As filed with the Securities and Exchange Commission on October 10, 2023

Registration No. 333-[•]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

3242 S. Halladay Street, Suite 202

Santa Ana, California 92705

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Sabas Carrillo

3242 S. Halladay Street, Suite 202

Santa Ana, California 92705

888-909-5564

(Name, address, including zip code, and telephone number, including area code, of agent for service)

With copy to:

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.

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 7(a)(2)(B) of the Securities Act. ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

EXPLANATORY NOTE

The proxy statement/prospectus that forms a part of this registration statement consists of (i) a proxy statement relating to the Annual Meeting of stockholders of Unrivaled Brands, Inc., a Nevada corporation, and (ii) a prospectus relating to the common stock and preferred stock of Blum Holdings, Inc., a Delaware corporation.

The information in this preliminary proxy statement/prospectus is not complete and may be changed. We may not issue these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary proxy statement/prospectus is not an offer to sell these securities, and it is not soliciting an offer to buy these securities in any state where the offer and sale is not permitted.

SUBJECT TO COMPLETION, DATED OCTOBER 10, 2023

PROXY STATEMENT/PROSPECTUS

A REORGANIZATION IS PROPOSED-YOUR VOTE IS VERY IMPORTANT

 [•], 2023

To Our Stockholders:

We cordially invite you to attend the Annual Meeting of the Stockholders of Unrivaled Brands, Inc. (“we,” “us,” “our” or the “Company”) to be held on December 5, 2023 at 9:30 a.m., Pacific Time (the “Annual Meeting”). The Annual Meeting will be a virtual meeting via live audiocast. You will not be able to attend the Annual Meeting in person.

At the Annual Meeting, you will be asked to consider and vote on a proposal to reorganize our company into a holding company structure pursuant to which our present company will become a subsidiary of a newly formed Delaware corporation named Blum Holdings, Inc., which we refer to in this proxy statement/prospectus as “Newco.” We refer to this proposal in this proxy statement/prospectus as the “Reorganization Proposal.” If the Reorganization Proposal is approved, you will become a stockholder of Newco. We currently expect to complete the reorganization, which we refer to in this proxy statement/prospectus as the “Reorganization,” during the fourth quarter of 2023, provided that our stockholders approve the Reorganization and all other conditions to completion of the Reorganization are satisfied.

Upon completion of the Reorganization, Newco will, in effect, replace the Company as the publicly held corporation. Newco and its subsidiaries will conduct all of the operations we currently conduct. We believe that implementing the holding company structure will provide us with more strategic, operational and financing flexibility, and incorporating the new holding company in Delaware will allow us to take advantage of the flexibility, predictability and responsiveness that Delaware corporate law provides.

In the Reorganization, your existing shares of our common stock, par value $0.001 per share (the “Company Common Stock” or the “Common Stock”) and our preferred stock, par value $0.001 per share (the “Company Preferred Stock” or the “Preferred Stock”) (in each case, other than shares held by stockholders that properly exercise dissenters’ rights) will be converted automatically into shares of Newco common stock, par value $0.001 per share (the “Newco Common Stock”) and Newco preferred stock, par value $0.001 per share (the “Newco Preferred Stock”), respectively. You will own the same number of shares of Newco Common Stock as you now own of our Common Stock, you will own the same number of shares of Newco Preferred Stock as you now own of our Preferred Stock, and your shares will represent the same ownership percentage of Newco as you have in us, subject to any changes resulting from any exercise of dissenters’ rights and the proposed reverse stock split as further described in this proxy statement/prospectus. In addition, the Reorganization is intended to be tax-free for our stockholders. Your rights as a stockholder of Newco will be substantially the same as your rights as a stockholder of the Company, subject to certain differences described herein.

We expect the shares of Newco Common Stock to trade under the ticker symbol “[•]” on the OTCQB tier of the OTC Markets Group, Inc. (the “OTC” or the “OTC Markets”). The ticker symbol will be different than that currently used for the trading of Company Common Stock on the OTCQB tier of the OTC Markets, “UNRV.” On October 9, 2023, the last trading day before the announcement of the Reorganization Proposal, the closing price per share of our Common Stock was $0.0216. On [•], 2023, the most recent trading day for which prices were available, the closing price per share of our Common Stock on the OTC Markets’ OTCQB tier was $[•].

In order to implement the Reorganization Proposal, we need our stockholders to approve and adopt the related Agreement and Plan of Merger, dated as of October 9, 2023 (the “Reorganization Agreement”). Our Board of Directors (the “Board” or the “Board of Directors”) has carefully considered (a) the Reorganization Agreement, which provides for the merger of a subsidiary of Newco called Blum Merger Sub, Inc. with and into the Company with the Company surviving the merger as a wholly owned subsidiary of Newco, and (b) the related transactions described in this proxy statement/prospectus, and the Board believes that they are advisable, fair to, and in the best interest of our stockholders.

Our Board of Directors recommends that you vote “FOR” the Reorganization Proposal.

Because adoption of the Reorganization Proposal requires the affirmative vote of at least a majority of the voting power of stockholders entitled to vote on the proposal, your vote is important, no matter how many or how few shares you may own. Whether or not you plan to attend the Annual Meeting, please consider voting prior to the Annual Meeting at https://www.westcoaststocktransfer.com/proxy-unrv/, or by calling (619) 664-4780 or if you received a printed proxy card in the mail, by completing, signing, dating and returning the proxy card. Voting prior to the Annual Meeting does not deprive you of your right to attend and to vote your shares during the Annual Meeting.

In addition to voting on the Reorganization Proposal at the Annual Meeting, you will also be asked to consider the following matters:

The accompanying notice of meeting and proxy statement/prospectus provide specific information about the Annual Meeting and further explain the Reorganization Proposal and the other matters to be considered. Please read these materials carefully. In particular, you should consider the discussion of “Risk Factors” beginning on page 14 of the accompanying proxy statement/prospectus before voting on the Reorganization Proposal.

If you have any questions or need assistance voting your shares, please contact the Company’s proxy solicitor, Okapi Partners, LLC, by calling (844) 343-2643 (toll free).

Thank you for your continued support of and interest in our company.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under this proxy statement/prospectus or determined if this proxy statement/prospectus is accurate or adequate. Any representation to the contrary is a criminal offense.

This proxy statement/prospectus is dated [•], 2023 and is being first sent to the Company’s stockholders on or about [•], 2023.

UNRIVALED BRANDS, INC.

3242 S. Halladay St., Suite 202

Santa Ana, CA 92705

NOTICE OF ANNUAL STOCKHOLDERS’ MEETING

To Be Held on December 5, 2023

Notice is hereby given that the Annual Meeting of Stockholders of UNRIVALED BRANDS, INC., a Nevada corporation (the “Company,” “we,” “our,” or “us”), will be held at 9:30 a.m., Pacific Time, on December 5, 2023 (the “Annual Meeting”). The Annual Meeting will be a virtual meeting via live audiocast. You will not be able to attend the Annual Meeting in person.

The Annual Meeting is being held for the following purposes:

Only holders of Company Common Stock and Company Preferred Stock of record at the close of business on October 16, 2023 are entitled to notice of, and to participate and vote at, the Annual Meeting or any adjournment thereof. Stockholders of record may virtually attend the Annual Meeting via live audiocast by calling 877-407-9218 or +1 201-493-6735. The audiocast provides our stockholders rights and opportunities equivalent to an in-person meeting of stockholders.

WHETHER OR NOT YOU EXPECT TO ATTEND THE VIRTUAL ANNUAL MEETING, PLEASE READ THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS AND PROMPTLY VOTE YOUR PROXY VIA THE INTERNET AT HTTPS://WWW.WESTCOASTSTOCKTRANSFER.COM/PROXY-UNRV/, BY TELEPHONE BY CALLING (619) 664-4780 OR, IF YOU RECEIVED A PRINTED FORM OF PROXY IN THE MAIL, BY COMPLETING, DATING, SIGNING AND RETURNING THE PROXY CARD IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES AT THE ANNUAL MEETING. YOUR PROXY, GIVEN THROUGH THE RETURN OF THE PROXY CARD, MAY BE REVOKED PRIOR TO ITS EXERCISE BY FILING WITH OUR TRANSFER AGENT OR OUR CORPORATE SECRETARY PRIOR TO THE ANNUAL MEETING A WRITTEN NOTICE OF REVOCATION OR A DULY EXECUTED PROXY BEARING A LATER DATE, OR BY ATTENDING THE ANNUAL MEETING AND VOTING.

We encourage you to read the accompanying proxy statement/prospectus and its appendices, including all documents incorporated by reference into the accompanying proxy statement/prospectus, carefully and in their entirety. If you have any questions concerning the Reorganization, the Annual Meeting or the accompanying proxy statement/prospectus, would like additional copies of the accompanying proxy statement/prospectus or need help voting your shares of Company Common Stock or Company Preferred Stock, please contact the Company’s proxy solicitor, Okapi Partners, LLC, at (844) 343-2643 (toll free).

By Order of the Board of Directors

Robert Baca, Secretary and Chief Legal Officer

[•], 2023

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE ANNUAL MEETING TO BE HELD ON DECEMBER 5, 2023:

This notice and the accompanying proxy statement/prospectus, proxy card and our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 are available at https://www.westcoaststocktransfer.com/proxy-unrv/. Additionally, and in accordance with the rules of the Securities and Exchange Commission (the “SEC”), stockholders may access these materials at the website indicated in the Notice of Internet Availability of Proxy Materials that you received in connection with this notice and the accompanying proxy statement/prospectus. This information, as well as similar information relating to all of our future annual meetings, will also be available by calling Investor Relations at (678) 570-6791 or by emailing jassad@unrivaledbrands.com.

For the date, time and location of the Annual Meeting and the matters to be voted upon at the Annual Meeting, please see the “Notice of Annual Stockholders’ Meeting” above and the section of the accompanying proxy statement/prospectus titled “Information Concerning the Annual Meeting—Date, Time and Place” beginning on page 1. For the Board’s recommendation regarding those matters, please refer to the section of the accompanying proxy statement/prospectus titled “Proposal 1. Reorganization” beginning on page 34. For information on how to participate and vote at the Annual Meeting, please see the section of the accompanying proxy statement/prospectus titled “Information Concerning the Annual Meeting—How to Participate in and Vote at the Annual Meeting” beginning on page 1.

ADDITIONAL INFORMATION

Blum Holdings, Inc., referred to in the accompanying proxy statement/prospectus as “Newco,” has filed a registration statement on Form S-4 to register with the SEC the shares of Newco Common Stock and Newco Preferred Stock into which each outstanding share of Company Common Stock and Company Preferred Stock, respectively, will be converted automatically in the Reorganization described herein. The accompanying proxy statement/prospectus is part of that registration statement and constitutes a prospectus of Newco in addition to being a proxy statement of the Company for the Annual Meeting.

If you would like to request a paper copy of any proxy materials, please contact the Company’s Secretary in writing at 3242 S. Halladay St., Suite 202, Santa Ana, California CA 92705 or by telephone at (888) 909-5564, and we will promptly deliver a printed set of the proxy materials free of charge. Please ensure to request a paper copy of any documents by November 28, 2023, which is the date that is five (5) business days prior to the date of the Annual Meeting, in order to receive them before the Annual Meeting.

You should rely only on the information contained in the accompanying proxy statement/prospectus or that to which we have referred you. We have not authorized anyone to provide you with any additional information. The accompanying proxy statement/prospectus is dated as of the date listed on the cover page. You should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than such date, and neither the mailing of this proxy statement/prospectus to stockholders, nor the issuance of Newco securities in the Reorganization, shall create any implication to the contrary.

If you have any questions about the Annual Meeting or need additional assistance in voting your shares, please contact the Company’s proxy solicitor Okapi Partners, LLC, at (844) 343-2643 (toll free).

TABLE OF CONTENTS

PROXY STATEMENT/PROSPECTUS

For the Annual Meeting of Stockholders

To Be Held December 5, 2023

INTRODUCTION

The Board of Directors (referred to in this proxy statement/prospectus as the “Board” or the “Board of Directors”) of UNRIVALED BRANDS, INC., a Nevada corporation (sometimes referred to in this proxy statement/prospectus as the “Company,” “Unrivaled,” or as “we,” “us” and “our”), is soliciting your proxy for use at the Annual Meeting of Stockholders of the Company to be held at 9:30 a.m., Pacific Time, on December 5, 2023 (the “Annual Meeting”), and at any adjournment thereof. The Annual Meeting will be a virtual meeting via live audiocast. At such meeting, the stockholders will consider and vote upon the items set forth in the attached Notice of Annual Stockholders’ Meeting. These proxy materials will be available on the Internet at the following website: http://www.westcoaststocktransfer.com/proxy-unrv/.

INFORMATION CONCERNING THE ANNUAL MEETING

Date, Time and Place

The Annual Meeting will be held at 9:30 a.m., Pacific Time, on December 5, 2023. The Annual Meeting will be a virtual meeting via live audiocast. We anticipate that the Notice of Internet Availability of Proxy Materials (the “Notice of Internet Availability”) will be sent, and this proxy statement/prospectus and the form of proxy relating to our Annual Meeting will be made available, to our stockholders commencing on or about [•], 2023.

Purposes of the Annual Meeting

The purposes of the Annual Meeting are to:

Record Date; Attendance at the Annual Meeting

Attendance at the Annual Meeting is limited to holders of our Common Stock and the holders of our preferred stock, par value $0.001 per share (the “Preferred Stock” or the “Company Preferred Stock”) at the close of business on October 16, 2023, the record date for the Annual Meeting, or their legal proxy holders, and the Company’s officers and invited guests. You will not be able to attend the Annual Meeting in person at a physical location.  

Quorum; Voting Rights

Only stockholders of record of the Company as of the close of business on October 16, 2023, the record date for the Annual Meeting, will be entitled to vote at the Annual Meeting. At the close of business on the record date, there were [774,998,097] shares of Company Common Stock issued and outstanding and entitled to vote, [14,071,431] shares of the Company’s Series V Preferred Stock, par value $0.001 (the “Company Series V Preferred Stock”) issued and outstanding and entitled to vote, and no shares of the Company’s Series N Preferred Stock, par value $0.001 per share (the “Company Series N Preferred Stock”) issued and outstanding and entitled to vote. A list of registered stockholders eligible to vote may be examined during business hours at the office of the Company’s Secretary, 3242 S. Halladay St., Suite 202, Santa Ana, California 92705, during the ten (10) day period immediately prior to the Annual Meeting, and will also be available at the Annual Meeting.

Holders of Company Common Stock and Company Preferred Stock will vote together as a single class on each of the proposals to be considered and voted on at the Annual Meeting. Each share of Company Common Stock entitles the holder to one (1) vote in the determination of all matters to be brought before the Annual Meeting. Holders of Company Series V Preferred Stock vote on an as-converted basis times two (2). The holders of five percent (5%) or more of the total number of outstanding shares of Company Common Stock and Company Preferred Stock entitled to vote must be present, either virtually via the Internet or by proxy, to constitute the necessary quorum for any business to be transacted at the Annual Meeting. Shares that abstain from voting on any proposal and “broker non-votes” will be counted as shares that are present and entitled to vote for purposes of determining whether a quorum exists at the Annual Meeting. The inspector of election appointed for the Annual Meeting will determine whether a quorum is present.

Required Vote

The required vote for each of the proposals expected to be acted upon at the Annual Meeting is as follows:

Proposal 1 – Reorganization. The adoption of the Reorganization Proposal requires the affirmative vote of a majority of the voting power of stockholders entitled to vote on the proposal.

Proposal 2 – Reverse Stock Split. The proposal to effect a reverse stock split of our Common Stock requires the affirmative vote of a majority of the voting power of stockholders entitled to vote on the proposal.

Proposal 3 – Election of Directors. Directors are elected by a plurality of the votes cast at a meeting of stockholders by the holders of shares entitled to vote thereon at the Annual Meeting.

Proposal 4 – Advisory (non-binding) vote on executive officer compensation (“say-on-pay”). The advisory vote on executive officer compensation will be approved if a majority of the votes cast by the holders of shares entitled to vote at the Annual Meeting are voted in favor of the proposal.

Proposal 5 – Advisory (non-binding) vote on frequency of future say-on-pay votes. The advisory vote on the frequency of future say-on-pay votes provides a choice among three frequency periods (every one, two or three years). Such proposal will be approved if a majority of the votes cast by the holders of shares entitled to vote at the Annual Meeting are voted in favor of the proposal.

Proposal 6 – Ratification of the appointment of our Independent Registered Public Accounting Firm. The ratification of the appointment of Marcum as the Company’s auditors for 2023 requires the affirmative vote of a majority of the votes cast by the holders of shares entitled to vote on the proposal.

Proposal 7 – Adjournment. The proposal to approve the adjournment of the Annual Meeting requires the affirmative vote of a majority of the votes cast by the holders of shares entitled to vote on the proposal present virtually at the Annual Meeting or by proxy, voting together as a single class, whether or not a quorum exists.

How to Participate in and Vote at the Annual Meeting

Registered stockholders and duly appointed proxyholders may connect to the audiocast meeting by dialing one of the telephone numbers below where you can participate and vote during the Annual Meeting live audiocast:

Participant Dial-In Numbers: (877) 407-9218 or +1 (201) 493-6735

If you are a stockholder who owns shares through a broker and you intend to vote at the Annual Meeting, you must obtain a legal proxy from the bank, broker or other holder of record of your shares to be entitled to vote those shares virtually at the Annual Meeting.

You will not be able to attend the Annual Meeting physically. The audiocast provides our stockholders rights and opportunities equivalent to an in-person meeting of stockholders.

Even if you plan to attend the Annual Meeting, we recommend that you also vote by proxy as described below so that your vote will be counted if you later decide not to participate in the Annual Meeting.

How to Vote without Participating in the Annual Meeting

Your vote is important. If you hold your shares as a record holder, your shares can be voted at the Annual Meeting only if you are present virtually at the Annual Meeting or your shares are represented by a valid proxy.

Even if you plan to attend the Annual Meeting, we urge you to vote by proxy in advance. You may vote your shares by using one of the following three methods:

If you submit your vote by proxy, your “proxy,” whose name is listed on the proxy card, will vote your shares as you instruct on the proxy card. If you sign and return the proxy card but do not give instructions on how to vote your shares, your shares will be voted, as recommended by our Board. Our Board recommends voting “FOR” each of the proposals.

You can participate in the virtual Annual Meeting and vote during the Annual Meeting even if you have previously voted by submitting a proxy as described above. However, if your shares are held in the name of your broker, bank or another nominee, you must get a proxy from the broker, bank or other nominee. That is the only way we can be sure that the broker, bank or nominee has not already voted your shares.

If your shares of Company Common Stock are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the “beneficial owner” of shares held in “street name.” The organization holding your account is considered the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to instruct that organization on how to vote the shares held in your account. You should follow the instructions provided to you by your broker, bank or nominee to ensure that the votes related to the shares you beneficially own are properly represented and voted at the Annual Meeting.

Counting of Votes

If a proxy in the accompanying form is duly executed and returned, the shares represented by the proxy will be voted as directed. All properly executed proxies delivered pursuant to this solicitation, and not revoked, will be voted at the Annual Meeting in accordance with the directions given. If you sign and return your proxy card without giving specific voting instructions, your shares will be voted as follows:

The Board of Directors does not know of any other matters to be acted upon at the Annual Meeting. As to any other matter of business that may properly be brought before the Annual Meeting, the accompanying proxy also confers discretionary authority upon the persons named therein to vote the shares represented by such proxy in accordance with their best judgment.

Abstentions and Broker Non-Votes

Shares that abstain from voting on any proposal and “broker non-votes” will be counted as shares that are present and entitled to vote for purposes of determining whether a quorum exists at the Annual Meeting. For purposes of determining the outcome of any matter as to which a broker (or other nominee) has not received instructions, and for which it does not have discretionary voting authority, those shares will be treated as not present and not entitled to vote with respect to that matter (even though those shares are considered entitled to vote for purposes of determining whether a quorum exists and may be entitled to vote on other matters). For proposals that require a majority of voting power to pass, shares that abstain will be treated as voted “against” such proposal. A properly executed proxy marked “WITHHOLD” with respect to the election of one or more directors will not be voted with respect to the director or directors indicated, and will have no effect on the election of directors. With respect to the proposals that require a majority of votes cast to pass, a properly executed proxy marked “ABSTAIN,” although counted for purposes of determining whether there is a quorum, will not be voted. Accordingly, an abstention will have no effect on the outcome of the vote on a proposal that requires a majority of votes cast to pass because an abstention does not count as a vote cast. Under Nevada law, a broker non-vote will have no effect on the outcome of the matters presented for a stockholder vote. Stockholders have no right to cumulative voting as to any matter, including the election of directors.

Proxy Revocation

Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before it is voted at the Annual Meeting. Proxies may be revoked by:

Any written notice of revocation or subsequent proxy should be addressed to our transfer agent at:

West Coast Stock Transfer, Inc.

Attn: Proxy Department

21 N. Vulcan Ave. Suite 106,

Encinitas, CA 92024

If you hold your shares through a broker, bank or other nominee, you should follow the instructions of your broker, bank or nominee regarding revocation of proxies.

Solicitation of Proxies.

This solicitation is made on behalf of our Board of Directors. The Company has engaged Okapi Partners, LLC (“Okapi Partners”) to assist in the solicitation of proxies for the Annual Meeting and the Company estimates that it will pay Okapi Partners a fee of approximately $10,000. The Company has also agreed to reimburse Okapi Partners for reasonable out-of-pocket expenses and disbursements incurred in connection with the proxy solicitation and to indemnify Okapi Partners against certain losses, claims, damages, liabilities and expenses. All costs of preparing, assembling and distributing the proxy materials and the cost of solicitation will be paid by the Company. The Company may pay persons holding shares in their names or the names of their nominees for the benefit of others, such as brokerage firms, banks, depositories, and other fiduciaries, for costs incurred in forwarding soliciting materials to their beneficial owners. The Company may also retain other firms or individuals to assist with the solicitation of proxies. Copies of this proxy statement/prospectus will be made available beginning on [•], 2023.

Adjournment of Virtual Meeting

If a quorum is not present or represented, our bylaws permit the stockholders who are present at the Annual Meeting, either in person or by proxy and who are entitled to vote, to adjourn the Annual Meeting by a majority of votes cast.

Stockholders Should Not Send Certificates with Their Proxies

A letter of transmittal and instructions for the surrender of Company Common Stock and Company Preferred Stock certificates or book-entry shares in exchange for the shares of Newco Common Stock and Newco Preferred Stock, as applicable, will be mailed to the Company’s stockholders promptly after the completion of the Reorganization.

QUESTIONS AND ANSWERS

ABOUT THE HOLDING COMPANY REORGANIZATION

What is the Reorganization Proposal?

We are asking you to approve and adopt an Agreement and Plan of Merger, dated as of October 9, 2023 (the “Reorganization Agreement”) that would result in our reorganization into a Delaware holding company. Prior to entering into the Reorganization Agreement, Newco was incorporated in the State of Delaware as a wholly-owned subsidiary of the Company, which is a Nevada corporation. Merger Sub was incorporated in the State of Nevada as a wholly-owned subsidiary of Newco. Under the Reorganization Agreement, Merger Sub will merge with and into the Company, with the Company surviving the merger as a wholly-owned subsidiary of Newco (the “Reorganization”).

Upon completion of the Reorganization, Newco will, in effect, replace the Company as the publicly held corporation. Newco and its subsidiaries will conduct all of the operations we currently conduct. As a result of the Reorganization, the current stockholders of the Company will become stockholders of Newco with the same number, class and percentage of shares of capital stock of Newco as they held in the Company prior to the Reorganization, subject to any changes resulting from any exercise of dissenters’ rights and the proposed reverse stock split as further described in this proxy statement/prospectus.

To review the details of the proposed Reorganization in greater detail, see “Proposal 1. The Reorganization—Reorganization Procedure” starting on page 35 Further, a copy of the Reorganization Agreement, which sets forth the agreement and plan of merger and is the primary legal document that governs the Reorganization, is attached as Annex I to this proxy statement/prospectus. You are encouraged to read the Reorganization Agreement carefully.

Why are you undertaking the Reorganization?

We are forming a holding company in Delaware to:

To review the reasons for the Reorganization in greater detail, see “Proposal 1. The Reorganization—Reasons for the Reorganization; Recommendation of our Board of Directors” beginning on page 34.

What will happen to my stock as a result of the Reorganization?

Unless you properly exercise your dissenters’ rights, which will entitle you to obtain payment of the fair value of your shares pursuant to Nevada Revised Statutes Sections 92A.300 to 92A.500, your shares of Company Common Stock and Company Preferred Stock will automatically be converted into the same number of shares of Newco Common Stock, and the same number and series of shares of Newco Preferred Stock, respectively. As a result, you will become a stockholder of Newco and will own the same number and percentage of shares of Newco Common Stock and/or Newco Preferred Stock that you now own of Company Common Stock or Company Preferred Stock, respectively, subject to any changes resulting from any exercise of dissenters’ rights and the proposed reverse stock split as further described in this proxy statement/prospectus. We expect that the Newco Common Stock will be listed on the OTC Markets Group, Inc.’s (the “OTC” or the “OTC Markets”) OTCQB tier under the symbol “[•].”

How will being a Newco stockholder be different from being a Company stockholder?

After the Reorganization, you will own the same class, series, number and percentage of shares of Newco’s stock that you owned of the Company’s stock immediately prior to the Reorganization, subject to any changes resulting from any exercise of dissenters’ rights and the proposed reverse stock split as further described in this proxy statement/prospectus. You will own shares of a Delaware holding company that owns our operating businesses. In addition, as a stockholder of Newco, your rights will be governed by Delaware corporate law and the Certificate of Incorporation and Bylaws of the Delaware holding company. Your rights as a stockholder of Newco will be substantially the same as your rights as a stockholder of the Company, except as noted herein. For further information, see “Proposal 1. Reorganization—Comparative Rights of Holders of Newco’s Capital Stock and the Company’s Capital Stock” beginning on page 34.

Will the management or the business of the Company change as a result of the Reorganization?

No. The management and business of our Company will remain the same after the Reorganization.

What will the name of the public company be following the Reorganization?

The name of the public company following the Reorganization will be “Blum Holdings, Inc.”

Will the company’s CUSIP number change as a result of the Reorganization?

Yes. Following the Reorganization, the CUSIP number for the Newco Common Stock will be 09642F 101.

Will I have to turn in my stock certificates?

Yes. Prior to the effective time of the Reorganization, the Company will appoint an exchange agent for the Reorganization and to handle the exchange of shares of Company Common Stock and Company Preferred Stock for Newco Common Stock and Newco Preferred Stock, respectively.

At or prior to the effective time of the Reorganization, Newco will deposit or cause to be deposited with the exchange agent the number of shares of Newco Common Stock and Newco Preferred Stock to be issued in the Reorganization. Promptly following the closing of the Reorganization, the exchange agent will mail to each holder of record of Company Common Stock and Company Preferred Stock who is entitled to receive the Newco Common Stock and Newco Preferred Stock in the Reorganization, a letter of transmittal and instructions for use in effecting the surrender of the shares in exchange for the Newco Common Stock or Newco Preferred Stock issuable in respect thereof.

COMPANY STOCKHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES OR BOOK-ENTRY SHARES UNTIL THEY RECEIVE A LETTER OF TRANSMITTAL FROM THE EXCHANGE AGENT WITH INSTRUCTIONS FOR THE SURRENDER OF SUCH STOCK CERTIFICATES OR BOOK-ENTRY SHARES.

What are the material U.S. federal income tax consequences as a result of the Reorganization?

It is a condition to each party’s obligation to complete the Reorganization that each of the Company and Newco receive an opinion of Manatt, Phelps & Phillips, LLP to the effect that the Reorganization should qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”) or, alternatively, that the Reorganization should be treated as an exchange described in Section 351 of the Code. Accordingly, it is expected that U.S. holders (as defined in the section entitled “Proposal 1. Reorganization—Material U.S. Federal Income Tax Consequences”) of shares of the Company’s stock should not recognize any gain or loss for U.S. federal income tax purposes upon the receipt of Newco’s stock in exchange for the Company’s stock in the Reorganization.

Company stockholders should consult their own tax advisors as to the particular consequences of the Reorganization to them, including the applicability and effect of any U.S. federal, state and local tax laws, as well as foreign tax laws. For more information regarding the material U.S. federal income tax consequences of the Reorganization, see the section entitled  “Proposal 1. Reorganization—Material U.S. Federal Income Tax Consequences” beginning on page 34 of this proxy statement/prospectus.

How will the Reorganization be treated for accounting purposes?

For accounting purposes, the Reorganization into a holding company structure will be treated as a merger of entities under common control. The accounting treatment for such events is similar to the former “pooling of interests method.” Accordingly, the consolidated financial position and results of operations of the Company will be included in the consolidated financial statements of Newco on the same basis as currently presented.

What vote is required to approve the Reorganization Proposal?

Under Nevada law and as a condition to completion of the Reorganization, stockholders holding at least a majority of the voting power of shares of the Company’s capital stock outstanding and entitled to vote at the close of business on the record date, voting together as a single class, must vote FOR the Reorganization Proposal.

If the stockholders approve the Reorganization, when will it occur?

Unless the Board of Directors determines otherwise, we expect to complete the Reorganization during the fourth quarter of 2023, provided that our stockholders approve the Reorganization and all other conditions to completion of the Reorganization are satisfied.

Do I have dissenters’ (or appraisal) rights?

Yes. Stockholders who do not vote in favor of the Reorganization Proposal may elect to exercise statutory dissenters’ rights. See “Proposal 1. Reorganization—Dissenters’ Rights” beginning on page 34 and the text of the Nevada dissenters’ rights statute, Sections 92A.300-92A.500 of the Nevada Revised Statutes, which is reproduced in its entirety as Annex VI to this proxy statement/prospectus.

What is the authorized capital of the Company and Newco?

The Company’s Articles of Incorporation, as amended (referred to herein as the “Current Articles”) currently authorize the issuance of 990,000,000 shares of Common Stock and 50,000,000 shares of Preferred Stock, of which 25,000,000 shares have been designated as Company Series V Preferred Stock under the Second Amended and Restated Certificate of Designation of Rights, Privileges, Preferences and Restrictions of Series V Preferred Stock (the “Company Series V Certificate”), and 2,500,000 shares have been designated as Company Series N Preferred Stock under the Certificate of Designation of Rights, Privileges, Preferences and Restrictions of Series N Preferred Stock (as amended, the “Company Series N Certificate,” and together with the Company Series V Certificate, the “Company Certificates of Designation” or the “Certificates of Designation”). Newco’s Amended and Restated Certificate of Incorporation (the “Newco Certificate of Incorporation”), which will govern the rights of our stockholders after the Reorganization, will authorize the issuance of 990,000,000 shares of Newco Common Stock and 50,000,000 shares of  Newco Preferred Stock, of which 25,000,000 shares will be designated as Newco Series V Preferred Stock (the “Newco Series V Preferred Stock”) pursuant to a Certificate of Designation of Rights, Privileges, Preferences and Restrictions of Series V Preferred Stock (the “Newco Series V Certificate”) to be filed immediately prior to the effective time of the Reorganization, and 2,500,000 shares will be designated as Newco Series N Preferred Stock (the “Newco Series N Preferred Stock”) pursuant to a Certificate of Designation of Rights, Privileges, Preferences and Restrictions of Series N Preferred Stock (the “Newco Series N Certificate,” and together with the Newco Series V Certificate, the “Newco Certificates of Designation”), to be filed immediately prior to the effective time of the Reorganization. The Newco Series V Certificate and Newco Series N Certificate are included in the accompanying proxy statement/prospectus as Annex III and Annex IV, respectively. Upon completion of the Reorganization, the number of shares of Newco Common Stock, Newco Series V Preferred Stock and Newco Series N Preferred Stock that will be outstanding will be equal to the number of shares of the Company Common Stock, Company Series V Preferred Stock and Company Series N Preferred Stock outstanding immediately prior to the Reorganization, respectively, subject to any changes resulting from any exercise of dissenters’ rights and the proposed reverse stock split as further described in this proxy statement/prospectus. The form of Newco Certificate of Incorporation included in the accompanying proxy statement/prospectus as Annex II  and the post-Reorganization share numbers described herein do not reflect any changes needed if the Reverse Stock Split (as defined and described in Proposal 2) is approved and implemented.

Will a proxy solicitor be used?

Yes. The Company has engaged Okapi Partners, LLC, which we refer to herein as “Okapi Partners,” to assist in the solicitation of proxies for the Annual Meeting and the Company estimates that it will pay Okapi Partners a fee of approximately $10,000. The Company has also agreed to reimburse Okapi Partners for reasonable out-of-pocket expenses and disbursements incurred in connection with the proxy solicitation and to indemnify Okapi Partners against certain losses, claims, damages, liabilities and expenses. In addition to mailing proxy solicitation material, the Company’s directors, officers and employees may also solicit proxies in person, by telephone or by any other electronic means of communication deemed appropriate. No additional compensation will be paid to the Company’s directors, officers or employees for such services.

Who should I contact if I have other questions about the Reorganization or the Annual Meeting?

If you have more questions about the Reorganization or the Annual Meeting, you should contact the Company’s proxy solicitor, Okapi Partners, toll-free at (844) 343-2643. If your broker holds your shares, you should also call your broker for additional information.

RISK FACTORS

In considering whether to vote in favor of the Reorganization Proposal, you should consider all of the information we have included in this proxy statement/prospectus, including its Annexes and the financial statements included herein. In addition, you should pay particular attention to the risks described below.

Summary of Risk Factors

Risks Relating to the Reorganization

Risks Relating to the Reverse Stock Split

Risks Relating to Our Business, Financial Position and Industry

Risks Related to an Investment in Our Securities

Risks Relating to the Reorganization

Our Board of Directors may choose to defer or abandon the Reorganization.

Completion of the Reorganization may be deferred or abandoned, at any time, by action of our Board of Directors, whether before or after the Annual Meeting. While we currently expect the Reorganization to take place in the fourth quarter of 2023, assuming that the Reorganization Proposal is approved at the Annual Meeting, our Board of Directors may defer completion or may abandon the Reorganization because of any determination by our Board of Directors that the Reorganization would be inadvisable or not in the best interest of the Company or its stockholders.

We may not obtain the expected benefits of our Reorganization into a Delaware holding company.

We believe our reorganization into a Delaware holding company will provide us with benefits in the future, as described in “Proposal 1. The Reorganization—Reasons for the Reorganization; Recommendation of our Board of Directors” beginning on page 34. These expected benefits may not be obtained if market conditions or other circumstances prevent us from taking advantage of the strategic, business, and financing flexibility that it affords us. As a result, we may incur the costs of implementing the Reorganization Proposal without realizing the possible benefits.

As a holding company, Newco will depend in large part on funding from its operating subsidiaries.

After the completion of the Reorganization, Newco will be a Delaware holding company with no business operations of its own. Its only significant assets will be the outstanding capital stock of its subsidiaries, which will include the Company. As a result, it will rely on funds from the Company and any subsidiaries that it may form or acquire in the future to meet its obligations. If the Company needs to retain its funds to meet its financial obligations, that may limit Newco’s access to funds and Newco’s ability to pursue strategic objectives.

The market for Newco shares may differ from the market for the Company’s shares.

Although it is anticipated that the Newco Common Stock will be authorized for listing on the OTCBQ tier of the OTC Markets, the market prices, trading volume, and volatility of the Newco Common Stock could be different from those of the Company Common Stock.

The proposed Reorganization into a Delaware holding company may result in substantial direct and indirect costs whether or not completed.

The Reorganization may result in substantial direct costs. These costs and expenses are expected to consist primarily of attorneys’ fees, accountants’ fees, filing fees, and printing expenses and will be substantially incurred prior to the vote of our stockholders. The Reorganization may also result in certain indirect costs by diverting the attention of our management and employees from our business and by increasing our administrative costs and expenses. These administrative costs and expenses will include keeping separate records and in some cases making separate regulatory filings for Newco and each of its subsidiaries.

Anti-takeover provisions in the Newco Certificate of Incorporation and Newco’s Amended and Restated Bylaws (the “Newco Bylaws”) and under Delaware law may delay or prevent a third party acquisition of Newco, which could decrease the value of the Newco Common Stock.

The Newco Certificate of Incorporation and the Newco Bylaws, which will take effect upon the consummation of the Reorganization, as well as Delaware law, contain provisions that could make it more difficult for a third party to acquire it without the consent of the Newco Board of Directors. For example, the Newco Bylaws:

Although we believe these provisions will make a higher third-party bid more likely by requiring potential acquirers to negotiate with the Newco Board of Directors, these provisions will apply even if an initial offer may be considered beneficial by some stockholders and therefore could delay and/or prevent a deemed beneficial offer from being considered.

As a stockholder of a Delaware corporation, your rights after the Reorganization will be different from, and may be less favorable than, your current rights as a stockholder of a Nevada corporation.

After the completion of the Reorganization, you will become a stockholder of a public company incorporated in Delaware instead of Nevada and will be subject to the terms of the Newco Certificate of Incorporation, the Newco Certificates of Designation and the Newco Bylaws instead of the Current Articles, the Company Certificates of Designation and the Second Amended and Restated Bylaws of the Company (the “Company Bylaws”), which are different. As a result, your rights after the Reorganization will be different from, and may be less favorable than, your current rights as a stockholder of a Nevada corporation based on the Current Articles, the Company Certificates of Designation and the Company Bylaws. Your rights as a stockholder will be governed by Delaware corporate law as opposed to Nevada corporate law. Because they are separate bodies of law, Delaware corporate law will be different from Nevada corporate law. Although many of these differences will not have a significant impact on the rights of stockholders, some of these differences may be less favorable to stockholders.

These differences may limit the significance of your rights as a stockholder in these contexts. For a discussion of these and other differences between Delaware and Nevada corporate law, and certain provisions of the organizational documents of Newco and the Company, see “Proposal 1. Reorganization—Description of Newco’s Capital Stock” beginning on page 45, “Proposal 1. Reorganization—Description of the Company’s Capital Stock” beginning on page 34, and “Proposal 1. Reorganization—Comparative Rights of Holders of Newco’s Capital Stock and the Company’s Capital Stock” beginning on page 54.

The Newco Certificate of Incorporation will designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for substantially all disputes between Newco and its stockholders, to the fullest extent permitted by law, which could limit the ability of Newco’s stockholders to obtain a favorable judicial forum for disputes with Newco or its directors, officers, stockholders, employees or agents.

The Newco Certificate of Incorporation that will be in effect upon the Reorganization provides that, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for:

This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with Newco or any of Newco’s directors, officers, or other employees, which may discourage lawsuits and increase the costs with respect to such claims. With respect to the federal securities laws and the rules and regulations thereunder, this provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act, which provides for the exclusive jurisdiction of the federal courts with respect to such claims. This provision could apply, however, to a suit that falls within one or more of the categories enumerated in the exclusive forum provision and asserts claims under the Securities Act, because Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by such act or the rules and regulations thereunder. There is uncertainty as to whether a court would enforce the exclusive forum provision with respect to claims under the Securities Act, and our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. If a court were to find the exclusive forum provision contained in the Newco Certificate of Incorporation to be inapplicable or unenforceable in an action, Newco may incur additional costs associated with resolving such action in other jurisdictions, which could harm Newco’s business, results of operations and financial condition.

If stockholders exercise dissenters’ rights in connection with the Reorganization, paying dissenting stockholders for their shares may force the Company to spend a material amount of its available cash to pay the fair value of such stockholders’ stock or in settlement of such dissenters’ rights claims.

Under Nevada law, our stockholders may exercise dissenters’ rights in connection with the Reorganization. Please see “Proposal 1. Reorganization—Dissenters’ Rights” beginning at page 38, for a more detailed discussion. Upon the proper exercise of dissenters’ rights, the Company must deliver the amount it determines to be the fair value of such shares, plus accrued interest, along with financial statements.

Separately, in connection with the exercise of dissenters’ rights in respect of a significant number of the Company shares or if dissenting stockholders disagree with the Company’s calculation of the fair value of their shares, the costs of the Reorganization may materially increase and we may be forced to spend a material amount of our available cash in settlement of such dissenters’ rights claims.

Risks Relating to the Reverse Stock Split

A reverse stock split may decrease the liquidity of the shares of our Common Stock.

The liquidity of the shares of our Common Stock may be affected adversely by a reverse stock split given the reduced number of shares that will be outstanding following the reverse stock split, especially if the market price of our Common Stock does not increase as a result of the reverse stock split. In addition, a reverse stock split may increase the number of stockholders who own odd lots (less than 100 shares) of our Common Stock, creating the potential for such stockholders to experience an increase in the cost of selling their shares and greater difficulty effecting such sales.

Following a reverse stock split, the resulting market price of our Common Stock may not attract new investors, including institutional investors, and may not satisfy the investing requirements of those investors. Consequently, the trading liquidity of our Common Stock may not improve.

Although we believe that a higher market price of our Common Stock may help generate greater or broader investor interest, there can be no assurance that a reverse stock split will result in a share price that will attract new investors, including institutional investors. In addition, there can be no assurance that the market price of our Common Stock will satisfy the investing requirements of those investors. As a result, the trading liquidity of our Common Stock may not necessarily improve.

Risks Relating to Our Business, Financial Position and Industry

We have had significant changes to our operations, which may make it difficult for investors to predict future performance based on current operations.

We have had significant changes to our operations which changes the relevance of our historical performance upon which investors may base an evaluation of our potential future performance. In particular, we may not be able to sell cannabis products in a manner that enables us to be profitable and meet customer requirements, obtain the necessary permits and/or achieve certain milestones to develop our dispensary businesses, enhance our line of cannabis products, develop and maintain relationships with key manufacturers and strategic partners to extract value from our intellectual property, raise sufficient capital in the public and/or private markets, or respond effectively to competitive pressures. As a result, there can be no assurance that we will be able to develop or maintain consistent revenue sources, or that our operations will be profitable and/or generate positive cash flow.

Any forecasts we make about our operations may prove to be inaccurate. We must, among other things, determine appropriate risks, rewards, and level of investment in our product lines, respond to economic and market variables outside of our control, respond to competitive developments and continue to attract, retain, and motivate qualified employees. There can be no assurance that we will be successful in meeting these challenges and addressing such risks and the failure to do so could have a materially adverse effect on our business, results of operations, and financial condition. Our prospects must be considered in light of the risks, expenses, and difficulties frequently encountered by companies in the early stage of development. As a result of these risks, challenges, and uncertainties, the value of our stockholder’s investment could be significantly reduced or completely lost.

Our independent registered public accounting firm’s report for the year ended December 31, 2022 is qualified as to our ability to continue as a going concern.

Due to the uncertainty of our ability to meet our current operating and capital expenses, in our audited annual financial statements as of and for the year ended December 31, 2022, our independent registered public accounting firm included a note to our financial statements regarding concerns about our ability to continue as a going concern. Recurring losses from operations raise substantial doubt about our ability to continue as a going concern. The presence of the going concern note to our financial statements may have an adverse impact on the relationships we are developing and plan to develop with third parties as we continue the commercialization of our products and could make it challenging and difficult for us to raise additional financing, all of which could have a material adverse impact on our business and prospects and result in a significant or complete loss of your investment.

We have incurred significant losses in prior periods, and losses in the future could cause the quoted price of our Common Stock to decline or have a material adverse effect on our financial condition, our ability to pay our debts as they become due and on our cash flow.

We have incurred significant losses in prior periods. For the year ended December 31, 2022, we incurred a net loss of $188.93 million and, as of that date, we had an accumulated deficit of $440.05 million. For the year ended December 31, 2021, we incurred a net loss of $31.27 million and, as of that date, we had an accumulated deficit of $250.02 million. Any losses in the future could cause the quoted price of our Common Stock to decline or have a material adverse effect on our financial condition, our ability to pay our debts as they become due, and on our cash flow.

We will likely need additional capital to sustain our operations and will likely need to seek further financing, which we may not be able to obtain on acceptable terms, or at all. If we fail to raise additional capital, as needed, our ability to implement our business model and strategy could be compromised.

We have limited capital resources and operations. To date, our operations have been funded primarily from the proceeds of debt and equity financings. We expect to require substantial capital in the near future to fund our future operations. We may not be able to obtain additional financing on terms acceptable to us, or at all. In particular, because marijuana is illegal under federal law, we may have difficulty attracting investors.

Even if we obtain financing for our near-term operations, we expect that we will require additional capital thereafter. Our capital needs will depend on numerous factors including: (i) our profitability; (ii) the release of competitive products by our competition; (iii) the level of our investment in research and development; and (iv) the amount of our capital expenditures, including acquisitions. We cannot provide assurance that we will be able to obtain capital in the future to meet our needs.

As of December 31, 2022, we had $1.20 million of cash and cash equivalents. We maintain our cash and cash equivalents with high quality, accredited financial institutions. However, some of these accounts at times exceed federally insured limits, and, while we believe that we are not exposed to significant credit risk due to the financial strength of these depository institutions or investments, the failure or collapse of one or more of these depository institutions or default on these investments could materially adversely affect our ability to recover these assets and/or materially harm our financial condition.

If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership held by our existing stockholders will be reduced and our stockholders may experience significant dilution. In addition, new securities may contain rights, preferences, or privileges that are senior to those of our Common Stock. If we raise additional capital by incurring debt, this will result in increased interest expense. If we raise additional funds through the issuance of securities, market fluctuations in the price of our shares of Common Stock could limit our ability to obtain equity financing.

We cannot provide any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us. If we are unable to raise capital when needed, our business, financial condition, and results of operations would be materially adversely affected, and we could be forced to reduce or discontinue our operations.

Failure to execute our strategies could result in impairment of goodwill or other intangible assets, which may negatively impact profitability.

As of June 30, 2023, we had goodwill of $3.59 million and other intangible assets of $1.73 million, which represented 14% of our total assets. As of June 30, 2022, we have goodwill of $14.51 million and other intangible assets of $102.77 million, which represented 65% of our total assets. We evaluate goodwill for impairment on an annual basis or more frequently if impairment indicators are present based upon the fair value of each reporting unit. We assess the impairment of other intangible assets on an annual basis, or more frequently if impairment indicators are present, based upon the expected future cash flows of the respective assets. These valuations include management’s estimates of sales, profitability, cash flow generation, capital structure, cost of debt, interest rates, capital expenditures, and other assumptions. Significant negative industry or economic trends, disruptions to our business, inability to achieve sales projections or cost savings, inability to effectively integrate acquired businesses, unexpected significant changes or planned changes in use of the assets or in entity structure, and divestitures may adversely impact the assumptions used in the valuations. If the estimated fair value of our reporting units changes in future periods, we may be required to record an impairment charge related to goodwill or other intangible assets, which would reduce earnings in such period.

The Company has identified material weaknesses in its internal control over financial reporting and may identify additional material weaknesses in the future that may cause us to fail to meet the reporting obligations or result in material misstatements of our financial statements. If the Company fails to remediate any material weaknesses or if the Company fails to establish and maintain effective control over financial reporting, its ability to accurately and timely report its financial results could be adversely affected.

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. generally accepted accounting principles. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis. The Company has identified material weaknesses pertaining to its primary user access controls and review of transactions and account reconciliations. The Company plans to implement measures designed to improve our internal control over financial reporting to remediate such material weaknesses, which will not be considered remediated until the remediated controls operate for a sufficient period of time and management has concluded that these controls are operating effectively.

If management is unable to further implement and maintain effective internal control over financial reporting or disclosure controls and procedures, the Company’s ability to record, process and report financial information accurately, and to prepare financial statements within required time periods could be adversely affected, which could subject it to litigation or investigations requiring management resources and payment of legal and other expenses, negatively affect investor confidence in the financial statements and adversely impact the stock price. If the Company is unable to assert that its internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of the financial reports, the market price of the shares could be adversely affected and the Company could become subject to litigation or investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.

Furthermore, the Company cannot assure you that the measures it has taken to date, and actions it may take in the future, will be sufficient to remediate the control deficiencies that led to the material weakness in its internal control over financial reporting or that they will prevent or avoid potential future material weaknesses. The current controls and any new controls that management develops may become inadequate because of changes in conditions in the business. Further, weaknesses in the disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm the Company’s operating results or cause the Company to fail to meet its reporting obligations and may result in a restatement of the financial statements for prior periods.

We face intense competition and many of our competitors have greater resources that may enable them to compete more effectively.

The industries in which we operate in general are subject to intense and increasing competition from other companies as well as from the illicit market. Some of our competitors may have greater capital resources, facilities, and diversity of product lines, which may enable them to compete more effectively in this market. Our competitors may devote their resources to developing and marketing products that will directly compete with our product lines. Illicit market participants divert customers away through product offerings, price point, anonymity and convenience. Due to this competition, there is no assurance that we will not encounter difficulties in obtaining revenues and market share or in the positioning of our products. Additionally, as the number of available licenses increase in the markets in which we operate, additional competition and increased product availability may result in competitors undercutting our prices. From time to time, we may need to reduce our prices in response to competitive and customer pressures and to maintain our market share, which could materially reduce our revenues. There are no assurances that competition in our respective industries will not lead to reduced prices for our products. If we are unable to successfully compete with existing companies and new entrants to the market, this will have a negative impact on our business and financial condition.

Our business may be adversely affected by a pandemic, epidemic, or outbreak of an infectious disease, such as the ongoing coronavirus pandemic and the emergence of additional variants.

Our business could be adversely affected by health epidemics in regions where we have retail facilities or other business activities and could cause significant disruption in the operations of third parties upon whom we rely. For example, the ongoing coronavirus (COVID-19) pandemic continues to have unpredictable impacts on global societies, economies, financial markets, and business practices around the world. The extent to which the ongoing coronavirus pandemic may impact our business, results of operations, and future growth prospects will depend on a variety of factors and future developments, which are highly uncertain and cannot be predicted with confidence, including the duration, scope, and severity of the pandemic, particularly as virus variants continue to spread. The extent to which COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. The outbreak and any preventative or protective actions that governments or we may take in respect of any epidemic may result in a period of business disruption and reduced operations. There may be interruptions to our supply chain due to the inability of manufacturers to continue normal business operations and to ship products. In addition, a significant outbreak of an infectious disease could result in a widespread health crisis that could adversely affect the economies and financial markets worldwide, resulting in an economic downturn that could impact our business, financial condition and results of operations. We are currently working to enhance our business continuity plans to include measures to protect our employees in the event of infection in our corporate offices, or in response to potential mandatory quarantines.

If we fail to protect our intellectual property, our business could be adversely affected.

Our viability will depend, in part, on our ability to develop and maintain the proprietary aspects of our intellectual property to distinguish our products from our competitors’ products. We rely on copyrights, trademarks, trade secrets, and confidentiality provisions to establish and protect our intellectual property. We may not be able to enforce some of our intellectual property rights because cannabis is illegal under federal law.

Any infringement or misappropriation of our intellectual property could damage its value and limit our ability to compete. We may have to engage in litigation to protect the rights to our intellectual property, which could result in significant litigation costs and require a significant amount of our time. In addition, our ability to enforce and protect our intellectual property rights may be limited in certain countries outside the United States, which could make it easier for competitors to capture market position in such countries by utilizing technologies that are similar to those developed or licensed by us.

Competitors may also harm our sales by designing products that mirror our products or processes that do not infringe on our intellectual property rights. If we do not obtain sufficient protection for our intellectual property, or if we are unable to effectively enforce our intellectual property rights, our competitiveness could be impaired, which would limit our growth and future revenue.

We may also find it necessary to bring infringement or other actions against third parties to seek to protect our intellectual property rights. Litigation of this nature, even if successful, is often expensive and time-consuming to prosecute and there can be no assurance that we will have the financial or other resources to enforce our rights or be able to enforce our rights or prevent other parties from developing similar products or processes or designing around our intellectual property.

Although we believe that our products and processes do not and will not infringe or violate the intellectual property rights of others, it is possible such infringement or violation has occurred or may occur, which could have a material adverse effect on our business.

We are not aware of any infringement by us of any person’s or entity’s intellectual property rights. In the event that products we sell or processes we employ are deemed to infringe upon the patents or proprietary rights of others, we could be required to modify our products or processes or obtain a license for the manufacture and/or sale of such products or processes or cease selling such products or employing such processes. In such event, we may not be able to modify our products or secure a license in a timely manner, upon acceptable terms and conditions, or at all, and the failure to do any of the foregoing could have a material adverse effect upon our business.

We may not have the financial or other resources necessary to enforce or defend a patent infringement or proprietary rights violation action. If our products or processes are deemed to infringe or likely to infringe upon the patents or proprietary rights of others, we could be subject to injunctive relief and, under certain circumstances, become liable for damages, which could also have a material adverse effect on our business and our financial condition.

Our trade secrets may be difficult to protect.

Our success depends upon the skills, knowledge, and experience of our scientific and technical personnel, our consultants and advisors, as well as our licensors and contractors. Because we operate in several highly competitive industries, we rely in part on trade secrets to protect our proprietary technology and processes. However, trade secrets are difficult to protect. We enter into confidentiality or non-disclosure agreements with our corporate partners, employees, consultants, outside scientific collaborators, developers, and other advisors. These agreements generally require that the receiving party keep confidential and not disclose to third parties, confidential information developed by the receiving party or made known to the receiving party by us during the course of the receiving party’s relationship with us. These agreements also generally provide that inventions conceived by the receiving party in the course of rendering services to us will be our exclusive property, and we enter into assignment agreements to perfect our rights.

These confidentiality, inventions, and assignment agreements may be breached and may not effectively assign intellectual property rights to us. Our trade secrets could also be independently discovered by competitors, in which case we would not be able to prevent the use of such trade secrets by our competitors. The enforcement of a claim alleging that a party illegally obtained and was using our trade secrets could be difficult, expensive, and time consuming and the outcome would be unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets. The failure to obtain or maintain meaningful trade secret protection could adversely affect our competitive position.

Our business, financial condition, results of operations, and cash flow may in the future be negatively impacted by challenging global economic conditions, including negative impacts from continued inflation.

Future disruptions and volatility in global financial markets and declining consumer and business confidence could lead to decreased levels of consumer spending. These macroeconomic developments could negatively impact our business, which depends on the general economic environment and levels of consumer spending. As a result, we may not be able to maintain our existing customers or attract new customers, or we may be forced to reduce the price of our products. Additionally, continued upward rate of inflation could negatively impact any future profits that we might generate from our business. When the rate of inflation rises, the operational costs of running our Company also increases, such as labor costs, raw materials, and public utilities, thus affecting our ability to provide our products at competitive prices. An increase in the rate of inflation could force our customers to search for other products, causing us to lose business and revenue. We are unable to predict the likelihood of the occurrence, duration, or severity of such disruptions in the credit and financial markets and adverse global economic conditions. Any general or market-specific economic downturn could have a material adverse effect on our business, financial condition, results of operations, and cash flow.

Our future success depends on our key executive officers and our ability to attract, retain, and motivate qualified personnel.

Our future success largely depends upon the continued services of our executive officers and management team. If one or more of our executive officers are unable or unwilling to continue in their present positions, we may not be able to replace them readily, if at all. Additionally, we may incur additional expenses to recruit and retain new executive officers. If any of our executive officers joins a competitor or forms a competing company, we may lose some or all of our customers. Finally, we do not maintain “key person” life insurance on any of our executive officers. Because of these factors, the loss of the services of any of these key persons could adversely affect our business, financial condition, and results of operations, and thereby an investment in our stock.

Our continuing ability to attract and retain highly qualified personnel will also be critical to our success because we will need to hire and retain additional personnel as our business grows. There can be no assurance that we will be able to attract or retain highly qualified personnel. We face significant competition for skilled personnel in our industries. In particular, if the marijuana industry continues to grow, demand for personnel may become more competitive. This competition may make it more difficult and expensive to attract, hire, and retain qualified managers and employees. Because of these factors, we may not be able to effectively manage or grow our business, which could adversely affect our financial condition or business. As a result, the value of your investment could be significantly reduced or completely lost.

We may not be able to effectively manage our growth or improve our operational, financial, and management information systems, which would impair our results of operations.

In the near term, we intend to expand the scope of our operations activities significantly. If we are successful in executing our business plan, we will experience growth in our business that could place a significant strain on our business operations, finances, management, and other resources. The factors that may place strain on our resources include, but are not limited to, the following:

Additionally, our strategy envisions a period of rapid growth that may impose a significant burden on our administrative and operational resources. Our ability to effectively manage growth will require us to substantially expand the capabilities of our administrative and operational resources and to attract, train, manage, and retain qualified management and other personnel. There can be no assurance that we will be successful in recruiting and retaining new employees or retaining existing employees.

Our management may not be able to manage this growth effectively. Our failure to successfully manage growth could result in our sales not increasing commensurately with capital investments or otherwise materially adversely affecting our business, financial condition, or results of operations.

If we are unable to continually innovate and increase efficiencies, our ability to attract new customers may be adversely affected.

In the area of innovation, we must be able to develop new technologies and products that appeal to our customers. This depends, in part, on the technological and creative skills of our personnel and on our ability to protect our intellectual property rights. We may not be successful in the development, introduction, marketing, and sourcing of new technologies or innovations, that satisfy customer needs, achieve market acceptance, or generate satisfactory financial returns.

We depend on the popularity of consumer acceptance of our product lines.

Our ability to generate revenue and be successful in the implementation of our business plan is dependent on consumer acceptance and demand of our product lines. Acceptance of our products will depend on several factors, including availability, cost, ease of use, familiarity of use, convenience, effectiveness, safety, and reliability. If customers do not accept our products, or if we fail to meet customers’ needs and expectations adequately, our ability to continue generating revenues could be reduced.

A drop in the retail price of medical and adult use marijuana products may negatively impact our business.

The demand for our products depends in part on the price of commercially grown marijuana. Fluctuations in economic and market conditions that impact the prices of commercially grown marijuana, such as increases in the supply of such marijuana and the decrease in the price of products using commercially grown marijuana, could cause the demand for marijuana products to decline, which would have a negative impact on our business.

Federal regulation and enforcement may adversely affect the implementation of cannabis laws and regulations may negatively impact our revenues and profits.

Currently, the CSA prohibits the manufacture, distribution, dispensation, and possession of cannabis. Unless Congress amends the CSA to alter the Schedule I status of cannabis, for which there can be no assurance, federal authorities may enforce current federal law, and we may be deemed to be producing, cultivating, or dispensing marijuana in violation of federal law. Active enforcement of the current federal regulatory position on cannabis may therefore indirectly and adversely affect our revenues and profits. The risk of strict enforcement of the CSA in light of Congressional activity, judicial holdings, and stated federal policy remains uncertain.

We could be found to be violating laws related to cannabis.

Currently, the CSA prohibits the manufacture, distribution, dispensation, and possession of cannabis. Unless Congress amends the CSA to alter the Schedule I status of cannabis, for which there can be no assurance federal authorities may enforce current federal law, including the CSA in appropriate circumstances. The risk of strict enforcement of the CSA in light of Congressional activity, judicial holdings, and stated federal policy remains uncertain. Because we cultivate, produce, sell and distribute marijuana, there is a risk that we will be deemed to facilitate the selling or distribution of medical marijuana in violation of federal law. Active enforcement of the CSA on cannabis may, hence cause a direct and adverse effect on our subsidiaries’ businesses, or intended businesses, and on our revenue and prospective profits.

Variations in state and local regulation, and enforcement in states that have legalized cannabis, may restrict cannabis-related activities, which may negatively impact our revenues and prospective profits.

Individual state and local laws do not always conform to the federal standard or to other states’ laws. A number of states have decriminalized marijuana to varying degrees, other states have created exemptions specifically for medical cannabis, and several have both decriminalization and medical laws. As of December 2022, 21 states and the District of Columbia have legalized the recreational use of cannabis. Variations exist among states that have legalized, decriminalized, or created medical marijuana exemptions. For example, certain states have limits on the number of marijuana plants that can be homegrown. In most states, the cultivation of marijuana for personal use continues to be prohibited except for those states that allow small-scale cultivation by the individual in possession of medical marijuana needing care or that person’s caregiver. Active enforcement of state laws that prohibit personal cultivation of marijuana may indirectly and adversely affect our business and our revenue and profits.

If we are unable to obtain and maintain the permits and licenses required to operate our business in compliance with state and local regulations in California, we may experience negative effects on our business and results of operations.

Prospective customers may be deterred from doing business with a company with a significant nationwide online presence because of fears of federal or state enforcement of laws prohibiting possession and sale of medical or recreational marijuana.

Our website is visible in jurisdictions where medicinal and adult use of marijuana is not permitted and, as a result, we may be found to be violating the laws of those jurisdictions.

Marijuana remains illegal under federal law.

Marijuana is a Schedule I controlled substance and is illegal under federal law. Even in those states in which the use of marijuana has been legalized, its use remains a violation of federal law. Since federal law criminalizing the use of marijuana preempts state laws that legalize its use, strict enforcement of federal law regarding marijuana would likely result in our inability to proceed with our business plan, especially in respect of our marijuana cultivation, production and dispensaries. In addition, our assets, including real property, cash, equipment and other goods, could be subject to asset forfeiture because marijuana is still federally illegal.

We are not able to deduct some of our business expenses.

Section 280E of the Internal Revenue Code prohibits marijuana businesses from deducting their ordinary and necessary business expenses, forcing us to pay higher effective federal tax rates than similar companies in other industries. The effective tax rate on a marijuana business depends on how large its ratio of nondeductible expenses is to its total revenues. Therefore, our marijuana business may be less profitable than it could otherwise be.

We may not be able to attract or retain a majority of independent directors.

Our Board currently has one independent director. We may in the future desire to list our Common Stock on The New York Stock Exchange (“NYSE”) or The NASDAQ Stock Market (“NASDAQ”), both of which require that a majority of our Board be comprised of independent directors. We may have difficulty attracting and retaining independent directors because, among other things, we operate in the marijuana industry, and as a result we may be delayed or prevented from listing our Common Stock on the NYSE or NASDAQ.

We may not be able to successfully execute on our merger and acquisition strategy.

Our business plan depends in part on merging with or acquiring other businesses in the marijuana industry. The success of any acquisition will depend upon, among other things, our ability to integrate acquired personnel, operations, products and technologies into our organization effectively, to retain and motivate key personnel of acquired businesses, and to retain their customers. Any acquisition may result in diversion of management’s attention from other business concerns, and such acquisition may be dilutive to our financial results and/or result in impairment charges and write-offs. We might also spend time and money investigating and negotiating with potential acquisition or investment targets, but not complete the transaction.

Although we expect to realize strategic, operational and financial benefits as a result of our acquisitions, we cannot predict whether and to what extent such benefits will be achieved. There are significant challenges to integrating an acquired operation into our business.

Any future acquisition could involve other risks, including the assumption of unidentified liabilities for which we, as a successor owner, may be responsible. These transactions typically involve a number of risks and present financial and other challenges, including the existence of unknown disputes, liabilities, or contingencies and changes in the industry, location, or regulatory or political environment in which these investments are located, that our due diligence review may not adequately uncover and that may arise after entering into such arrangements.

Laws and regulations affecting the medical and adult use marijuana industry are constantly changing, which could detrimentally affect our cultivation, production and dispensary operations.

Local, state, and federal medical and adult use marijuana laws and regulations are broad in scope and subject to evolving interpretations, which could require us to incur substantial costs associated with compliance or alter certain aspects of our business plan. In addition, violations of these laws, or allegations of such violations, could disrupt certain aspects of our business plan and result in a material adverse effect on certain aspects of our planned operations. In addition, it is possible that regulations may be enacted in the future that will be directly applicable to certain aspects of our cultivation, production and dispensary businesses, and our business of selling cannabis products. 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.

We may not obtain the necessary permits and authorizations to operate our medical and adult use marijuana businesses.

We may not be able to obtain or maintain the necessary licenses, permits, authorizations, or accreditations for our cultivation, production and dispensary businesses, or may only be able to do so at great cost. In addition, we may not be able to comply fully with the wide variety of laws and regulations applicable to the medical and adult use marijuana industry. Failure to comply with or to obtain the necessary licenses, permits, authorizations, or accreditations could result in restrictions on our ability to operate the medical and adult use marijuana business, which could have a material adverse effect on our business.

If we incur substantial liability from litigation, complaints, or enforcement actions, our financial condition could suffer.

Our participation in the medical and adult use marijuana industry may lead to litigation, formal or informal complaints, enforcement actions, and inquiries by various federal, state, or local governmental authorities against us. Litigation, complaints, and enforcement actions could consume considerable amounts of financial and other corporate resources, which could have a negative impact on our sales, revenue, profitability, and growth prospects. We have not been, and are not currently, subject to any material litigation, complaint, or enforcement action regarding marijuana (or otherwise) brought by any federal, state, or local governmental authority.

We may have difficulty accessing the service of banks, which may make it difficult for us to operate.

Since the use of marijuana is illegal under federal law, many banks will not accept for deposit funds from businesses involved with the marijuana industry. Consequently, businesses involved in the marijuana industry often have difficulty finding a bank willing to accept their business. The inability to open or maintain bank accounts may make it difficult for us to operate our medical and adult use marijuana businesses. If any of our bank accounts are closed, we may have difficulty processing transactions in the ordinary course of business, including paying suppliers, employees and landlords, which could have a significant negative effect on our operations.

Litigation may adversely affect our business, financial condition, and results of operations.

From time to time in the normal course of our business operations, we may become subject to litigation that may result in liability material to our financial statements as a whole or may negatively affect our operating results if changes to our business operations are required. The cost to defend such litigation may be significant and may require a diversion of our resources. There also may be adverse publicity associated with litigation that could negatively affect customer perception of our business, regardless of whether the allegations are valid or whether we are ultimately found liable. Insurance may not be available at all or in sufficient amounts to cover any liabilities with respect to these or other matters. A judgment or other liability in excess of our insurance coverage for any claims could adversely affect our business and the results of our operations.

Our insurance coverage may not cover all significant risk exposures.

We will be exposed to liabilities that are unique to the products we provide. While we intend to maintain insurance for certain risks, the amount of our insurance coverage may not be adequate to cover all claims or liabilities, and we may be forced to bear substantial costs resulting from risks and uncertainties of our business. It is also not possible to obtain insurance to protect against all operational risks and liabilities. In particular, we have had difficulty obtaining insurance because we operate in the marijuana industry. The failure to obtain adequate insurance coverage on terms favorable to us, or at all, could have a material adverse effect on our business, financial condition, and results of operations. We do not have any business interruption insurance. Any business disruption or natural disaster could result in substantial costs and diversion of resources.

We may become subject to legal proceedings and liability if our products are contaminated.

We source some of our products from third-party suppliers. Although we verify that the products we receive from third-party suppliers are adequately tested, we may not identify all contamination in those products. Possible contaminates include pesticides, molds and fungus. If any of our products harm a customer, they may sue us in addition to the supplier, and we may not have adequate insurance to cover any such claims, which could result in a negative effect on our results of operations.

Some of our lines of business rely on our third-party service providers to host and deliver services and data, and any interruptions or delays in these hosted services, security or privacy breaches, or failures in data collection could expose us to liability and harm our business and reputation.

Some of our lines of business and services, including our dispensaries, rely on services hosted and controlled directly by third-party service providers. We do not have redundancy for all of our systems, many of our critical applications reside in only one of our data centers, and our disaster recovery planning may not account for all eventualities. If our business relationship with a third-party provider of hosting or software services is negatively affected, or if one of our service providers were to terminate its agreement with us, we might not be able to deliver access to our data, which could subject us to reputational harm and cause us to lose customers and future business, thereby reducing our revenue.

We hold large amounts of customer data, some of which is hosted in third-party facilities. A security incident at those facilities or ours may compromise the confidentiality, integrity or availability of customer data. Unauthorized access to customer data stored on our computers or networks may be obtained through break-ins, breaches of our secure network by an unauthorized party, employee theft or misuse or other misconduct. It is also possible that unauthorized access to customer data may be obtained through inadequate use of security controls by customers. Accounts created with weak passwords could allow cyber-attackers to gain access to customer data. If there were an inadvertent disclosure of customer information, or if a third party were to gain unauthorized access to the information we possess on behalf of our customers, our operations could be disrupted, our reputation could be damaged and we could be subject to claims or other liabilities. In addition, such perceived or actual unauthorized disclosure of the information we collect or breach of our security could damage our reputation, result in the loss of customers and harm our business.

Because of the large amount of data we collect and manage using our hosted solutions, it is possible that hardware or software failures or errors in our systems (or those of our third-party service providers) could result in data loss or corruption, cause the information that we collect to be incomplete or contain inaccuracies that our customers regard as significant or cause us to fail to meet committed service levels. Furthermore, our ability to collect and report data may be delayed or interrupted by a number of factors, including access to the Internet, the failure of our network or software systems or security breaches. In addition, computer viruses or other malware may harm our systems, causing us to lose data, and the transmission of computer viruses or other malware could expose us to litigation. We may also find, on occasion, that we cannot deliver data and reports in near real time because of a number of factors, including failures of our network or software. If we supply inaccurate information or experience interruptions in our ability to capture, store and supply information in near real time or at all, our reputation could be harmed and we could lose customers, or we could be found liable for damages or incur other losses.

Loss of access to our data could have a negative impact on our business and results of operations. In particular, the states in which we operate require that we maintain certain information about our customers and transactions. If we fail to maintain such information, we could be in violation of state laws.

Disruptions to cultivation, manufacturing and distribution of cannabis in California may negatively affect our access to products for sale at our dispensaries.

California laws and regulations require us to purchase products only from licensed vendors and through licensed distributors. To date, a relatively small number of licenses have been issued in California to cultivate, manufacture and distribute cannabis products. We have obtained a license to distribute products from our cultivation and manufacturing facilities to our dispensaries, however we currently do not cultivate and manufacture enough of our own products to satisfy customer demand. In addition, we carry products cultivated and manufactured by third parties. As a result, if an insufficient number of cultivators, manufacturers and distributors are able to obtain licenses our ability to purchase products and have them delivered to our dispensaries may be limited and may impact our sales.

High tax rates on cannabis and compliance costs in California may limit our customer base.

The States of California impose excise tax on products sold at licensed cannabis dispensaries. Local jurisdictions typically impose additional taxes on cannabis products. In addition, we incur significant costs complying with state and local laws and regulations. As a result, products sold at our dispensaries will likely cost more than similar products sold by unlicensed vendors and we may lose market share to those vendors.

Federal income tax reform could have unforeseen effects on our financial condition and results of operations.

The Tax Cuts and Jobs Act, or the Tax Act, was enacted on December 22, 2017, and contains many changes to U.S. federal tax laws. The Tax Act requires complex computations that were not previously provided for under U.S. tax law and significantly revised the U.S. tax code by, among other changes, lowering the corporate income tax rate from 35% to 21%, requiring a one-time transition tax on accumulated foreign earnings of certain foreign subsidiaries that were previously tax deferred and creating new taxes on certain foreign sourced earnings. As of December 31, 2022, the Company has completed its accounting for the tax effects of the 2017 Tax Act. However, additional guidance may be issued by the Internal Revenue Service, the Department of the Treasury, or other governing body that may significantly differ from our interpretation of the law, which may result in a material adverse effect on our business, cash flow, results of operations or financial conditions.

Inadequate funding for the DOJ and other government agencies could hinder their ability to perform normal business functions on which the operation of our business may rely, which could negatively impact our business.

In an effort to provide guidance to federal law enforcement, the DOJ has issued Guidance Regarding Marijuana Enforcement to all United States Attorneys in a memorandum from Deputy Attorney General David Ogden on October 19, 2009, in a memorandum from Deputy Attorney General James Cole on June 29, 2011, in a memorandum from Deputy Attorney General James Cole on August 29, 2013, and in a memorandum from Attorney General Jefferson Sessions on January 4, 2018. Each memorandum provides that the DOJ is committed to the enforcement of the CSA but, the DOJ is also committed to using its limited investigative and prosecutorial resources to address the most significant threats in the most effective, consistent, and rational way.

The DOJ has not historically devoted resources to prosecuting individuals whose conduct is limited to possession of small amounts of marijuana for use on private property but has relied on state and local law enforcement to address marijuana activity. In the event the DOJ reverses its stated policy and begins strict enforcement of the CSA in states that have laws legalizing medical marijuana and recreational marijuana in small amounts, there may be a direct and adverse impact to our business and our revenue and profits. Furthermore, H.R. 83, enacted by Congress on December 16, 2014, provides that none of the funds made available to the DOJ pursuant to the 2015 Consolidated and Further Continuing Appropriations Act may be used to prevent certain states, including California, from implementing their own laws that authorized the use, distribution, possession, or cultivation of medical marijuana. If a prolonged government shutdown occurs, it could enable the DOJ to enforce the CSA in states that have laws legalizing medical marijuana.

California’s Phase-In of Laboratory Testing Requirements could impact the availability of the products sold in our dispensaries.

Beginning July 1, 2018, cannabis goods must meet all statutory and regulatory requirements. A licensee can only sell cannabis goods that have been tested by a licensed testing laboratory and have passed all statutory and regulatory testing requirements. In order to be sold, cannabis goods harvested or manufactured prior to January 1, 2018, must be tested by a licensed testing laboratory and must comply with all testing requirements in section 5715 of the Bureau of Cannabis Control (“BCC”) regulations. Cannabis goods that do not meet all statutory and regulatory requirements must be destroyed in accordance with the rules pertaining to destruction.

There is uncertainty related to the regulation of vaporization products and certain other consumption accessories. Increased regulatory compliance burdens could have a material adverse impact on our business development efforts and our operations.

There is uncertainty regarding whether and in what circumstances federal, state, or local regulatory authorities will seek to develop and enforce regulations relative to vaporizer hardware and accessories that can be used to vaporize cannabis and/or tobacco. Further, it remains to be seen whether current or future regulations relating to tobacco vaporization products would also apply to cannabis vaporization products and related consumption accessories.

There has been increasing activity on the federal, state, and local levels with respect to scrutiny of vaporizer products. Federal, state, and local governmental bodies across the United States have indicated that vaporization products and certain other consumption accessories may become subject to new laws and regulations at the state and local levels. For example, in September 2019, the Administration announced a plan to ban the sale of most flavored e-cigarettes nationwide. At the state level, over 25 states have implemented statewide regulations that prohibit vaping in public places.

In January 2015, the California Department of Health declared electronic cigarettes and certain other vaporizer products a health threat that should be strictly regulated like tobacco products, and in September 2019, California’s governor issued an executive order on vaping, focused on enforcement and disclosure. Many states, provinces, and some cities have passed laws restricting the sale of electronic cigarettes and certain other tobacco vaporizer products. Some cities have also implemented more restrictive measures than their state counterparts, such as San Francisco, which in June 2018, approved a new ban on the sale of flavored tobacco products, including vaping liquids and menthol cigarettes. In August 2020, California prohibited the sale of most flavored tobacco products, including menthol cigarettes.

The application of any new laws or regulations that may be adopted in the future, at a federal, state, or local level, directly or indirectly implicating cannabis vaporization products or consumption accessories could limit our ability to sell such products, result in additional compliance expenses, and require us to change our labeling and methods of distribution, any of which could have a material adverse effect on our business, results of operations and financial condition.

The scientific community has not yet extensively studied the long-term health effects of the use of vaporizer products.

Cannabis vaporizers and related products were recently developed and therefore the scientific community has not had a sufficient period of time to study the long-term health effects of their use. If the scientific community were to determine conclusively that use of any or all of these products poses long-term health risks, market demand for these products and their use could materially decline. Such a determination could also lead to litigation and significant regulation. Loss of demand for our product, product liability claims, and increased regulation stemming from unfavorable scientific studies on these products could have a material adverse effect on our business, results of operations, and financial condition.

If product liability lawsuits are brought against us, we will incur substantial liabilities.

We face an inherent risk of product liability. For example, we could be sued if any product we sell allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties. Claims could also be asserted under state consumer protection acts.

Furthermore, vaporizer products and other similar consumption product manufacturers, suppliers, distributors, and sellers have recently become subject to litigation. While we have not been a party to any product liability litigation, several lawsuits have been brought against other manufacturers and sellers of smokeless products for injuries to health allegedly caused by use of smokeless products. We may be subject to similar claims in the future relating to vaporizer products that we sell. We may also be named as a defendant in product liability litigation against one of our suppliers by association, including in class action lawsuits. In addition, we may see increasing litigation over our vaporizer products or the regulation of our products as the regulatory regimes surrounding these products develop. If such lawsuits are filed against us in the future, we could incur substantial costs, including costs to defend the cases and possible damages awards.

If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit sales of our products. Even a successful defense of these hypothetical future cases would require significant financial and management resources. If we are unable to successfully defend these hypothetical future cases, we could face at least the following potential consequences:

In addition, while we continue to take what we believe are appropriate precautions, we may be unable to avoid significant liability if any product liability lawsuit is brought against us.

Unionization of employees could have a material adverse impact on our business.

Employees in our Blüm Oakland and Blüm San Leandro facilities are unionized. We could face an increased risk of work stoppages and higher labor costs wherever labor is organized. If additional employees at our dispensaries, production or cultivation facilities were to unionize, our relationship with our employees could be adversely affected. Accordingly, unionization of our employees could have a material adverse impact on our operating costs and financial condition and could force us to raise prices on our products or curtail operations.

Inadequate funding for state and local regulatory agencies and the effects of COVID-19 could hinder their ability to perform normal business functions on which the operation of our business may rely, which could negatively impact our business.

We operate in a highly regulated industry and rely on state and local regulatory agencies to issue licenses to operate our business and, in some cases, approve transfers of ownership interests in the event we intend to dispose of assets. Since the onset of the COVID-19 pandemic, many state and local regulatory agencies have been operating at reduced capacity which has resulted in delayed approvals of transfers of ownership interests.

Competition from synthetic production and technological advances could adversely impact our profitability.

The pharmaceutical industry may attempt to dominate the cannabis industry, and in particular, legal cannabis, through the development and distribution of synthetic products which emulate the effects and treatment of organic cannabis. If they are successful, the widespread popularity of such synthetic products could change the demand, volume and profitability of the cannabis industry. This could materially adversely affect the ability of the Company to secure long-term profitability and success through the sustainable and profitable operation of its business.

There are risks inherent in an agricultural business.

Medical and adult-use cannabis is an agricultural product. There are risks inherent in the cultivation business, such as insects, plant diseases and similar agricultural risks. Although the products are usually grown indoors or in green houses under climate-controlled conditions, there can be no assurance that natural elements will not have a material adverse effect on the production of the products and, consequentially, on the business, financial condition and operating results of the Company.

We may suffer from unfavorable publicity or consumer perception.

The legal cannabis industry in the U.S. is at an early stage of its development. Cannabis has been, and is expected to continue to be, a controlled substance. Consumer perceptions regarding legality, morality, consumption, safety, efficacy and quality of cannabis are mixed and evolving. Consumer perception can be significantly influenced by scientific research or findings, regulatory investigations, litigation, media attention and other publicity regarding the consumption of 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 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 cannabis and on the business, results of operations, financial condition and cash flows of the Company. Further, adverse publicity, reports or other media attention regarding cannabis in general, or associating the consumption of cannabis with negative effects or events, could have such a material adverse effect.

Risks Related to an Investment in Our Securities

We expect to experience volatility in the price of our Common Stock, which could negatively affect stockholders’ investments.

The trading price of our Common Stock may be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. The stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies with securities traded in those markets. Broad market and industry factors may seriously affect the market price of companies’ stock, including ours, regardless of actual operating performance. All of these factors could adversely affect our stockholders’ ability to sell their shares of Common Stock or, if they are able to sell their shares, to sell their shares at a price that they determine to be fair or favorable.

Our Common Stock may be categorized as “penny stock,” which may make it more difficult for investors to sell their shares of Common Stock due to suitability requirements.

Our Common Stock may be categorized as “penny stock.” The SEC has adopted Rule 15g-9, which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. The price of our Common Stock is significantly less than $5.00 per share and may therefore be considered a “penny stock.” This designation imposes additional sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors. The penny stock rules require a broker-dealer buying our securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities given the increased risks generally inherent in penny stocks. These rules may restrict the ability and/or willingness of brokers or dealers to buy or sell our Common Stock, either directly or on behalf of their clients, may discourage potential stockholders from purchasing our Common Stock, or may adversely affect the ability of stockholders to sell their shares.

FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our Common Stock, which could depress the price of our Common Stock.

In addition to the “penny stock” rules described above, FINRA has adopted rules that require a broker-dealer to have reasonable grounds for believing that the investment is suitable for that customer before recommending an investment to a customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives, and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. Thus, the FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our Common Stock, which may limit investors’ ability to buy and sell our shares of Common Stock, have an adverse effect on the market for our shares of Common Stock, and thereby depress our price per share of Common Stock.

Our voting control is concentrated.

Our Chief Executive Officer controls a significant amount of the voting power of our capital stock due to (i) his ownership of approximately 14% of the outstanding Common Stock, (ii) his ownership of approximately 25% of the Company’s outstanding Series V Preferred Stock, referred to herein as the “Company Series V Preferred Stock,” which vote in a number equal to two (2) times the number of shares of the Common Stock into which such shares of Company Series V Preferred Stock are then convertible, and (iii) the fact that he has voting power over an additional approximately 75% of the Company Series V Preferred Stock owned by others due to such other owners executing Voting Agreements which provide Mr. Carrillo with their voting rights with respect to the Company Series V Preferred Stock owned by them. As a result, Mr. Carrillo potentially has the ability to control the outcome of matters submitted to our stockholders for approval, including the election and removal of directors and any arrangement or sale of all or substantially all of our assets. Certain other of our executive officers own, in the aggregate, approximately 1% of the outstanding shares of Common Stock and approximately 8% of the outstanding shares of Company Series V Preferred Stock.

This concentrated control could delay, defer, or prevent a change of control, arrangement, or merger involving sale of all or substantially all of our assets that our other stockholders may support. Conversely, this concentrated control could allow Mr. Carrillo and certain of our other executive officers to consummate such a transaction our other stockholders do not support.

The elimination of monetary liability against our directors, officers, and employees under Nevada law and the existence of indemnification rights for our obligations to our directors, officers, and employees may result in substantial expenditures by us and may discourage lawsuits against our directors, officers, and employees.

Our Articles of Incorporation contain a provision permitting us to eliminate the personal liability of our directors to us and our stockholders for damages for the breach of a fiduciary duty as a director or officer to the extent provided by Nevada law. We may also have contractual indemnification obligations under any future employment agreements with our officers or agreements entered into with our directors. The foregoing indemnification obligations could result in us incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup. These provisions and the resulting costs may also discourage us from bringing a lawsuit against directors and officers for breaches of their fiduciary duties; and may similarly discourage the filing of derivative litigation by our stockholders against our directors and officers even though such actions, if successful, might otherwise benefit us and our stockholders.

We may issue additional shares of Company Common Stock or Company Preferred Stock in the future, which could cause significant dilution to all stockholders.

Our Current Articles authorize the issuance of up to 990,000,000 shares of Company Common Stock and 50,000,000 shares of Company Preferred Stock. As of October 2, 2023, we had 774,998,097 shares of Company Common Stock outstanding, 14,071,431 shares of Company Series V Preferred Stock outstanding, and no shares of Company Series N Preferred Stock outstanding. We may issue additional shares of Company Common Stock or Company Preferred Stock in the future in connection with a financing or an acquisition. Such issuances may not require the approval of our stockholders. In addition, certain of our outstanding rights to purchase additional shares of Company Common Stock or securities convertible into our Common Stock are subject to full-ratchet anti-dilution protection, which could result in the right to purchase significantly more shares of Company Common Stock being issued or a reduction in the purchase price for any such shares or both. Any issuance of additional shares of our Common Stock, or equity securities convertible into our Common Stock, including but not limited to, preferred stock, warrants, and options, will dilute the percentage ownership interest of all stockholders, may dilute the book value per share of our Common Stock, and may negatively impact the market price of our Common Stock.

Anti-takeover effects of certain provisions of Nevada state law hinder a potential takeover of us.

Nevada has a business combination law that prohibits certain business combinations between Nevada corporations and “interested stockholders” for three years after an “interested stockholder” first becomes an “interested stockholder,” unless the corporation’s board of directors approves the combination in advance. For purposes of Nevada law, an “interested stockholder” is any person who is (i) the beneficial owner, directly or indirectly, of 10% or more of the voting power of the outstanding voting shares of the corporation or (ii) an affiliate or associate of the corporation and at any time within the three previous years was the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the then outstanding shares of the corporation. The definition of the term “business combination” is sufficiently broad to cover virtually any kind of transaction that would allow a potential acquirer to use the corporation’s assets to finance the acquisition or otherwise to benefit its own interests rather than the interests of the corporation and its other stockholders.

The effect of Nevada’s business combination law is potentially to discourage parties interested in taking control of us from doing so if they cannot obtain the approval of our board of directors. Both of these provisions could limit the price investors would be willing to pay in the future for shares of our Common Stock.

Because we do not intend to pay any cash dividends on our Common Stock, our stockholders will not be able to receive a return on their shares unless they sell them.

We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our Common Stock in the foreseeable future. Declaring and paying future dividends, if any, will be determined by our board of directors, based upon earnings, financial condition, capital resources, capital requirements, restrictions in our Current Articles, contractual restrictions, and such other factors as our board of directors deems relevant. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them. There is no assurance that stockholders will be able to sell shares when desired.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements made in this proxy statement/prospectus include forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are indicated by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “estimates,” “will” or words of similar meaning, and include, without limitation, statements regarding the outlook of our business and expected financial performance. These forward-looking statements are subject to changes and uncertainties which are, in many instances, beyond our control and have been made based upon our assumptions, expectations and beliefs concerning future developments and their potential effect upon us. There can be no assurance that future developments will be in accordance with our expectations, or that the effect of future developments on us will be as anticipated. It is not a matter of corporate policy for us to make specific projections relating to future earnings, and we do not endorse any projections regarding future performance made by others. Additionally, we do not publicly update or revise forward-looking statements based on the outcome of various foreseeable or unforeseeable events. Forward-looking statements are not guarantees of future performance and involve various risks and uncertainties. There are certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements, including without limitation:

PROPOSAL 1.

REORGANIZATION

This section of the proxy statement/prospectus describes the Reorganization Proposal. Although we believe that the description in this section covers the material terms of the Reorganization Proposal, this summary may not contain all of the information that is important to you. The summary of the material provisions of the Reorganization Agreement provided below is qualified in its entirety by reference to the Reorganization Agreement, which we have attached as Annex I to this proxy statement/prospectus and which we incorporate by reference into this proxy statement/prospectus. You should carefully read the entire proxy statement/prospectus and the Reorganization Agreement for a more complete understanding of the Reorganization Proposal. Your approval of the Reorganization Proposal will constitute your approval and adoption of the Reorganization Agreement, the Reorganization, the Newco Certificate of Incorporation and the Newco Bylaws. The form of Newco Certificate of Incorporation included in the accompanying proxy statement/prospectus as Annex II and the post-Reorganization share numbers described herein do not reflect any changes needed to reflect the Reverse Stock Split (as defined and described in Proposal 2) if it is approved and implemented..

Reasons for the Reorganization; Recommendation of our Board of Directors

Our Board of Directors concluded that the Reorganization is advisable, determined that the terms of the Reorganization Agreement are fair to and in the best interest of the Company and its stockholders, and adopted and approved the Reorganization Agreement. During the course of its deliberations, our Board of Directors consulted with management and legal counsel and considered a number of positive factors, including the following:

In addition to the positive factors described above, our Board of Directors also considered the following potential negative factor associated with the Reorganization Proposal:

Reorganization Procedure

The Company currently owns all of the issued and outstanding shares of Newco Common Stock. Newco currently owns all of the issued and outstanding shares of common stock of Merger Sub, the subsidiary formed for purposes of completing the proposed Reorganization. Following the approval and adoption of the Reorganization Agreement by the Company’s stockholders and the satisfaction or waiver of the other conditions specified in the Reorganization Agreement (which are described below), Merger Sub will merge with and into the Company with the Company surviving the merger. As a result of this merger:

Treatment of Company Common Stock and Company Preferred Stock in the Reorganization

If the proposed amendment to the Company’s Current Articles to effect a reverse stock split of all issued and outstanding shares of Company Common Stock, at a ratio ranging from 1-for-70 to 1-for-100 as discussed in Proposal 2 (the “Reverse Stock Split”) is approved and the Board determines to proceed with the proposal, then the Reverse Stock Split will be effected immediately prior to the Reorganization. Then, except for shares held by stockholders that properly exercise dissenters’ rights, upon the effectiveness of the Reorganization, (a) each outstanding share of Company Common Stock will automatically be converted into one (1) share of Newco Common Stock, (b) each outstanding share of Company Series V Preferred Stock will automatically be converted into one (1) share of Newco Series V Preferred Stock, and (c) each outstanding share of Company Series N Preferred Stock will automatically be converted into one (1) share of Newco Series N Preferred Stock. Therefore, after the completion of the Reorganization, you will own the same number of shares of Newco Common Stock, Newco Series V Preferred Stock and/or Newco Series N Preferred Stock as you own of Company Common Stock, Company Series V Preferred Stock and/or Company Series N Preferred Stock, respectively, immediately prior to the Reorganization. Because stockholders may exercise dissenters’ rights and cash will be paid in lieu of any fractional interests resulting from the proposed Reverse Stock Split, the number of shares of Newco’s capital stock outstanding may be lower than the number of shares of the Company’s capital stock outstanding prior to the Reorganization, and as a result, you may own a slightly higher percentage of Newco’s capital stock than you own of the Company’s capital stock immediately prior to the Reorganization. A stockholder that properly exercises dissenters’ rights will be entitled to obtain payment of the fair value of his or her shares according to Nevada Revised Statutes 92A.300 to 92A.500.

Surrender of Stock Certificates Required

In the Reorganization, shares of Company Common Stock and Company Preferred Stock (other than shares held by stockholders that properly exercise dissenters’ rights as described below) will be converted automatically into shares of Newco Common Stock and Newco Preferred Stock, respectively. Your certificates of Company Common Stock and/or Company Preferred Stock, if any, will represent, after the Reorganization, an equal number of shares of Newco Common Stock and/or Newco Preferred Stock, respectively. The Company’s exchange agent will require you to exchange your stock certificates as a result of the Reorganization.  A letter of transmittal and instructions for the surrender of Company Common Stock and Company Preferred Stock certificates or book-entry shares in exchange for the shares of Newco Common Stock and Newco Preferred Stock, as applicable, will be mailed to the Company’s stockholders promptly after the completion of the Reorganization. If your shares are held in book-entry form (i.e., uncertificated), a book entry will be made in the stockholder records of Newco to evidence the issuance to you of the number of shares of Newco Common Stock and/or Newco Preferred Stock into which your shares of Company Common Stock and/or Company Preferred Stock have been converted, respectively.

Treatment of Equity Incentive Plans and Outstanding Awards in the Reorganization

Pursuant to the terms of the Reorganization Agreement, the Company will assign to Newco, and Newco will assume and agree to perform, all obligations of the Company pursuant to (a) the Terra Tech Corp. 2016 Equity Incentive Plan, which is referred to as the “2016 Plan,” and each outstanding award granted thereunder, (b) the Terra Tech Corp. Amended and Restated 2018 Equity Incentive Plan, as amended, which is referred to as the “2018 Plan,” and each outstanding award granted thereunder, and (c) the UMBRLA, Inc. 2019 Equity Incentive Plan, as amended, which is referred to as the “UMBRLA Plan,” and each outstanding award granted thereunder (which such UMBRLA Plan was previously assumed by the Company pursuant to a merger transaction with UMBRLA, Inc. in 2021). Accordingly, Newco will assume (i) all unexercised and unexpired options to purchase Company Common Stock that are outstanding under the 2016 Plan at the time of the Reorganization and the remaining unallocated reserve of Company Common Stock issuable under the 2016 Plan, (ii) all unexercised and unexpired options to purchase Company Common Stock that are outstanding under the 2018 Plan at the time of the Reorganization and the remaining unallocated reserve of Company Common Stock issuable under the 2018 Plan, and (iii) all unexercised and unexpired options to purchase Company Common Stock that are outstanding under the UMBRLA Plan at the time of the Reorganization and the remaining unallocated reserve of Company Common Stock issuable under the UMBRLA Plan, (in each case, subject to changes needed to reflect the Reverse Stock Split, to the extent it is approved and implemented).

As of October 2, 2023, there are (i) 248,888 unexercised and unexpired options to purchase Company Common Stock outstanding under the 2016 Plan, (ii) 5,342,857 unexercised and unexpired options to purchase Company Common Stock under the 2018 Plan, and (iii) 11,999,150 unexercised and unexpired options to purchase Company Common Stock outstanding under the UMBRLA Plan. In addition, (x) the maximum number of shares that may be issued under the 2016 Plan is 2,000,000 shares, (y) the maximum number of shares that may be issued under the 2018 Plan is 43,980,000 shares plus the number of shares, not to exceed 2,000,000, that may become available under the 2016 Plan after termination of awards thereunder, subject to adjustment in accordance with the terms of the 2018 Plan, and (z) the maximum number of shares that may be issued under the UMBRLA Plan is 55,000,000 shares. Therefore, as of October 2, 2023, (A) since there are awards for 244,888 shares outstanding under the 2016 Plan, there are 1,751,112 shares reserved for issuance pursuant to future awards under the 2016 Plan, (B) since there are awards for 5,342,857 shares outstanding under the 2018 Plan, there are 36,637,143 shares reserved for issuance pursuant to future awards under the 2018 Plan, and (C) since there are awards for 11,999,150 shares outstanding under the UMBRLA Plan, there are 43,000,850 shares reserved for issuance pursuant to future awards under the UMBRLA Plan. Upon completion of the Reorganization, the reserve of Company Common Stock under the 2016 Plan, the 2018 Plan and the UMBRLA Plan, whether allocated to outstanding equity awards under the 2016 Plan, the 2018 Plan or the UMBRLA Plan, respectively, or unallocated at the time will automatically be converted on a one-share-for-one-share basis into shares of Newco Common Stock, and the terms and conditions that are in effect immediately prior to the Reorganization (subject to changes needed to reflect the Reverse Stock Split, if it is approved and implemented) under each outstanding equity award assumed by Newco will continue in full force and effect after the Reorganization, including, without limitation, the vesting schedule and applicable issuance dates, the per share exercise price, the expiration date and other applicable termination provisions, except that the shares of common stock issuable under each such award will be shares of Newco Common Stock.

Issuances of Newco Common Stock under the Incentive Plans

The adoption by the Company’s stockholders of the Reorganization Agreement will also constitute approval of the assumption by Newco of the Incentive Plans and, where appropriate, the future issuance of shares of Newco Common Stock in lieu of shares of Company Common Stock under the Incentive Plans in connection with the Reorganization without further stockholder action.

Treatment of Outstanding Warrants and Convertible Notes in the Reorganization

As of October 2, 2023, the Company had outstanding Company Warrants to purchase 146,243,471 shares of Company Common Stock. Pursuant to the terms of the Reorganization Agreement, upon completion of the Reorganization, each Company Warrant will automatically convert into a warrant of Newco, or a “Newco Warrant,” exercisable for the same number of shares of Newco Common Stock as the warrant holder would have been entitled to receive had the warrant holder exercised the Company Warrant immediately prior to the Reorganization. Immediately following the Reorganization, the Newco Warrants will become exercisable for an aggregate of 146,243,471 shares of Newco Common Stock, and will be subject to the same exercise price and other terms and conditions as applied immediately prior to the Reorganization (subject to adjustment in connection with the Reverse Stock Split if it is approved and implemented).

As of October 2, 2023, the Company had outstanding Company Notes convertible into 23,542,297 shares of Company Common Stock. Pursuant to the terms of the Reorganization Agreement, upon completion of the Reorganization, each Company Note will automatically convert into a convertible promissory note of Newco, or a “Newco Note,” convertible into the same number of shares of Newco Common Stock as the noteholder would have been entitled to receive had the Company Note converted into shares of Company Common Stock immediately prior to the Reorganization. Immediately following the Reorganization, the Newco Notes will be convertible into an aggregate of 23,542,297 shares of Newco Common Stock, and will be subject to the same terms and conditions as applied immediately prior to the Reorganization (subject to adjustment in connection with the Reverse Stock Split if it is approved and implemented).

Conditions to Completion of the Reorganization

We will complete the Reorganization only if each of the following conditions is satisfied or waived by the parties to the Reorganization:

Effectiveness of Reorganization

The Reorganization will become effective on the date we file the Articles of Merger (the “Articles of Merger”) with the Secretary of State of the State of Nevada, or a later date that we specify therein. We will file the Articles of Merger when the conditions to the Reorganization described above have been satisfied or waived. We expect that the Reorganization will be effective in the fourth quarter of 2023.

Termination of Reorganization Agreement

The Reorganization Agreement may be terminated at any time prior to the completion of the Reorganization (even after adoption by our stockholders) by action of our Board of Directors if it determines that, for any reason, the completion of the transactions provided for therein would be inadvisable or not in the best interest of the Company or its stockholders.

Amendment of Reorganization Agreement

The Reorganization Agreement may, to the extent permitted by the Nevada Revised Statutes, be supplemented, amended, or modified at any time prior to the completion of the Reorganization (even after adoption by our stockholders) by the mutual consent of the parties thereto.

Dissenters’ Rights

Holders of shares of the Company’s stock who do not vote in favor of the Reorganization Proposal, who hold their shares through the effective time of the merger and who follow the procedures set forth in Sections 92A.300 to 92A.500 inclusive, of the Nevada Revised Statutes, which we refer to as the “Dissenters’ Rights Provisions,” will be entitled to dissent from the Reorganization and demand payment of the fair value of their shares. The “fair value” of the shares as used in the Dissenters’ Rights Provisions is the value of the shares immediately before the effectuation of the proposed merger, excluding appreciation or depreciation in anticipation of the merger unless exclusion would be inequitable, using customary and current valuation concepts and techniques generally employed for similar businesses in the context of a merger, and without discounting for lack of marketability or minority status.

If you elect to dissent, you must deliver to the Company a written notice of dissent stating that you intend to demand payment for your shares if the merger is consummated, and must refrain from voting on the Reorganization Proposal. This notice must be delivered to the Company before the vote on the Reorganization Proposal at the Annual Meeting. If you fail to comply with these requirements, you will not be entitled to dissenters’ rights in connection with the Reorganization.

Within ten (10) days after the effective time of the Reorganization, the Company will give written notice of the effective date of the merger by certified mail to each of the Company’s stockholders who properly delivered a written notice of dissent. The Company’s notice will also state where demand for payment must be sent and where and when share certificates must be deposited, among other information. Within the time period set forth in the notice, which may not be less than thirty (30) days nor more than sixty (60) days following the date notice is delivered, the dissenting stockholder must make a written demand on the Company for payment of the fair value of his or her shares and deposit his or her share certificates in accordance with the notice.

Within thirty (30) days after the receipt of the dissenters’ demand for payment, the Company will pay each dissenter who complied with the required procedures the amount it estimates to be the fair value of the dissenters’ shares, plus accrued interest. Additionally, the payment must be accompanied by a balance sheet as of the end of a fiscal year ending not more than sixteen (16) months before the date of payment, a statement of income for that year, a statement of changes in the stockholders equity for that year and the latest available interim financial statements, if any, a statement as to how fair value was calculated, a statement as to how interest was calculated, and a statement of the dissenters’ right to demand payment of fair value under Nevada law.

Following receipt of payment for the shares, a dissenting stockholder, within thirty (30) days, may send the Company notice containing such stockholder’s own estimate of fair value and accrued interest, and demand payment for that amount less the amount received pursuant to the Company’s payment of fair value to such stockholder. This right is waived if the stockholder does not make written demand within thirty (30) days of receiving the Company’s payment or offer of payment for the stockholders’ shares and the stockholder will only be entitled to the payment made or offered.

If a demand for payment remains unsettled, the Company will petition the court to determine fair value and accrued interest. If the Company fails to commence an action within sixty (60) days following the receipt of the stockholder’s demand, the Company will pay to the stockholder the amount demanded by the stockholder in the stockholder’s notice containing the stockholder’s estimate of fair value and accrued interest.

All dissenting holders, whether residents of Nevada or not, must be made parties to the action and the court will render judgment for the fair value of their shares. Each party must be served with the petition. The judgment shall include payment for the amount, if any, by which the court finds the fair value of such shares, plus interest, exceeds the amount already paid. The costs and expenses of bringing the action will be determined by the court. If the court finds that the demand of any dissenting stockholder for payment was arbitrary, vexatious or otherwise not in good faith, the court may assess costs, including reasonable fees of counsel and experts, against such stockholder. In addition, reasonable fees and expenses of counsel and experts may be assessed against the Company if the court finds that it did not substantially comply with the requirements of the Dissenters’ Rights Provisions or that it acted arbitrarily, vexatiously, or not in good faith with respect to the rights granted to dissenters under Nevada law.

The foregoing discussion is not a complete statement of the law pertaining to dissenters’ rights under the Dissenters’ Rights Provisions and is qualified in its entirety by the full text of the Dissenters’ Rights Provisions, which is attached to this proxy statement/prospectus as Annex VI. You are encouraged to read Annex VI carefully. All references in the Dissenters’ Rights Provisions and in this summary to a “stockholder” are to the record holder of the shares of Company Common Stock as to which dissenters’ rights are asserted. A person having a beneficial interest in shares of Company Common Stock held of record in the name of another person, such as a broker, fiduciary, depositary or other nominee, must act promptly to cause the record holder to follow the steps summarized above properly and in a timely manner to perfect dissenters’ rights.

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

The following is a discussion of material U.S. federal income tax consequences of the Reorganization. This discussion is based on the Code, U.S. Treasury Regulations promulgated thereunder, rulings and other administrative pronouncements issued by the Internal Revenue Service (“IRS”), and judicial decisions, in each case as in effect and available on the date of this proxy statement/prospectus and all of which are subject to differing interpretations and may change at any time, possibly with retroactive effect. Any such change could affect the accuracy of the statements and conclusions set forth in this proxy statement/prospectus.

This discussion applies only to U.S. holders (as defined below) of shares of the Company’s capital stock who hold such shares as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion is based upon the assumption that the Reorganization will be completed in accordance with the Reorganization Agreement and as described in this proxy statement/prospectus. This discussion does not address all aspects of U.S. federal income taxation that may be relevant to particular U.S. holders of the Company’s capital stock in light of their particular circumstances nor does it address tax considerations applicable to holders that are or may be subject to special treatment under U.S. federal income tax law (such as, for example, insurance companies, tax-exempt organizations, financial institutions, S corporations or other pass-through entities, regulated investment companies, real estate investment trusts, certain former U.S. citizens or long-term residents of the United States, broker-dealers, traders in securities who elect a mark-to-market method of accounting, holders who directly, indirectly or constructively own five percent (5%) or more (by vote or value) of the Company’s capital stock, holders who hold their stock as part of a “hedge,” “straddle,” “conversion,” “synthetic security,” “integrated investment” or “constructive sale transaction,” holders who acquired capital stock of the Company upon the exercise of employee stock options or otherwise as compensation, or U.S. holders whose functional currency is not the U.S. dollar). This discussion also does not address any tax consequences arising under the alternative minimum tax or the Medicare tax on net investment. In addition, no information is provided with respect to any tax considerations under state, local or foreign laws or U.S. federal laws other than those pertaining to the U.S. federal income tax (such as the estate tax).

If a partnership (or any other entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds shares of the Company’s stock, the tax treatment of a partner in such partnership will generally depend upon the status of the partner, the activities of the partnership and certain determinations made at the partnership level. Company stockholders that are partnerships and partners in such partnerships should consult their own tax advisors as to the tax consequences of the Reorganization.

For purposes of this discussion, a “U.S. holder” is a beneficial owner of Company Common Stock that is, for U.S. federal income tax purposes:

THE FOLLOWING DISCUSSION IS A SUMMARY OF MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION UNDER CURRENT LAW AND IS FOR GENERAL INFORMATION ONLY.  MOREOVER, THE DISCUSSION DOES NOT ADDRESS ANY NON-INCOME, NON-U.S., STATE OR LOCAL TAX CONSEQUENCES OR TAX REPORTING REQUIREMENTS. ACCORDINGLY, ALL COMPANY STOCKHOLDERS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF THE REORGANIZATION TO THEIR PARTICULAR SITUATION, INCLUDING THE APPLICATION AND EFFECT OF U.S. FEDERAL, STATE, LOCAL, NON-U.S. AND OTHER TAX LAWS.

It is a condition to each party’s obligation to complete the Reorganization that the Company and Newco receive an opinion of Manatt, Phelps & Phillips, LLP to the effect that the merger should qualify as a “reorganization” within the meaning of Section 368(a) of the Code or, alternatively, that the Reorganization should be treated as an exchange described in Section 351 of the Code.

This opinion of counsel will be based upon and rely on, among other things, various facts and assumptions, as well as certain representations, statements and undertakings of Newco and the Company. If any of these representations, statements or undertakings is, or becomes, inaccurate or incomplete, or if any of the representations or covenants contained in any of the transaction-related agreements and documents or in any documents relating to the opinions of counsel are inaccurate or not complied with by Newco or Company, such opinion of counsel may be invalid and the conclusions reached therein could be jeopardized.

An opinion of counsel represents the judgment of counsel and is not binding on the IRS or any court and the IRS or a court may disagree with the conclusions in the opinions of counsel. Further, Newco and the Company have not and do not intend to seek any ruling from the IRS regarding the qualification of the Reorganization as a “reorganization” within the meaning of Section 368(a) of the Code, or an exchange described in Section 351 of the Code. Accordingly, notwithstanding receipt by Newco and the Company of the opinion of counsel, there can be no assurance that the IRS will not assert that the Reorganization fails to qualify as a “reorganization” within the meaning of Section 368(a) or an exchange described in Section 351 of the Code, or that a court would not sustain such a challenge.

Reorganization or Section 351 Treatment

Provided the Reorganization qualifies as a “reorganization” within the meaning of Section 368(a) of the Code and/or an exchange described in Section 351 of the Code, the material U.S. federal income tax consequences of the Reorganization to U.S. holders will be as follows:

Exchange of Shares of the Company’s Stock for Shares of Newco’s Stock

U.S. holders who exchange their shares of the Company’s stock for shares of Newco’s stock should not recognize any gain or loss for U.S. federal income tax purposes. Each U.S. holder’s aggregate tax basis in the shares of Newco’s stock received in the Reorganization should equal such U.S. holder’s aggregate adjusted tax basis in the shares of Company’s stock exchanged therefor. The holding period of the shares of Newco’s stock received by a U.S. holder in the Reorganization should include such U.S. holder’s holding period for the shares of the Company’s stock exchanged therefor. If a U.S. holder holds different blocks of the Company’s stock (generally, the Company’s stock acquired on different dates or at different prices), such U.S. holder should consult its tax advisor with respect to the determination of the tax basis and holding period of the particular shares of Newco’s stock received in the Reorganization.

Backup Withholding and Information Reporting

Payments of cash to U.S. holders generally will be subject to information reporting and, under certain circumstances, may be subject to backup withholding (currently, at a rate of 24%), unless such U.S. holder delivers a properly completed IRS Form W-9 certifying such U.S. holder’s correct taxpayer identification number and certain other information, or otherwise establishes an exemption from backup withholding. Backup withholding is not an additional tax. Amounts withheld under the backup withholding rules may be refunded or credited against a U.S. holder’s U.S. federal income tax liability, provided that the required information is timely furnished to the IRS.

Interests of Directors and Executive Officers of the Company

There are no agreements or understandings, whether written or unwritten, between any executive officer and the Company, Newco, or Merger Sub concerning any type of compensation, whether present, deferred, or contingent, that is based on or otherwise relates to the Reorganization including, without limitation, any payments or benefits that otherwise would be reportable pursuant to Item 402(t) of Regulation S-K. Accordingly, because there are no amounts that would be subject to approval pursuant to such a resolution, we have not included a non-binding, advisory resolution commonly known as a “say on golden parachute” resolution in this proxy statement/prospectus.

Anticipated Accounting Treatment

For accounting purposes, the Company’s Reorganization into a holding company structure will be treated as a merger of entities under common control. The accounting treatment for such events is similar to the former “pooling of interests method.” Accordingly, the financial position and results of operations of the Company will be included in the consolidated financial statements of Newco on the same basis as currently presented, except for differences resulting from any exercise of dissenters’ rights by stockholders of the Company in connection with the Reorganization.

Authorized and Outstanding Capital Stock

The Company’s Articles of Incorporation, which we refer to as the “Current Articles,” currently authorize the issuance of 990,000,000 shares of Company Common Stock and 50,000,000 shares of Company Preferred Stock, of which 25,000,000 shares are designated as Company Series V Preferred Stock pursuant to the Company Series V Certificate, and 2,500,000 are designated as Company Series N Preferred Stock pursuant to the Company Series N Certificate. The Newco Certificate of Incorporation and the Newco Certificates of Designation currently authorize the issuance of 990,000,000 shares of Newco Common Stock and 50,000,000 shares of Newco Preferred Stock, of which 25,000,000 shares will be designated as Newco Series V Preferred Stock pursuant to the Newco Series V Certificate, and 2,500,000 shares will be designated as Newco Series N Preferred Stock pursuant to the Newco Series N Certificate. The form of Newco Certificate of Incorporation, which together with the Newco Certificates of Designation will govern the rights of our stockholders after the Reorganization, included in this accompanying proxy statement/prospectus as Annex II and the post-Reorganization share numbers described herein do not reflect any changes needed if the Reverse Stock Split (as defined and described in Proposal 2) is approved and implemented.

Upon completion of the Reorganization:

Regulatory Approvals

As noted above, the Reorganization is conditioned on, among other things (i) the effectiveness of the registration statement, of which this proxy statement/prospectus forms a part, (ii) the admission of Newco to the OTCQB tier of the OTC Markets and eligibility of the Newco Common Stock issuable in the Reorganization for quotation on the OTCQB tier of the OTC Markets, subject to official notice of issuance, and (iii) receipt by the Company of permits, authorizations, consents, approvals, certifications or terminations or expirations of waiting periods as are required under applicable corporate and cannabis laws. In addition, to complete the Reorganization, we must file Articles of Merger with the Nevada Secretary of State in accordance with the Nevada Revised Statutes.

We are not aware of any other federal, state, local or foreign regulatory requirements that must be complied with or material governmental approvals that must be obtained in connection with the Reorganization.

Trading of Newco Common Stock

The Newco Common Stock is not currently traded on any stock exchange or quoted on any market. The completion of the Reorganization is conditioned on, among other things, Newco having been admitted to the OTCQB tier of the OTC Markets and the shares of Newco Common Stock issuable in the Reorganization (and any other shares to be reserved for issuance in connection with the Reorganization) being eligible for quotation on the OTCQB tier of the OTC Markets. Following the Reorganization, we expect that the Newco Common Stock to be quoted on the OTCQB under the ticker symbol “[•].” In addition, Newco will become a reporting company under the Exchange Act.

Following the Reorganization, the CUSIP number for the Newco Common Stock will be different than the CUSIP number for the Company Common Stock.

West Coast Stock Transfer, Inc., the Company’s transfer agent and registrar, will act as transfer agent and registrar for Newco.

On October 9, 2023, the last trading day before the announcement of the Reorganization Proposal, the closing price per share of Company Common Stock was $0.0216. On [•], 2023, the most recent trading day for which prices were available, the closing price per share of Company Common Stock was $[•].

Termination of Quotation on the OTCQB and De-Registration of Company Common Stock

Following the Reorganization, the Company Common Stock will no longer be quoted on the OTC Markets and will no longer be registered under the Exchange Act. In addition, the Company will cease to be a reporting company under the Exchange Act.

Consequences Under the Securities Act

The shares of Newco Common Stock to be issued in the Reorganization will be registered under the Securities Act. These shares will be freely transferable under the Securities Act, subject to existing restrictions on certain affiliates of Newco.

Security Ownership of Directors and Executive Officers of the Company

As of October 16, 2023, the record date for the Annual Meeting, our directors and executive officers beneficially owned [133,895,269] shares of Company Common Stock, representing approximately [•]% of the issued and outstanding shares of common stock as calculated pursuant to Rule 13d-3 of the Exchange Act. We expect that each director and executive officer will vote all of their respective shares of Company Common Stock in favor of the proposals to be presented at the Annual Meeting, including the Reorganization Proposal.

Governance of Newco Following the Reorganization

As of the date of this proxy statement/prospectus, Sabas Carrillo is the sole member of the Newco Board. The Reorganization Agreement provides that, upon completion of the Reorganization, the Newco Board will be the same as the current members of the Company’s Board of Directors, and include the following persons: Sabas Carrillo, James Miller and Matthew Barron.

As of the date of this proxy statement/prospectus, Sabas Carrillo serves as the Chief Executive Officer, President, Secretary and Treasurer of Newco. The Reorganization Agreement provides that upon completion of the Reorganization, the executive officers will be the same as the executive officers of the Company on the date of this proxy statement/prospectus. For more information, see “Proposal 3. Election of Directors” beginning on page 69.

Newco Certificate of Incorporation and Bylaws

The adoption by the Company’s stockholders of the Reorganization Agreement will also constitute approval of the terms of the Newco Certificate of Incorporation, the Newco Series V Certificate, the Newco Series N Certificate, and the Newco Bylaws in the forms attached to this proxy statement/prospectus as Annex II, Annex III, Annex IV, and Annex V, respectively.

Restrictions on the Sale of Newco Shares

The shares of Newco Common Stock to be issued in the Reorganization will be registered under the Securities Act. These shares will be freely transferable under the Securities Act, subject to certain existing contractual restrictions and restrictions on certain affiliates of Newco.

Independent Registered Public Accounting Firm of Newco

We expect that Marcum LLP, which we refer to herein as “Marcum,” the Company’s independent registered public accounting firm selected by the Company’s audit committee for fiscal year 2023, will serve in such capacity for Newco following the Reorganization. See “Proposal 6. Ratification Of The Appointment of Our Independent Registered Public Accounting Firm” beginning on page 96.  

Certain Financial Information

We have not included pro forma financial comparative per share information concerning the Company that gives effect to the Reorganization because, immediately after the completion of the Reorganization, the consolidated financial statements of Newco will be the same as the Company’s consolidated financial statements immediately prior to the Reorganization, and the Reorganization will result in the conversion of each share of the Company’s stock into one (1) corresponding share of Newco’s stock. In addition, we have not provided financial statements of Newco because, prior to the Reorganization, it will have no assets, liabilities, or operations other than incident to its formation.

DESCRIPTION OF NEWCO’S CAPITAL STOCK

Newco is incorporated in the State of Delaware. The rights of stockholders of Newco will generally be governed by Delaware law and the Newco Certificate of Incorporation, the Newco Certificates of Designation and the Newco Bylaws. The following is a summary of the material provisions of the Newco Certificate of Incorporation, the Newco Certificates of Designation and the Newco Bylaws. This summary is not complete and is qualified in its entirety by reference to Delaware statutory and common law, and the full texts of the Newco Certificate of Incorporation, the Newco Series V Certificate, the Newco Series N Certificate, and the Newco Bylaws, copies of which are attached as Annex II, Annex III, Annex IV and Annex V, respectively, to this proxy statement/prospectus. The form of Newco Certificate of Incorporation included in the accompanying proxy statement/prospectus as Annex II and the post-Reorganization share numbers described herein do not reflect any changes needed if the Reverse Stock Split (as described in Proposal 2) is approved and implemented.

Authorized Capital Stock

Upon the completion of the Reorganization, and subject to adjustments to reflect the Reverse Stock Split if approved and implemented as described in Proposal 2, the authorized capital stock of Newco will be 990,000,000 shares of Newco Common Stock and 50,000,000 shares of Newco Preferred Stock, of which (a) 25,000,000 shares will be designated as Newco Series V Preferred Stock and (b) 2,500,000 shares will be designated as Newco Series N Preferred Stock. All of the shares of Newco Common Stock and Newco Preferred Stock issued and outstanding upon completion of the Reorganization will be fully paid and nonassessable. Upon completion of the Reorganization, the number of shares of Newco Common Stock, Newco Series V Preferred Stock and Newco Series N Preferred Stock issued and outstanding will be equal to the number of shares of Company Common Stock, Company Series V Preferred Stock and Company Series N Preferred Stock, respectively, issued and outstanding immediately prior to the Reorganization, subject to adjustments to reflect the Reverse Stock Split if approved and implemented.

Authorized but Unissued Shares of Newco Common Stock and Newco Preferred Stock

All authorized but unissued shares of Newco Common Stock and Newco Preferred Stock will be available for issuance by the Newco Board without stockholder approval. Newco may use the additional authorized shares for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions, and employee benefit plans. The existence of Newco’s authorized but unissued shares could render more difficult or discourage an attempt to obtain control of Newco by means of a proxy contest, tender offer, merger, or other transaction.

Newco Common Stock

Dividends and Distributions

The holders of outstanding shares of Newco Common Stock will be entitled to receive dividends and other distributions out of assets legally available at times and in amounts as the Newco Board of Directors may determine from time to time. All shares of Newco Common Stock will be entitled to participate ratably with respect to dividends or other distributions paid to stockholders.

Liquidation Rights

If Newco is liquidated, dissolved or wound up, voluntarily or involuntarily, then, after payment in full of the amounts required to be paid to holders of any then outstanding Newco Preferred Stock, holders of Newco Common Stock would be entitled to share ratably in any assets of Newco available for distribution to Newco’s stockholders after payment or provision for payment of all of Newco’s debts and liabilities.

Voting Rights

Each share of Newco Common Stock is entitled to one (1) vote on all matters to be voted upon by Newco’s stockholders. There are no cumulative voting rights. Stockholders may vote by proxy.

Directors of the Newco Board will be elected by a plurality of the votes cast at a meeting of the stockholders by the holders of stock entitled to vote in the election of directors. All other corporate actions to be taken by vote of the stockholders shall be authorized by a majority of the votes cast by the stockholders entitled to vote thereon who are present in person or represented by proxy, and where a separate vote by class or series is required, a majority of the votes cast by the stockholders of such class or series who are present in person or represented by proxy shall be the act of such class or series.