HERO TECHNOLOGIES INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations. (form 10-K)


Overview

Hero Technologies Inc. is an early stage cannabis company. The company has a
majority stake in BlackBox Systems and Technologies LLC. BlackBox is an
aeroponic cannabis cultivation system that provides optimal conditions to
enhance photosynthesis and cultivation of large flowering plants, creating
increased efficiencies. The BlackBox project consists of environmental growth
chambers for the cultivation of large flowering plants based on aeroponic
technology. Hero Technologies owns and operates HighlyRelaxing.com under Highly
Relaxing LLC
. The Company also operates VeteranHempCo.com after the acquisition
of V Brokers LLC assets.

Our flagship project, Blackbox has applied to the state of Michigan for
marijuana licenses which, if granted, will allow Blackbox to cultivate cannabis
for sale in the state of Michigan. Blackbox is currently seeking two Michigan
marijuana licenses, one for adult use and one for medicinal use. The current
status of Blackbox’s marijuana license may be summarized as follows:




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Our flagship project, Blackbox has applied to the state of Michigan for
marijuana licenses which, if granted, will allow Blackbox to cultivate cannabis
for sale in the state of Michigan. Blackbox is currently seeking two Michigan
marijuana licenses, one for adult use and one for medicinal use. The current
status of Blackbox’s marijuana license may be summarized as follows:



    ·   Blackbox is in the process of pursuing a Class C license, which would
        permit them to cultivate up to 2,000 marijuana plants for adult use and
        1,500 plants for medicinal use.
    ·   To date, Blackbox has spent approximately $190,577 in pursuit of a
        marijuana license.
    ·   Per the MRA, Blackbox is required to pay an initial fee of $40,000 for
        each license.
    ·   Blackbox is required to pay a renewal fee for every year that they wish to
        retain their license. The fee for renewing a marijuana license can range
        from $30,000 to $50,000, depending on the total weight of the marijuana
        plants that were cultivated for the preceding year.
    ·   These licenses will allow Blackbox to cultivate cannabis, within the state
        of Michigan, for adult use and medicinal use.
    ·   Blackbox has already completed Step 1 in the application process. However,
        before Blackbox can submit an application for Step 2, Blackbox is required
        to complete construction of its greenhouse facilities.
    ·   Once the facilities are complete, Blackbox may proceed with a Step 2
        application, which entails having the newly constructed facility inspected
        by the Bureau of Fire Services within 60 days after the Step 2 application
        is submitted.
    ·   Failure to pass an inspection by the BFS within 60 days may result in the
        denial of the license.
    ·   Blackbox is also required, by the MRA, to disclose the sources and total
        amount of capitalization that is required to operate and maintain a
        proposed marijuana facility. For a Class C license, Blackbox is required
        to show that they have $500,000 available to operate and maintain the
        facility.
    ·   Completing the Step 2 process will allow the company to proceed with the
        cultivation of cannabis in Michigan.



Once Blackbox receives a Class C marijuana license for adult use, they will be
subject to various provisions and obligations, including the following:



    ·   Under rule 420.102(1), one who holds a Class C marijuana license for adult
        use is permitted to grow 2,000 marijuana plants
    ·   According to rule 420.102(4) of the MRA, A marijuana grower license
        authorizes a marijuana grower to transfer marijuana without using a
        marijuana secure transporter to a marijuana processor or marijuana
        retailer if both of the following are met:




       o   (a) The marijuana processor or marijuana retailer occupies the same
           location as the marijuana grower and the marijuana is transferred using
           only private real property without accessing public roadways.
       o   (b) The marijuana grower enters each transfer into the statewide
           monitoring system.




    ·   Pursuant to rule 420.102(5), A marijuana grower license authorizes sale of
        marijuana, other than seeds, seedlings, tissue cultures, immature plants,
        and cuttings, to a marijuana processor or marijuana retailer.
    ·   Under rule 420.102(7), A marijuana grower must enter all transactions,
        current inventory, and other information into the statewide monitoring
        system, known as METRC, as required in these rules. Under the METRC
        system:




  · a serialized tag must be attached to every plant,
  · and labels must be attached to wholesale packages




    ·   According to rule 420.102(8), A marijuana grower license does not
        authorize the marijuana grower to operate in an area unless the area is
        zoned for industrial or agricultural use. At present, the Company is in
        compliance with this rule, as we intend to operate in an area that has
        been zoned for industrial and agricultural use.
    ·   Under 420.102(9), A marijuana grower may accept the transfer of marijuana
        seeds, tissue cultures, and clones that do not meet the definition of
        marijuana plant in these rules at any time from another grower licensed
        under the acts, these rules, or both. Marijuana.
    ·   Per rule 420.102(11), A marijuana grower licensee is required to comply
        with the requirements of the Michigan regulation and taxation of marijuana
        act and these rules.





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With regard to a Class C marijuana license for medicinal use, the MRA imposes very
similar provisions and obligations to those state above. According to rule R
420.108 of the MRA, one who possess a Class C marijuana license for medical use is
subject to the following obligations:

    ·   Under rule 420.108(1), one who holds a Class C marijuana license for
        medicinal use is only permitted to grow marijuana1,500 marijuana plants,
        as opposed to the 2,000 plants authorized for those who obtain an
        adult-use license
    ·   Similar to the rule governing an adult-use license, marijuana under rule
        420.108(3), a medicinal-use license authorizes a grower to transfer
        marijuana without using a secure transporter to a processor or
        provisioning center if both of the following are met:




       o   (a) The processor or provisioning center occupies the same location as
           the grower and the marijuana is transferred using only private real
           property without accessing public roadways.
       o   (b) The grower enters each transfer into the statewide monitoring
           system.




    ·   According to rule 420.108(4), a grower license authorizes sale of
        marijuana, other than seeds, seedlings, tissue cultures, and cuttings, to
        a processor or a provisioning center.
    ·   To be eligible for a grower license, the applicant and each investor in
        the grower must not have an interest in a secure transporter or safety
        compliance facility.
    ·   Under rule 420.108(7), a medicinal-use license, like an adult-use license,
        requires a grower to enter all transactions, current inventory, and other
        information into the statewide monitoring system, known as METRC
    ·   Similar to the rule for an adult-use license, under rule 420.108(8), a
        medicinal-use license does not authorize the grower to operate in an area
        unless the area is zoned for industrial or agricultural use. As mentioned,
        the Company is in compliance with this rule, as we intend to operate in an
        area that has been zoned for industrial and agricultural use.



Our goal is to become a low-cost national or internationally branded cannabis
company. Through cost measurement methods unused elsewhere by the industry, we
will be able to measure costs of production by pound. With this information, we
will target production costs of $150 to $350 per pound, and estimate selling
cannabis at wholesale prices between $2,400 and $3,200. The end goal is to
become a Multi-State Operator (MSO) that is fully integrated from seed to sale

However, there are numerous other developments that will need to occur in order
to allow us to implement the final aspects of our business plan and there are no
assurances that any of these developments will occur, or if they do occur, that
we will be successful in fully implementing our plan.

Since inception of Hero Technologies, we have devoted the majority of our
resources to acquiring assets and subsidiaries, organizing and staffing our
company, business planning and execution, and raising capital.



    ·   We have incurred recurring losses, the majority of which is attributable
        to minimal revenue, compensation expenses, consulting expenses, loss on
        the sale of a subsidiary, and losses on share conversion.
    ·   We have funded our operations primarily through issuance of shares for
        services and proceeds from sale of stock.
    ·   Our net loss was $5,957,927 for the year ended December 31, 2020, and
        $3,419,621 for the year ended December 31, 2021.
    ·   As of December 31, 2021, we had an accumulated deficit of $38,856,110.
    ·   Our primary use of cash is to fund operating expenses, which consist
        primarily of compensation expenses, consulting expenses, and general and
        administrative expenditures.





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As of December 31, 2021, only Veteran Hemp Co. has generated any revenue.

Material changes in our Statement of Operations for the periods shown below
compared to the prior periods are discussed below:

Year ended December 31, 2021



                       Increase (I) or
Item                    Decrease (D)     Reason
Consulting Expense            I          Increased activity due to cannabis
                                         licensing
Impairment of                 D          Decreased due to less investment in
Intangibles                              cannabis assets
Compensation Expense          D          Decreased due to a decline in the issuance
                                         of stock-based compensation
Office, Travel and            D          Decreased activity due to a decline in
General                                  travel
Professional Fees             I          Increased activity due to cannabis
                                         licensing
Loss on Sale of               D          Final sale of assets to exit the oil
Subsidiary                               business
Unrealized Loss on            I          Shift in focus and investment towards
Investments                              cannabis assets



Factors that will most significantly affect future operating results will be:



  · Funding for construction of greenhouses in Michigan under Blackbox
  · Timing related to construction and actual production of cannabis
  · Wholesale cannabis prices in the state of Michigan

Other than the foregoing we do not know of any trends, events or uncertainties
that have had, or are reasonably expected to have, a material impact on our
revenues or expenses.




Results of Operations



Comparison of Results of Operations for the Years Ended December 31, 2021 and
December 31, 2020.



                                          Year ended
                              December 31,      December 31,
                                  2021              2020
Sales                         $       1,525               197
Cost of goods sold                   72,686
Gross profit                        (71,161 )             197
Operating Expenses
Consulting                          421,908           209,070
Compensation                        383,190         5,317,100
Office, travel, general             163,810           193,349
Professional fees                   199,605            58,077
Other                                 7,929            60,700
Total Operating Expenses         (1,176,442 )      (5,838,296 )
Other income (expense), net      (2,265,346 )        (119,828 )
Net loss                      $  (3,512,949 )$  (5,957,927 )





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Revenue and Cost of Goods Sold

Sales increased by $1,328 for the year ended December 31, 2021. This is a slight
increase from the year 2020, in which the sales totaled $197. Cost of Goods sold
similarly increased by $72,686.



Operating Expenses


Operating expenses decreased from $5,838,296 to $1,176,442. This decline was
driven by a decrease in consulting expenses, compensation expenses, and office,
travel, and general expenses. Increases in professional fees were driven by
licensing activity.




Consulting

Consulting expenses increased from $209,070 to $421,908. This increase was
driven by licensing and marketing activity, as well as other operating expenses.

Compensation

Compensation expenses decreased from $5,317,100 to $383,190. Compensation was
significantly higher in the year 2020 due to the issuance of stock-based
compensation.




Professional Fees

Professional fees increased from $58,077 to $199,605. This increase was driven
by cannabis licensing projects in Michigan and Massachusetts, as well as debt
funding attorneys in Michigan.




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Our Energy and Exploration Legacy and Transition to Cannabis

The Company underwent significant changes from the year 2019 to 2020, which
caused fluctuations in the various operating costs. Before its name change in
2020, the Company was incorporated in the state of Nevada under the name
Holloman Energy Corporation.” The Company had previously focused on oil and gas
exploration in Australia’sCooper Basin. However, during 2019, the Company sold
its remaining oil and gas assets and discontinued operations in the energy
industry. On May 1, 2020, Holloman Energy Corporation Series A Preferred Shares
were purchased by Magenta Value Holdings LLC. On July 20, 2020, the Company
changed its name to Hero Technologies Inc. with the state of Nevada. After
which, the Company begun making the transition into the cannabis industry.

On September 10, 2020, Hero Technologies Inc. formed the company Blackbox
Technologies and Systems LLC
and entered into an operating agreement. The name
was subsequently changed to Blackbox Systems and Technologies LLC. The Blackbox
project consists of environmental growth chambers for the cultivation of large
flowering plants based on aeroponic technology. On November 3, 2020, the Company
purchased Veteran Hemp Co., which operates an international retail and wholesale
online store selling cannabis and cannabidiol. On November 4, 2020, the Company
purchased a www.highlrelaxing.com and began selling CBD topicals and rubs under
the name “Highly Relaxing”. Today, Hero Technologies Inc. is a cannabis company
with a vertically integrated business model and plan that includes cannabis
genetic engineering, farmland for medical and recreational cannabis cultivation,
production licenses, distribution licenses, consumer packaging, retail
operations and dispensaries. The Company focuses on two principal segments of
the cannabis industry, (i) cultivation and (ii) the dispensary business model,
including combinations. The Company is an expanding vertically integrated,
cannabis operator, focusing on high-growth markets. Hero Technologies Inc. pairs
premier seed genetics and growing techniques, with plans to utilize and expand
its growing technology/techniques to all its facilities and operations. The
Company’s business model includes cultivation, licensing operations, processing
operations, processing facilities, sale of products, brand creation, and
technology development.




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Capital Resources and Liquidity



Overview


Since our inception, we have recognized limited revenue from our core cannabis
operations and have incurred operating losses and negative cash flows from our
operations. We have not yet commercialized any product from our planned
aeroponic cultivation of cannabis, and we do not expect to generate revenue
until completion of greenhouse buildouts. Since our inception through December
2021
, we have funded our operations through proceeds from the sale of stock,
borrowings on debt, and shares issued for service. We expect our existing cash
and cash equivalents, together with the anticipated net proceeds from this
offering, to enable us to fund our operating expenses and capital expenditure
requirements for the foreseeable future.




Our sources and (uses) of cash for the years ended December 31, 2021 and 2020
are shown below:



                                                     2021           2020
                                                      $              $
Cash provided by (used in) operations               (732,649 )     (345,794 )
Cash received upon sale of subsidiary                      -              -
Cash provided by (used in) investing activities            -         (2,331 )

Cash provided by (used in) financing activities 470,000 716,000
Changes in exchange rates

                                  -           (344 )




Our material capital commitments for the twelve months ending December 31, 2022
are:




Description                                       Amount
(Include all amounts pertaining to
Blackbox, cannabis licensing,
pre-acquisition development, land acquisition
construction, etc.)                             $ 9,000,000




Operating Activities


During the year ended December 31, 2020, we used $345,794 of cash in operating
activities. Cash used in operating activities reflected our net loss of
$5,957,927, offset by a $173,000 increase in our operating assets and
liabilities and noncash charges of approximately $5,400,000, which was driven by
stock-based compensation. The primary use of cash was to fund our operations
related to compensation.




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During the year ended December 31, 2021, we used $732,649 of cash in operating
activities. Cash used in operating activities reflected our net loss of
$3,419,621 and a net increase of $150,431 in our operating assets and
liabilities, offset by approximately $2,629,869 of noncash charges, which was
driven by loss from conversion of debt to common stock. The primary use of cash
was to fund our operations related to compensation expenses, consulting
expenses, and professional fees.



Investing Activities


During the year ended December 31, 2020 we used $2,331 for fixed assets. During
the year ended December 31, 2021, we received $0 for investing activities.



Financing Activities


During the year ended December 31, 2020, financing activities provided $716,000
for proceeds from the sale of stock. During the year ended December 31, 2021,
financing activities provided $470,000, which was borrowed on debt and proceeds
from the sale of stock.

We anticipate material capital requirements of $9,000,000 for the twelve months
ending December 31, 2022.

Other than as disclosed above, we do not know of any trends, demands,
commitments, events or uncertainties that will result in, or that are reasonably
likely to result in, our liquidity increasing or decreasing in any material way.

Other than as disclosed above, we do not know of any significant changes in our
expected sources and uses of cash.

We do not have any commitments or arrangements from any person to provide us
with any equity capital.

Our current losses, working capital deficit, and accumulated deficit raise
substantial doubt about our ability to continue as a going concern.

Our current operations are being funded by capital that has been raised through
the issuance of capital stock. Additionally, we may decide to raise more capital
in the future through private offerings, public offerings, and/or debt
offerings.




Funding Requirements



Our primary use of cash is to fund operating expenses, primarily consisting of
compensation, consulting and professional fees and general administrative
expenses.




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Because of the numerous risks and uncertainties associated the cannabis
industry, we are unable to estimate the exact amount of our operating capital
requirements. Our future funding requirements will depend on many factors,
including, but not limited to:



    ·   Regulatory and statutory developments regarding the legalization and
        commercialization of the marijuana industry in the United States

    ·   Compensation expenses related to our growing platform

    ·   Business development opportunities in the form of targeted acquisitions of
        subsidiaries

    ·   Investment activities related to the construction and deployment of
        aeroponic growth technology.



We currently have no credit facility or committed sources of capital. Because of
the numerous risks and uncertainties associated with the cannabis industry and
our core businesses, we are unable to estimate the amounts of increased capital
outlays and operating expenditures.

Until such time, if ever, as we can generate substantial product revenue, we
expect to finance our operations through a combination of equity offerings
and/or debt financings. To the extent that we raise additional capital through
the sale of equity or convertible debt securities, ownership interests will be
diluted, and the terms of these securities may include liquidation or other
preferences that adversely affect the rights of common stockholders. Debt
financing and preferred equity financing, if available, may involve agreements
that include covenants limiting or restricting our ability to take specific
actions, such as incurring additional debt, making acquisitions or capital
expenditures or declaring dividends. If we are unable to raise additional funds
through equity or debt financings or other arrangements when needed, we may be
required to delay, limit, reduce or terminate the implementation of our business
plans.




Critical Accounting Policies



The discussion and analysis of our financial condition and results of operations
are based upon our financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States. The
preparation of these financial statements requires us to make estimates and
judgments that affect the amounts of assets, liabilities, revenues and expenses,
and related disclosure of contingent assets and liabilities. On an on-going
basis, we evaluate our estimates based on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different
assumptions or conditions. The following represents a summary of our critical
accounting policies, defined as those policies that we believe are the most
important to the portrayal of our financial condition and results of operations
and that require management’s most difficult, subjective or complex judgments,
often as a result of the need to make estimates about the effects of matters
that are inherently uncertain.

See Note 2 to the December 31, 2021 Financial Statements included as part of
this document for a summary of our significant accounting policies.



Use of Estimates


The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions.
These estimates and assumptions affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
It is possible that accounting estimates and assumptions may be material to the
Company due to the levels of subjectivity and judgment involved.




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Accounts Receivable


The Company grants credit to customers under credit terms that it believes are
customary in the industry and does not require collateral to support customer
receivables. The Company currently does not provide an allowance for doubtful
collections, which is based upon a review of outstanding receivables, historical
collection information, and existing economic conditions. Normal receivable
terms vary from 30-90 days after the issuance of the invoice and typically would
be considered past due when the term expires. Delinquent receivables are written
off based on individual credit evaluation and specific circumstances of the
customer.




Inventory



Inventory is valued at the lower of the inventory’s cost (first in, first out
basis) or the current market price of the inventory. Management compares the
cost of inventory with its market value and an allowance is made to write down
inventory to market value, if lower.



Long-Lived Assets


The Company applies the provisions of ASC Topic 360, Property, Plant, and
Equipment, which addresses financial accounting and reporting for the impairment
or disposal of long-lived assets. ASC 360 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets’ carrying amounts. In that event, a loss is
recognized based on the amount by which the carrying amount exceeds the fair
value of the long-lived assets. Loss on long-lived assets to be disposed of is
determined in a similar manner, except that fair values are reduced for the cost
of disposal.




Revenue Recognition



Net sales include product sales, less excise taxes and customer programs and
incentives. The Company recognizes revenue by applying the following steps in
accordance with Accounting Standards Codification (“ASC”) Topic 606 – Revenue
from Contracts with Customers: (1) identify the contract with a customer; (2)
identify the performance obligations in the contract; (3) determine the
transaction price; (4) allocate the transaction price to each performance
obligation in the contract; and (5) recognize revenue when each performance
obligation is satisfied.

The Company recognizes sales when merchandise is shipped from a warehouse
directly to wholesale customers (except in the case of a consignment sale). For
consignment sales, the Company recognizes sales upon the consignee’s shipment to
the customer. Postage and handling charges billed to customers are also
recognized as sales upon shipment of the related merchandise. Shipping terms are
generally FOB shipping point, and title passes to the customer at the time and
place of shipment or purchase by customers at a retail location. For consignment
sales, title passes to the consignee concurrent with the consignee’s shipment to
the customer. The customer has no cancellation privileges after shipment or upon
purchase at retail locations, other than customary rights of return. The Company
excludes sales tax collected and remitted to various states from sales and cost
of sales




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Deferred Income



In some instances, the Company receives payments prior to delivery of its
products, whereupon such revenues are deferred until the revenue recognition
criteria are met.




Stock-Based Compensation



The Company records stock-based compensation in accordance with FASB ASC Topic
718, Compensation – Stock Compensation. FASB ASC Topic 718 requires companies to
measure compensation cost for stock-based employee compensation at fair value at
the grant date and recognize the expense over the employee’s requisite service
period. The Company recognizes in the statement of operations the grant-date
fair value of stock options and other equity-based compensation issued to
employees and non-employees.

Off-Balance Sheet Arrangements

We do not maintain any off-balance sheet arrangements, transactions, obligations
or other relationships with unconsolidated entities that would be expected to
have a material current or future effect upon our financial condition or results
of operations.




Going Concern



Our net losses through December 31, 2021 raise some or substantial doubt about
the Company’s ability to continue as a going concern.

Recent Accounting Pronouncements

In January 2017, the Financial Accounting Standards Board (“FASB”) issued an
Accounting Standards Update (“ASU”) 2017-01, Business Combinations (Topic 805)
Clarifying the Definition of a Business. The amendments in this update clarify
the definition of a business with the objective of adding guidance to assist
entities with evaluating whether transactions should be accounted for as
acquisitions or disposals of assets or businesses. The definition of a business
affects many areas of accounting including acquisitions, disposals, goodwill,
and consolidation. The guidance is effective for interim and annual periods
beginning after December 15, 2017 and should be applied prospectively on or
after the effective date. The Company does not believe the adoption of ASU
2017-04 had any material impact on its consolidated financial statements.



Competition


We face extreme competition from both larger, better-financed national brands as
well as an ever-increasing number of boutique service providers in the cannabis
industry. We currently track sixty-nine (69) such providers in this space and
are continually monitoring their progress and presence in the industry while
working to continue to demonstrate our unique licensing offering. We also track
eighty-eight (88) public companies that are either directly in or loosely
involved in the cannabis industry.




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Regulatory Considerations


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 laws.

As of the date of this Prospectus 36 states and the District of Columbia allow
its citizens to use Medical Marijuana. Additionally, 15 states and the District
of Columbia
have legalized cannabis for recreational use by adults. The state
laws are in conflict with the Federal Controlled Substances Act, which makes
marijuana use and possession illegal on a national level. The Biden
Administration
, if it follows Obama Administration policies, is not likely to
use of resources to direct law federal law enforcement agencies to prosecute
those lawfully abiding by state-designated laws allowing the use and
distribution of medical marijuana. However, there is no guarantee that the
Administration will not change its stated policy regarding the low-priority
enforcement of federal laws. Additionally, any new administration that follows
could change this policy and decide to enforce the federal laws strongly. Any
such change in the Federal Government’s enforcement of current federal laws
could cause significant financial damage to us.

The Department of Justice has stated that it will continue to enforce the
Controlled Substance Act with respect to marijuana to prevent:



    ·   the distribution of marijuana to minors;
    ·   criminal enterprises, gangs and cartels receiving revenue from the sale of
        marijuana;
    ·   the diversion of marijuana from states where it is legal under state law
        to other states;
    ·   state-authorized marijuana activity from being used as a cover or pretext
        for the trafficking of other illegal drugs or other illegal activity;
    ·   violence and the use of firearms in the cultivation and distribution of
        marijuana;
    ·   driving while impaired and the exacerbation of other adverse public health
        consequences associated with marijuana use;
    ·   the growing of marijuana on public lands; and
    ·   marijuana possession or use on federal property.



Laws and regulations affecting the medical marijuana industry are constantly
changing, which could detrimentally affect our proposed operations. Local, state
and federal medical 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 its business plan. In addition,
violations of these laws, or allegations of such violations, could disrupt our
business and result in a material adverse effect on its operations. It is also
possible that regulations may be enacted in the future that will be directly
applicable to our business. These ever-changing regulations could even affect
federal tax policies that may make it difficult to claim tax deductions on our
returns. 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 its business.

Since the use of marijuana is illegal under federal law, most banks will not
accept, for deposit, funds from businesses involved with marijuana.
Consequently, businesses involved in the marijuana industry often have trouble
finding a bank willing to accept their business. The inability to open bank
accounts may make it difficult for us to operate.

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