring~~from onthe oradoption ~~after~~of the ~~effective~~amendments recognized in earnings and disclosed on the date of adoption. ASU ~~2021~~2022-0803 is effective for fiscal years beginning after December 15, ~~2022~~2023, with early adoption permitted. The Company adopted ASU ~~2021~~2022-0803 effective as of January 1, ~~2023~~2024, and there aswas ~~such had~~ no impact on the Company'’s consolidated financial statements.

In ~~June~~November ~~2022~~2023, the FASB issued ~~Accounting~~ASU ~~Standards Update 2022~~2023-~~03-Fair~~07, ~~Value~~Segment ~~Measurement~~Reporting ~~(Topic~~– ~~820):~~Improvements ~~Fair Value Measurement of Equity Securities Subject~~ to ~~Contractual~~Reportable ~~Sale~~Segments ~~Restrictions~~Disclosures. ~~("ASU~~The ~~2022-03"),~~amendments ~~which~~enhance ~~requires~~disclosures ~~that~~of asignificant ~~contractual~~segment ~~restriction~~expenses onby ~~the~~requiring ~~sale~~disclosure of ansignificant ~~equity~~segment ~~security~~expenses isregularly ~~not~~provided ~~considered~~to ~~part of~~ the ~~unit~~chief ofoperating ~~account~~decision ofmaker ~~the equity security and~~(CODM), ~~therefore,~~extend iscertain ~~not~~annual ~~considered~~disclosures into ~~measuring~~interim ~~fair~~periods, ~~value.~~and ~~The~~permit ~~amendments~~more ~~also~~than ~~clarify~~one ~~that~~measure anof ~~entity~~segment ~~cannot,~~profit asor aloss ~~separate~~to ~~unit~~be ofreported ~~account,~~under ~~recognize~~certain ~~and measure a contractual sale restriction~~conditions. The ~~effects~~amendments ~~of adoption~~ are ~~accounted~~effective for ~~prospectively with any adjustments from~~ the ~~adoption~~Company ~~of the amendments recognized~~ in ~~earnings~~fiscal ~~and~~years ~~disclosed~~beginning onafter ~~the~~December ~~date~~15, of2023, ~~adoption.~~and ~~ASU~~interim ~~2022-03~~periods iswithin ~~effective for~~ fiscal years beginning after December 15, ~~2023, with early adoption permitted~~2024. The Company adopted ASU ~~2022~~2023-0307 effective as of ~~January~~December 131, 2024, and asthe ~~such~~segment ~~had~~disclosures noin ~~impact~~Note on25 ~~the~~in ~~Company's~~these consolidated financial statements are reflective of that adoption.

In ~~November~~December 2023, the FASB issued ~~ASU~~Accounting Standards Update 2023-0708, ~~Segment~~Crypto ~~Reporting~~Assets (Subtopic 350-60) ~~Improvements~~("ASU to2023-08"), ~~Reportable~~which ~~Segments~~addresses ~~Disclosures.~~the ~~The~~accounting ~~amendments~~and ~~enhance~~disclosure ~~disclosures~~requirements offor ~~significant~~certain ~~segment~~crypto ~~expenses~~assets. byThe ~~requiring~~guidance ~~disclosure~~requires ofentities ~~significant segment expenses regularly provided~~ to ~~the~~subsequently ~~chief~~measure ~~operating decision maker (CODM), extend~~ certain ~~annual~~crypto ~~disclosures~~assets toat ~~interim~~fair ~~periods~~value, ~~and~~with ~~permit~~changes ~~more~~in ~~than~~fair ~~one~~value ~~measure~~recorded ofin ~~segment~~net ~~profit~~income orin ~~loss~~each toreporting beperiod. ~~reported~~In ~~under~~addition, ~~certain~~entities ~~conditions.~~are ~~The~~required ~~amendments~~to ~~are~~provide ~~effective~~additional ~~for~~disclosures about the ~~Company~~holdings inof ~~fiscal~~certain ~~years~~crypto ~~beginning~~assets. ~~after~~For ~~December~~all 15entities, ~~2023,~~the ~~and~~ASU's ~~interim~~amendments ~~periods~~are ~~within~~effective for fiscal years beginning after December 15, 2024. ~~Early adoption of the amendment is permitted, including adoption in any interim periods for which financial statements have not been issued.~~ The Company adopted ASU 2023-0708 effective as of ~~December~~January 311, ~~2024~~2025 and the ~~segment~~ disclosures inaround ~~Note~~the 24Company's indigital ~~this~~assets ~~Annual Report~~ are reflective of that adoption.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which improve the transparency of disclosures related to the income tax rate reconciliation and income taxes paid. The amendments are effective for the Company in fiscal years beginning after December 15, 2024. The Company adopted ASU 2023-09 effective as of January 1, 2025 and the disclosures around the Group's income taxes are reflective of that adoption.

Accounting pronouncements not yet adopted

Certain new standards, amendments and interpretations, and improvements to existing standards have been published by the FASB and ~~United~~the ~~States~~SEC ~~Securities and Exchange Commission~~ but are not yet effective and have not been adopted early by the Company. Management anticipates that all the relevant pronouncements will be adopted in the first reporting period following the date of application unless noted. Information on new standards, amendments and interpretations, and improvements to existing standards which could potentially impact the Company's financial statements are detailed as follows:

In ~~December~~November ~~2023~~2024, the FASB issued ASU ~~2023~~2024-0903, Income ~~Taxes~~Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (~~Topic~~Subtopic ~~740~~220-40): ~~Improvements~~Disaggregation toof Income ~~Tax~~Statement ~~Disclosures~~Expenses, which ~~improve~~requires ~~the~~all ~~transparency~~public ofentities ~~disclosures~~to ~~related~~disclose toinformation ~~the~~about ~~income~~purchases ~~tax~~of ~~rate~~inventory, ~~reconciliation~~employee compensation, depreciation, intangible asset amortization, and depletion for each income ~~taxes~~statement ~~paid~~line item that contains those expenses. The amendments are effective for the Company in fiscal years beginning after December 15, ~~2024~~2026. Early adoption is permitted ~~for~~on ~~annual~~either ~~financial~~a ~~statements~~prospective ~~that have not yet been issued~~ or ~~made~~retrospective ~~available for issuance~~basis. The Company is currently evaluating the guidance and its impact to the consolidated financial statements.

InCertain ~~November~~other ~~2024,~~new ~~the~~standards FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires all public entities to disclose information about purchases of inventory, employee compensation, depreciation, intangible asset amortization, and ~~depletion~~interpretations ~~for~~have ~~each~~been ~~income~~issued ~~statement~~but ~~line item that contains those expenses. The amendments~~ are ~~effective~~not ~~for~~expected ~~the~~to ~~Company~~have ina ~~fiscal~~material ~~years~~impact ~~beginning after December 15, 2026, and interim periods within fiscal years beginning after December 27, 2027. Early adoption is permitted~~ on ~~either~~the ~~a prospective or retrospective basis. The~~ Company’s isconsolidated ~~currently evaluating the guidance and its impact to the~~ financial statements.

Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Company's financial statements.

Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2024 and 2023(United States dollars, except shares and per share amounts)

4. CRITICAL JUDGMENTS AND ESTIMATION UNCERTAINTIES

The preparation of the Company'’s consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, revenues, and expenses. These estimates and judgements are subject to change based on experience and new information which could result in outcomes that require a material adjustment to the carrying amounts of assets or liabilities affecting future periods. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized prospectively.

Going concern considerations

The accompanying consolidated financial statements have been prepared assuming that the ~~Company~~Group will continue as a going concern. Management must assess the ~~Company'~~Group’s ability to continue as a going concern each reporting period. This assessment involves the use of internal budgets and estimates of revenues, expenses and cash flows, which requires a significant amount of management judgement. With the Group’s new digital asset treasury strategy, this assessment also involves determining the liquidity of 0G.

Determination of functional currency

The Company determines the functional currency through an analysis of several indicators. Primary considerations include the currency in which the ~~Company'~~Group’s goods and services are sold and the currency of the country whose competitive forces and regulations mainly determine the sales prices of its goods and services. The Company also considers the currency in which funds from financing debt and equity activities are generated and the currency in which receipts from operating activities are retained. Management judgment is applied when there are indicators supporting more than one currency for a Company subsidiary.

~~Expected~~Digital ~~credit losses on financial~~ assets

~~Determining~~The anGroup's ~~allowance~~accounting for ~~expected~~digital ~~credit~~assets ~~losses~~involves ~~for~~significant ~~all~~management ~~financial~~judgment ~~asset~~and ~~receivables~~estimation ~~not~~uncertainty. ~~held~~In applying ASC 350-60, Intangibles-Goodwill and Other-Crypto Assets, management evaluates whether digital assets meet the definition of in-scope crypto assets and determines the appropriate accounting treatment. In accordance with ASU 2023-08, qualifying digital assets are measured at fair value, ~~through~~with ~~profit~~changes orin ~~loss~~fair ~~requires~~value ~~judgment.~~recognized ~~Factors~~in ~~that~~earnings ~~cause~~each ~~the~~reporting ~~estimate~~period. toManagement beexercises ~~sensitive~~judgment toin ~~change~~identifying ~~include~~the ~~historical~~principal market and ~~expected~~determining ~~future~~fair ~~patterns~~value ~~for~~based ~~the~~on ~~probability~~observable ofquoted ~~default~~prices in active markets, including the ~~timing~~assessment of ~~collection~~market accessibility and ~~the~~liquidity. ~~amount~~When ofobservable ~~incurred~~inputs ~~credit~~are ~~losses,~~not ~~and~~directly available, management's ~~judgment~~evaluates ~~about~~the ~~whether~~appropriateness ~~economic~~of ~~conditions~~valuation techniques and ~~credit~~assumptions ~~terms~~consistent ~~are~~with ~~such~~ASC ~~that~~820. ~~actual~~Additional ~~losses~~judgment ~~may~~is berequired ~~higher~~in orassessing ~~lower~~risks ~~than~~associated ~~what~~with ~~the~~custodial ~~historical~~arrangements, ~~patterns~~including ~~suggest.~~reliance ~~These~~on ~~conditions~~third-party ~~are~~service ~~applied~~providers, ~~across~~as ~~each~~well ofas ~~the~~in ~~Company's~~monitoring ~~business~~regulatory, ~~units~~legal, toand ~~the~~technological ~~extent~~developments that may affect the ~~expected~~Group's ~~risk~~ability ofto ~~loss~~access ~~differ~~or ~~from~~transfer ~~each~~its ~~other~~digital assets.

~~Inventory~~84

~~Inventory~~ZeroStack isCorp. ~~valued~~(formerly atFlora ~~the~~Growth ~~lower of cost and net realizable value~~Corp.)Notes ~~Determining~~to ~~net~~the ~~realizable~~consolidated ~~value~~financial ~~requires~~statementsFor the ~~Company~~years toended ~~make~~December ~~assumptions~~31, ~~about~~2025 ~~estimated~~and ~~selling prices~~ 2024(in ~~the~~thousands ~~ordinary~~of ~~course~~United ofStates ~~business~~dollars, ~~the~~except ~~estimated~~number ~~costs~~ of ~~completion~~shares and ~~the~~units ~~estimated~~and ~~variable~~per ~~costs~~share toand ~~sell.~~per ~~Management~~unit ~~judgment is applied to determine potential impairment exposure related to potential excess product inventory levels~~amounts, ~~obsolescence,~~or ~~and~~as ~~expiration.~~indicated)

Debt

The Company applies significant judgment and estimates in determining the fair value of the Zero Gravity Convertible Note at year end. The fair value of the note is not directly observable in the market and, as a result, was determined using the lower of the face value plus the interest payable of a Monte Carlo simulation incorporating Brownian motion. This valuation technique simulates a range of potential outcomes for the Company’s common stock price and the price of the 0G Token over the contractual term of the note. The fair value measurement is highly sensitive to key assumptions, including the expected term to maturity of 9.7 years, the closing price of the Company’s common stock of $6.26 and the closing price of the 0G Token of $0.98 as of December 31, 2025, the contractual conversion price of $33.34, a discount rate of 21.5%, an assumed risk-free interest rate of 3.84%, an interest rate on the note of 8.0%, and an expected volatility of 101%, which was derived from the historical daily returns of Solana due to limited observable trading history for the 0G Token. Changes in any of these assumptions could result in a materially different fair value measurement. Based on the observability of the inputs used in the valuation, the Zero Gravity Convertible Note was classified as a Level 3 financial instrument within the fair value hierarchy as of December 31, 2025.

The Company applies significant judgment and estimates in determining the fair value of the unsecured convertible note with an original principal amount of 95,333 S

/s/ DAVIDSON & COMPANY LLP

Vancouver, Canada

Chartered Professional Accountants

PCAOB ID: 731

March 24, 2025

February 27, 2026

Filing Compare · ZeroStack Corp.