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Exhibit 99.1

AYR WELLNESS INC.

ANNUAL INFORMATION FORM

As of and for the Year Ended December 31, 2021

Dated March 30, 2022


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TABLE OF CONTENTS

AYR WELLNESS INC.

    

1

EXPLANATORY NOTES

2

FORWARD-LOOKING INFORMATION

2

MARKET AND INDUSTRY DATA

4

CORPORATE STRUCTURE

4

GENERAL DEVELOPMENT OF THE BUSINESS

7

DESCRIPTION OF THE BUSINESS

11

CANNABIS MARKET OVERVIEW

16

Non-Compliance with State and Local Cannabis Laws

50

Ability to Access Public and Private Capital

50

RISK FACTORS

51

DIVIDENDS

77

DESCRIPTION OF SHARE CAPITAL

77

Equity Shares

78

Multiple Voting Shares

80

Warrants

81

MARKET FOR SECURITIES

83

TRADING PRICE AND VOLUME

83

Equity Shares

83

Warrants

84

Rights

84

SECURITIES SUBJECT TO CONTRACTUAL RESTRICTION ON TRANSFER

84

DIRECTORS AND OFFICERS

84

Names, Occupations and Security Holdings

84

Shareholdings of Directors and Executive Officers

87

Corporate Cease Trade Orders, Bankruptcies, Penalties or Sanctions

87

Conflicts of Interest and Interests of Management and Others in Material Transactions

87

PROMOTER

88

LEGAL PROCEEDINGS AND REGULATORY ACTIONS

88

AUDITORS, TRANSFER AGENT AND REGISTRAR

88

MATERIAL CONTRACTS

88

INTERESTS OF EXPERTS

89

AUDIT COMMITTEE

89

AUDIT COMMITTEE CHARTER

89

COMPOSITION OF AUDIT COMMITTEE

89

EXTERNAL AUDITOR SERVICE FEES

89

ADDITIONAL INFORMATION

90

APPENDIX A

A-1

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AYR WELLNESS INC.

Ayr Wellness Inc. (the “Company” or “Ayr” or “we” or “us”) derives its revenues from the cannabis industry in certain states (“States”, each a “State”) of the United States of America (“U.S.” or “United States”), which industry is illegal under U.S. federal law. Ayr is a vertically integrated multi-State operator in the U.S. cannabis sector, with a portfolio in the States of Massachusetts, Nevada, Pennsylvania, Florida, Arizona, New Jersey, and Ohio. Currently, through its operating companies, Ayr is a leading cultivator, manufacturer, and retailer of cannabis products and branded cannabis packaged goods, and is engaged in the manufacture, possession, use, sale or distribution of cannabis and/or holds licenses in the adult-use and/or medicinal cannabis marketplace in the States of Massachusetts, Nevada, Pennsylvania, Florida, Arizona, New Jersey, and Ohio.

The United States federal government regulates drugs through the Controlled Substances Act (21 U.S.C.§ 811), which places controlled substances, including marijuana (defined as all parts of the plant Cannabis sativa L. containing more than 0.3 percent tetrahydrocannabinol (“THC”)), by dry weight, in a schedule. Marijuana (also referred to herein as Cannabis) is classified as a Schedule I drug. Under United States federal law, a Schedule I drug or substance has a high potential for abuse, no accepted medical use in the United States, and a lack of accepted safety for the use of the drug under medical supervision. The United States Food and Drug Administration has not approved marijuana as a safe and effective drug for any indication.

In the United States, marijuana is largely regulated at the State level. State laws regulating cannabis are in direct conflict with the federal Controlled Substances Act, which makes cannabis use and possession federally illegal. Although certain states authorize medical or adult-use cannabis production and distribution by licensed or registered entities, under U.S. federal law, the possession, use, cultivation, and transfer of cannabis and any related drug paraphernalia is illegal and any such acts are criminal acts under federal law. The Supremacy Clause of the United States Constitution establishes that the United States Constitution and federal laws made pursuant to it are paramount and, in case of conflict between federal and State law, the federal law shall apply.

Under President Barack Obama, the U.S. government attempted to address the inconsistencies between federal and state regulation of cannabis in a memorandum sent by then-Deputy Attorney General James Cole to all United States Attorneys in August 2013 (the “Cole Memorandum”). The Cole Memorandum acknowledged that notwithstanding the designation of cannabis as a controlled substance at the federal level in the United States, several States have enacted laws relating to cannabis for medical and recreational purposes, and that conduct in compliance with the laws of those jurisdictions were less likely to be an enforcement priority for the Department of Justice. The Cole Memorandum listed the type of threats related to cannabis on which the Department of Justice should focus, but did not provide guidelines for acceptable State regulatory schemes.

In March 2017, then newly appointed Attorney General Jeff Sessions, a long-time opponent of State-regulated medical and recreational cannabis, noted limited federal resources and acknowledged that much of the Cole Memorandum had merit; however, he had previously stated that he did not believe it had been implemented effectively. On January 4, 2018, Sessions issued a new memorandum (known as the “Sessions Memorandum”) which rescinded the Cole Memorandum, and directed all U.S. Attorneys to enforce the laws enacted by the United States Congress according to already-established principles. The Sessions Memorandum did not direct prosecutors to enforce federal law against persons and entities operating in compliance with State regulatory schemes, and there was no direction to give such enforcement any particular priority.

On January 20, 2021, Joseph R. Biden Jr. was sworn in as the new President of the United States. During his campaign, he stated a policy goal to decriminalize possession of cannabis at the federal level. However, he has not publicly supported the full legalization of cannabis. It is unclear how much of a priority decriminalization may be for President Biden’s administration. The head of the Department of Justice is now Attorney General Merrick Garland. During his confirmation hearings in the Senate on February 22, 2021, Garland confirmed that he would not prioritize pursuing cannabis prosecutions in states that have legalized and that are regulating the use of cannabis, both for medical and adult use. However, he has expressed continued concern over international transport of large amounts of illicit cannabis from other nations—namely Mexico—and large-scale domestic cultivation of illicit cannabis (including the environmental impact of those operations).

To date, the Biden administration has not indicated that enforcement against state-legal cannabis businesses will be given any priority. Nonetheless, there is ‎no guarantee that the position of the Department of ‎Justice will not change.

The United States Congress has made certain moves toward legalization in recent months. Senate Majority Leader Chuck Schumer (D-NY) has indicated that he intends to file proposed legislation legalizing cannabis at the federal level—the Cannabis Administration & Opportunity Act in April 2022. Schumer has indicated that his bill is intended to prevent large corporate

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interests from dominating the United States cannabis market. There is no way to know whether or when the legislation might pass and be signed into law.

There is no guarantee that State laws legalizing and regulating the sale and use of cannabis will not be repealed or overturned, or that local governmental authorities will not limit the applicability of State laws within their respective jurisdictions. Unless and until the United States Congress amends the Controlled Substances Act with respect to medical and/or adult-use cannabis (and as to the timing or scope of any such potential amendments there can be no assurance), there is a risk that U.S. federal authorities may enforce current U.S. federal law. If the U.S. federal government begins to enforce U.S. federal laws relating to cannabis in States where the sale and use of cannabis is currently legal, or if existing applicable State laws are repealed or curtailed, Ayr’s Business, results of operations, financial condition and prospects and Ayr would be materially adversely affected. See “U.S. Federal Enforcement Priorities”.

In light of the political and regulatory uncertainty surrounding the treatment of U.S. cannabis-related activities, including the rescission of the Cole Memorandum discussed above, on February 8, 2018, the Canadian Securities Administrators published Staff Notice 51-352 (Revised) – Issuers with U.S. Marijuana-Related Activities (“Staff Notice 51-352”) setting out the Canadian Securities Administrator’s disclosure expectations for specific risks facing issuers with cannabis-related activities in the United States. Staff Notice 51-352 includes additional disclosure expectations that apply to all issuers with U.S. cannabis-related activities, including those with direct and indirect involvement in the cultivation and distribution of cannabis, as well as issuers that provide goods and services to third parties involved in the U.S. cannabis industry.

Ayr’s involvement in the U.S. cannabis market may subject Ayr to heightened scrutiny by regulators, stock exchanges, clearing agencies and other U.S. and Canadian authorities. There can be no assurance that this heightened scrutiny will not in turn lead to the imposition of certain restrictions on Ayr’s ability to operate in the U.S. or any other jurisdiction. There are a number of risks associated with the business of Ayr. See “Cannabis Market Overview” and “Risk Factors”.

EXPLANATORY NOTES

Unless otherwise indicated, the information appearing in this annual information form (“AIF”) is stated as of December 31, 2021, and all amounts are in United States dollars unless otherwise indicated.

FORWARD-LOOKING INFORMATION

This AIF and the documents incorporated by reference herein contain certain “forward-looking statements” and “forward-looking information” within the meaning of applicable securities laws, including Canadian securities laws and United States securities laws (collectively, “forward-looking statements”). All information, other than statements of historical facts, included in this AIF and the documents incorporated by reference herein, including estimates, plans, expectations, opinions, forecasts, projections, targets and guidance, constitutes forward-looking information. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as “pro forma”, “expects”, “anticipates”, “plans”, “believes”, “estimates”, “intends”, “targets”, “projects”, “forecasts”, “seeks”, “likely” or negative versions thereof and other similar expressions, or future or conditional verbs such as “may”, “will”, “should”, “would” and “could”.

By their nature, forward-looking statements are subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of material factors, many of which are beyond the parties’ control, could affect operations, business, financial condition, performance and results of the parties that may be expressed or implied by such forward-looking statements and could cause actual results to differ materially from current expectations of estimated or anticipated events or results.

These factors include, but are not limited to, the following:

the extent of the impact of COVID-19, including government and/or regulatory responses to the outbreak;

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laws and regulations and any amendments thereto applicable to our business and the impact thereof, including uncertainty regarding the application of U.S. state and federal law to U.S. cannabis products and the scope of any regulations by the U.S. Food and Drug Administration, the U.S. Drug Enforcement Administration, the U.S. Federal Trade Commission, the U.S. Patent and Trademark Office, the U.S. Department of Agriculture and any state equivalent regulatory agencies over U.S. cannabis products;
climate change impacting economic factors such as prices and supply chain disruption, as well as governmental response through laws or regulations regarding greenhouse gas emissions;
assumptions and expectations described in the Company’s significant accounting judgments and estimates;
the adoption and impact of certain accounting pronouncements;
the number of users of cannabis or the size of the regulated cannabis market in the United States;
the potential time frame for the implementation of legislation to legalize and regulate medical or adult-use cannabis (and the consumer products derived from each of the foregoing) in the United States, and the potential form the legislation and regulations will take;
the Company’s future financial and operating performance and anticipated profitability;
future performance, results and terms of strategic initiatives, strategic agreements and supply agreements;
the market for the Company’s current and proposed products and services, as well as the Company’s ability to capture market share;
the benefits and applications of the Company’s products and services and expected sales thereof;
development of affiliated brands, product diversification and future corporate development;
anticipated investment in and results of research and development;
inventory and production capacity, including discussions of plans or potential for expansion of capacity at existing or new facilities;
future expenditures, strategic investments and capital activities;
the competitive landscape in which the Company operates and the Company’s market expertise;
the Company’s ability to comply with any applicable debt covenants;
the Company’s ability to secure further equity or debt financing, if required;
changes in U.S. generally accepted accounting principles or in the interpretation thereof;
consistent or increasing pricing of various cannabis products;
the level of demand for cannabis products, including the Company’s and third-party products sold by the Company;
the Company’s ability to mitigate risks relating to the cannabis industry, the larger economy such as inflation or fluctuation in interest rates, breaches of and unauthorized access to the Company’s systems and related cybersecurity risks, money laundering, costly litigation, and health pandemics;
the ability to gain appropriate regulatory approvals for announced acquisitions in the timeframe anticipated;
the application for additional licenses and the grant of licenses or renewals of existing licenses that have been applied for;

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the rollout of new dispensaries, including as to the number of planned dispensaries to be opened in the future and the timing and location in respect of the same, and related forecasts;
the Company’s ability to hit anticipated development targets of cultivation and production projects;
the ability to successfully integrate and maintain employees from recent acquisitions;
the ability to develop the Company’s brand and meet growth objectives;
the risk related to limited market data and difficulty to forecast results;
the concentrated voting control of the Company;
market volatility and the risks associated with selling of substantial amount of Equity Shares (as defined in this AIF);
product liability claims related to the products the Company cultivates, produces, and sells; and
other events or conditions that may occur in the future.

See “Risk Factors” for further details. No assurance can be given that these expectations will prove to be correct and such forward-looking information included in this AIF should not be unduly relied upon, and the Company does not undertake any obligation to revise or update any forward-looking information or statements other than as required by applicable law. In making these statements, in addition to those described above and elsewhere herein, the parties have made assumptions with respect to, without limitation, receipt of requisite regulatory approvals on a timely basis, receipt and/or maintenance of required licenses and third-party consents in a timely manner, successful integration of the Company’s and its subsidiaries’ operations, and no unplanned materially adverse changes to its facilities, assets, customer base and the economic conditions affecting the Company’s current and proposed operations. These assumptions, although considered reasonable by the Company at the time of preparation, may prove to be incorrect. In addition, the Company has assumed that there will be no material adverse change to the current regulatory landscape affecting the cannabis industry and has also assumed that the Company will remain compliant in the future with all State and local laws, regulations and rules imposed upon it by law. The Company’s forward-looking information is expressly qualified in its entirety by this cautionary statement.

MARKET AND INDUSTRY DATA

This AIF includes market and industry data that has been obtained from third-party sources, including industry publications. The Company believes that the industry data is accurate and that its estimates and assumptions are reasonable, but there is no assurance as to the accuracy or completeness of this data. Third party sources generally state that the information contained therein has been obtained from sources believed to be reliable, but there is no assurance as to the accuracy or completeness of included information. Although the data is believed to be reliable, the Company has not independently verified any of the data from third-party sources referred to in this AIF or ascertained the underlying economic assumptions relied upon by such sources.

CORPORATE STRUCTURE

Name, Address and Incorporation

The Company (formerly known as “Cannabis Strategies Acquisition Corp.” and “Ayr Strategies Inc.”, respectively) was incorporated on July 31, 2017 under the Business Corporations Act (Ontario). Ayr continued on May 24, 2019 into British Columbia under the Business Corporations Act (British Columbia) (“BCBCA”), changed its name to “Ayr Strategies Inc.”, and amended its financial year-end from September 30 to December 31 in connection with its Qualifying Transaction. The Company changed its name to “Ayr Wellness Inc.” on February 11, 2020. The registered office of the Company is located at 666 Burrard Street, Suite 1700, Vancouver, British Columbia V6C 2X8. The head office of the Company  is located at 2601 South Bayshore Drive, Suite 900, Miami, FL, 33133.

The subordinate voting shares, restricted voting shares and limited voting shares of the Company (the “Subordinate Voting Shares”, “Restricted Voting Shares” and “Limited Voting Shares”, respectively, and collectively, the “Equity Shares”) are trading under the single symbol “AYR.A” on the Canadian Stock Exchange (the “CSE”). The Equity Shares are also trading on the Over-the-Counter Market in the United States under the symbol “AYRWF”.

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The Subordinate Voting Share purchase warrants of the Company (“Warrants”) and rights of the Company (“Rights”), the latter of which were formerly convertible into Equity Shares on a 10-to-1 basis, formerly traded on the CSE under the symbols “AYR.WT” and “AYR.RT”, respectively, and ceased trading on September 30, 2021 and May 25, 2021, respectively, in connection with the expiry1 of such securities. See “General Development of the Business – Subsequent Developments – Acceleration of Expiry Date of Warrants” and “General Development of the Business – Subsequent Developments – Expiry of Rights”.

The multiple voting shares of the Company (the “Multiple Voting Shares”), Exchangeable Shares (defined below), and the Mercer Warrants are unlisted. The Multiple Voting Shares and the Equity Shares are together referred to herein as the “Shares”.

Ayr’s 12.5% senior secured notes (the “Senior Notes”) began trading on the CSE effective April 21, 2021 under the symbol “AYR.NT.U”. The Senior Notes, in the aggregate principal amount of $110 million, were initially issued on December 10, 2020 through a private placement led by Canaccord Genuity Corp. On November 12, 2021, an additional approximately $147 million in Senior Notes were issued (the “Additional Notes”). The Senior Notes and the Additional Notes pay interest of 12.5% per annum (semi-annually) and mature on December 10, 2024.


1 2,874,058 Warrants held by Mercer (the “Mercer Warrants”) did not expire on September 30, 2021, in accordance with the terms of the Warrant Agreement, and remain issued and outstanding. Each Mercer Warrant is exercisable for one (1) Subordinate Voting Share for an exercise price of $9.07.

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Intercompany Relationships

The following is an organizational summary of the Company as of March 29, 2022:

Subsidiaries

    

State of operation

    

Purpose

Ayr Wellness Inc.

British Columbia, CA

Parent Company

Ayr Wellness Holdings LLC

NV

Corporate - Holding Company

CSAC Holdings Inc.

NV

Corporate - Holding Company

CSAC Acquisition Inc.

NV

Corporate - Holding Company

CSAC Acquisition MA Corp

NV

Corporate - Holding Company

CSAC Acquisition MA II Corp.

NV

Corporate - Holding Company

CSAC Acquisition FL Corp ("CSAC FL")

NV

Corporate - Holding Company

CSAC Acquisition PA Corp ("CSAC PA")

NV

Corporate - Holding Company

CSAC Acquisition PA II Corp ("CSAC PA II")

NV

Corporate - Holding Company

CSAC Acquisition PA III Corp

NV

Corporate - Holding Company

CSAC Acquisition AZ Corp ("CSAC AZ")

NV

Corporate - Holding Company

CSAC Acquisition NJ Corp

NV

Corporate - Holding Company

CSAC Acquisition DE Corp

NV

Corporate - Holding Company

CSAC Acquisition IL Corp

NV

Corporate - Holding Company

CSAC Acquisition NV Corp

NV

Corporate - Holding Company

Ayr Ohio LLC

OH

Corporate - Holding Company

Ayr NJ, LLC

NV

Management Company

CSAC Ohio, LLC

NV

Production

Sira Naturals, Inc.

MA

Cultivation, Production, and Retail

Cultivauna, LLC

MA

Production

CannaPunch of Nevada LLC

NV

Branded Manufactured Products

LivFree Wellness, LLC

NV

Retail

Tahoe-Reno Botanicals, LLC

NV

Cultivation

Tahoe-Reno Extractions, LLC

NV

Production

Kynd-Strainz, LLC

NV

Retail

Lemon Aide, LLC

NV

Retail

Tahoe Hydroponics Company, LLC(1)

NV

Managed Services - Cultivation and Production

NV Green, Inc(1)

NV

Managed Services - Production

DocHouse, LLC

PA

Cultivation and Production

CannTech PA, LLC ("CannTech PA")

PA

Cultivation, Production, and Retail

Blue Camo LLC (doing business as ("dba") "Oasis")

AZ

Corporate - Holding Company

Ocotillo Vista, Inc

AZ

Cultivation, Production, and Retail

Total Health and Wellness, Inc.

AZ

Cultivation, Production, and Retail

WillCox OC, LLC ("WillCox") (owned 60%)

AZ

Cultivation

242 Cannabis LLC (referred to as "Liberty")

FL

Real Estate

DFMMJ Investments LLC (dba "Liberty Health Sciences Florida LTD.") (referred to as "Liberty")

FL

Cultivation, Production, and Retail

Greenlight Management, LLC

OH

Managed Services - Cultivation

Greenlight Holdings, LLC

OH

Real Estate

GSD NJ, LLC

NJ

Cultivation, Production, and Retail

PA Natural Medicine, LLC ("PA Natural")

PA

Retail

Eskar Holdings, LLC ("Eskar")

MA

Retail

DWC Investments, LLC

NV

Real Estate

Parker RE MA, LLC

NV

Real Estate

Parker RE PA, LLC

NV

Real Estate

Clear Choice Admin Services, LLC

AZ

Payroll

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Mercer Strategies PA, LLC

NV

Payroll

Parker Solutions PA, LLC

NV

Payroll

Mercer Strategies MA, LLC

NV

Payroll

Parker Solutions MA, LLC

NV

Payroll

Mercer Strategies FL, LLC

NV

Payroll

Parker Solutions FL LLC

FL

Payroll

Parker Solutions OH, LLC

NV

Payroll

Parker Solutions IL, LLC

NV

Payroll

BP Solutions LLC

NV

Payroll

Klymb Project Management, Inc.

NV

Corporate


(1)   Entered into an equity purchase agreement with CSAC Acquisition NV Corp. pending regulatory approval for the license transfers by the Nevada Cannabis Compliance Board. The Company has a controlling interest, and provides operational and service support to licensed cannabis companies. All intercompany balances and transactions are eliminated for consolidation.

On September 12, 2018, Ayr incorporated a wholly-owned subsidiary in Nevada, United States, named CSAC Holdings Inc., to facilitate the Qualifying Transaction (as defined below). On September 17, 2018, CSAC Holdings Inc. incorporated a wholly-owned subsidiary in Nevada, United States, named CSAC Acquisition Inc. (“CSAC AcquisitionCo”). On May 24, 2019, the Company  completed its acquisitions of control of the target businesses of: (i) Washoe Wellness, LLC (“Washoe”), a Nevada limited liability company, (ii) The Canopy NV, LLC (“Canopy”), a Nevada limited liability company, (iii) Sira Naturals, Inc. (“Sira”), a Massachusetts corporation, (iv) LivFree Wellness, LLC (“LivFree”), a Nevada limited liability company, and (v) CannaPunch of Nevada LLC, a Nevada limited liability company (“CannaPunch”), and entered into either a services agreement or operations agreement with Washoe, Canopy and LivFree pending regulatory approval for the consummation of the transaction, which collectively constituted its qualifying transaction (collectively, the “Qualifying Transaction”). Subsequent to the Qualifying Transaction, the Company expanded its operations into the States of Pennsylvania, Florida, Arizona, New Jersey, and Ohio. The Company has also entered into definitive agreements to expand its operations into the State of Illinois. See “General Development of the Business – Three-Year History – Subsequent Developments – Recent Acquisitions” and “General Development of the Business – Three-Year History – Subsequent Developments – Proposed Acquisitions”.

Ayr’s principal shareholder, Mercer Park CB, L.P. (“Mercer”), is a limited partnership formed under the laws of the State of Delaware, of which Mercer Park CB GP, LLC is the general partner, and which is indirectly controlled by Jonathan Sandelman. Mercer is a privately-held family office based in New York, United States, the executive leadership and entrepreneurial expertise, investment and deal experience and network of which have been a critical component of Ayr’s success to date. Mercer Park, L.P., the parent of Mercer, provides services to the Company pursuant to a services agreement.

On March 5, 2021, Ayr formed Ayr Wellness Holdings LLC (“AWH LLC”), a Nevada limited liability company, as a new holding company. Ayr owns all of the membership interests in AWH LLC and AWH LLC owns all of the shares of CSAC Holdings Inc.

GENERAL DEVELOPMENT OF THE BUSINESS

Three-Year Summary

Initial Public Offering

In 2017, the Company completed its initial public offering (the “Offering”). Concurrent with the completion of the Offering, Mercer, Kamaldeep Thindal and Charles Miles (or persons or companies controlled by them) (collectively with Mercer, the “Founders”) purchased an aggregate of 3,434,298 Class B shares of the Company (each, a “Class B Share”) (such Class B Shares issued to the Founders referred to as the “Founders’ Shares”), consisting of 3,415,438 Class B Shares purchased by Mercer, 9,430 Class B Shares purchased by Kamaldeep Thindal, and 9,430 Class B Shares purchased by Charles Miles. In addition, Mercer purchased an aggregate of 262,188 Class B units of the Company (each, a “Class B Unit”) at C$10.00 per Class B Unit and 2,621,870 warrants (the “Founders’ Warrants”) at C$1.00 per Founders’ Warrant. Each Class B Unit consisted of one Class B Share, one Warrant and one Right. The Founders’ Warrants were subject to the same terms and conditions as the Warrants underlying the Class A Restricted Voting units of the Company (the “Class A Restricted Voting Units”) and Class B Units. The Rights underlying the Class B Units were subject to the same terms and conditions as the Rights underlying the Class A Restricted Voting Units.

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Qualifying Transaction

On May 24, 2019, Ayr completed its acquisitions which qualified as its Qualifying Transaction, the businesses of which are briefly summarized below under “Ayr’s Businesses”. The Company’s businesses operate in the cultivation, manufacturing, branding and/or retail, as applicable, of cannabis products in the states of Massachusetts and Nevada.

The aggregate purchase price consideration for the Qualifying Transaction payable by Ayr was comprised of a combination of cash, debt and the issuance of non-voting Exchangeable Shares of CSAC AcquisitionCo (the “Exchangeable Shares”) to the vendors thereof, which are exchangeable, on a one-for-one basis, into Subordinate Voting Shares, at the option of the holder, and are designed to be economically equivalent (without taking into account tax consequences) to the Subordinate Voting Shares.

Any summary information of certain material terms from definitive agreements, as may have been amended, in respect of the acquisitions of Washoe, Canopy, Sira, LivFree, and CannaPunch (collectively the “Definitive Agreements”) is not exhaustive and is qualified in its entirety by reference to the terms of the Definitive Agreements, which may be found on Ayr’s profile on SEDAR at www.sedar.com.

Ayr previously provided administrative, consulting, and operations services to licensed cannabis establishments in the State of Nevada, specifically to the businesses of Washoe, Canopy and LivFree, through separate services and operations agreements governed by Nevada law, pending regulatory approval to transfer the applicable Washoe, Canopy and LivFree cannabis licenses to the Company. Washoe, Canopy, and LivFree received regulatory approval to transfer such licenses to the Company on April 27, 2021. Effective September 21, 2021, the Washoe, Canopy and LivFree licensed entities were transferred to the Company, such that CSAC AcquisitionCo now wholly-owns LivFree Wellness LLC, Tahoe-Reno Botanicals, LLC, Tahoe-Reno Extractions, LLC, Kynd-Strains LLC and Lemon-Aide LLC.

In connection with each Definitive Agreement, Ayr entered into the corresponding support agreement as well as an exchange rights agreements with CSAC AcquisitionCo and the respective holders of the Exchangeable Shares (collectively, the “Exchange Rights Agreements”) for the benefit of the sellers under each Definitive Agreement, whereby Ayr agreed to make certain covenants in favor of the sellers to protect their rights as holders of Exchangeable Shares. Among other things, Ayr agreed to reserve an amount of applicable Subordinate Voting Shares for issuance upon exchange of the Exchangeable Shares, and upon notice to Ayr and CSAC AcquisitionCo, Ayr will issue such number of applicable Subordinate Voting Shares to a holder of Exchangeable Shares in exchange for the Exchangeable Shares of such holder, subject to the terms specified in the Exchange Rights Agreements. Additionally, Ayr has an overriding liquidation call right under the Exchange Rights Agreements to purchase all, but not less than all, of the Exchangeable Shares from the holders thereof upon a proposed liquidation, dissolution or winding-up of CSAC AcquisitionCo, as well as a redemption call right and retraction call right on the Exchangeable Shares, in each case for the consideration set forth in such agreements.

The description of the Exchange Rights Agreement is not exhaustive and qualified in its entirety by reference to the terms of such agreements, which may be found on Ayr’s profile on SEDAR at www.sedar.com. Further information about the Company and its operations can be obtained at www.ir.ayrwellness.com and under the Company’s profile at www.sec.gov and www.sedar.com. The information contained on such website are not a part of, nor are they incorporated by reference into, this Annual Report (or the equivalent thereof).

Subsequent Developments

Acquisitions Post-Qualifying Transaction

Pennsylvania Acquisitions

On November 18, 2020, Ayr completed its acquisition of 100% of the membership interests of DocHouse, LLC (“DocHouse”), a licensed grower-processor. The transaction includes DocHouse’s 38,000 sq. ft. cultivation and extraction facility, which has the capacity to expand to 74,000 sq. ft. The total purchase consideration paid for the transaction was $21.5 million, satisfied through $17.5 million in cash, $1.9 million in promissory notes payable, and $2.1 million in the form of approximately 128,000 Subordinate Shares of the Company.

On December 23, 2020, Ayr completed its acquisition of 100% of the membership interests of CannTech PA, a vertically integrated cannabis company with a grower-processor and dispensary permit. CannTech PA has a permit to operate six retail dispensaries and cultivation and processing facility.

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The total purchase consideration of $64 million was comprised of $25 million in cash, $14 million of promissory notes, and $25 million in Exchangeable Shares (representing approximately 1.3 million Exchangeable Shares).

Recent Acquisitions

Florida Acquisition

On February 26, 2021, Ayr acquired 100% of licensed Liberty Health Sciences Inc. (“Liberty”) in a stock for stock combination pursuant to a Plan of Arrangement under the Business Corporations Act (British Columbia). Liberty shareholders received 0.03683 Equity Shares for each Liberty share held (subject to certain collars described in the purchase agreement that is filed under the Company’s profile on SEDAR), equating to the issuance approximately 13.0 million new Equity Shares on closing. The total purchase consideration was equivalent to approximately $406 million based on the closing price of the Equity Shares.

The assets acquired from Liberty include a 387-acre cultivation campus in Gainesville, FL with over 300,000 sq. ft. of current production facilities in operation, and 31 open retail dispensaries. As of March 29, 2022, Liberty had 45 open stores in the State of Florida, with approximately 620 employees.

Arizona Acquisition

On March 23, 2021, Ayr acquired 100% of the membership interests of Blue Camo LLC, which operates under the name Oasis, a vertically integrated cannabis operation in the State of Arizona, including three (3) medical and adult-use dispensaries in the greater Phoenix area, a 10,000 sq. ft. licensed cultivation and processing facility in Chandler and an 80,000 sq. ft. licensed and completed cultivation facility in Phoenix. The terms of the transaction include upfront consideration of $157.4 million, made up of $9.7 million in cash, $125.2 million in Exchangeable Shares (representing approximately 2.57 million Exchangeable Shares and 2.0 million Exchangeable Shares held in escrow and payable upon reaching certain cultivation targets) and $22.5 million in seller notes. Additional earn-out consideration through Q1 2023 may be paid in Exchangeable Shares.

Ohio Acquisitions

On March 30, 2021, Ayr completed its acquisition of 100% of the membership interests of the management company of Parma Wellness Center, LLC (Ohio) (“Parma”) and associated real estate. Total purchase consideration of $17 million in cash has been allocated as $13 million for the right-to-use licenses and $4 million for real estate. Ayr expects to complete construction of the facility by the end of the second quarter of 2022 and anticipates sales from the facility will commence in Q4 2022. Parma holds a provisional level one (1) medical marijuana cultivator license in Ohio, with initial construction plans for 25,000 sq. ft. of canopy inside a 58,000 sq. ft. building.

On March 31, 2021, Ayr completed the acquisition of the assets of Ohio Medical Solutions, Inc. (“OMS”), the Ohio processor previously owned by Vireo Health (CSE: VREO, OTCQX: VREOF). Total purchase consideration of $1.15 million was paid in cash. OMS, which holds a Certificate of Operation in Ohio for the processing of medical marijuana, is based in Akron, Ohio and manufactures cannabis-based products in a 9,000 sq. ft. processing facility.

Massachusetts Acquisitions

On July 1, 2021, Ayr acquired Eskar Holdings, LLC through a membership interest purchase agreement for total purchase consideration of $1 million in cash.

On February 15, 2022, Ayr acquired 100% of the equity interests in Cultivauna, LLC, the owner of Levia branded cannabis infused seltzers and water-soluble tinctures. The terms of the transaction included $20 million in upfront consideration, made up of up to $10 million in cash with the remainder in stock. An earn-out payment of up to an additional $40 million will be paid in Exchangeable Shares based on the achievement of revenue targets in 2022 and 2023.

New Jersey Acquisition

On September 15, 2021, Ayr completed the acquisition, through a wholly-owned subsidiary, of the purchase of 100% of the membership interests of GSD NJ LLC (“GSD”), one of the 12 existing vertical permit holders in New Jersey and one of the state’s original six (6) alternative treatment centers. GSD has three (3) open dispensaries, the maximum allowed under its permit, at heavily trafficked highway locations throughout the central region of the State, as well as approximately 30,000 sq. ft. of operational cultivation and

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production facilities. An additional 75,000 sq. ft. cultivation facility is completed and pending regulatory approval, as of the publication of this AIF. Total upfront consideration of $101 million includes $42 million in cash, $30 million in Exchangeable Shares and $30 million in the form of a promissory note. Earn-outs based on exceeding revenue target thresholds in 2022 will be capped at a maximum of $97 million and payable in a combination of cash, promissory notes and Exchangeable Shares.

Pennsylvania Acquisition

On October 4, 2021, Ayr completed the acquisition, through a wholly owned subsidiary, of the purchase of 100% of the membership interests of PA Natural Medicine, LLC (“PA Natural”), an operator of three licensed retail dispensaries, deepening Ayr’s presence in the rapidly growing medical market in the Commonwealth of Pennsylvania. PA Natural has locations in the college towns of Bloomsburg and State College, as well as Selinsgrove, PA and operates under the retail banner “Nature’s Medicine”. The terms of the transaction included upfront consideration of $80 million, made up of $19 million in Exchangeable Shares, $25 million in seller notes and $36.5 million in cash. Subsequent to December 31, 2021, the Company paid out the earn-out provision consisting of $10.0 million of cash, $14.9 million of promissory notes, and $14.9 million of Exchangeable Shares.

Proposed Acquisitions

Illinois Acquisition

On July 20, 2021, Ayr announced that it had entered into a definitive agreement to acquire Herbal Remedies Dispensaries, LLC (“Herbal”). Ayr intends to purchase 100% of the membership interests of Herbal, an operator of two licensed dispensaries in Quincy, Illinois, the county seat of Adams County, the western-most county in Illinois. The terms of the transaction include upfront consideration of $30 million, made up of $10 million in Exchangeable Shares, $12 million in notes and $8 million in cash. The acquisition is subject to customary closing conditions and regulatory approvals.

On November 22, 2021, Ayr entered into a definitive agreement to acquire Gentle Ventures, LLC d/b/a Dispensary 33 (“Dispensary 33”), and certain of its affiliates that collectively own and operate two licensed retail dispensaries in Chicago, Illinois. Ayr intends to acquire the equity interests in Dispensary 33 pursuant to a definitive purchase and sale agreement proposed to be entered into between Ayr, its affiliate, and Dispensary 33 and the holders of 100% of the equity interests’ holders of Dispensary 33. Upfront consideration is expected to consist of $55 million, including $12 million of cash, $3 million of seller notes and $40 million of stock. The acquisition is subject to customary closing conditions and regulatory approvals.

Nevada Acquisition

On July 19, 2021, Ayr announced that it had entered into a definitive purchase agreement to acquire Tahoe Hydroponics Company, LLC (“Tahoe Hydro”), a cultivation and production company, and NV Green, Inc. (“NV Green”), a production company. Tahoe Hydro operates approximately 33,000 sq. ft. of total cultivation and manufacturing space in its facilities in Carson City, Nevada, and Sparks, Nevada. Ayr intends to purchase 100% of the membership interests of Tahoe Hydro and NV Green, adding two cultivation licenses, one production license, and one distribution license to Ayr’s Nevada footprint. The terms of the transaction include, subject to adjustment, $17 million in total consideration, made up of $5 million in cash, $3.5 million in debt, and approximately $8.5 million in stock. As of February 1, 2022, Ayr provides administrative, consulting, and operations services to Tahoe Hydro through a separate management agreement governed by Nevada law.

Expiry of Rights

In accordance with the rights agreement between the Company and Odyssey Trust Company (“Odyssey”) dated December 21, 2017, as supplemented, all of the remaining unconverted Rights expired and became null and void on May 24, 2021.

Acceleration of Expiry Date of Warrants

The expiry date of the Warrants, which was previously scheduled for May 2024, became subject to acceleration in November 2020, after the closing price of the Subordinate Voting Shares equaled or exceeded C$18.00 for a period of 20 trading days within a 30-trading day period. In accordance with the terms of the warrant agency agreement dated December 21, 2017 between Ayr and Odyssey, as warrant agent, as amended (the “Warrant Agreement”), the Mercer Warrants were not subject to such accelerated expiry and remain issued and outstanding.

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On August 31, 2021, Ayr provided notice of the accelerated expiry date of the Warrants in accordance with the terms of the. On notice in accordance with the applicable provisions of the Warrant Agency Agreement, the expiry date of the Warrants (other than the Mercer Warrants) was accelerated to 5:00 p.m. (Toronto time) on September 30, 2021. Ayr also announced a C$0.75 incentive for the exercise of Warrants available to the holders of Warrants (“Warrantholders”) who exercised their Warrants for cash. Upon exercise, a Warrantholder was entitled to receive one (1) Subordinate Voting Share at an exercise price of C$11.50 (C$10.75 net of the incentive) per Subordinate Voting Share (with each Subordinate Voting Share being subject to automatic conversion on a one-for-one basis into Restricted or Limited Voting Share in accordance with the articles of the Company), for each whole Warrant, subject to adjustment in certain circumstances in accordance with the terms and conditions of the Warrant Agreement.

On October 20, 2021, Ayr announced that a total of 5.85 million (91%) of the publicly-held Warrants exercised were exercised for cash and received the benefit of the incentive, pursuant to which Ayr added approximately $49.5 million in cash to its balance sheet. The remaining 9% of publicly-held Warrants exercised were settled for Equity Shares on a net basis.

Change of Auditor

On August 16, 2021, Ayr changed its auditor from MNP LLP to Marcum LLP. MNP LLP, in coordination with Ayr, advised that it was resigning because it is strictly a mid-market firm and with Ayr’s recent acquisitions and expanding market capitalization, the Company no longer met their criteria of a mid-market audit client. MNP LLP also confirmed that there were no disagreements or unresolved issues between Ayr and MNP LLP in connection with its resignation as Ayr’s auditor.

Share Buyback

On August 25, 2021, Ayr announced the authorization of the repurchase of up to 5% of the Equity Shares, the maximum amount allowed for CSE listed companies, over the following 12 months pursuant to a normal course issuer bid. As of March 1, 2022, Ayr had repurchased 645,300 Equity Shares, which are now held by the Company in treasury, in addition to a total of 93,900 Equity Shares that were repurchased and cancelled, under the repurchase program.

Private Placement of Additional Notes under the Indenture

On November 12, 2021, the Company completed a private placement offering of approximately $133 million aggregate principal amount of secured promissory notes at a premium price of $1,070 per $1,000, resulting in approximately $147 million of proceeds. The resulting yield-to-maturity is 9.8% per annum. The Additional Notes were issued pursuant to a trust indenture dated December 10, 2020  (the “Original Indenture”) between the Company and Odyssey, as amended by the first supplemental indenture dated as of February 12, 2021 (the “First Supplemental Indenture”) and the second supplemental indenture dated as  of November 10, 2021 (the “Second Supplemental Indenture” and together with the Original Indenture and First Supplemental Indenture, the “Indenture”). The Additional Notes are considered “Additional Notes” and as a single series with the existing Senior Notes under the Indenture.

DESCRIPTION OF THE BUSINESS

Ayr Wellness Inc. is a national cannabis consumer packed goods company and retailer. Founded in 2019 and headquartered in Miami, Florida since 2021 the Company is focused on delivering high quality cannabis products and a premium customer experience throughout its footprint. As of December 31, 2021, the Company has operations in seven U.S. States and employs roughly 2,300 people. The Company, through its subsidiaries and affiliates, holds, operates and manages licenses and permits in the States of Arizona, Florida, Massachusetts, Nevada, New Jersey, Ohio, and Pennsylvania.

The Company’s strategy is to vertically integrate through the consolidation of cultivation, production, distribution, and dispensation of cannabis brands and products at scale. The Company’s portfolio of consumer-packaged goods brands includes Kynd, Origyn Extracts, Levia, STiX Preroll Co., Secret Orchard, and Entourage, among others. The Company distributes and markets its products to Ayr-owned retail stores and to third-party licensed retail cannabis stores throughout Ayr’s operating footprint.

The Company owns and operates a chain of cannabis retail stores under brand names including AYR, Liberty Health Sciences, and The Dispensary. Ayr owns stores under other names, primarily where stores acquired still retain their pre-acquisition branding, though the Company intends to unify its retail footprint under the AYR retail brand name over time. The income of Ayr’s retail stores derives primarily from the sale of cannabis products, with an immaterial portion of income resulting from the sale of other merchandise (such as cannabis accessories). As of March 29, 2022, Ayr operates 67 retail stores, located across Ayr’s portfolio.

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Strategy

The Company’s business strategy is to evaluate each market opportunity pursuant to the relevant local competitive and regulatory landscape, supply/demand dynamics, and growth potential. The Company evaluates the economic viability of each opportunity before making capital allocation decisions and may decide to participate in one or more facets of the supply chain based on the dynamics mentioned above. The Company targets best-in-class assets in relevant markets with large addressable populations in  states with disciplined license structures that are either currently or soon expected to be approved for adult-use cannabis sales. By establishing a substantial presence in markets that have the greatest growth potential, the Company expects to be well‐positioned for future growth in adult‐use cannabis as the market continues to expand.

Growth

The Company remains focused on pursuing acquisition opportunities in markets with disciplined license structures that complement its existing portfolio while deepening its presence in current markets. The Company’s financial capacity will help the Company emerge as an even stronger player in this capital constrained industry. The Company plans to implement its growth strategy by targeting acquisition opportunities in jurisdictions with disciplined license structures, applying for de novo licenses and deepening its presence in its current markets.

Targeting acquisition opportunities in limited licenses jurisdictions. The Company is pursuing acquisition opportunities in limited license markets with high barriers to entry.

Applying for de novo licenses. The Company is actively seeking additional avenues of growth in its existing markets and other key markets.

Deepening its presence in current markets. The Company currently operates in markets with disciplined license structures, where State-level restrictions limit the number of cannabis licenses awarded, resulting in high barriers to entry, limited market participants, and long-term competitive advantages.

Licenses

The following table provides a list of the licenses granted to companies and facilities operated by, or to which operational support is provided by, the Company as of March 29, 2022.

Entity on
License

d/b/a

Address 
Attached to 
License

Type

License

Certificate/License #

Summary

Certificate

State of Nevada – Medical Marijuana Cultivation – Cannabis Compliance Board

74378723704914675084

Cultivation – Medical

Certificate

State of Nevada – Adult-Use Marijuana Cultivation – Cannabis Compliance Board

68096361433916615303

Cultivation – Adult-Use

LivFree Wellness LLC

3900 Ponderosa Way, Las Vegas, NV 89118

Certificate

State of Nevada – Medical Marijuana Production – Cannabis Compliance Board

52864127312203226338

Production – Medical

Certificate

State of Nevada – Adult-Use Marijuana Production – Cannabis Compliance Board

59998657224967428496

Production – Adult-Use

License

Clark County – Medical Cultivation/Production & Retail Cultivation/Production/Distribution – Department of Business License

2000178.MMR-301

Cultivation/Production/
Distribution – Medical/Adult-Use

License

City of Las Vegas – Conditional License – Cannabis Production Facility OLV – Department of Planning

M67-00022

Production

LivFree Wellness LLC

The Dispensary

8605 S Eastern Ave Las Vegas, NV 89123

Certificate

State of Nevada – Adult-Use Retail Store – Cannabis Compliance Board

64345737726226352455

Retail – Adult-Use

License

Clark County – Temporary Business License – Cannabis Master License Retail Store – Department of Business License

2000229-MMR-301

Retail – Adult-Use

Certificate

State of Nevada – Medical Marijuana Dispensary – Cannabis Compliance Board

60215712221216816750

Retail – Medical

LivFree Wellness LLC

The Dispensary

5347 S. Decatur, Las Vegas, NV 89118

Certificate

State of Nevada – Adult-Use Retail Store – Cannabis Compliance Board

71224329369156133247

Retail – Adult-Use

Certificate

State of Nevada – Adult-Use Distribution – Cannabis Compliance Board

14504799651148975256

Distribution – Adult-Use

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License

Clark County – Limited Business License Cannabis Retail Store/Medical Dispensary – Department of Business License

2000118.MMR-301

Retail – Medical/Adult-Use

Certificate

State of Nevada – Medical Marijuana Dispensary – Cannabis Compliance Board

54403159919762505142

Retail – Medical

Certificate

State of Nevada – Adult-Use Retail Store – Cannabis Compliance Board

08792343110299625005

Retail – Adult-Use

LivFree Wellness LLC

The Dispensary

50 N. Gibson, Henderson, NV 89014

License

City of Henderson – Medical Marijuana Dispensary – Finance Department

2017305992

Retail – Medical

License

City of Henderson – Adult-Use Marijuana Distributor – Finance Department

2017306144

Distribution – Adult-Use

License

City of Henderson – Adult-Use Marijuana Retail Store – Finance Department

2017305994

Retail – Adult-Use

LivFree Wellness LLC

The Dispensary

100 W. Plumb Lane, Reno, NV 89509

Certificate

State of Nevada – Medical Marijuana Dispensary – Cannabis Compliance Board

04186481440349513323

Retail – Medical

Certificate

State of Nevada – Adult-Use Retail Store – Cannabis Compliance Board

71702389611437559364

Retail – Adult-Use

The Dispensary

100 W. Plumb Lane, Reno, NV 89509

License

City of Reno – Medical Marijuana Dispensary – City Clerk

R101848Q

Retail – Medical

The Dispensary

100 W. Plumb Lane, Reno, NV 89509

License

City of Reno – Marijuana Establishment-Retail Store – City Clerk

R145282Q

Retail – Adult-Use

The Dispensary

100 W. Plumb Lane, Reno, NV 89509

License

City of Reno – Marijuana Establishment – Annual Merchandise Sales License – City Clerk

R134462A

Merchandise Sales

LivFree Wellness LLC

The Dispensary

435 Eureka Avenue, Reno, NV 89512

Certificate

State of Nevada – Medical Marijuana Cultivation – Cannabis Compliance Board

96804690721657828547

Cultivation – Medical

Certificate

State of Nevada – Medical Marijuana Production – Cannabis Compliance Board

18668881888004789228

Production – Medical

Certificate

State of Nevada – Adult-Use Marijuana Cultivation – Cannabis Compliance Board

94104154254817748080

Cultivation – Adult-Use

Certificate

State of Nevada – Adult-Use Production – Cannabis Compliance Board

56693629355290417097

Production – Adult-Use

License

City of Reno – Medical Marijuana Production – City Clerk

R145364Q

Production – Medical

License

City of Reno – Medical Marijuana Cultivation – City Clerk

R145363Q

Cultivation – Medical

License

City of Reno – Marijuana Establishment – City Clerk

R145362A

Marijuana Establishment

License

City of Reno – Marijuana Establishment – City Clerk

R145361A

Marijuana Establishment

License

City of Reno – Adult-Use Production – City Clerk

R145418Q

Production – Adult-Use

License

City of Reno – Adult-Use Cultivation – City Clerk

R145417Q

Cultivation – Adult-Use

Tahoe-Reno Botanicals LLC

Kynd Cannabis Company

1645 Crane Way, Sparks, NV 89431

Certificate

State of Nevada – Medical Marijuana Cultivation – Cannabis Compliance Board

82842542964915513809

Cultivation – Medical

Certificate

State of Nevada – Adult-Use Marijuana Cultivation – Cannabis Compliance Board

20856188563796491040

Cultivation – Adult-Use

Tahoe-Reno Botanicals LLC

1645 Crane Way, Sparks, NV 89431

License

City of Sparks – Adult-Use Marijuana Cultivation – Business License Division

S080844Q-LIC

Cultivation – Adult-Use

Certificate

State of Nevada – Medical Marijuana Production – Cannabis Compliance Board

12078072637090304628

Production – Medical

Tahoe-Reno Extractions LLC

Kynd Cannabis Company

1645 Crane Way, Sparks, NV 89431

Certificate

State of Nevada – Adult-Use Production – Cannabis Compliance Board

76163748746660781629

Production – Adult-Use

Certificate

State of Nevada – Adult-Use Distribution – Cannabis Compliance Board

77027711033924812731

Distribution – Adult-Use

Tahoe-Reno Extractions LLC

1645 Crane Way, Sparks, NV 89431

License

City of Sparks – Adult-Use Marijuana Production – Business License Division

S080842Q-LIC

Production – Adult-Use

License

City of Sparks – Adult-Use Marijuana Distributor – Business License Division

S080843Q-LIC

Distribution – Adult-Use

Kynd Cannabis Company

1645 Crane Way, Sparks, NV 89431

License

City of Las Vegas – Conditional License – Cannabis Cultivation Facility OLV – Department of Planning

M69-00021

Cultivation

License

City of Las Vegas – Conditional License – Cannabis Production Facility OLV – Department of Planning

M69-00036

Production

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Kynd-Strainz LLC

MYNT Cannabis Dispensary

132 E. Second St., Reno, NV 89501

License

City of Reno – Marijuana Establishment – City Clerk

R134783A

Retail – Adult-Use

Certificate

State of Nevada – Medical Marijuana Dispensary – Cannabis Compliance Board

97519348303293892007

Retail – Medical

Certificate

State of Nevada – Adult-Use Retail Store – Cannabis Compliance Board

46934338604709544132

Retail – Adult-Use

License

City of Reno – Medical Marijuana Dispensary – City Clerk

R101872Q

Retail – Medical

MYNT Cannabis Dispensary

132 E. Second St., Reno, NV 89501

License

City of Reno – Marijuana Establishment-Retail Store – City Clerk

R145321Q

Retail – Adult-Use

Lemon Aide, LLC

340 Lemmon Drive, Reno, NV 89506

Certificate

State of Nevada – Medical Marijuana Dispensary – Cannabis Compliance Board

80994578239784321818

Retail – Medical

Lemon Aide, LLC

340 Lemmon Drive, Reno, NV 89506

Certificate

State of Nevada – Adult-Use Retail Store – Cannabis Compliance Board

13244303247046007918

Retail – Adult-Use

Lemon Aide, LLC

MYNT Cannabis Dispensary

340 Lemmon Drive, Reno, NV 89506

License

Washoe County – Marijuana Retail Store/Dispensary – Washoe County Business License

W000013ME-LIC

Retail – Medical/Adult-Use

Certificate

State of Nevada – Adult-Use Marijuana Cultivation – Cannabis Compliance Board

80476394983467584488

Cultivation – Adult-Use

Certificate

State of Nevada – Adult-Use Marijuana Production – Cannabis Compliance Board

08300436904530710396

Production – Adult-Use

Certificate

State of Nevada – Medical Marijuana Cultivation – Cannabis Compliance Board

33102338992967161675

Cultivation – Medical

NV Green Inc.

1475 Hymer Ave Suite A, Sparks, NV 89431

Certificate

State of Nevada – Medical Marijuana Production – Cannabis Compliance Board

51157511271279283787

Production – Medical

License

City of Las Vegas – Conditional License – Cannabis Production Facility OLV – Department of Planning

M67-00020

Production

License

City of Las Vegas – Conditional License – Cannabis Cultivation Facility OLV – Department of Planning

M67-00027

Cultivation

License

City of Sparks – Adult-Use Marijuana Cultivation – Business License Division

S082294Q-LIC

Cultivation – Adult-Use

License

City of Sparks – Adult-Use Marijuana Production – Business License Division

S082295Q-LIC

Production – Adult-Use

Tahoe Hydroponics Company LLC

3535 Arrowhead Dr Ste B, Carson City, NV 89706

Certificate

Carson City – Marijuana Distributor – Business License Division

MJ-004914-2020

Distribution

Certificate

Carson City – Marijuana Cultivation – Business License Division

MJ-004913-2020

Cultivation

License

City of North Las Vegas – Marijuana Distributor Outside NLV – Land Development and Community Services

BL115813

Distribution

License

City of Henderson – Adult-Use Marijuana Distributor – Finance Department

2019311882

Distribution – Adult-Use

License

City of Las Vegas – Cannabis Distributor OLV – Department of Planning

M67-00047

Distribution

License

City of Las Vegas – Conditional License – Cannabis Cultivation OLV – Department of Planning

M67-00040

Cultivation

Certificate

State of Nevada – Medical Marijuana Cultivation – Cannabis Compliance Board

97712183133535367749

Cultivation – Medical

Certificate

State of Nevada – Adult-Use Marijuana Cultivation – Cannabis Compliance Board

15066280419696569275

Cultivation – Adult-Use

Certificate

State of Nevada – Adult-Use Distribution – Cannabis Compliance Board

33766980341791854561

Distribution – Adult-Use

Ocotillo Vista, Inc.

Oasis

6676 West Bell Road, Glendale, AZ 85308

Certificate

ADHS – Medical Marijuana Dispensary Registration Certificate

00000109DCIT00443532

Retail – Medical

Certificate

ADHS – Marijuana Establishment License

00000051ESYP04501588

Retail – Recreational

Total Health & Wellness, Inc.

Oasis

17006 S. Weber Drive, Chandler, Arizona 85226

Certificate

ADHS – Medical Marijuana Dispensary Registration Certificate

00000100DCWU00857159

Retail – Medical

Certificate

ADHS – Marijuana Establishment License

00000021ESQX24132908

Retail – Recreational

Certificate

ADHS – Medical Marijuana Dispensary Registration Certificate

00000036DCOP00819772

Retail – Medical

Total Health & Wellness, Inc.

Oasis

26427 S Arizona Ave, Chandler, AZ 85248

Certificate

ADHS – Marijuana Establishment License

00000060ESTV86857950

Retail – Recreational

950 US Highway 1, Woodbridge, NJ 07095

Permit

CRC – Cultivate, process, and dispense medicinal marijuana

11202013 A

Cultivation, Production, Retail – Medical

GSD NJ, LLC

Garden State Dispensary

Permit

CRC – Manufacture medicinal marijuana

11202013 B

Production – Medical

2536 Rt. 22, Union, NJ 07083

Permit

CRC – Dispense medicinal marijuana

11202013 C

Retail – Medical

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Table of Contents

59 NJ-35, Eatontown, NJ 07724

Permit

CRC – Dispense medicinal marijuana

11202013 D

Retail – Medical

Sira Naturals, Inc.

48 North Beacon Street, Watertown, MA 02472

License

CCC – Registered Marijuana Dispensary

RMD-325

Retail – Medical

Sira Naturals, Inc.

Sira Naturals

240 Elm Street, Somerville, MA 02114

License

CCC – Registered Marijuana Dispensary

RMD-245

Retail – Medical

Sira Naturals, Inc.

29 Franklin Street, Needham, MA 02492

License

CCC – Registered Marijuana Dispensary

RMD-625

Retail – Medical

License

CCC – Marijuana Establishment License (Cultivation/Tier 3 – Indoor)

MC281252

Cultivation

Sira Naturals, Inc.

13 Commercial Way, Milford, MA 01757

License

CCC – Marijuana Establishment License (Product Manufacturer)

MP281303

Production

License

CCC – Marijuana Establishment License (Transporter with Other Existing ME License)

MX281310

Transportation

Sira Naturals, Inc.

1 Industrial Way, Milford MA 01751

License

CCC – Marijuana Establishment License (Cultivation/Tier 3 – Indoor)

MC282015

Cultivation

Sira Naturals, Inc.

5-7 Industrial Way, Milford, MA 01757

License

CCC – Provisional Marijuana Establishment License (Cultivation/Tier 8 – Indoor)

MC283066

Cultivation

License

CCC – Provisional Marijuana Establishment License (Product Manufacturer)

MP281613

Production

Cultivauna, LLC

Levia

68 Tenney Street, Georgetown, MA 01833

License

CCC – Marijuana Establishment License (Product Manufacturer)

MP281871

Production

AYR Wellness

844 East Tallmadge Avenue, Akron, Ohio, 44310

License

City of Akron – Medical Marijuana Processor Operating License

001

Production – Medical

Certificate

State of Ohio – Medical Marijuana Processor Operating License

MMCPP00102

Production – Medical

DFMMJ Investments, LLC

Liberty Health Sciences

18770 N County Road 225, Gainesville, Florida, 32609

License

Medical Marijuana Treatment Center

MMTC-2015-0002

Cultivate, process, transport, retail – Medical

CannTech PA, LLC

535 Keystone Drive, Warrendale, PA 15086

Permit

DOH OMM – Operate Medical Marijuana Grower/Processor Facility

CR04-GP20-5701

Cultivation – Medical

CannTech PA, LLC

809 Sampson Street, New Castle, PA 16101

Permit

DOH OMM – Operate Medical Marijuana Dispensary Facility

CR04-D20-6701 A

Retail – Medical

CannTech PA, LLC

Ayr Wellness

505 W. Germantown Pike, Plymouth Meeting, PA 19462

Permit

DOH OMM – Operate Medical Marijuana Dispensary Facility

CR04-D20-6701 B

Retail – Medical

CannTech PA, LLC

112 Northtowne Square, Gibsonia PA 15044

Permit

DOH OMM – Operate Medical Marijuana Dispensary Facility

CR04-D20-6701 C

Retail – Medical

CannTech PA, LLC

712 Lancaster Ave., Bryn Mawr, PA 19010

Permit

DOH OMM – Operate Medical Marijuana Dispensary Facility

CR04-D20-6701 D

Retail – Medical

CannTech PA, LLC

801 Horsham Rd, Montgomeryville, PA 18936

Permit

DOH OMM – Operate Medical Marijuana Dispensary Facility

CR04-D20-6701 E

Retail – Medical

DocHouse LLC

740 Ann St Pottsville, PA 17901

Permit

DOH OMM – Operate Medical Marijuana Grower/Processor Facility

GP18-1002

Cultivation – Medical

PA Natural Medicine LLC

Nature’s Medicine

261-269 Columbia Mall Dr., Bloomsburg, PA 17815

Permit

DOH OMM – Operate Medical Marijuana Dispensary Facility

D-4007-17 A

Retail – Medical

PA Natural Medicine LLC

1420 N. Susquehanna Trail, Selinsgrove, PA 17870

Permit

DOH OMM – Operate Medical Marijuana Dispensary Facility

D-4007-17 B

Retail – Medical

PA Natural Medicine LLC

2105 N. Atherton St., State College, PA 16803

Permit

DOH OMM – Operate Medical Marijuana Dispensary Facility

D-4007-17 C

Retail – Medical

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Intangible Assets

As of December 31, 2021, intangible assets had a net book value of $978,915,457 million (excluding goodwill) and consisted of the following: Licenses, Right-to-use Licenses, Host community agreements and Trade name / brand which have useful lives of 15, 15, 15, and 5 years, respectively. Amortization is recorded on a straight-line basis over their estimated useful lives, which do not exceed the contractual period, if any. Such assets are tested annually for impairment, or more frequently, if events or changes in circumstances indicate that they might be impaired.

Employees

As of December 31, 2021, the Company had approximately 2,300 employees. The Company seeks to attract, hire and promote the most qualified and diverse candidates for each position. Based on both acquisitions and hires, the Company leverages experience from multiple individuals that have been in the regulated cannabis market. The Company draws upon this knowledge base and proven training program to develop and educate employees. With policies and procedures that have successfully been rolled out in multiple markets, the Company uses these proven policies and procedures where applicable to other businesses in order to meet the operational expectations for each market. The Company seeks to ensure that staff are appropriately trained and ensure the safety and welfare of employees at the Company’s facilities. Leveraging existing operations in legal adult use States, all new employees receive true hands-on training prior to starting in their new market. Setting the tone from the top, the Company’s executive team goes above and beyond to seek to ensure that all individuals within the Company are held to the highest standards, particularly with respect to compliance.

Foreign Operations

The Company does not currently have any foreign operations outside of the United States. Neither the Company nor any reportable segment of the Company has any dependence upon foreign operations outside of the United States.

Investment Policies

The Company may provide working capital facilities to its acquisition targets in order to fund development of assets prior to completion of the acquisitions, where it is to the benefit of the Company to do so.

No Bankruptcy Proceedings

There are presently no bankruptcy, receivership, or similar proceedings against the Company or any of its subsidiaries, including voluntary bankruptcy, receivership, or similar proceedings, nor have there been any such proceedings within the three (3) most recently completed financial years.

CANNABIS MARKET OVERVIEW

On February 8, 2018, the Canadian Securities Administrators revised their previously released Staff Notice 51-352, which provides specific disclosure expectations for issuers that currently have, or are in the process of developing, cannabis-related activities in the United States as permitted within a particular State’s regulatory framework. All issuers with U.S. cannabis-related activities are expected to clearly and prominently disclose certain prescribed information in disclosure documents. As a result of the Company’s existing operations in Massachusetts, Nevada, Pennsylvania, Florida, Arizona, New Jersey, and Ohio, Ayr provides the following disclosure:

The legalization and regulation of marijuana for medical use is being implemented at the State level in the United States. State laws regulating cannabis are in direct conflict with the CSA, which makes cannabis use and possession federally illegal. Although certain States and territories of the United States authorize medical or adult-use cannabis production and distribution by licensed or registered entities, under United States federal law, the possession, use, cultivation, and transfer of cannabis and any related drug paraphernalia is illegal and any such acts are criminal acts under federal law under any and all circumstances under the CSA. Although the Company’s business activities are believed to be compliant in all material respects with applicable U.S. State and local law, strict compliance with State and local laws with respect to cannabis may neither absolve Ayr of liability under United States federal law, nor may it provide a defense to any federal proceeding which may be brought against Ayr.

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The following table is intended to assist readers in identifying those parts of this AIF that address the disclosure expectations outlined in Staff Notice 51-352.

Industry
Involvement

Specific Disclosure Necessary to Fairly Present all
Material Facts, Risks and Uncertainties

AIF Cross-Reference

All Issuers with U.S. Marijuana- Related Activities

Describe the nature of the issuer’s involvement in the U.S. marijuana industry and include the disclosures indicated for at least one of the direct, indirect and ancillary industry involvement types noted in this table.

-

Description of the Business

Prominently State that marijuana is illegal under U.S. federal law and that enforcement of relevant laws is a significant risk.

-

Cover page

(disclosure in bold typeface)

-

Cannabis Market Overview (disclosure in bold typeface)

Discuss any statements and other available guidance made by federal authorities or prosecutors regarding the risk of enforcement action in any jurisdiction where the issuer conducts U.S. marijuana-related activities.

-

Cover page

(disclosure in bold typeface)

-

Federal Regulatory Environment

-

U.S. Federal Enforcement Priorities

-

Risk Factors – While legal under applicable U.S. State law, Ayr’s business activities are illegal under U.S. federal law

-

Risk Factors – The approach to the enforcement of cannabis laws may be subject to change or may not proceed as previously outlined

Outline related risks including, among others, the risk that third-party service providers could suspend or withdraw services and the risk that regulatory bodies could impose certain restrictions on the issuer’s ability to operate in the U.S.

-

Risk Factors – Service providers could suspend or withdraw service

-

Risk Factors – While legal under applicable U.S. State law, Ayr’s business activities are illegal under U.S. federal law

Given the illegality of marijuana under U.S. federal law, discuss the issuer’s ability to access both public and private capital and indicate what financing options are / are not available in order to support continuing operations.

-

Ability to Access Public and Private Capital

-

Risk Factors – Ayr may be subject to restricted access to banking in the United States and Canada

-

Risk Factors – Ayr’s investments in the U.S. are subject to applicable anti-money laundering laws and regulations

Quantify the issuer’s balance sheet and operating statement exposure to U.S. marijuana related activities.

-

Exposure to U.S. Marijuana Related Activities

Disclose if legal advice has not been obtained, either in the form of a legal opinion or otherwise, regarding (a) compliance with applicable State regulatory frameworks and (b) potential exposure and implications arising from U.S. federal law.

-

The Company has received and continues to receive legal input regarding (a) compliance with applicable State regulatory frameworks and (b) potential exposure and implications arising from U.S. federal law in certain respects. The Company receives such advice on an ongoing basis but does not have a formal legal opinion on such matters.

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Industry
Involvement

Specific Disclosure Necessary to Fairly Present all
Material Facts, Risks and Uncertainties

AIF Cross-Reference

U.S. Marijuana Issuers with direct involvement in cultivation or distribution

Outline the regulations for U.S. States in which the issuer operates and confirm how the issuer complies with applicable licensing requirements and the regulatory framework enacted by the applicable U.S. State.

-

Cannabis Market Overview – Nevada

-

Cannabis Market Overview – Massachusetts

-

Cannabis Market Overview – Pennsylvania

-

Cannabis Market Overview – Florida

-

Cannabis Market Overview – Ohio

-

Cannabis Market Overview – New Jersey

-

Cannabis Market Overview – Arizona

-

Cannabis Market Overview – Illinois

-

State Regulatory Landscapes

Discuss the issuer’s program for monitoring compliance with U.S. State law on an ongoing basis, outline internal compliance procedures and provide a positive statement indicating that the issuer is in compliance with U.S. State law and the related licensing framework. Promptly disclose any non-compliance, citations or notices of violation which may have an impact on the issuer’s license, business activities or operations.

-

Cannabis Market Overview – Compliance with State Regulatory Frameworks

In accordance with Staff Notice 51-352, below is a discussion of the federal and State-level U.S. regulatory regimes in those jurisdictions where Ayr is directly or indirectly involved through its subsidiaries. Ayr is currently indirectly engaged in the manufacture, possession, use, sale or distribution of cannabis and/or holds licenses in the adult-use and/or medicinal cannabis marketplace in the States of Massachusetts, Nevada, Pennsylvania, Florida, Arizona, New Jersey and Ohio and has entered into definitive agreements to expand into the State of Illinois. In accordance with Staff Notice 51-352, Ayr will evaluate, monitor and reassess this disclosure, and any related risks, on an ongoing basis and the same will be supplemented and amended to investors in public filings, including in the event of government policy changes or the introduction of new or amended guidance, laws or regulations regarding cannabis regulation. As noted under “Non-Compliance with State and Local Cannabis Laws” below, Ayr intends to cause its businesses to promptly remedy any material known occurrences of non-compliance with applicable State and local cannabis rules and regulations, and Ayr intends to publicly disclose any material non-compliance, citations or notices of violation which may have an impact on its licenses, business activities or operations.

Exposure to U.S. Marijuana Related Activities

As of December 31, 2021, 100% of the businesses was directly derived from United States cannabis-related activities. As such, the Company’s exposure to United States cannabis related activities is 100%.

Federal Regulatory Environment

The federal government of the United States regulates controlled substances through the Controlled Substances Act (CSA), which places controlled substances on one of five schedules. Currently, marijuana is classified as a Schedule I controlled substance. A Schedule I controlled substance means the Drug Enforcement Agency considers it to have a high potential for abuse, no accepted medical treatment, and a lack of accepted safety for the use of it even under medical supervision. Overall, the United States federal government has specifically reserved the right to enforce federal law regarding the sale and disbursement of medical or adult-use marijuana even if such sale and disbursement is sanctioned by State law. Accordingly, there are a number of significant risks associated with the business of the Company and unless and until the United States Congress amends the CSA with respect to medical and/or adult-use cannabis (and as to the timing or scope of any such potential amendments there can be no assurance), there is a significant risk that federal authorities may enforce current federal law, and the business of the Company may be deemed to be producing, cultivating, extracting, or dispensing cannabis or aiding or abetting or otherwise engaging in a conspiracy to commit such acts in violation of federal law in the United States.

The Company’s operations, to the Company’s knowledge, are in compliance with applicable State laws, regulations and licensing requirements in all material respects. Additionally, the Company uses the same proprietary, best-practices policies and procedures in its managed facilities as in its owned facilities in order to ensure systematic operations and, as such, to the Company’s knowledge, the facilities that the Company operates are in compliance with applicable State laws, regulations and licensing requirements in all material

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respects. Nonetheless, for the reasons described above and risks described under the “Forward-Looking Information”, but not limited to these reasons, there are significant risks associated with the business of the Company. Readers are strongly encouraged to carefully read all the risk factors contained herein.

The following sections entitled describe the legal and regulatory landscape in respect of the States in which the Company currently operates and, in the case of Illinois, in which it intends to operate.

While the Company’s compliance controls have been developed to mitigate the risk of any material violations of a license arising, there is no assurance that the Company’s licenses will be renewed in the future in a timely manner. Any unexpected delays or costs associated with the licensing renewal process could impede the ongoing or planned operations of the Company and have a material adverse effect on the Company’s business, financial condition, results of operations or prospects.

As a result of the November 2020 U.S. federal election, President Joseph R. Biden is now in office. There can be no assurance as to the position any administration may take on marijuana and the Biden administration could decide to enforce the federal laws strongly. Any enforcement of current federal laws could cause significant financial damage to the Company and its shareholders. Further, future presidential administrations may want to treat marijuana differently and potentially enforce the federal laws more aggressively.

U.S. Federal Enforcement Priorities

Due to the current federal regulatory environment in the United States, as further described herein, Ayr may become the subject of heightened scrutiny by regulators, stock exchanges and other authorities in Canada and the U.S. As a result, Ayr may be subject to significant direct and indirect interaction with public officials. There can be no assurance that this heightened scrutiny will not in turn lead to the imposition of certain restrictions on Ayr’s ability to invest in the U.S. or any other jurisdiction. See “Risk Factors – While legal under applicable U.S. State law, Ayr’s business activities are illegal under U.S. federal law” and “Risk Factors – The approach to the enforcement of cannabis laws may be subject to change or may not proceed as previously outlined”.

Changes in government policy or public opinion can significantly influence the regulation of the cannabis industry in Canada, the United States and elsewhere. A negative shift in the public’s perception of cannabis in the U.S. or any other applicable jurisdiction could affect future legislation or regulation. Among other things, such a shift could cause State jurisdictions to abandon initiatives or proposals to legalize cannabis, thereby limiting the number of new State jurisdictions into which Ayr could expand. Any inability to fully implement Ayr’s expansion strategy may have a material adverse effect on Ayr’s business, financial condition and results of operations. See “Risk Factors”.

Further, violations of any U.S. federal laws and regulations could result in significant fines, penalties, administrative sanctions, convictions or settlements arising from criminal charges or civil proceedings conducted by either the U.S. federal government or private citizens (who have the right to seek private relief for Ayr’s “aiding and abetting” activities that violate U.S. federal law), including, but not limited to, disgorgement of profits, cessation of business activities or divestiture. This could have a material adverse effect on Ayr, including on its reputation and ability to conduct business, its holding (directly or indirectly) of cannabis licenses in the U.S., the listing of its securities on various stock exchanges, its financial position, operating results, profitability or liquidity, or the market price of its publicly-traded shares. In addition, it is difficult for Ayr to estimate the time or resources that would be needed for the investigation or final resolution of any such matters because, in part, the time and resources that may be needed are dependent on the nature and extent of any information requested by the applicable authorities involved, and such time or resources could be substantial. See “Risk Factors – Risks Related to Legality of Cannabis”.

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Nevada

Nevada Regulatory Landscape

The use of medical cannabis was legalized in Nevada by a ballot initiative in 2000. Nevada has legislatively enacted the licensing of medical cannabis business establishments since 2013. Adult-use cannabis was approved in November 2016, when voters in Nevada passed an adult-use cannabis measure to allow for the licensing of business establishments to engage in the sale of adult-use cannabis in the State. The first retail stores to sell adult-use cannabis began sales in July 2017. As of July 1, 2020, the Nevada Cannabis Compliance Board (the “CCB,” successor to the Nevada Department of Taxation as the applicable regulatory agency) governs and administers regulatory oversight for the medical and adult-use cannabis programs. Cities and counties in Nevada are allowed to determine the number of local cannabis licenses they will issue up to the maximum number allocated by the statute. In April 2021, the Company received regulatory approval from the CCB for the acquisition of five (5) Nevada licensed companies (LivFree Wellness LLC, Kynd-Strainz LLC, Lemon Aide LLC, Tahoe-Reno Botanicals LLC, and Tahoe-Reno Extractions LLC) (collectively the “Nevada Subsidiaries”), and through these subsidiaries, the Company currently operates facilities located in the Clark County, City of Henderson, City of Reno and Washoe County jurisdictions in Nevada. Additionally, in January 2022, the Company received regulatory approval from the CCB for management services agreements with Tahoe Hydroponics Company LLC and NV Green Inc. (collectively,“Nevada Managed Entities”, and together with the Nevada Subsidiaries, the “Nevada Businesses”), and since that time, provides operational support to the Nevada Managed Entities.

Licenses

The Company, through the Nevada Businesses, operates four (4) cultivation facilities, three (3) production facilities, six (6) dispensaries, and two (2) distribution facilities in the State of Nevada. Under applicable laws, the licenses issued for these facilities permit the businesses to cultivate, manufacture, process, package, sell, purchase, and transport cannabis pursuant to the license types and Nevada regulations.

State issued licenses are renewed annually, and local business licenses are renewed quarterly or annually, and there is no ultimate expiry after which no renewals are permitted. Additionally, in respect of the renewal process, provided that the requisite renewal fees are paid, the renewal application is submitted in a timely manner along with the necessary supporting documents, including requisite background investigations, and regulatory requirements are met, the licensee would expect to receive the applicable renewed license in the ordinary course of business. One of the Nevada Subsidiaries, LivFree Wellness, was also awarded one (1) additional contingent dispensary license in the greater Las Vegas market (City of Henderson).

Regulations

In the State of Nevada, only cannabis that is grown/produced in the State by a licensed establishment may be sold in the State. The Nevada Businesses are vertically integrated and have the capabilities to cultivate, harvest, process, sell, dispense, deliver, and transport adult-use and medical cannabis and cannabis products.

Reporting Requirements

The State of Nevada uses METRC solution (“METRC”) as the State’s computerized tracking system (“seed-to-sale”) used to track commercial cannabis activity. Individual licensees whether directly or through third-party integration systems are required to transmit data to the State to meet reporting requirements. The Nevada Businesses each have a seed-to-sale system in the State which is designed to capture the required data points for cultivation, manufacturing and retail as required in Nevada Revised Statutes sections 678C and 678D.

Storage and Security

To ensure the safety and security of cannabis business premises and to maintain adequate controls against diversion, theft, and loss of cannabis and cannabis products, Nevada licensed cannabis establishments are required to do the following:

1.Have a single secure entrance of the physical building;
2.No visible cannabis or cannabis products from outside the establishment;
3.Implement and install, at a minimum, the following security equipment and practices to deter and prevent unauthorized entrance into limited access areas that includes, without limitation:

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a.devices that detect unauthorized intrusion (which may include a signal system);
b.exterior lighting designed to facilitate surveillance;
c.electronic monitoring devices, further including (without limitation);
i.at least one call-up monitor that is at least 19 inches in size;
ii.a video printer that can immediately produce a clear still photo from any video camera image;
iii.video cameras with a recording resolution of at least 1920 x 1080 at a rate of at least 15 frames per second, which provide coverage of all entrances and exits of the building. Any room or area that holds a vault and any point-of-sale location, which record 24 hours per day, which are capable of being accessed remotely by a law enforcement agency upon request and which may record motion only. A video camera providing coverage of a point-of-sale location must allow for the identification of any person purchasing cannabis;
iv.video cameras with a recording resolution of at least 720 x 480 at a rate of at least 15 frames per second that fully capture all of the building’s limited access areas not described in subsection (iii) and any activity in or adjacent to the establishment, which records 24 hours per day, which are capable of being accessed remotely by a law enforcement agency in real time upon request and which may record motion only;
v.a video camera that can identify any activity occurring within the cannabis establishment in low light conditions 24 hours per day;
vi.a method for storing video recordings from the video cameras for at least 30 calendar days in a secure on-site or off-site location or through a service or network that provides on-demand access to the recordings and providing copies of the recordings to the Board and Board Agents for review upon request;
vii.a failure notification system that provides an audible and visual notification of any failure in the electronic monitoring system;
viii.sufficient battery backup for video cameras and recording equipment to support at least five (5) minutes of recording in the event of a power outage; and
ix.an immediate automatic or electronic notification security alarm to alert local law enforcement of unauthorized breach of security
4.Implement security procedures that:
a.restrict access of the establishment to only those persons/employees authorized to be there;
b.deter and prevent theft;
c.provide identification (badge) for those persons/employees authorized to be in the establishment;
d.prevent loitering;
e.limiting the amount of money available in any retail areas of the cannabis establishment and for training employees on this practice;
f.require and explain electronic monitoring;
g.require and explain the use of automatic or electronic notifications to alert local law enforcement of any security breaches, and for maintaining communication with law enforcement agencies;
h.limit the amount of money available in any retail areas of the cannabis establishment and notifying the public of the minimal amount of money available; and
i.provide for receiving notifications regarding burglary, attempted burglary, robbery, attempted robber and other suspicious activity.

Massachusetts

Massachusetts Regulatory Landscape

The use of cannabis for medical use was legalized in Massachusetts by a voter approval of the Massachusetts Marijuana Initiative in 2012. The law took effect on January 1, 2013, eliminating criminal and civil penalties for the possession and use of up to a 60-day or ten (10) ounce supply of marijuana for medical use for patients possessing a State issued registration card.

On November 8, 2016, Massachusetts voters approved Question 4 or the Massachusetts Marijuana Legalization Initiative, which allowed for recreational or “adult use” cannabis in the Commonwealth. On September 12, 2017, the Cannabis Control Commission (“CCC”)

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was established under Chapter 55 of the Acts of 2017 (the “Massachusetts Act”) to implement and administer laws enabling access to medical and adult-use cannabis.

On November 16, 2018, the CCC issued the first notices for retail marijuana establishments to commence adult-use operations in Massachusetts.

Under the current program there are no State-wide limits on the total number of licenses permitted; however, no individual or entity shall be a controlling person over more than three licenses in a particular class of license. Similarly, no individual, corporation or other entity shall be in a position to control the decision making of more than three licenses in a particular class of license. In addition, all marijuana establishments are required to enter into host community agreements with the municipality in which they are located.

Licenses

The Company maintains three (3) adult-use cultivation licenses, two (2) adult-use product manufacturer license, three (3) adult-use marijuana retailer licenses and one (1) adult-use transportation license in the Commonwealth of Massachusetts. In addition, the Company owns medical licenses that allow it to maintain three (3) medical marijuana dispensaries in the Commonwealth. These licenses permit the Company to cultivate, manufacture, process, package, sell, and purchase marijuana pursuant to the terms of the licenses.

Regulations

Under the terms of the marijuana cultivator license, the licensee may cultivate, process and package marijuana, and transfer and deliver marijuana products to marijuana establishments, but not to consumers. A marijuana product manufacturer is an entity authorized to obtain, manufacture, process and package marijuana and marijuana products, to deliver marijuana and marijuana products to marijuana establishments and to transfer marijuana and marijuana products to other marijuana establishments, but not to consumers. A marijuana retailer is an entity authorized to purchase and deliver marijuana and marijuana products from marijuana establishments and to sell or otherwise transfer marijuana and marijuana products to marijuana establishments and to consumers. A marijuana retailer provides a retail location which may be accessed by consumers 21 years of age or older or, if the retailer is co-located with a registered marijuana dispensary (“RMD”) by individuals who are registered qualifying patients with the Medical Use of Marijuana Program with a registration card.

In order for a customer to be dispensed marijuana, they must present a valid government issued photo ID immediately upon entry of the retail facility. If the individual is younger than 21 years old but 18 years of age or older, he or she shall not be admitted unless he or she produces an active medical registration card issued by the CCC. If the individual is younger than 18 years old, he or she shall not be admitted unless he or she produces an active medical registration card and is accompanied by a personal caregiver with an active medical registration card. In addition to the medical registration card, registered qualifying patients 18 years of age and older and personal caregivers must also produce proof of identification.

Each recreational customer may be dispensed no more than one ounce of marijuana or its combined dry weight equivalent in marijuana concentrate or edibles to a retail customer per day. One ounce of marijuana flower is equivalent to five grams of active tetrahydrocannabinol (“THC”) in marijuana concentrate, or five hundred milligrams of active THC in edibles, as outlined in 935 CMR 500.140(3). Medical patients may be dispensed up to a 60-day supply of marijuana, or the equivalent amount of marijuana in marijuana infused products (“MIPs”), that a registered qualifying patient would reasonably be expected to need over a period of 60 calendar days for his or her personal medical use, which is ten ounces, subject to 105 CMR 725.010(I).

Allowable forms of marijuana in Massachusetts include smokable dried flower, dried flower for vaporizing, cannabis derivative products (i.e., vape pens, gel caps, tinctures, etc.) and medical cannabis-infused products, including edibles.

In the Commonwealth of Massachusetts, only cannabis that is grown and manufactured in the Commonwealth can be sold in the State. For adult-use, Massachusetts does not require a vertically-integrated system. As a result, a marijuana retailer may purchase and transport marijuana products from marijuana establishments and transport, sell or otherwise transfer marijuana products to marijuana establishments and to consumers. Licensed cultivators and product manufacturers may cultivate, harvest, process, produce package and sell marijuana products to marijuana establishments.

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Reporting Requirements

The CCC has selected METRC as the State’s track-and-trace (“T&T”) system used to track commercial cannabis activity and movement across the distribution chain. The system allows for other third-party system integration via API.

Pennsylvania

Pennsylvania Regulatory Landscape

Commenced in 2016, the Pennsylvania Medical Marijuana Program (“PA Program”), which operates pursuant to a comprehensive regulatory scheme, currently serves more than 729,000 registered patients (and caregivers) suffering from one of 23 authorized medical conditions through over 1,700 approved medical practitioners. The Commonwealth of Pennsylvania, which consists of nearly 13 million residents and has the fifth largest population in the U.S., operates as a high-barrier market with very limited market participation. The Pennsylvania Medical Marijuana Act (the “PAMMA”) authorizes only a maximum of 25 grower/processor permits and 50 dispensary permits. Through April 2021, the PA Program had realized $2.6 billion in total sales. The PA Program allows only the cultivation and sale of cannabis products for medical purposes only and the state has no adult-use program at this time.

The PAMMA, which established the PA Program was signed into law on April 17, 2016 and originally provided access to Pennsylvania residents with one of 17 qualifying conditions, including epilepsy, chronic pain, and post-traumatic stress disorder. As part of “Phase 1” of the Commonwealth’s permitting process in 2017, the Pennsylvania Department of Health (the “PA DOH”) which administers the Commonwealth’s Medical Marijuana Program, originally awarded only 12 grower/processor permits and 27 dispensary permits. Subsequently, in 2018, PA DOH conducted “Phase 2” of the permitting process, during which it awarded the remaining 13 grower/processor permits and 23 dispensary permits authorized under the PAMMA.

Since the PA Program’s inception, a series of changes to its governing rules have expanded patient access and the market for products. In 2018, PA DOH authorized dispensing of flower and expanded the list of eligible qualifying conditions to include cancer remission therapy, opioid-addiction therapy, neurodegenerative disorders and spastic movement disorders. In July of 2019, the PA DOH further expanded the list of qualifying medical conditions to include anxiety disorders and Tourette syndrome, increasing the total number of qualifying conditions to 23. On June 30, 2021, Act 44 was signed into law, expanding the definition of serious medical condition to include other conditions that are recommended by the Medical Marijuana Advisory Board and approved by the Secretary of Health. As of February 2022, more than 729,000 patients and caregivers are registered for the Program.

Chapter 20 of the PAMMA established a marijuana research program whereby clinical registrants collaborate with medical schools and hospitals to design and implement a research plan. Following the passage of Act 44, the PA DOH is authorized to issue grower/processor and dispensary permits to up to ten (10) clinical registrants. Under these permits, which are in addition to the 25 grower/processor and 50 dispensaries mentioned above, clinical registrants effectively operate as vertically integrated entities. Furthermore, the dispensary permits authorize clinical registrants to operate dispensaries at up to six (6) locations in any region of the Commonwealth. The dispensaries must dispense marijuana for the purpose of conducting research. To date, PA DOH has issued permits to nine (9) clinical registrants.

Pennsylvania Licenses

PA Program rules require all participants in the supply chain – referred to as “Medical Marijuana Organizations” or “MMOs” – to be licensed by PA DOH. There are two permit types: Grower/Processor permits, which authorize plant cultivation, and manufacture, packaging, and transportation of finished products, and Dispensary permits, which authorize acquisition of finished products from Grower/Processor permit holders and the retail sale of same to Program-registered patients. Permits are subject to an annual renewal process, which includes fees and compliance requirements for MMOs.

As of February 2022, 150 dispensary facilities were open and dispensing products to patients, while 33 grower/processors are operational, with 28 shipping medical marijuana products to dispensaries throughout the Commonwealth.

Site-Visits & Inspections

All MMO facilities must be inspected and approved by the PA DOH before commencing operations. Thereafter, facilities are subject to PA DOH inspection, whether with or without notice.

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Reporting Requirements

The Commonwealth of Pennsylvania uses MJ Freeway as a T&T system for seed-to-sale reporting. Individual permittees are required to use MJ Freeway to push data to the Commonwealth to meet all reporting requirements. The Company’s subsidiaries use MJ Freeway as its in-house computerized seed-to-sale software, which integrates with the Commonwealth’s MJ Freeway program and captures the required data points for cultivation, manufacturing and retail as required in the Pennsylvania medical marijuana laws and regulations.

Storage and Security

All dispensaries are required to have a locked limited access area for the storage of medical marijuana that is expired, damaged, deteriorated, mislabeled, contaminated, recalled or whose containers or packages have been opened or breached until such product is returned to the grower/processor.

Florida

Florida Regulatory Landscape

In 2014, the Florida Legislature passed the Compassionate Use Act (§381.986, Fla. Stat.), which was the first legal medical cannabis program in the state’s history. The original Compassionate Use Act only allowed for low-THC cannabis to be dispensed and purchased by patients suffering from cancer and epilepsy. In 2016, the Florida Legislature passed the Right To Try Act which allowed for full potency cannabis to be dispensed to patients suffering from a diagnosed terminal condition. Also in 2016, the Florida Medical Marijuana Legalization Initiative was introduced by citizen referendum and passed with a 71.3% majority. This initiative amended the state constitution and mandated an expansion of the state’s medical cannabis program.

The Florida Medical Marijuana Legalization Initiative, Amendment 2 (“Amendment 2”), and the expanded qualifying medical conditions, became effective on January 3, 2017. The Florida Department of Health (“FDOH”), physicians, dispensing organizations, and patients are currently subject to regulations provided for in Article X Section 29 of the Florida Constitution (the constitutional provision created by Amendment 2), §381.986 of the Florida Statutes, and administrative rules adopted by the FDOH. On June 9, 2017, the Florida House of Representatives and Florida Senate passed respective legislation to implement the expanded program by replacing large portions of the existing Compassionate Use Act, which officially became law on June 23, 2017. As amended, §381.986 provides licenses to operate as Medical Marijuana Treatment Centers (“MMTCs”) to all entities that held an active, unrestricted licenses to cultivate, process, transport, and dispense low-THC cannabis or medical cannabis before July 1, 2017, as well as an additional 10 entities. The law also provides for another four licenses to be issued for every 100,000 patients added to the state’s medical marijuana registry and allows MMTCs to open an unlimited number of dispensaries.

Licenses

Subsection 381.986(8)(a) of the Florida Statutes provides a vertically-integrated regulatory framework that requires each MMTC to cultivate, process and dispense their own medical cannabis. Licenses issued by the FDOH may be renewed biennially so long as the license meets the requirements of the law and the license holder pays a renewal fee.

The license permits the sale of medical cannabis to qualified patients to treat certain medical conditions. In Florida, there is no state-imposed limitation on the permitted size, or number, of cultivation or processing facilities, nor is there a limit on the number of plants that may be grown. Dispensaries may be located in any location throughout Florida as long as the local government has not prohibited MMTC dispensaries in their respective municipality. Provided there is not a ban, a dispensary may be located in any site that meets applicable zoning requirements, and such zoning requirements cannot be stricter than the requirements applicable to a pharmacy. Additionally, the location must be greater than 500 feet from public or private elementary, middle, and secondary schools.

Licensing Requirements

Licenses issued by the FDOH are renewed biennially so long as the licensee meets requirements of the law and pays a renewal fee. Provided that the requisite renewal fees are paid, the renewal application is submitted in a timely manner, and there are no material violations noted against the applicable license, a licensee would expect to receive the applicable renewed license in the ordinary course of business.

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An MMTC license applicant must demonstrate that: (i) they have been registered to do business in Florida for the previous five years, (ii) they possess a valid certificate of nursery registration issued by the Florida Department of Agriculture and Consumer Services, (iii) they have the technical and technological ability to cultivate and produce cannabis, including, but not limited to, low-THC cannabis, (iv) they have the ability to secure the premises, resources, and personnel necessary to operate as an MMTC, (v) they have the ability to maintain accountability of raw materials, finished products, and by-products to prevent diversion or unlawful access to or possession of these substances, (vi) they have an infrastructure reasonably required to dispense cannabis to registered qualified patients statewide or regionally as determined by the FDOH, (vii) they have the financial ability to maintain operations for the duration of the two-year approval cycle, including the provision of certified financial statements to the FDOH, (viii) its owners, officers, board members and managers have passed a Level II background screening, inclusive of fingerprinting, and ensure that a medical director is employed to supervise the activities of the MMTC, and (ix) they have a diversity plan and veterans plan accompanied by a contractual process for establishing business relationships with veterans and minority contractors and/or employees. Upon approval of the application by the FDOH, the applicant must post a performance bond of up to $5,000,000, which may be reduced to $2,000,000 by meeting certain criteria, such as a minimum number of patients served.

Dispensary

An MMTC may not dispense to a patient more than a 70-day supply of cannabis within a 70-day period, except an MMTC may not dispense more than a 35-day supply of marijuana in a form for smoking within a 35-day period. A 35-day supply of marijuana in a form for smoking may not exceed 2.5 ounces unless an exception to this amount is approved by the department. The MMTC employee who dispenses the cannabis must enter into the registry his or her name or unique employee identifier. The MMTC must verify that: (i) the qualified patient and the caregiver, if applicable, each has an active registration in the registry and active and valid medical cannabis use registry identification card, (ii) the amount and type of cannabis dispensed matches the physician certification in the registry for the qualified patient, and (iii) the physician certification has not already been filled. An MMTC may not dispense to a qualified patient younger than 18 years of age and must instead dispense to such patient’s caregiver. An MMTC may not dispense or sell any other type of cannabis, alcohol, or illicit drug-related product, except a cannabis delivery device as specified in the physician certification. An MMTC must, upon dispensing, record in the registry: (i) the date, time, quantity and form of cannabis dispensed, (ii) the type of cannabis delivery device dispensed, and (iii) the name and registry identification number of the qualified patient or caregiver to whom the cannabis delivery device was dispensed. An MMTC must ensure that patient records are not visible to anyone other than the patient, caregiver, and MMTC employees.

Storage and Security

Each MMTC must maintain a video surveillance system that records continuously 24 hours per day and has specified features. MMTCs must retain video surveillance recordings for at least 45 days, or longer upon the request of law enforcement.

An MMTC’s outdoor premises must have sufficient lighting from dusk until dawn. An MMTC’s dispensing facilities must include a waiting area with sufficient space and seating to accommodate qualified patients and caregivers and at least one private consultation area and such facilities may not display products or dispense cannabis or cannabis delivery devices in the waiting area and may not dispense cannabis from its premises between the hours of 9:00 p.m. and 7:00 a.m. but may perform all other operations and deliver cannabis to qualified patients 24-hours a day.

Cannabis must be stored in a secured, locked room or a vault. An MMTC must have at least two employees, or two employees of a security agency, on the premises at all times where cultivation, processing, or storing of cannabis occurs. MMTC employees must wear a photographic identification badge and visitors must wear a visitor pass at all times on the premises. An MMTC must report to law enforcement within 24 hours after the MMTC is notified of or becomes aware of the theft, diversion or loss of cannabis.

Transportation

A cannabis transportation manifest must be maintained in any vehicle transporting cannabis or a cannabis delivery device. The manifest must be generated from the MMTC’s seed-to-sale tracking system and must include the: (i) departure date and time, (ii) name, address, and license number of the originating MMTC, (iii) name and address of the recipient, (iv) quantity and form of any cannabis or cannabis delivery device being transported, (v) arrival date and time, (vi) delivery vehicle make and model and license plate number; and (vii) name and signature of the MMTC employees delivering the product. Further, a copy of the transportation manifest must be provided to each individual, MMTC that receives a delivery. MMTCs must retain copies of all cannabis transportation manifests for at least three years. Cannabis and cannabis delivery devices must be locked in a separate compartment or container within the vehicle and employees transporting cannabis or cannabis delivery devices must have their employee identification on them at all times. Lastly, at

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least two people must be in a vehicle transporting cannabis or cannabis delivery devices, and at least one person must remain in the vehicle while the cannabis or cannabis delivery device is being delivered.

Inspections

The FDOH conducts announced and unannounced inspections of MMTC facilities to determine compliance with the laws and rules. The FDOH shall inspect an MMTC upon receiving a complaint or notice that the MMTC has dispensed cannabis containing mold, bacteria, or other contaminants that may cause an adverse effect to humans or the environment. The FDOH shall conduct at least a biennial inspection of each MMTC to evaluate the MMTC’s records, personnel, equipment, security, sanitation practices, and quality assurance practices.

Ohio

Ohio Regulatory Landscape

House Bill 523, effective on September 8, 2016, legalized medical marijuana in Ohio. The Ohio Medical Marijuana Control Program (“MMCP”) allows people with certain medical conditions, upon the recommendation of an Ohio-licensed physician certified by the State Medical Board of Ohio, to purchase and use medical marijuana. House Bill 523 required that the framework for the MMCP would be in place no later than September 8, 2018. This timeframe allowed for a deliberate process to ensure the safety of the public and to promote access to a safe product. Sales of medical marijuana in Ohio began in January 2019.

The following three state government agencies are responsible for the operation of the MMCP: (i) the Ohio Department of Commerce is responsible for overseeing medical marijuana cultivators, processors and testing laboratories; (ii) the State of Ohio Board of Pharmacy is responsible for overseeing medical marijuana retail dispensaries, the registration of medical marijuana patients and caregivers, the approval of new forms of medical marijuana and coordinating the Medical Marijuana Advisory Committee; and (iii) the State Medical Board of Ohio is responsible for certifying physicians to recommend medical marijuana and may add to the list of qualifying conditions for which medical marijuana can be recommended. Qualifying medical conditions for medical marijuana include: acquired immune deficiency syndrome, AIDS, amyotrophic lateral sclerosis (also known as Lou Gehrig’s disease), Alzheimer’s disease, cachexia, cancer, chronic traumatic encephalopathy, Crohn’s disease, epilepsy or other seizure disorder, fibromyalgia, glaucoma, hepatitis C, Huntington’s disease, inflammatory bowel disease, multiple sclerosis (MS), pain (that is either chronic and severe, or intractable), Parkinson’s disease, positive status for HIV, post-traumatic stress disorder, sickle cell anemia, spasticity, spinal cord disease or injury, terminal illness, Tourette’s syndrome, traumatic brain injury, ulcerative colitis or any other disease or condition added by the state medical board under section 4731.302 of the Ohio Revised Code. In February 2021, the State Medical Board of Ohio determined the following conditions are considered covered by an existing qualifying condition: arthritis, chronic migraines, and complex region pain syndrome. These conditions were determined to be covered by pain that is either chronic or intractable. In order for a patient to be eligible to obtain medical marijuana, a physician must make the diagnosis of one of these conditions. The State of Ohio Board of Pharmacy is in the process of revising its regulations for dispensaries, for the forms and methods for administering medical marijuana, and for patients and caregivers.

Several forms of medical marijuana are legal in Ohio, these include: inhalation of marijuana through a vaporizer, oils, tinctures, plant material, edibles, patches, lotions, creams, or ointments for topical administration and any other forms approved by the State of Ohio Board of Pharmacy (though smoking or combustion of medical marijuana is prohibited other than through a vaporizer) On September 14, 2021, the State of Ohio Board of Pharmacy voted to approve sublingual products (including strips, sprays, salves, dissolving tablets, lozenges, and films).

License and Regulations

Ayr’s subsidiary CSAC Ohio, LLC (CSAC) maintains an active processing license with the Ohio Department of Commerce to process medical marijuana. To be considered for approval of a processing license, the applicant must complete all mandated requirements under Chapter 3796 of the Ohio Revised Code and the Ohio Administrative Code. To obtain a Certificate of Operation for a processing facility, the prospective licensee must be capable of operating in accordance with Chapter 3796 of the Ohio Revised Code and the Ohio Administrative Code. Following issuance of a Certificate of Operation, the processing facility will be authorized to manufacture and produce medical cannabis products. Certificates of Operation for a processing license must be renewed annually. A Certificate of Operation will expire annually on the date it was issued. A processor licensee must submit its renewal application with the Ohio Department of Commerce at least 30 days prior to the expiration date of the Certificate of Operation. If a licensee’s renewal application is not filed prior to the expiration date of the Certificate of Operation, the Certificate of Operation will be suspended for a maximum of

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thirty (30) days, at which point it will be deemed expired if the processor has not successfully renewed including the payment of all applicable fees. Ayr’s subsidiary owns Greenlight Management, LLC (Greenlight) which will be the management company for the Parma Wellness Center’s Level I cultivation facility once it is operational in 2022. A license is not required for Greenlight.

Reporting

The Department of Commerce maintains an electronic database to monitor medical marijuana from its seed source through its cultivation, processing, testing, and dispensing. The Department of Commerce has contracted with METRC to establish and maintain the electronic database on behalf of the Department of Commerce. Licensees are required to use METRC to submit such required information to the Department of Commerce to meet all the reporting requirements. The Company has implemented its seed-to-sale tracking system to comply with the Department of Commerce’s tracking and reporting requirements.

Storage and Security

All licensees must have a security system that always remains operational and that uses commercial grade equipment to prevent and detect diversion, theft or loss of medical cannabis, including:

Fencing and gates around the facilities;
A perimeter alarm;
Video surveillance recording system;
Approved safes, vaults, or any other approved equipment or areas used for processing or storing of plant material, medical marijuana extract, and medical marijuana products;
Well-lit outside perimeter;
Restricted access;
Back-up alarm systems;
Motion detectors; and
Duress and panic alarms.

Video cameras must be installed at the processing facility and directed at all approved safes, approved vaults, cannabis sales areas, and any other area where plant material, medical cannabis extract, or medical cannabis products are being processed, stored or handled. Live feed video surveillance with motion active recording capabilities must be in place 24 hours a day, seven days a week. Recordings from all video cameras must be readily available for immediate review by regulating and law enforcement with jurisdiction upon request and must be retained for at least six (6) months.

New Jersey

New Jersey Regulatory Landscape

New Jersey has had a medicinal cannabis program in place since 2010. The medicinal program serves over 117,000 registered patients through twelve licensed and operating alternative treatment centers. In 2021, the state established an adult-use program, which is currently in the process of implementation. Sales under the adult-use program have not yet been authorized and are expected to commence in 2022. Both programs operate pursuant to a comprehensive regulatory scheme and are administered by the New Jersey Cannabis Regulatory Commission (“NJCRC”).

On January 18, 2010, the governor of New Jersey signed into law S.119, the Compassionate Use Medical Marijuana Act (now the “Compassionate Use Medical Cannabis Act” or ”CUMCA”), establishing a regulatory and licensing scheme for the state legal cultivation, manufacture and retail sale of cannabis to authorized patients (“NJ Medicinal Program” or “Medicinal Program”). CUMCA enumerated certain debilitating conditions including cancer, HIV/AIDS, amyotrophic lateral sclerosis (ALS), multiple sclerosis (MS), Crohn’s disease and terminal illnesses, under certain circumstances, for which patients could be qualified to register under the NJ Medicinal Program. The New Jersey Department of Health (“NJDH”), which administered the NJ Medicinal Program prior to 2021, issued comprehensive program regulations pursuant to CUMCA at N.J.A.C. 8:64. (Such regulations as amended along with CUMCA as amended shall hereinafter be referred to as the “NJ Medicinal Cannabis Rules”.)

CUMCA permits the cultivation, processing (referred to as “manufacture” under the law) and dispensing of medical cannabis only by a state-licensed “Alternative Treatment Center” (“ATC”). CUMCA originally authorized a minimum of six ATC permits, which authorized vertical cannabis operations subject to NJDH approval. Such operations are limited to one of three regions (North, Central,

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and South) within the state. In 2011, NJDH selected six ATCs, two in each region, to receive permits pursuant to a request for application (“RFA”) process.

Pursuant to a provision in the CUMCA, the original six ATCs were all non-profit entities. However, such requirement has since been eliminated to allow for-profit entities. Subsequent RFAs have permitted both non-profit and for-profit entities to apply for permits.

On March 27, 2018 through executive order No. 6 (2018), Governor Phil Murphy expanded the Medicinal Program by adopting a series of over 20 reform measures recommended by the NJDH. The NJDH’s recommendations and next steps included certain measures that took effect immediately (e.g., the addition of debilitating conditions and the reduction of registration fees) and other recommendations (e.g., the home delivery model) that require further regulatory or statutory enactment.

In February 2019, the NJDH amended the list of debilitating conditions to include opioid use disorder. The NJDH also implemented measures to streamline the enrollment process for patients, allow physicians to opt out of being listed publicly, and have started the permitting process for six new ATCs.

On July 2, 2019, Governor Murphy signed the Jake Honig Compassionate Use Medical Cannabis Act (“2019 CUMCA Amendments”), which amended the CUMCA by (1) creating a new regulatory body, the Cannabis Regulatory Commission, (2) expanding the monthly cannabis limit that may be dispensed to a patient from two to three ounces, (3) increasing the supply that a physician may authorize per certification from a three-month supply to a 12-month supply, (4) removes the purchasing limit for terminally ill and hospice patients, (5) authorizing the inclusion of edible forms of cannabis to adult patients, (6) a phasing out of the sales tax by July, 2022, (7) authorizing physician assistants and advanced practice nurses to certify patients under the program, (8) instituting employment protections for patients registered in the program, (9) allowing for the registration of two caregivers per patient, (10) provides reciprocity for patients registered with other state medical marijuana programs, and (11) authorizes home delivery to patients.

The 2019 CUMCA Amendments further identified three distinct permit “endorsements” for cultivation, manufacturing and dispensaries and allowed for the issuance of single-endorsement permits. The amendments further clarified that no ATC could hold more than one endorsement of the same type.

These initiatives have facilitated expansion of New Jersey’s medical cannabis program. As of February 1 2021, approximately 101,496 patients were registered.

On November 3, 2020, New Jersey voters approved New Jersey Public Question 1, an amendment to the state constitution to legalize the recreational use of cannabis by people ages 21 and older. The amendment provides for the state to establish a regulated market for the cultivation, distribution, and sale of cannabis.

On February 22, 2021, the Governor of New Jersey signed into law an adult-use legalization bill entitled the “New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act,” which legalized personal use cannabis for certain adults, subject to State regulations (the “CREAMM Act”). The CREAMM Act provides ATCs specific expanded cultivation rights as well as the right to open up sales to the adult-use marketplace, subject to limited and specified conditions. As it relates to sales into the adult-use marketplace, the only conditions imposed on ATCs are: (1) written approval to operate as an adult-use cannabis establishment from the municipality in which the ATC is located and compliance with said municipality’s local zoning restrictions; and (2) the ATC’s certification that it has sufficient quantities of medical cannabis and, if applicable, medical cannabis products, available to meet the reasonably anticipated needs of registered qualifying conditions. The CREAMM Act also permits ATCs to cultivate from up to two physical locations, provided that the ATC’s combined mature cannabis plant grow canopy between both locations does not exceed 150,000 square feet of bloom space, or the square footage of canopy permitted under the largest tier in the tiered system adopted by the Cannabis Regulatory Commission (“CRC”), the successor agency taking over regulatory oversight for both the medical and adult-use marketplaces.

On August 19, 2021, the CRC approved the first set of rules governing the state’s adult-use cannabis program. The rules are effective upon their filing with the state’s Office of Administrative Law, until August 19, 2022. The CRC began accepting applications for cultivation, manufacturing, and testing laboratories in December 2021 and recently began accepting applications for retail businesses in March 2022.

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Licenses

An ATC permit may carry up to three endorsements to authorize cultivation, manufacture and/or dispensary activities under the NJ Medicinal Program. ATC Permits are subject to an annual renewal process, which requires ATCs to pay fees and meet compliance standards.

Based upon a second RFA issued in 2018, NJDH selected an additional six applicants to receive vertical ATC Permits. NJDH issued a third RFA in 2019. However, litigation over the selection process delayed the awarding of the additional ATC permits until late 2021. In October 2021, NJCRC announced its decision to award four (4) additional vertical ATC Permits and ten (10) ATC Permits with cultivation-only endorsements, and in December 2021 announced its decision to award thirty (30) additional ATC Permits with dispensary-only endorsements. None of the ATC Permit awardees from the 2019 RFA are yet operational.

Reporting Requirements

Prior to 2022, New Jersey did not employ a unified T&T platform. In 2022, NJCRC announced its decision to contract with METRC for the implementation of a unified T&T system which is in the process of being implemented. The Medicinal Cannabis Rules impose a comprehensive set of reporting requirements on ATCs, including without limitation an obligation to report material changes to company information and operations to NJCRC. Certain changes, including material changes to ownership, managed service arrangements, financial source arrangements, and facility locations or alterations require NJCRC pre-approval. Each ATC collects and submits to the NJCRC for each calendar year statistical data on (a) the number of registered qualified patients and registered primary caregivers, (b) the debilitating medical conditions of the qualified patients, (c) patient demographic data, (d) summary of the patient surveys and evaluation of services and I other information as the NJCRC may require. The ATC must retain records for at least two years.

Storage and Security

The ATC will establish inventory controls and procedures for the conduct of inventory reviews and comprehensive inventories of cultivating, stored, usable and unusable cannabis. The ATC will conduct a monthly inventory of cultivating, stored, usable and unusable cannabis. An ATC is authorized to possess two ounces of usable cannabis per registered qualifying patient plus an additional supply, not to exceed the amount needed to enable the alternative treatment center to meet the demand of newly registered qualifying patients.

Per regulatory requirements an ATC, at a minimum, must (a) establish inventory controls and procedures for the conduct of inventory reviews and comprehensive inventories of cultivating, stored, usable and unusable cannabis, (b) conduct a monthly inventory of cultivating, stored, usable and unusable cannabis, (c) perform a comprehensive inventory inspection at least once every year from the date of the previous comprehensive inventory, and (d) promptly transcribe inventories taken by use of an oral recording device. If cannabis is disposed of, the ATC must maintain a written record of the date, the quantity disposed of, the manner of disposal and the persons present during the disposal, with their signatures. ATCs must keep disposal records for at least two years. Results of the inventory inspection should document the date of the inventory review, a summary of the inventory findings and the name, signature and title of the individuals who conducted the inventory inspection.

An ATC shall limit access to medicinal cannabis storage areas to the absolute minimum number of specifically authorized employees. In the event non-employee maintenance personnel, business guests or visitors to be present in or pass through medical cannabis storage areas, the ATC must have a dedicated person who is specifically authorized by policy or job description to supervise the activity. The ATC must ensure that the storage of usable cannabis prepared for dispensing to patients is in a locked area with adequate security.

Security

An ATC is required to implement effective controls and procedures to guard against theft and diversion of cannabis including systems to protect against electronic records tampering. At a minimum, every ATC must (a) install, maintain in good working order and operate a safety and security alarm system that provides suitable protection 24 hours a day, seven days a week against theft and diversion, (b) immediately notifies the state or local police agencies of an unauthorized breach of security. An ATC must conduct maintenance inspections and tests of the security alarm system at intervals not to exceed 30 days from the previous inspection.

A video surveillance system must be installed and operated to clearly monitor all critical control activities of the ATC and must operate in good working order at all times. The ATC must provide two monitors for remote viewing via telephone lines to the NJCRC offices. This security system must be approved by State of New Jersey’s Medicinal Marijuana Program prior to permit issuance. The original tapes or digital pictures produced by the system must be stored in a safe place for a minimum of 30 days.

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Transportation

An ATC that is authorized by permit to cultivate medicinal marijuana at one location and to dispense it at a second location shall transport only usable marijuana from the cultivation site to the dispensing site according to a delivery plan submitted to the Department. Each vehicle must be staffed with at least two registered ATC employees. At least one delivery team member shall remain with the vehicle at all times that the vehicle contains medicinal marijuana. Each delivery team member shall have access to a secure form of communication with the ATC, such as a cellular telephone, at all times that the vehicle contains medicinal marijuana. Each delivery team member must possess their ATC employee identification card at all times and shall produce it to NJCRC staff or law enforcement officials upon demand.

Each transport vehicle needs to be equipped with a secure lockbox or locking cargo area, which shall be used for the sanitary and secure transport of medicinal marijuana. Each ATC must maintain current commercial automobile liability insurance on each vehicle used for transport of medicinal marijuana in the amount of one million dollars per incident. Each ATC must ensure that vehicles used to transport medicinal marijuana bear no markings that would either identify or indicate that the vehicle is used to transport medicinal marijuana, and each trip must be completed in a timely and efficient manner, without intervening stops or delays. Each ATC shall maintain a record of each transport of medicinal marijuana in a transport logbook, which must include dates and times of trips, names of employees on the delivery team, relevant facts about the products transported and the signatures of the delivery team.

ATCs must report any vehicle accidents, diversions, losses, or other reportable events that occur during transport to the permitting authority in accordance with New Jersey law.

The state has issued a number of waivers to regulatory requirements as a result of the COVID-19 pandemic, including a waiver to permit dispensaries to home-deliver products to registered patients.

Inspections

An ATC is subject to onsite assessment by the NJCRC at any time. The NJCRC may enter an ATC without notice to carry out an onsite assessment in accordance New Jersey laws and regulations. All ATCs are required to provide the NJCRC or the NJCRC’s designee immediate access to any material and information so requested. Submission of an application for an ATC permit constitutes permission for entry and onsite assessment of an ATC, and failure to cooperate with an onsite assessment and or to provide the NJCRC access to the premises or information may be grounds to revoke the permit of the ATC and to refer the matter to state law enforcement agencies.

An onsite assessment may include (1) the review of all ATC documents and records and conferences with qualifying patients and primary caregivers and other persons with information, and the making and retaining of copies and/or extracts, (2) the use of any computer system at the ATC to examine electronic data, (3) the reproduction and retention of any document and/or electronic data in the form of a printout or other output, (4) the examination and collection of samples of any marijuana found at the ATC, and (5) the seizure and detention of any marijuana or thing believed to contain marijuana found at the ATC.

Arizona

Arizona Regulatory Landscape

In 2010, Arizona passed Ballot Proposition 203, which amended Title 36 to the Arizona Revised Statutes. This amendment added Chapter 28.1, titled the Arizona Medical Marijuana Act (the “AMMA”). The AMMA is codified in Arizona Revised Statutes (“ARS”) § 36-2801 et. seq. The AMMA also appointed the Arizona Department of Health Services (“ADHS”) as the regulator for the program and authorized ADHS to promulgate, adopt and enforce regulations for the AMMA. These ADHS regulations are embodied in the Arizona Administrative Code Title 9 Chapter 17 (the “Rules”). ARS § 36-2801(12) defines a “nonprofit medical marijuana dispensary” as “a not-for-profit entity that acquires, possesses, cultivates, manufactures, delivers, transfers, transports, supplies, sells or dispenses marijuana or related supplies and educational materials to cardholders.”

The ADHS established the medical marijuana program. To operate within the medical marijuana program, an entity must apply for, and receive from ADHS, a Medical Marijuana Dispensary Registration Certificate (“Certificate”). Each Certificate is vertically integrated and authorizes the entity that holds the Certificate to dispense and cultivate medical cannabis. Each Certificate allows the holding entity to operate one retail dispensary, one on-site cultivation facility located at the same location as the retail dispensary, and one off-site cultivation facility located anywhere within the State of Arizona. Prior to opening its dispensary and cultivation operations, the entity must apply for, and receive from ADHS, an Approval to Operate. The entity must then file an application with ADHS to renew its

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Certificate every two years and must also submit audited annual financial statements. The Rules prohibit an entity from transferring or assigning the Certificate; however, entities that hold a Certificate may contract with third parties to provide various services related to the ongoing operation, maintenance, and governance of its dispensary and/or cultivation facility, so long as such contracts do not violate the requirements of the AMMA or the medical marijuana program.

The ADHS had until April 2012 to establish a registration application system for patients and nonprofit marijuana dispensaries, as well as a web-based verification platform for use by officials and dispensaries to verify a patient’s status. It also specified patients’ rights, qualifying medical conditions, and allowed out-of-state medical marijuana patients to maintain their patient status (though not to purchase marijuana). To purchase medical marijuana, a patient must apply for, and receive from ADHS, a medical marijuana patient card. On December 6, 2012, Arizona’s first licensed medical marijuana dispensary opened in Glendale, Arizona.

To qualify to use medical marijuana under the AMMA, a patient must have a qualifying medical condition. Qualifying medical conditions include Human Immunodeficiency Virus (“HIV”), cancer, glaucoma, Acquired Immune Deficiency Syndrome (“AIDS”), Hepatitis C, Crohn’s disease, agitation of Alzheimer’s disease, Amyotrophic Lateral Sclerosis (“ALS”), Post-Traumatic Stress Disorder, and a chronic or debilitating disease or medical condition, or the treatment for a chronic or debilitating disease or medical condition, that causes cachexia or wasting syndrome, severe and chronic pain, severe nausea, seizures, or severe or persistent muscle spasms.

In 2019, Arizona Governor Doug Ducey signed into law Senate Bill 1494, which, among other items, requires testing of medical marijuana and establishes biannual renewal of patient cards. Senate Bill 1494 also authorizes the ADHS to adopt rules for inspecting medical marijuana dispensaries and creates an independent testing regime for marijuana cultivated by a medical marijuana dispensary. Beginning in November 2020, before marijuana is sold, the entity holding a Certificate must test the marijuana for unsafe levels of microbial contamination, heavy metals, pesticides, herbicides, fungicides, growth regulators, and residual solvents. Senate Bill 1494 also authorizes civil penalties of up to $1,000 per violation (not to exceed $5,000 in a 30-day period) on medical marijuana dispensaries. Regulations implementing Senate Bill 1494 went into effect on August 27, 2019. In February 2020, the ADHS began an additional round of rulemaking designed to improve the regulations regarding independent testing, which remains an ongoing process.

On November 3, 2020, Arizona voters passed Proposition 207, known as the “Smart and Safe Arizona Act,” which permits the lawful sale of marijuana to adults over 21 years old for recreational use. Proposition 207 directs ADHS to establish additional rules and regulations regarding the recreational sale of marijuana. Entities that hold a Certificate to sell medical marijuana have the right under Proposition 207 to obtain a Marijuana Establishment License to sell recreational marijuana. ADHS has published rules to administer the Adult-Use Marijuana Program which are embodied in the Arizona Administrative Code Title 9 Chapter 18. These Adult-Use Rules became effective on January 15, 2021.

Arizona Licensing Requirements

In order for an applicant entity to receive a Certificate, it must: (i) fill out an application on the form proscribed by ADHS, (ii) submit the applicant’s articles of incorporation and by-laws, (iii) submit fingerprints for each principal officer and board member of the applicant for a background check to exclude certain felonies, (iv) submit a business plan and policies and procedures for inventory control, security, patient education, and patient recordkeeping that are consistent with the AMMA and the Rules to ensure that the dispensary will operate in compliance, and (v) designate an Arizona licensed physician as the Medical Director for the dispensary. Certificates are renewed every two years so long as the dispensary is in good standing with ADHS, pays the renewal fee, and submits an independent third party financial audit.

Once an applicant entity is issued a Certificate, it may establish one physical retail dispensary location, one cultivation location which is co-located at the dispensary’s retail site (if allowed by local zoning), and one additional off-site cultivation location. None of these sites can be operational, however, until the dispensary receives an Approval to Operate from ADHS for the applicable site. This Approval to Operate requires: (i) an application on the ADHS form, (ii) demonstration of compliance with local zoning regulations, (iii) a site plan and floor plan for the applicable property, and (iv) an in-person inspection by ADHS of the applicable location to ensure compliance with the Rules and consistency with the dispensary’s applicable policies and procedures.

With the passage of Senate Bill 1494, Certificates are renewed biennially. Before expiry, an entity holding a Certificate must submit a renewal application. While renewals are granted biennially, there is no ultimate expiry after which no renewals are permitted.

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Arizona Security Requirements for Dispensary Facilities

Any dispensary facility (both retail and cultivation) must abide by the following security requirements: (i) ensure that access to the facilities is limited to authorized agents of the dispensary who are in possession of a dispensary agent identification card, and (ii) equip the facility with: (a) intrusion alarms and surveillance equipment, (b) exterior and interior lighting to facilitate surveillance, (c) at least one 19-inch monitor for surveillance and a video capable of printing a high resolution still image, (d) high resolution video cameras at all points of sale, entrances, exits, and limited access areas, both in and around the building, (e) 30 days’ video storage, (f) failure notifications and battery backups for the security system, and (g) panic buttons inside each building.

Arizona Storage Requirements

Any dispensary facility (both retail and cultivation) must abide by the following requirements for the storage of product: (i) product must be stored in an area that is separate from areas used to store toxic and flammable materials, (ii) product must be stored in a manner that is clean and sanitary, (iii) product must be protected from flies, dust, dirt, and any other contamination, and (iv) surfaces and objects used in the handling and storage of product must be cleaned daily. Additionally, the Rules establish strict inventory protocols for tracking product from “seed to sale,” which requires product to be traceable to the original plants used to grow the cannabis used in the product.

Arizona Transportation Requirements

Dispensaries may transport medical cannabis between their own sites, or between their sites and another dispensary’s site, and must comply with the following Rules: (i) prior to transportation, the dispensary agent must complete a trip plan showing: (a) the name of the dispensary agent in charge of transporting the cannabis, (b) the date and start time of the trip, (c) a description of the cannabis, cannabis plants, or cannabis paraphernalia being transported, and (d) the anticipated route of transportation, including any anticipated stops during the trip; (ii) during transport the dispensary agent shall: (a) carry a copy of the trip plan at all times, (b) use a vehicle with no medical cannabis identification, (c) have a means of communicating with the dispensary, and (d) ensure that no cannabis is visible; and (iii) dispensaries must maintain trip plan records for at least two years.

ADHS Inspections and Enforcement

ADHS may inspect a facility at any time upon five (5) days’ notice to the dispensary. However, if ADHS receives a complaint that a dispensary is not in compliance with the AMMA or the Rules, ADHS may conduct an unannounced inspection. ADHS will provide written notice to the dispensary via a Statement of Deficiencies of any violations found during any inspection, after which the dispensary has 20 working days to take corrective action and to provide ADHS with a written Plan of Correction.

ADHS shall revoke a Certificate if a dispensary: (i) operates before obtaining Approval to Operate a dispensary from ADHS, (ii) dispenses, delivers, or otherwise transfers cannabis to an entity other than another licensed dispensary, a qualifying patient with a valid registry identification card, or a designated caregiver with a valid registry identification card, (iii) acquires usable cannabis or mature cannabis plants from any entity other than another licensed dispensary, a qualifying patient with a valid registry identification card, or a designated caregiver with a valid registry identification card, or (iv) if a principal officer or board member has been convicted of an excluded felony offense.

Furthermore, ADHS may revoke a Certificate if a dispensary does not: (i) comply with the requirements of the AMMA or the Rules, or (ii) implement the policies and procedures or comply with the statements provided to ADHS with the dispensary’s application.

Compliance with State Regulatory Frameworks

Nevada Regulatory Compliance

The  Company’s Nevada Businesses are in compliance with applicable licensing requirements and the regulatory framework enacted by the State of Nevada in all material respects, and maintain the appropriate licenses for the cultivation, production, distribution and operation of dispensaries, as applicable.

The Nevada Businesses have not experienced any unremedied non-compliance which may have an impact on its licenses, business activities or operations which have not been remedied, nor are such businesses subject to any outstanding notices of violation by the State of Nevada which may have an impact on its licenses, business activities or operations. As noted under “Non-Compliance with State and Local Cannabis Laws” below, Ayr intends to cause its businesses to promptly remedy any material known occurrences of

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non-compliance with applicable State and local cannabis rules and regulations and Ayr intends to publicly disclose any material non-compliance, citations or notices of violation which may have an impact on its licenses, business activities or operations.

Each of the Nevada Businesses uses a seed-to-sale capable control system for tracking and tracing cannabis plants and products. Each of LeafLogix and METRC are in use among the Company’s Nevada Businesses. These solutions have been specifically designed to satisfy the applicable reporting requirements associated with regulated cannabis activities.

In addition to these software-based control systems, each of the Nevada Businesses have designated a set of operating procedures, including employee training in respect of such procedures, to secure compliance.

Standard operating procedures in respect of regulatory compliance were developed by each of the Nevada Businesses and reviewed with the applicable regulators during such business’ initial licensing processes and are reviewed on a continuous basis by virtue of ongoing inspections and reviews by the applicable regulatory authorities. Managers and employees at the Company’s Nevada Businesses are empowered to identify key business processes that should be formally documented to assure safety and regulatory compliance.

Each of the Nevada Businesses have detailed standard operating procedures in respect of building security, cash management, security of financial instruments, security monitoring systems, security of information, and general security and safety.

Each of the Nevada Businesses utilizes a security system around the perimeter of each dispensary designed to prevent and detect diversion, theft or less of cannabis, utilizing commercial grade security and surveillance equipment in compliance with State regulatory requirements.

Additionally, the Company’s Nevada Businesses have detailed standard operating procedures and protocols for inventory and storage processes, including responsibility for management, inventory limits, inventory counts and reviews, facility reporting, cannabis inventory receipts, a waste disposal plan, salvage and solid waste disposal.

Inventory Management Requirements: The Company’s Nevada Businesses maintain policies and procedures and employs industry-specific software to track inventory and to ensure strict regulatory compliance at both the retail and wholesale levels. These processes include:

wholesale transfer;
inventory intake;
inventory management;
retail transactions; and
sales data tracking and reporting.

Procedures exist to seek to ensure that each of the applicable Nevada Businesses track its cumulative inventory of seeds, plants, and usable cannabis. Generally, these inventory control systems are designed to:

establish and maintain a perpetual inventory system which adequately documents the flow of materials through the manufacturing process;
establish procedures which reconcile the raw material used to the finished product on the basis of each job; and
seek to ensure the absence of significant variances between system outputs and physical inventory counts.

For cultivation and production facilities, for each lot received at a facility, such inventory control systems are designed to document:

the batch, lot, and production run number, as applicable;
whether the batch originated from cannabis seeds or cannabis cuttings
the strain of the cannabis seeds or cannabis cuttings planted;
the number of cannabis seeds or cannabis cuttings planted;
the date on which the cannabis seeds or cuttings were planted;
a list of all chemical additives used in the cultivation, including nonorganic pesticides, herbicides and fertilizers;
the number of cannabis plants grown to maturity;
harvest information, including:

o

the date of harvest;

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o

the final yield weight of processed usable cannabis; and

o

the name and agent registration card number of the agent responsible for the harvest;

cannabis flowers in process in all locations;
cannabis in storage by location;
cannabis in locked containers awaiting disposal; and
an audit trail of all material inventory adjustments.

Retail dispensaries maintain current and complete books and records and sales reports, including invoices that reflect all purchases and sales of cannabis made to and by the applicable dispensary, that are available from an electronic verification system, point of sale systems, and/or inventory control systems (which may be separate systems or functionalities combined into a single system) and are stored in secure safe rooms. Such records include:

in respect of dispensary inventory:

o

the date and time of delivery of each purchase or transfer from a cultivation or production facility;

o

the quantity, type and form and price of cannabis and infused or edible products purchased from a cultivation or production facility in each purchase as well as related products;

o

invoices and delivery documents, showing entry into the inventory control system; and

o

the quantity of cannabis still available for sale at the dispensary; and

in respect of dispensary retail sales:

o

the date and time of each retail sale;

o

the quantity, type, form, and price of cannabis distributed or dispensed;

o

the price paid or consideration given for the cannabis;

o

identifying information of the purchaser (i.e., name and address, and card number in the case of medical cannabis transactions); and

oidentifying information of the employee conducting the transaction (i.e., the name, initials, or employee identification number of the person who dispensed or sold the cannabis).

All invoices and delivery documents must be systematically filed and maintained for a period of five years from date of delivery and must show a legible and complete statement of terms and conditions for each purchase.

Sales records must be compliant with all of the applicable policies and procedures according to applicable documented plans State laws and regulations, and must include for regulatory authority reporting and internal tracking purposes:

verification of the age of the consumer by checking a government-issued identification card containing a photograph of the consumer using an approved identification scanner
the date and time of each sale;
the method of distribution (on-site or delivery);
the quantity, form, and price cannabis and any other products sold;
the number of the cannabis establishment agent registration card of the employee completing the sales transaction; and
the number of the license for the cannabis establishment

Disposal of Inventory: All cannabis waste, including waste composed of or containing finished cannabis, must be stored, secured, and managed in accordance with applicable State and local statutes, ordinances, and regulations. All waste disposed of by the Nevada Businesses is recorded in the relevant inventory control system, including:

a description of and reason for the cannabis being disposed of, including, if applicable, the number of failed or other unusable cannabis plants;
the date of disposal;
confirmation that the cannabis was rendered unusable before disposal;
the method of disposal; and
the name and cannabis establishment agent registration card number of the agent responsible for the disposal.

Only specifically authorized employees can destroy product. A list of authorized employees that may destroy product is required to be maintained at each of the Nevada Businesses. Permissions are defined by agent and password protected. The destroyed weight and the reason for destruction is required and recorded. The inventory control systems of the Nevada Businesses can generate reports on destroyed material at any point in the destruction process.

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In addition to controls over inventory, State regulatory frameworks specify guidelines in respect of general security.

General Security Guidelines: The applicable Nevada Businesses’ general security guidelines include:

background checks for current/new employees, particularly if the employee is to be accessing restricted areas;
maintaining video surveillance of facilities;
maintaining visitor logs;
providing for and maintaining secure perimeters for facilities;
requesting employees to watch for suspicious activities;
keeping all access system credentials, access codes, access cards, passwords, etc., in a way that is designed to be secure and accessible only to specifically authorized personnel;
retrieving keys and employment identification cards from an employee and changing computer access passwords when their employment ends;
arranging for prompt and safe disposal of materials;
all employees being required to be trained on emergency procedures; and
posting emergency response numbers, including fire, law enforcement, and executive team in several locations in each facility.

Cash Management: As noted above, the Company’s Nevada Businesses have detailed standard operating procedures and protocols for cash management, including internal controls and cash security procedures. Examples of such standard operating procedures and protocols used by certain of the Nevada Businesses include, without limitation:

random review of cash register drawers by dispensary supervisors;
random removal of cash from cash register drawers by dispensary supervisors and placement of such cash into a secure vault;
insertion of all cash from cash registers drawers into a secure vault at the end of each day;
recording of daily cash intake by supervisors on a “Register Close” sheet and daily reconciliation of such values against daily sales reports and the prior day’s recording of total cash on-hand;
recording of all disbursements on a disbursement form; and
daily audits of total cash on hand and investigations in respect of any noted variances.

The Company’s Nevada Businesses have worked with internal personnel and advisors to help prescribe and/or implement measures designed to seek to ensure compliance with applicable State laws on an ongoing basis, including:

correspondence and updates with regulators;
ongoing monitoring of compliance with operating procedures and regulations by on-site management; and
appropriate employee training for all standard operating procedures.

In Nevada, Ayr enlists their internal compliance personnel, whose responsibilities include monitoring the day-to-day activities, ensuring that the established standard operating procedures are being adhered to, identifying any non-compliance matters and putting into place the necessary modifications to seek to ensure compliance.

While the Company’s Nevada Businesses  are compliant with State and local cannabis laws in all material respects, their cannabis-related activities remain illegal under United States federal law. See “Risk Factors”.

Massachusetts Regulatory Compliance

The Company’s Massachusetts-based business is in compliance with applicable licensing requirements and the regulatory framework enacted by the Commonwealth of Massachusetts in all material respects, and maintains the appropriate licenses for the cultivation, production, distribution and operation of dispensaries, as applicable.

The Company’s Massachusetts-based business has not experienced any unremedied non-compliance which may have an impact on its licenses, business activities or operations which has not been remedied, nor is such business subject to any outstanding notices of violation by the Commonwealth of Massachusetts which may have an impact on its licenses, business activities or operations. As noted under “Non-Compliance with State and Local Cannabis Laws” below, Ayr intends to cause its businesses to promptly remedy any material known occurrences of non-compliance with applicable State and local cannabis rules and regulations and Ayr intends to publicly disclose any material non-compliance, citations or notices of violation which may have an impact on its licenses, business activities or operations. Given the stage of business of the Company’s Massachusetts-based business, such business has, on an on-going

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basis, internally reviewed applicable Massachusetts laws and regulations relating to the cultivation, manufacture, distribution and sale of cannabis and cannabis products and has internally analyzed its exposure to U.S. federal law. The Company’s Massachusetts-based business has enlisted internal compliance personnel to provide on-going advice on applicable U.S. federal and Massachusetts laws.

The Company’s Massachusetts-based business currently possesses three (3) registered marijuana dispensary registrations which allow the business to sell medical marijuana in Massachusetts directly to consumers, and which allow for the right to open three (3) adult use dispensaries subject to local municipality and other marijuana regulatory approvals. The Massachusetts-based business also currently possesses licenses to cultivate, manufacture and transport to other marijuana establishments in Massachusetts. No assurance can be given that the applicable regulatory approvals allowing for the opening of adult use dispensaries will be received.

In order to seek to ensure compliance with applicable regulatory frameworks, the Company’s Massachusetts-based business employs a combination of software-based metric tracking and operational processes and procedures designed to comply with in-place regulatory requirements.

The Company’s Massachusetts-based business uses LeafLogix, a seed-to-sale capable control system, for tracking and tracing cannabis plants and products. This solution has been specifically designed to satisfy the applicable reporting requirements associated with regulated cannabis activities.

In addition to the software-based control systems, the Company’s Massachusetts-based business has designated a set of operating procedures, including employee training with respect to such procedures, to secure compliance.

Standard operating procedures for regulatory compliance were developed by the Massachusetts-based business and reviewed with the applicable regulators during such business’ initial licensing processes and are reviewed on a continuous basis by virtue of ongoing inspections and reviews by the applicable regulatory authorities. Managers and employees at the Company’s Massachusetts-based business are empowered to identify key business processes that should be formally documented to assure safety and regulatory compliance.

The Company’s Massachusetts-based business has detailed standard operating procedures for building security, cash management, security of financial instruments, security monitoring systems, security of information, and general security and safety.

The Company’s Massachusetts-based business utilizes a security system around the perimeter of each dispensary designed to prevent and detect diversion, theft or less of marijuana, utilizing commercial grade security and surveillance equipment in compliance with the Commonwealth’s regulatory requirements.

Additionally, the Company’s Massachusetts-based business also has detailed standard operating procedures and protocols for inventory and storage processes, including responsibility for management, inventory limits, inventory counts and reviews, facility reporting, cannabis inventory receipts, a waste disposal plan, salvage and solid waste disposal.

Inventory Management Requirements: The Company’s Massachusetts-based business maintains policies and procedures and employs industry-specific software to track inventory and to seek to ensure strict regulatory compliance at both the retail and wholesale levels. These processes include:

wholesale transfer;
inventory intake;
inventory management;
retail transactions; and
sales data tracking and reporting.

Procedures exist to seek to ensure that each applicable Massachusetts-based facility tracks its cumulative inventory of seeds, plants, and usable marijuana. Generally, these inventory control systems are designed to:

establish and maintain a perpetual inventory system which adequately documents the flow of materials through the manufacturing process;
establish procedures which reconcile the raw material used to the finished product on the basis of each job; and
seek to ensure the absence of significant variances between system outputs and physical inventory counts.

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For cultivation and production facilities, for each lot received at a facility, such inventory control systems are designed to document:

the batch;
the strain of the marijuana seeds or marijuana cuttings planted;
the number of marijuana seeds or marijuana cuttings planted;
the date on which the marijuana seeds or cuttings were planted;
a log or schedule of chemical additives used in the cultivation, including nonorganic pesticides, herbicides and fertilizers;
the number of marijuana plants grown to maturity;
harvest information, including:

o

the date of harvest; and

o

the final yield weight of processed usable marijuana;

marijuana flowers in process in all locations;
marijuana in storage by location;
marijuana in locked containers awaiting disposal; and
an audit trail of all material inventory adjustments.

Retail dispensaries maintain current and complete books and records and sales reports, including invoices that reflect all purchases and sales of marijuana made to and by the applicable dispensary, that are available from the Massachusetts-based business’ electronic verification systems, point of sale systems, and/or inventory control systems (which may be separate systems or functionalities combined into a single system) and are stored in secure safe rooms. Such records include:

in respect of dispensary inventory:

o

the date and time of delivery of each purchase or transfer from a cultivation or production facility;

o

the quantity, type and form of marijuana and infused or edible products purchased from a cultivation or production facility in each purchase as well as related products;

o

invoices and delivery documents, showing entry into the inventory control system; and

o

the quantity of marijuana still available for sale at the dispensary; and

in respect of dispensary retail sales:

o

the date and time of each retail sale;

o

the quantity, type, form, and price of marijuana distributed or dispensed;

o

the price paid or consideration given for the marijuana;

o

identifying information of the purchaser (i.e., name and address, and card number in the case of medical marijuana transactions); and

o

identifying information of the employee conducting the transaction (i.e., the name, initials, or employee identification number of the person who dispensed or sold the marijuana).

All invoices and delivery documents must be systematically filed and must show a legible and complete statement of terms and conditions for each purchase.

Sales records must be compliant with all applicable Ayr policies and procedures according to applicable documented plans, State laws and regulations, and must include for regulatory authority reporting and internal tracking purposes:

the date and time of each sale;
the method of distribution (on-site or delivery);
the quantity, form, and price marijuana and any other products dispensed;
the consideration given;
the name, address, and identification number of the marijuana as recorded on the electronic verification system; and
the names, initials, or employee identification numbers of the individuals who packaged, dispensed, delivered, and sold the marijuana.

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Disposal of Inventory: All marijuana waste, including waste composed of or containing finished marijuana, must be stored, secured, and managed in accordance with applicable State and local statutes, ordinances, and regulations. All waste disposed of by the Massachusetts-based business is recorded in such business’ inventory control system, including:

a description of and reason for the marijuana being disposed of, including, if applicable, the number of failed or other unusable marijuana plants;
the date of disposal;
confirmation that the marijuana was rendered unusable before disposal; and
the method of disposal.

In addition to controls over inventory, State regulatory frameworks specify guidelines in respect of general security.

General Security Guidelines: The Massachusetts-based business’ general security guidelines include:

background checks for current/new employees, particularly if the employee is to be accessing restricted areas;
maintaining video surveillance of facilities;
maintaining visitor logs;
providing for and maintaining secure perimeters for facilities;
requesting employees to watch for suspicious activities;
keeping all access system credentials, access codes, access cards, passwords, etc., in a way that is designed to be secure and accessible only to specifically authorized personnel;
retrieving keys and employment identification cards from an employee and changing computer access passwords when their employment ends;
arranging for prompt and safe disposal of materials;
all employees being required to be trained on emergency procedures; and
posting emergency response numbers, including fire, law enforcement, and executive team in several locations in each facility.

Cash Management: As noted above, the Company’s Massachusetts-based business has detailed standard operating procedures and protocols for cash management, including internal controls and cash security procedures. Examples of such standard operating procedures and protocols used by such business’ dispensaries include, without limitation:

random review of cash register drawers by dispensary supervisors;
random removal of cash from cash register drawers by dispensary supervisors and placement of such cash into a secure vault;
insertion of all cash from cash registers drawers into a secure vault at the end of each day;
recording of daily cash intake by supervisors on a “Register Close” sheet and daily reconciliation of such values against daily sales reports and the prior day’s recording of total cash on-hand;
recording of all disbursements on a disbursement form; and
daily audits of total cash on hand and investigations in respect of any noted variances.

The Company’s Massachusetts-based business has worked with an internal advisor to help prescribe and/or implement measures designed to seek to ensure compliance with applicable State laws on an ongoing basis, including:

correspondence and updates with regulators;
ongoing monitoring of compliance with operating procedures and regulations by on-site management; and
appropriate employee training for all standard operating procedures.

In Massachusetts, Ayr enlists its management and compliance personnel, whose responsibilities include monitoring the day-to-day activities, ensuring that the established standard operating procedures are being adhered to, identifying any non-compliance matters and putting into place the necessary modifications to seek to ensure compliance.

While the Company’s Massachusetts-based business is compliant with State and local cannabis laws in all material respects, its cannabis-related activities remain illegal under United States federal law. See “Risk Factors”.

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Pennsylvania Regulatory Compliance

The Company’s Pennsylvania-based business is in compliance with applicable licensing requirements and the regulatory framework enacted by the Commonwealth of Pennsylvania, and maintains the appropriate licenses for the cultivation, manufacture and transport of medical cannabis, as applicable.

The Company’s Pennsylvania-based business has not experienced any unremedied non-compliance which may have an impact on its licenses, business activities or operations which has not been remedied, nor is such business subject to any outstanding notices of violation by the Commonwealth of Pennsylvania which may have an impact on its licenses, business activities or operations. As noted under “Non-Compliance with State and Local Cannabis Laws” below, Ayr intends to cause its businesses to promptly remedy any known occurrences of non-compliance with applicable State and local cannabis rules and regulations and Ayr intends to publicly disclose any non-compliance, citations or notices of violation which may have an impact on its licenses, business activities or operations. Given the stage of business of the Company’s Pennsylvania-based business, such business has, on an on-going basis, internally reviewed applicable Pennsylvania laws and regulations relating to the cultivation, manufacture and transport of medical cannabis and has internally analyzed its exposure to U.S. federal law. The Company’s Pennsylvania-based business has enlisted internal compliance personnel to provide on-going advice on applicable U.S. federal and Pennsylvania laws.

The Company’s Pennsylvania-based subsidiaries currently possesses two (2) Grower/Processor permits and two (2) Dispensary permits. The cultivation license allows for unlimited cultivation with no cap on either canopy size or production volume. Its Dispensary licenses authorize a total of nine retail locations.

In order to seek to ensure compliance with applicable regulatory frameworks, the Company’s Pennsylvania-based business employs a combination of software-based metric tracking and operational processes and procedures designed to comply with in-place regulatory requirements.

The Company’s Pennsylvania-based business uses MJ Freeway, a seed-to-sale capable control system, for tracking and tracing cannabis plants and products. This solution has been specifically designed to satisfy the applicable reporting requirements associated with regulated cannabis activities.

In addition to the software-based control systems, the Company’s Pennsylvania-based business has designated a set of operating procedures, including employee training with respect to such procedures, to seek to secure compliance.

Standard operating procedures for regulatory compliance were developed by the Pennsylvania-based business and reviewed with the applicable regulators during such business’ initial licensing processes and are reviewed on a continuous basis by virtue of ongoing inspections and reviews by the applicable regulatory authorities. Managers and employees at the Company’s Pennsylvania-based business are empowered to identify key business processes that should be formally documented to seek to assure safety and regulatory compliance.

The Company’s Pennsylvania-based business has detailed standard operating procedures for building security, security of financial instruments, security monitoring systems, security of information, and general security and safety.

The Company’s Pennsylvania-based business utilizes a security system around the perimeter of its premises designed to prevent and detect diversion, theft or less of marijuana, utilizing commercial grade security and surveillance equipment in compliance with the Commonwealth’s regulatory requirements.

Additionally, the Company’s Pennsylvania-based business also has detailed standard operating procedures and protocols for inventory and storage processes, including responsibility for management, inventory limits, inventory counts and reviews, facility reporting, cannabis inventory receipts, a waste disposal plan, salvage and solid waste disposal.

Inventory Management Requirements: The Company’s Pennsylvania-based business maintains policies and procedures and employs industry-specific software to track inventory and to seek to ensure strict regulatory compliance at both the retail and wholesale levels. These processes include:

wholesale transfer;
inventory intake;
inventory management; and

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sales data tracking and reporting.

Procedures exist to seek to ensure that each applicable Pennsylvania-based facility tracks its cumulative inventory of seeds, plants, and usable marijuana. Generally, these inventory control systems are designed to:

establish and maintain a perpetual inventory system which adequately documents the flow of materials through the manufacturing process;
establish procedures which reconcile the raw material used to the finished product on the basis of each job; and
seek to ensure the absence of significant variances between system outputs and physical inventory counts.

For each lot received at a cultivation/production facility, such inventory control systems are designed to document:

the batch;
the strain of the marijuana seeds or marijuana cuttings planted;
the number of marijuana seeds or marijuana cuttings planted;
the date on which the marijuana seeds or cuttings were planted;
a log or schedule of chemical additives used in the cultivation, including nonorganic pesticides, herbicides and fertilizers;
the number of marijuana plants grown to maturity;
harvest information, including:

o

the date of harvest; and

o

the final yield weight of processed usable marijuana;

marijuana flowers in process in all locations;
marijuana in storage by location;
marijuana in locked containers awaiting disposal; and
an audit trail of all material inventory adjustments.

All invoices and delivery documents must be systematically filed and must show a legible and complete statement of terms and conditions for each purchase.

Disposal of Inventory: All marijuana waste, including waste composed of or containing finished marijuana, must be stored, secured, and managed in accordance with applicable State and local statutes, ordinances, and regulations. All waste disposed of by the Pennsylvania-based business is recorded in such business’ inventory control system, including:

a description of and reason for the marijuana being disposed of, including, if applicable, the number of failed or other unusable marijuana plants;
the date of disposal;
confirmation that the marijuana was rendered unusable before disposal; and
the method of disposal.

In addition to controls over inventory, State regulatory frameworks specify guidelines in respect of general security.

General Security Guidelines: The Pennsylvania-based business’ general security guidelines include:

background checks for current/new employees, particularly if the employee is to be accessing restricted areas;
maintaining video surveillance of facilities;
maintaining visitor logs;
providing for and maintaining secure perimeters for facilities;
requesting employees to watch for suspicious activities;
keeping all access system credentials, access codes, access cards, passwords, etc., in a way that is designed to be secure and accessible only to specifically authorized personnel;
retrieving keys and employment identification cards from an employee and changing computer access passwords when their employment ends;
arranging for prompt and safe disposal of materials;
all employees being required to be trained on emergency procedures; and
posting emergency response numbers, including fire, law enforcement, and executive team in several locations in each facility.

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The Company’s Pennsylvania-based business has worked to prescribe and/or implement measures designed to seek to ensure compliance with applicable State laws on an ongoing basis, including:

correspondence and updates with regulators;
ongoing monitoring of compliance with operating procedures and regulations by on-site management; and
appropriate employee training for all standard operating procedures.

In Pennsylvania, Ayr enlists its management and compliance personnel, whose responsibilities include monitoring the day-to-day activities, ensuring that the established standard operating procedures are being adhered to, identifying any non-compliance matters and putting into place the necessary modifications to seek to ensure compliance.

While the Company’s Pennsylvania-based business is compliant with State and local cannabis laws in all material respects, its cannabis-related activities remain illegal under United States federal law. See “Risk Factors”.

Florida Regulatory Compliance

The Company’s Florida-based business is in compliance with applicable licensing requirements and the regulatory framework enacted by the State of Florida, and maintains the appropriate licenses for the cultivation, manufacture, transport and dispensing of medical cannabis, as applicable.

The Company’s Florida-based business has not experienced any unremedied non-compliance which may have an impact on its licenses, business activities or operations which has not been remedied. As noted under “Non-Compliance with State and Local Cannabis Laws” below, Ayr intends to cause its businesses to promptly remedy any known occurrences of non-compliance with applicable State and local cannabis rules and regulations and Ayr intends to publicly disclose any non-compliance, citations or notices of violation which may have an impact on its licenses, business activities or operations. Given the stage of business of the Company’s Florida-based business, such business has, on an on-going basis, internally reviewed applicable Florida laws and regulations relating to the cultivation, manufacture, transport and dispensing of medical cannabis and has internally analyzed its exposure to U.S. federal law. The Company’s Florida-based business has enlisted internal compliance personnel to provide on-going advice on applicable U.S. federal and Florida laws.

The Company’s Florida-based business currently possesses a license to cultivate, manufacture, transport and dispense medical cannabis to qualified patients in Florida. The Company’s Florida-based business’s license allows for unlimited cultivation with no cap on either canopy size or production volume.

In order to seek to ensure compliance with applicable regulatory frameworks, the Company’s Florida-based business employs a combination of software-based metric tracking and operational processes and procedures designed to comply with in-place regulatory requirements.

The Company’s Florida-based business uses LeafLogix, a seed-to-sale capable control system, for tracking and tracing cannabis plants and products. This solution has been specifically designed to satisfy the applicable reporting requirements associated with regulated cannabis activities.

In addition to the software-based control systems, the Company’s Florida-based business has designated a set of operating procedures, including employee training with respect to such procedures, to seek to secure compliance.

Standard operating procedures for regulatory compliance were developed by the Florida-based business and reviewed with the applicable regulators during such business’ initial licensing processes and are reviewed on a continuous basis by virtue of ongoing inspections and reviews by the applicable regulatory authorities. Managers and employees at the Company’s Florida-based business are empowered to identify key business processes that should be formally documented to seek to assure safety and regulatory compliance.

The Company’s Florida-based business has detailed standard operating procedures for building security, security of financial instruments, security monitoring systems, security of information, and general security and safety.

The Company’s Florida-based business utilizes a security system around the perimeter of its premises designed to prevent and detect diversion, theft or less of marijuana, utilizing commercial grade security and surveillance equipment in compliance with the State’s regulatory requirements.

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Additionally, the Company’s Florida-based business also has detailed standard operating procedures and protocols for inventory and storage processes, including responsibility for management, inventory limits, inventory counts and reviews, facility reporting, cannabis inventory receipts, a waste disposal plan, salvage and solid waste disposal.

Inventory Management Requirements: The Company’s Florida-based business maintains policies and procedures and employs industry-specific software to track inventory and to seek to ensure strict regulatory compliance at both the retail and wholesale levels. These processes include:

wholesale transfer;
inventory intake;
inventory management; and
sales data tracking and reporting.

Procedures exist to seek to ensure that each applicable Florida-based facility tracks its cumulative inventory of seeds, plants, and usable marijuana. Generally, these inventory control systems are designed to:

establish and maintain a perpetual inventory system which adequately documents the flow of materials through the manufacturing process;
establish procedures which reconcile the raw material used to the finished product on the basis of each job; and
seek to ensure the absence of significant variances between system outputs and physical inventory counts.

For each lot received at a cultivation/production facility, such inventory control systems are designed to document:

the batch;
the strain of the marijuana seeds or marijuana cuttings planted;
the number of marijuana seeds or marijuana cuttings planted;
the date on which the marijuana seeds or cuttings were planted;
a log or schedule of chemical additives used in the cultivation, including nonorganic pesticides, herbicides and fertilizers;
the number of marijuana plants grown to maturity;
harvest information, including:

o

the date of harvest; and

o

the final yield weight of processed usable marijuana;

marijuana flowers in process in all locations;
marijuana in storage by location;
marijuana in locked containers awaiting disposal; and
an audit trail of all material inventory adjustments.

All invoices and delivery documents must be systematically filed and must show a legible and complete statement of terms and conditions for each purchase.

Disposal of Inventory: All marijuana waste, including waste composed of or containing finished marijuana, must be stored, secured, and managed in accordance with applicable State and local statutes, ordinances, and regulations. All waste disposed of by the Florida-based business is recorded in such business’ inventory control system, including:

a description of and reason for the marijuana being disposed of, including, if applicable, the number of failed or other unusable marijuana plants;
the date of disposal;
confirmation that the marijuana was rendered unusable before disposal; and
the method of disposal.

In addition to controls over inventory, State regulatory frameworks specify guidelines in respect of general security.

General Security Guidelines: The Florida-based business’s general security guidelines include:

background checks for current/new employees, particularly if the employee is to be accessing restricted areas;

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maintaining video surveillance of facilities;
maintaining visitor logs;
providing for and maintaining secure perimeters for facilities;
requesting employees to watch for suspicious activities;
keeping all access system credentials, access codes, access cards, passwords, etc., in a way that is designed to be secure and accessible only to specifically authorized personnel;
retrieving keys and employment identification cards from an employee and changing computer access passwords when their employment ends;
arranging for prompt and safe disposal of materials;
all employees being required to be trained on emergency procedures; and
posting emergency response numbers, including fire, law enforcement, and executive team in several locations in each facility.

The Company’s Florida-based business has worked to prescribe and/or implement measures designed to seek to ensure compliance with applicable State laws on an ongoing basis, including:

correspondence and updates with regulators;
ongoing monitoring of compliance with operating procedures and regulations by on-site management; and
appropriate employee training for all standard operating procedures.

In Florida, Ayr enlists its management and compliance personnel, whose responsibilities include monitoring the day-to-day activities, ensuring that the established standard operating procedures are being adhered to, identifying any non-compliance matters and putting into place the necessary modifications to seek to ensure compliance.

While the Company’s Florida-based business is compliant with State and local cannabis laws, its cannabis-related activities remain illegal under United States federal law. See “Risk Factors”.

Arizona Regulatory Compliance

Except as provided below, the Company’s Arizona-based business is in compliance with applicable licensing requirements and the regulatory framework enacted by the State of Arizona, and maintains the appropriate licenses for a Marijuana Establishment and Medical Marijuana Dispensary and has obtained authorizations for off-site cultivation facilities and the manufacturing of edibles under both licenses.

Except as provided below, the Company’s Arizona-based business has not experienced any unremedied non-compliance which may have an impact on its licenses, business activities or operations which has not been remedied, nor is such business subject to any outstanding notices of violation by the State of Arizona which may have an impact on its licenses, business activities or operations. Ayr intends to cause its businesses to promptly remedy any known occurrences of non-compliance with applicable State and local cannabis rules and regulations. Given the stage of business of the Company’s Arizona-based business, such business has, on an on-going basis, internally reviewed applicable Arizona laws and regulations relating to recreational and medical marijuana and has internally analyzed its exposure to U.S. federal law. The Company has enlisted internal compliance personnel to provide on-going advice on applicable U.S. federal and Arizona laws.

In order to seek to ensure compliance with applicable regulatory frameworks, the Company’s Arizona-based business employs a combination of software-based metric tracking and operational processes and procedures designed to comply with in-place regulatory requirements.

The Company’s Arizona-based business uses LeafLogix, a seed-to-sale capable control system, for tracking and tracing cannabis plants and products. This solution has been specifically designed to satisfy the applicable reporting requirements associated with regulated cannabis activities.

In addition to the software-based control systems, the Company’s Arizona-based business has designated a set of operating procedures, including employee training with respect to such procedures, to seek to secure compliance.

Standard operating procedures for regulatory compliance were developed by the Arizona-based business and reviewed with the applicable regulators during such business’ initial licensing processes and are reviewed on a continuous basis by virtue of ongoing inspections and reviews by the applicable regulatory authorities. Managers and employees at the Company’s Arizona-based business

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are empowered to identify key business processes that should be formally documented to seek to assure safety and regulatory compliance.

The Company’s Arizona-based business has detailed standard operating procedures for building security, security of financial instruments, security monitoring systems, security of information, and general security and safety.

The Company’s Arizona-based business utilizes a security system around the perimeter of its premises designed to prevent and detect diversion, theft or less of marijuana, utilizing commercial grade security and surveillance equipment in compliance with Arizona’s regulatory requirements.

Additionally, the Company’s Arizona-based business also has detailed standard operating procedures and protocols for inventory and storage processes, including responsibility for management, inventory limits, inventory counts and reviews, facility reporting, cannabis inventory receipts, a waste disposal plan, salvage and solid waste disposal.

Inventory Management Requirements: The Company’s Arizona-based business maintains policies and procedures and employs industry-specific software to track inventory and to seek to ensure strict regulatory compliance at both the retail and wholesale levels. These processes include:

wholesale transfer;
inventory intake;
inventory management; and
sales data tracking and reporting.

Procedures exist to seek to ensure that each applicable Arizona-based facility tracks its cumulative inventory of seeds, plants, and usable marijuana. Generally, these inventory control systems are designed to:

establish and maintain a perpetual inventory system which adequately documents the flow of materials through the manufacturing process;
establish procedures which reconcile the raw material used to the finished product on the basis of each job; and
seek to ensure the absence of significant variances between system outputs and physical inventory counts.

For each lot received at a cultivation/production facility, such inventory control systems are designed to document:

the batch;
the strain of the marijuana seeds or marijuana cuttings planted;
the number of marijuana seeds or marijuana cuttings planted;
the date on which the marijuana seeds or cuttings were planted;
a log or schedule of chemical additives used in the cultivation, including nonorganic pesticides, herbicides and fertilizers;
the number of marijuana plants grown to maturity;
harvest information, including:

o

the date of harvest; and

o

the final yield weight of processed usable marijuana;

marijuana flowers in process in all locations;
marijuana in storage by location;
marijuana in locked containers awaiting disposal; and
an audit trail of all material inventory adjustments.

All invoices and delivery documents must be systematically filed and must show a legible and complete statement of terms and conditions for each purchase.

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Disposal of Inventory: All marijuana waste, including waste composed of or containing finished marijuana, must be stored, secured, and managed in accordance with applicable State and local statutes, ordinances, and regulations. All waste disposed of by the Arizona-based business is recorded in such business’ inventory control system, including:

a description of and reason for the marijuana being disposed of, including, if applicable, the number of failed or other unusable marijuana plants;
the date of disposal;
confirmation that the marijuana was rendered unusable before disposal; and
the method of disposal.

In addition to controls over inventory, State regulatory frameworks specify guidelines in respect of general security.

General Security Guidelines: The Arizona-based business’ general security guidelines include:

background checks for current/new employees, particularly if the employee is to be accessing restricted areas;
maintaining video surveillance of facilities;
maintaining visitor logs;
providing for and maintaining secure perimeters for facilities;
requesting employees to watch for suspicious activities;
keeping all access system credentials, access codes, access cards, passwords, etc., in a way that is designed to be secure and accessible only to specifically authorized personnel;
retrieving keys and employment identification cards from an employee and changing computer access passwords when their employment ends;
arranging for prompt and safe disposal of materials;
all employees being required to be trained on emergency procedures; and
posting emergency response numbers, including fire, law enforcement, and executive team in several locations in each facility.

The Company’s Arizona-based business has worked to prescribe and/or implement measures designed to seek to ensure compliance with applicable State laws on an ongoing basis, including:

correspondence and updates with regulators;
ongoing monitoring of compliance with operating procedures and regulations by on-site management; and
appropriate employee training for all standard operating procedures.

In Arizona, Ayr enlists its management and compliance personnel, whose responsibilities include monitoring the day-to-day activities, ensuring that the established standard operating procedures are being adhered to, identifying any non-compliance matters and putting into place the necessary modifications to seek to ensure compliance.

While the Company’s Arizona-based business is compliant with State and local cannabis laws, its cannabis-related activities remain illegal under United States federal law. See “Risk Factors”.]

New Jersey Regulatory Compliance

The Company’s New Jersey-based subsidiary, GSD, is in compliance with applicable licensing requirements and the regulatory framework enacted by the State of New Jersey and maintains the appropriate ATC Permit for its existing operations, which consist of cultivation and manufacturing at a single facility and retail operations at three facilities. GSD holds a vertical ATC permit with approved facilities as follows: Woodbridge (cultivation, manufacturing, dispensary), Union (dispensary), and Eatontown (dispensary).

The Company’s New Jersey-based subsidiary has not experienced any unremedied non-compliance which may have an impact on its licenses, business activities or operations which has not been remedied, nor is such business subject to any outstanding notices of violation by the State of New Jersey which may have an impact on its licenses, business activities or operations. As noted under “Non-Compliance with State and Local Cannabis Laws” below, Ayr intends to cause its businesses to promptly remedy any known occurrences of non-compliance with applicable State and local cannabis rules and regulations and Ayr intends to publicly disclose any non-compliance, citations or notices of violation which may have an impact on its licenses, business activities or operations. Given the stage of business of the Company’s New Jersey-based business, such business has, on an on-going basis, internally reviewed applicable New

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Jersey Cannabis Rules and has internally analyzed its exposure to U.S. federal law. The Company has enlisted internal compliance personnel to provide on-going advice on applicable U.S. federal and New Jersey laws.

In addition to the foregoing ATC-permitted facilities, the Company’s New-Jersey based subsidiary has developed new cultivation and manufacturing facilities in Lakewood and Cranbury respectively. These facilities await inspection and final approval of NJCRC for certification to commence operations.

Additionally, the Company’s New Jersey-based subsidiary has submitted to NJCRC complete and timely certifications for the expansion of ATC Permit to commence adult use operations at the Woodbridge, Union, and Eatontown facilities.

In order to seek to ensure compliance with applicable regulatory frameworks, the Company’s New Jersey-based business employs a combination of software-based metric tracking and operational processes and procedures designed to comply with in-place regulatory requirements.

The Company’s New Jersey-based subsidiary currently utilizes LeafLogix, a seed-to-sale capable control platform, for the tracking and tracing of cannabis plants and products under the Medicinal Program and is currently integrating its system with the new state-wide METRC platform to be introduced by the NJCRC.

In addition to the software-based control systems, the Company’s New Jersey-based business has designated a set of operating procedures, including employee training with respect to such procedures, to seek to secure compliance.

Standard operating procedures for regulatory compliance were developed by the New Jersey-based business and reviewed with the applicable regulators during such business’ initial licensing processes and are reviewed on a continuous basis by virtue of ongoing inspections and reviews by the applicable regulatory authorities. Managers and employees at the Company’s New Jersey-based business are empowered to identify key business processes that should be formally documented to seek to assure safety and regulatory compliance.

The Company’s New Jersey-based business has detailed standard operating procedures for building security, security of financial instruments, security monitoring systems, security of information, and general security and safety.

The Company’s New Jersey-based business utilizes a security system around the perimeter of its premises designed to prevent and detect diversion, theft or less of marijuana, utilizing commercial grade security and surveillance equipment in compliance with New Jersey’s regulatory requirements.

Additionally, the Company’s New Jersey-based business also has detailed standard operating procedures and protocols for inventory and storage processes, including responsibility for management, inventory limits, inventory counts and reviews, facility reporting, cannabis inventory receipts, a waste disposal plan, salvage and solid waste disposal.

Inventory Management Requirements: The Company’s New Jersey-based business maintains policies and procedures and employs industry-specific software to track inventory and to seek to ensure strict regulatory compliance at both the retail and wholesale levels. These processes include:

wholesale transfer;
inventory intake;
inventory management; and
sales data tracking and reporting.

Procedures exist to seek to ensure that each applicable New Jersey-based facility tracks its cumulative inventory of seeds, plants, and usable marijuana. Generally, these inventory control systems are designed to:

establish and maintain a perpetual inventory system which adequately documents the flow of materials through the manufacturing process;
establish procedures which reconcile the raw material used to the finished product on the basis of each job; and
seek to ensure the absence of significant variances between system outputs and physical inventory counts.

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For each lot received at a cultivation/production facility, such inventory control systems are designed to document:

the batch;
the strain of the marijuana seeds or marijuana cuttings planted;
the number of marijuana seeds or marijuana cuttings planted;
the date on which the marijuana seeds or cuttings were planted;
a log or schedule of chemical additives used in the cultivation, including nonorganic pesticides, herbicides and fertilizers;
the number of marijuana plants grown to maturity;
harvest information, including:

o

the date of harvest; and

o

the final yield weight of processed usable marijuana;

marijuana flowers in process in all locations;
marijuana in storage by location;
marijuana in locked containers awaiting disposal; and
an audit trail of all material inventory adjustments.

All invoices and delivery documents must be systematically filed and must show a legible and complete statement of terms and conditions for each purchase.

Disposal of Inventory: All marijuana waste, including waste composed of or containing finished marijuana, must be stored, secured, and managed in accordance with applicable State and local statutes, ordinances, and regulations. All waste disposed of by the New Jersey-based business is recorded in such business’ inventory control system, including:

a description of and reason for the marijuana being disposed of, including, if applicable, the number of failed or other unusable marijuana plants;
the date of disposal;
confirmation that the marijuana was rendered unusable before disposal; and
the method of disposal.

In addition to controls over inventory, State regulatory frameworks specify guidelines in respect of general security.

General Security Guidelines: The New Jersey-based business’ general security guidelines include:

background checks for current/new employees, particularly if the employee is to be accessing restricted areas;
maintaining video surveillance of facilities;
maintaining visitor logs;
providing for and maintaining secure perimeters for facilities;
requesting employees to watch for suspicious activities;
keeping all access system credentials, access codes, access cards, passwords, etc., in a way that is designed to be secure and accessible only to specifically authorized personnel;
retrieving keys and employment identification cards from an employee and changing computer access passwords when their employment ends;
arranging for prompt and safe disposal of materials;
all employees being required to be trained on emergency procedures; and
posting emergency response numbers, including fire, law enforcement, and executive team in several locations in each facility.

The Company’s New Jersey-based business has worked to prescribe and/or implement measures designed to seek to ensure compliance with applicable State laws on an ongoing basis, including:

correspondence and updates with regulators;
ongoing monitoring of compliance with operating procedures and regulations by on-site management; and
appropriate employee training for all standard operating procedures.

GSD, the Company’s New Jersey-based subsidiary utilizes the management and compliance services and personnel provided by the Company’s parent company and other Company affiliates. The responsibilities of such management and compliance staff include

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monitoring the day-to-day activities of GSD, ensuring that the established standard operating procedures are being adhered to, identifying any non-compliance matters and putting into place the necessary modifications to seek to ensure compliance.

While the Company’s New Jersey-based business is compliant with State and local cannabis laws in all material respects, its cannabis-related activities remain illegal under United States federal law. See “Risk Factors”.

Ohio Regulatory Compliance

The Company’s Ohio-based businesses are in compliance with applicable licensing requirements and the regulatory framework enacted by the State of Ohio, and CSAC maintains the appropriate license for the Ayr Wellness processing facility. Greenlight currently maintains the appropriate approvals to manage the Parma cultivation facility once it is operational.

The Company’s Ohio-based businesses have not experienced any unremedied non-compliance which may have an impact on its licenses, business activities or operations which has not been remedied, nor is such business subject to any outstanding notices of violation by the State of Ohio which may have an impact on its licenses, business activities or operations. As noted under “Non-Compliance with State and Local Cannabis Laws” below, Ayr intends to cause its businesses to promptly remedy any known occurrences of non-compliance with applicable State and local cannabis rules and regulations and Ayr intends to publicly disclose any non-compliance, citations or notices of violation which may have an impact on its licenses, business activities or operations. Given the stage of business of the Company’s Ohio-based business, such business has, on an on-going basis, internally reviewed applicable Ohio laws and regulations relating to and has internally analyzed its exposure to U.S. federal law. The Company has enlisted internal compliance personnel to provide on-going advice on applicable U.S. federal and Ohio laws.

In order to seek to ensure compliance with applicable regulatory frameworks, the Company’s Ohio-based business employs a combination of software-based metric tracking and operational processes and procedures designed to comply with in-place regulatory requirements.

The Company’s Ohio-based businesses use METRC, a seed-to-sale capable control system, for tracking and tracing cannabis plants and products. This solution has been specifically designed to satisfy the applicable reporting requirements associated with regulated cannabis activities.

In addition to the software-based control systems, the Company’s Ohio-based businesses have designated a set of operating procedures, including employee training with respect to such procedures, to seek to secure compliance.

Standard operating procedures for regulatory compliance were developed by the Ohio-based businesses and reviewed with the applicable regulators during such business’ initial licensing processes and are reviewed on a continuous basis by virtue of ongoing inspections and reviews by the applicable regulatory authorities. Managers and employees at the Company’s Ohio-based businesses are empowered to identify key business processes that should be formally documented to seek to assure safety and regulatory compliance.

The Company’s Ohio-based businesses have detailed standard operating procedures for building security, security of financial instruments, security monitoring systems, security of information, and general security and safety.

The Company’s Ohio-based businesses utilize a security system around the perimeter of its premises designed to prevent and detect diversion, theft or less of marijuana, utilizing commercial grade security and surveillance equipment in compliance with Ohio’s regulatory requirements.

Additionally, the Company’s Ohio-based businesses also have detailed standard operating procedures and protocols for inventory and storage processes, including responsibility for management, inventory limits, inventory counts and reviews, facility reporting, cannabis inventory receipts, a waste disposal plan, salvage and solid waste disposal.

Inventory Management Requirements: The Company’s Ohio-based businesses maintain policies and procedures and employs industry-specific software to track inventory and to seek to ensure strict regulatory compliance at both the retail and wholesale levels. These processes include:

wholesale transfer;
inventory intake;
inventory management; and

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sales data tracking and reporting.

Procedures exist to seek to ensure that each applicable Ohio-based facility tracks its cumulative inventory of seeds, plants, and usable marijuana. Generally, these inventory control systems are designed to:

establish and maintain a perpetual inventory system which adequately documents the flow of materials through the manufacturing process;
establish procedures which reconcile the raw material used to the finished product on the basis of each job; and
seek to ensure the absence of significant variances between system outputs and physical inventory counts.

For each lot received at the processing facility, or cultivation facility as applicable, such inventory control systems are designed to document:

the batch;
the strain of the marijuana seeds or marijuana cuttings planted;
the number of marijuana seeds or marijuana cuttings planted;
the date on which the marijuana seeds or cuttings were planted;
a log or schedule of chemical additives used in the cultivation, including nonorganic pesticides, herbicides and fertilizers;
the number of marijuana plants grown to maturity;
harvest information, including:

o

the date of harvest; and

o

the final yield weight of processed usable marijuana;

marijuana flowers in process in all locations;
marijuana in storage by location;
marijuana in locked containers awaiting disposal; and
an audit trail of all material inventory adjustments.

All invoices and delivery documents must be systematically filed and must show a legible and complete statement of terms and conditions for each purchase.

Disposal of Inventory: All marijuana waste, including waste composed of or containing finished marijuana, must be stored, secured, and managed in accordance with applicable State and local statutes, ordinances, and regulations. All waste disposed of the Ohio-based businesses is recorded in such business’ inventory control system, including:

a description of and reason for the marijuana being disposed of, including, if applicable, the number of failed or other unusable marijuana plants;
the date of disposal;
confirmation that the marijuana was rendered unusable before disposal; and
the method of disposal.

In addition to controls over inventory, State regulatory frameworks specify guidelines in respect of general security.

General Security Guidelines: The Ohio-based businesses general security guidelines include:

background checks for current/new employees, particularly if the employee is to be accessing restricted areas;
maintaining video surveillance of facilities;
maintaining visitor logs;
providing for and maintaining secure perimeters for facilities;
requesting employees to watch for suspicious activities;
keeping all access system credentials, access codes, access cards, passwords, etc., in a way that is designed to be secure and accessible only to specifically authorized personnel;
retrieving keys and employment identification cards from an employee and changing computer access passwords when their employment ends;
arranging for prompt and safe disposal of materials;
all employees being required to be trained on emergency procedures; and

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posting emergency response numbers, including fire, law enforcement, and executive team in several locations in each facility.

The Company’s Ohio-based businesses have worked to prescribe and/or implement measures designed to seek to ensure compliance with applicable State laws on an ongoing basis, including:

correspondence and updates with regulators;
ongoing monitoring of compliance with operating procedures and regulations by on-site management; and
appropriate employee training for all standard operating procedures.

In Ohio, Ayr enlists its management and compliance personnel, whose responsibilities include monitoring the day-to-day activities, ensuring that the established standard operating procedures are being adhered to, identifying any non-compliance matters and putting into place the necessary modifications to seek to ensure compliance.

While the Company’s Ohio-based businesses are compliant with State and local cannabis laws in all material respects, its cannabis-related activities remain illegal under United States federal law. See “Risk Factors”.

Expected Illinois Regulatory Compliance

Following the closing of the proposed acquisition in Illinois, similar regulatory compliance procedures are expected to be adopted as are used in other States.

Non-Compliance with State and Local Cannabis Laws

From time to time, as with all businesses and all rules, it is anticipated that the Company, through its subsidiaries and establishments to which the Company provides operational support, may experience incidences of non-compliance with applicable rules and regulations, which may include matters such as:

staying open slightly too late due to an excess of customers at stated closing time;
minor inventory discrepancies with regulatory reporting software;
missing fields in regulatory reports;
improper illumination of exterior of facilitates;
packaging and labels out of compliance with most recent regulatory guidelines; and
partial obstruction of camera views.

During the year ended December 31, 2021, Ayr’s Massachusetts-based subsidiary, Sira, entered into a settlement with the Massachusetts Cannabis Control Commission relating to allegedly transporting cannabis under a Medical versus Adult-Use license number during Q3 2020. Sira neither admitted nor denied the alleged activities and settled the matter without a finding of liability by paying a fine of $295,000 to the regulator.

In addition, either on an inspection basis or in response to complaints, such as from neighbors, customers or former employees, State or local regulators may among other things issue “Notice of Violation” letters. Such regulatory actions could lead to the requirement to submit a corrective action plan, or, in more serious cases, lead to penalties and/or amendments, suspensions or revocations of licenses or otherwise have an impact on Ayr’s licenses, business activities, operational support activities or operations.

Ayr has implemented regular compliance reviews to seek to ensure compliance with applicable State and local cannabis rules and regulations. Ayr intends to promptly remedy any material known occurrences of non-compliance with applicable State and local cannabis rules and regulations and Ayr intends to publicly disclose any material non-compliance, citations or notices of violation which may have an impact on its licenses, business activities, operational support activities or operations.

Ability to Access Public and Private Capital

Ayr has historically had and will continue to have access to equity financing from the public capital markets by virtue of its status as a reporting issuer in each of the provinces and territories of Canada.

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Ayr has access to equity and debt financing from the prospectus exempt (private placement) markets in Canada and the U.S. and has relationships with sources of private capital (such as funds and high net worth individuals) that could be investigated at a higher cost of capital.

While Ayr is unable to obtain traditional bank financing in the U.S. or financing from other U.S. federally regulated entities, it currently has access to equity financing through markets in Canada and the U.S. Since the use of marijuana is illegal under U.S. federal law, and in light of concerns in the banking industry regarding money laundering and other federal financial crime related to marijuana, U.S. banks have been reluctant to accept 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. Likewise, marijuana businesses have limited, if any, access to credit card processing services. As a result, marijuana businesses in the U.S. are largely cash-based. This complicates the implementation of financial controls and increases security issues.

Commercial banks, private equity firms and venture capital firms have approached the cannabis industry cautiously to date. However, there are increasing numbers of high net worth individuals and family offices that have made meaningful investments in companies and businesses similar to Ayr’s. Although there has been an increase in the amount of private financing available over the last several years, there is neither a broad nor deep pool of institutional capital that is available to cannabis license holders and license applicants. There can be no assurance that additional financing, if raised privately, will be available to Ayr when needed or on terms which are acceptable to Ayr. Ayr’s inability to raise financing to fund capital expenditures or acquisitions could limit its growth and may have a material adverse effect upon future profitability. See “Risk Factors – Ayr may be subject to restricted access to banking services in the United States and Canada.”

RISK FACTORS

The Company is subject to various risks and uncertainties and an investment in securities of the Company should be considered highly speculative. Prior to making an investment decision, investors should consider the investment risks set forth below and those described elsewhere in this AIF, which are in addition to the usual risks associated with an investment in a business at an early stage of development. The Company considers the risks set forth below to be the most significant, but do not consider them to be all the risks associated with an investment in securities of the Company.

The following information is a summary only of certain risk factors and is qualified in its entirety by reference to, and must be read in conjunction with, the detailed information appearing elsewhere in this AIF. Additional risks and uncertainties not presently known to Ayr or currently deemed immaterial by Ayr may also impair the operations of Ayr. If any such risks actually occur, shareholders of Ayr could lose all or part of their investment and the business, financial condition, liquidity, results of operations and prospects of Ayr could be materially adversely affected and the ability of Ayr to implement its growth plans could be adversely affected. Prospective investors should consult with their professional advisors to assess any investment in the Company.

Risks Related to Legality of Cannabis

While legal under applicable U.S. State law, Ayr’s business activities are illegal under U.S. federal law.

Investors are cautioned that in the United States, cannabis is largely regulated at the State level. To Ayr’s knowledge, as of March 2022, some form of cannabis has been legalized in approximately 37 States, the District of Columbia, and the territories of Guam, U.S. Virgin Islands, Northern Mariana Islands and Puerto Rico. Additional States have pending legislation regarding the same. Although each State in which Ayr will operate authorizes, as applicable, medical and/or adult-use cannabis production and distribution by licensed or registered entities, and numerous other States have legalized cannabis in some form, under U.S. federal law, the possession, use, cultivation, and transfer of non-hemp cannabis and any related drug paraphernalia is illegal, and any such acts are criminal acts under federal law under any and all circumstances under the Substances Act. The concepts of “medical cannabis”, “retail cannabis” and “adult-use cannabis” do not exist under U.S. federal law. Marijuana is a Schedule I drug under the Substances Act. Under U.S. federal law, a Schedule I drug or substance has a high potential for abuse, no accepted medical use in the U.S., and a lack of safety for the use of the drug under medical supervision. Although Ayr believes its businesses are compliant with applicable U.S. State and local law, strict compliance with State and local laws with respect to cannabis may not absolve Ayr of liability under U.S. federal law, nor may it provide a defense to any federal proceeding which may be brought against Ayr. Any such proceedings brought against the Ayr may result in a material adverse effect on Ayr.

Since the possession and use of non-hemp cannabis and any related drug paraphernalia is illegal under U.S. federal law, Ayr may be deemed to be aiding and abetting illegal activities. The Company’s businesses manufacture and/or distribute medical and adult-use

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cannabis. As a result, U.S. law enforcement authorities, in their attempt to regulate the illegal use of cannabis and any related drug paraphernalia, may seek to bring an action or actions against Ayr, including, but not limited to, a claim regarding the possession, use and sale of cannabis, and/or aiding and abetting another’s criminal activities. The U.S. federal aiding and abetting statute provides that anyone who “commits an offense or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal.” As a result, the U.S. Department of Justice (“DOJ”), under the current administration, could allege that Ayr has “aided and abetted” violations of federal law by providing financing and services to the Company. Under these circumstances, the federal prosecutor could seek to seize the assets of Ayr, and to recover the “illicit profits” previously distributed to shareholders resulting from any of the foregoing. In these circumstances, Ayr’s operations would cease, shareholders may lose their entire investment and directors, officers and/or shareholders may be left to defend any criminal charges against them at their own expense and, if convicted, be sent to federal prison. Such an action would result in a material adverse effect on Ayr.

U.S. Customs and Border Protection (“CBP”) enforces the laws of the United States. Crossing the border while in violation of the Substances Act and other related federal laws may result in denied admission, seizures, fines and apprehension. CBP officers administer the Immigration and Nationality Act to determine the admissibility of travelers, who are non-U.S. citizens, into the United States. An investment in Ayr, if it became known to CBP, could have an impact on a shareholder’s admissibility into the United States and could lead to a lifetime ban on admission. See “Risk Factors - U.S. border officials could deny entry of non-U.S. citizens into the U.S. to employees of or investors in companies with cannabis operations in the United States and Canada”.

The Company derives 100% of their revenues from the cannabis industry in certain States, which industry is illegal under U.S. federal law. Even where the Company’s cannabis-related activities are compliant with applicable State and local law, such activities remain illegal under U.S. federal law.

The enforcement of relevant laws is a significant risk.

Medical cannabis has been protected against enforcement by enacted legislation from the United States Congress in the form of what is commonly called the “Rohrabacher-Blumenauer Amendment”, which prevents federal prosecutors from using federal funds to impede the implementation of medical cannabis laws enacted at the State-level, subject to the United States Congress restoring such funding. Notably, this amendment has always applied to only medical cannabis programs, and has no effect on pursuit of recreational cannabis activities. The amendment has historically been passed as an amendment to omnibus appropriations bills, which by their nature expire at the end of a fiscal year or other defined term. Subsequent to the issuance of the Sessions Memorandum by then Attorney General Sessions on January 4, 2018, the United States Congress passed its omnibus appropriations bill, SJ 1662, which for the fourth consecutive year contained the Rohrabacher-Blumenauer Amendment language (referred to in 2018 as the Leahy Amendment) and continued the protections for the medical cannabis marketplace and its lawful participants from interference by the U.S. DOJ up and through the 2018 appropriations deadline of September 30, 2018.

The deadline passed, but the Rohrbacher-Leahy Amendment remained in effect by virtue of a continuing resolution under which the entire 2018 budget continued to operate. Following the expiration of the continuing resolution on December 7, 2018, Congress failed to agree upon an appropriations bill, and the United States government entered a partial shutdown. The Rohrabacher-Leahy Amendment was no longer in effect during the partial shutdown. The partial shutdown ended on January 25, 2019 when the United States Congress passed an appropriations bill funding the United States government through February 15, 2019. This temporary appropriations bill included language similar to the Rohrabacher Leahy Amendment (now referred to as the “Joyce/Leahy Amendment”). On February 15, 2019, the amendment was renewed through the signing of the Fiscal Year 2019 omnibus spending bill, effective through September 30, 2019. On September 27, 2019, the amendment was renewed through a stopgap spending bill, and it was renewed again on November 21, 2019. On December 20, 2019, the amendment was renewed by the signing of the Fiscal Year 2020 omnibus spending bill, effective through September 30, 2020. That legislation also contained a provision continuing to block Washington, D.C. from using its own local tax dollars to implement a legal marijuana sales program.

In July 2020, the House of Representatives passed the “Blumenauer-McClintock-Norton-Lee amendment,” to the Commerce, Justice, Science (CJS) Appropriations bill. That amendment was included in a series of stopgap spending bills from September 2020 through the end of December 2020. On December 27, 2020, the amendment was renewed through the signing of the Fiscal Year 2021 spending bill, which was effective through September 30, 2021. Following the expiration of the Fiscal Year 2021 bill, President Biden has renewed the amendment through a series of stopgap spending bills, with the most recent extension effective through March 11, 2022. On March 10, 2022, the Fiscal Year 2022 omnibus appropriations bill including the amendment was signed into law by President Biden.

Should the Joyce/Leahy amendments language not be included in future appropriations packages, there can be no assurance that the federal government will not seek to prosecute cases involving medical cannabis businesses that are otherwise compliant with State law.

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Such potential proceedings could involve significant restrictions being imposed upon Ayr or third parties, while diverting the attention of key executives. Such proceedings could have a material adverse effect on Ayr, even if such proceedings were concluded successfully in favor of Ayr.

Violations of any federal laws and regulations could result in significant fines, penalties, administrative sanctions, convictions or settlements arising from civil proceedings conducted by either the federal government or private citizens, or criminal charges, including, but not limited to, disgorgement of profits, cessation of business activities or divestiture. This could have a material adverse effect on Ayr, including its reputation and ability to conduct business, its holding (directly or indirectly) of medical and adult-use cannabis licenses in the United States, its financial position, operating results, profitability or liquidity or the market price of its publicly-traded shares. In addition, it will be difficult for Ayr to estimate the time or resources that would be needed for the investigation of any such matters or its final resolution because, in part, the time and resources that may be needed are dependent on the nature and extent of any information requested by the applicable authorities involved, and such time or resources could be substantial.

The approach to the enforcement of cannabis laws may be subject to change or may not proceed as previously outlined.

As a result of the conflicting views between State legislatures and the federal government regarding cannabis, investments in cannabis businesses in the U.S. are subject to inconsistent legislation and regulation. The response to this inconsistency was addressed in the Cole Memorandum addressed to all United States district attorneys acknowledging that notwithstanding the designation of cannabis as a controlled substance at the federal level in the United States, several States have enacted laws relating to cannabis for medical purposes.

The Cole Memorandum outlined certain priorities for the U.S. DOJ relating to the prosecution of cannabis offenses. In particular, the Cole Memorandum noted that in jurisdictions that have enacted laws legalizing cannabis in some form and that have also implemented strong and effective regulatory and enforcement systems to control the cultivation, distribution, sale and possession of cannabis, conduct in compliance with those laws and regulations is less likely to be a priority at the federal level. Notably, however, the U.S. DOJ has never provided specific guidelines for what regulatory and enforcement systems it deems sufficient under the Cole Memorandum standard.

In light of limited investigative and prosecutorial resources, the Cole Memorandum concluded that the U.S. DOJ should be focused on addressing only the most significant threats related to cannabis. States where medical cannabis had been legalized were not characterized as a high priority. In March 2017, then newly appointed Attorney General Jeff Sessions again noted limited federal resources and acknowledged that much of the Cole Memorandum had merit; however, he had previously stated that he did not believe it had been implemented effectively and, on January 4, 2018, Sessions issued the Sessions Memorandum, which rescinded the Cole Memorandum. The Sessions Memorandum rescinded previous nationwide guidance specific to the prosecutorial authority of United States Attorneys relative to cannabis enforcement on the basis that they are unnecessary, given the well-established principles governing federal prosecution that are already in place. Those principles are included in chapter 9.27.000 of the USAM and require federal prosecutors deciding which cases to prosecute to weigh all relevant considerations, including federal law enforcement priorities set by the Attorney General, the seriousness of the crime, the deterrent effect of criminal prosecution, and the cumulative impact of particular crimes on the community.

As a result of the Sessions Memorandum, federal prosecutors are now free to utilize their prosecutorial discretion to decide whether to prosecute cannabis activities despite the existence of State-level laws that may be inconsistent with federal prohibitions. No direction was given to federal prosecutors in the Sessions Memorandum as to the priority they should ascribe to such cannabis activities, and resultantly it is uncertain how active U.S. federal prosecutors will be in relation to such activities.

As discussed above, should the Joyce/Leahy amendment not be renewed, there can be no assurance that the federal government will not seek to prosecute cases involving medical cannabis businesses that are otherwise compliant with State law.

The Sessions Memorandum did not discuss the treatment of medical cannabis by federal prosecutors. While dozens of U.S. attorneys from across the country have affirmed that their view of federal enforcement priorities has not changed, there can be no assurances that such views are universally held or will continue in the near future. In California, at least one U.S. Attorney has made comments indicating a desire to enforce the Controlled Substances Act, stating that the Sessions Memorandum and the rescission of the Cole Memorandum “returns trust and local control to federal prosecutors” to enforce the Controlled Substances Act. These and other so called “enforcement hawks” in California or elsewhere may choose to enforce the Controlled Substances Act in accordance with federal policies prior to the issuance of the Cole Memorandum. As such, there can be no assurance that the federal government will not seek to prosecute cases involving cannabis businesses that are otherwise compliant with State law.

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On November 7, 2018, Mr. Sessions tendered his resignation as Attorney General at the request of President Donald Trump. Following Mr. Sessions’ resignation, Matthew Whitaker began serving as Acting United States Attorney General, and William Barr was eventually appointed to the role. Mr. Barr was a former Attorney General under George H.W. Bush, with an anti-drug stance during his tenure. During his Senate confirmation hearing, Mr. Barr stated that he disagrees with efforts by States to legalize marijuana, but will not go after marijuana companies in states that legalized it under Obama administration policies. He stated further that he would not upset settled expectations that have arisen as a result of the Cole Memorandum. In June 2020, a federal prosecutor accused Mr. Barr of ordering “politically motivated” antitrust reviews of 10 marijuana business mergers, allegedly because he personally did not support their underlying business in the marijuana industry. At least one of those investigations allegedly resulted in the collapse of a proposed merger between two large cannabis businesses.

On January 20, 2021, Joseph R. Biden was inaugurated as President of the United States. During the campaign, President Biden expressed support for nationwide decriminalization of cannabis, but has not yet supported full legalization for medial or recreational use. President Biden appointed former District of Columbia Court of Appeals Judge Merrick Garland to serve as Attorney General, and his nomination was confirmed by the Senate on March 10, 2021. During his confirmation hearing, in response to a question from Senator Cory Booker, Garland did not confirm whether he would reinstate the Cole Memorandum, but indicated that enforcement of federal cannabis laws “does not seem to me a useful use of limited resources.”

Going forward, there can be no assurance as to the position the new administration or any future administration, DOJ, FBI, or other governmental agency may take on marijuana. A new administration could decide to enforce the federal laws strongly. Any enforcement of current federal laws could cause significant financial damage to the Company and its shareholders. Further, future presidential administrations may want to treat marijuana differently and potentially enforce the federal laws more aggressively. Ayr regularly monitors the activities of the current administration in this regard.

Any potential proceedings to enforce federal cannabis laws could involve significant restrictions being imposed upon Ayr or third parties, while diverting the attention of key executives. Such proceedings could have a material adverse effect on Ayr, as well as Ayr’s reputation, even if such proceedings were concluded successfully in favor of Ayr. In the extreme case, such proceedings could ultimately involve the prosecution of key executives of Ayr or the seizure of corporate assets; however as of the date hereof, Ayr believes that proceedings of this nature are remote.

Ayr may be subject to restricted access to banking services in the United States and Canada.

In February 2014, FinCEN issued guidance through the FinCEN Memorandum (which is not law) with respect to financial institutions providing banking services to cannabis businesses. This guidance includes burdensome due diligence expectations and reporting requirements, and does not provide any safe harbors or legal defenses from examination or regulatory or criminal enforcement actions by the U.S. DOJ, FinCEN or other federal regulators. Thus, many banks and other financial institutions in the United States choose not to provide banking services to cannabis-related businesses or rely on this guidance, which can be amended or revoked at any time by the Trump administration. In addition to the foregoing, banks may refuse to process debit card payments, and credit card companies generally refuse to process credit card payments for cannabis-related businesses. As a result, Ayr may have limited or no access to banking or other financial services in the United States. The inability, or limitation of Ayr’s ability, to open and maintain bank accounts, obtain other banking services and/or accept credit card and debit card payments may make it difficult for Ayr to operate and conduct its business as planned or to operate efficiently. Ayr does not consider this to be a risk at the current time in Nevada.

Additionally, Canadian banks may potentially refuse to provide banking services to companies engaged in U.S. cannabis activities while it is illegal under U.S. federal law.

There are increasing numbers of high net worth individuals and family offices that have made meaningful investments in companies and businesses similar to the Company. Although there has been an increase in the amount of private financing available over the last several years, there is neither a broad nor deep pool of institutional capital that is available to cannabis license holders and license applicants. There can be no assurance that additional financing, if raised privately, will be available to Ayr when needed or on terms which are acceptable to Ayr. Ayr’s inability to raise financing to fund capital expenditures or acquisitions could limit its growth and may have a material adverse effect upon future profitability.

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The differing regulatory requirements across State jurisdictions may hinder or otherwise prevent Ayr from achieving economies of scale.

Traditional rules of investing may prove to be imperfect in the cannabis industry. For example, while it would be common for investment managers to purchase equity in companies in different States to reach economies of scale and to conduct business across State lines, such an investment thesis may not be feasible in the cannabis industry because of varying State-by-State legislation. Applicable regulations in many States may require advance disclosure of and approval of State regulators to accomplish an investment. As no two regulated markets in the cannabis industry are exactly the same, doing business across State lines may not be possible or commercially practicable. As a result, Ayr may be limited to identifying opportunities in individual States, which may have the effect of slowing the growth prospects of Ayr.

Risk of legal, regulatory or other political change.

The success of the business strategy of Ayr depends on the legality of the cannabis industry. The political environment surrounding the cannabis industry in general can be volatile and the regulatory framework remains in flux. To Ayr’s knowledge, as of March 2022, some form of cannabis has been legalized in approximately 37 States, the District of Columbia, and the territories of Guam, U.S. Virgin Islands, Northern Mariana Islands and Puerto Rico; however, the risk remains that a shift in the regulatory or political realm could occur and have a drastic impact on the industry as a whole, adversely impacting Ayr’s business, results of operations, financial condition or prospects.

Delays in enactment of new State or federal regulations could restrict the ability of Ayr to reach strategic growth targets. The growth strategy of Ayr is contingent upon certain federal and State regulations being enacted to facilitate the legalization of medical and adult-use marijuana. If such regulations are not enacted, or enacted but subsequently repealed or amended, or enacted with prolonged phase-in periods, the growth targets of Ayr could be negatively impacted, and thus, the effect on the return of investor capital, could be detrimental.

Ayr is unable to predict with certainty when and how the outcome of these complex regulatory and legislative proceedings will affect its business and growth.

Further, there is no guarantee that State laws legalizing and regulating the sale and use of cannabis will not be repealed or overturned, or that local governmental authorities will not limit the applicability of State laws within their respective jurisdictions, including prohibiting ownership of cannabis businesses by public companies. If the federal government begins to enforce federal laws relating to cannabis in States where the sale and use of cannabis is currently legal under State law, or if existing applicable State laws are repealed or curtailed, Ayr’s business, results of operations, financial condition and prospects would be materially adversely affected. It is also important to note that local and city ordinances may strictly limit and/or restrict disbursement of marijuana in a manner that will make it extremely difficult or impossible to transact business in that jurisdiction, which may adversely affect Ayr’s continued operations. Federal actions against individuals or entities engaged in the cannabis industry or a repeal of applicable marijuana legislation could adversely affect Ayr and its business, results of operations, financial condition and prospects.

Ayr is also aware that multiple States are considering special taxes or fees on businesses in the cannabis industry. It is a potential yet unknown risk at this time that other States are in the process of reviewing such additional fees and taxation. Should such special taxes or fees be adopted, this could have a material adverse effect upon Ayr’s business, results of operations, financial condition or prospects.

Overall, the medical and adult-use cannabis industry is subject to significant regulatory change at both the State and federal level. For instance, in Massachusetts, the State’s Department of Public Health recently transferred the medical cannabis program, which it has been regulating since 2013, to the Cannabis Control Commission (the current regulator of the State’s adult-use cannabis program). The inability of Ayr to respond to the changing regulatory landscape may cause it to not be successful in capturing significant market share and could otherwise harm its business, results of operations, financial condition or prospects.

The cannabis industry is a new industry that may not succeed.

Should the U.S. federal government change course and decide to prosecute those dealing in medical or adult-use cannabis under applicable law, there may not be any market for Ayr’s products and services. It is a new industry subject to extensive regulation, and there can be no assurance that it will grow, flourish or continue to the extent necessary to permit Ayr to succeed. Ayr is treating the cannabis industry as a deregulating industry with significant unsatisfied demand for its proposed products and will adjust its future operations, product mix and market strategy as the industry develops and matures.

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Ayr’s operations in the U.S. cannabis market may become the subject of heightened scrutiny.

For the reasons set forth above, Ayr’s existing operations in the U.S., and any future operations or investments, may become the subject of heightened scrutiny by regulators, stock exchanges and other authorities in Canada and the U.S. As a result, Ayr may be subject to significant direct and indirect interaction with public officials. There can be no assurance that this heightened scrutiny will not in turn lead to the imposition of certain restrictions on Ayr’s ability to operate or invest in the U.S. or any other jurisdiction, in addition to those described herein.

Given the heightened risk profile associated with cannabis in the U.S., CDS Clearing and Depository Services Inc. (“CDS”) may implement procedures or protocols that would prohibit or significantly curtail the ability of CDS to settle trades for cannabis companies that have cannabis businesses or assets in the U.S. On February 8, 2018, following discussions with the Canadian Securities Administrators and recognized Canadian securities exchanges, the TMX Group announced the signing of a Memorandum of Understanding (“TMX MOU”) with the Neo Exchange Inc., the CSE, the Toronto Stock Exchange, and the TSX Venture Exchange. The TMX MOU outlines the parties’ understanding of Canada’s regulatory framework applicable to the rules, procedures, and regulatory oversight of the exchanges and CDS as it relates to issuers with cannabis-related activities in the U.S. The TMX MOU confirms, with respect to the clearing of listed securities, that CDS relies on the exchanges to review the conduct of listed issuers. As a result, there is no CDS ban on the clearing of securities of issuers with cannabis-related activities in the U.S. However, there can be no guarantee that this approach to regulation will continue in the future. If such a ban were to be implemented, it would have a material adverse effect on the ability of holders of Equity Shares to make and settle trades. In particular, Equity Shares would become highly illiquid as until an alternative was implemented, investors would have no ability to effect a trade of Equity Shares through the facilities of a stock exchange.

In light of the political and regulatory uncertainty surrounding the treatment of U.S. cannabis-related activities, including the rescission of the Cole Memorandum discussed above, on February 8, 2018, the Canadian Securities Administrators revised their previously released Staff Notice – 51-352 Issuers with U.S. Marijuana-Related Activities setting out their disclosure expectations for specific risks facing issuers with cannabis-related activities in the U.S. The Staff Notice confirms that a disclosure-based approach remains appropriate for issuers with U.S. cannabis-related activities. The Staff Notice includes additional disclosure expectations that apply to all issuers with U.S. cannabis-related activities, including those with direct and indirect involvement in the cultivation and distribution of cannabis, as well as issuers that provide goods and services to third parties involved in the U.S. cannabis industry. Ayr views the Staff Notice favorably, as it provides increased transparency and greater certainty regarding the views of its exchange and its regulator of existing operations and strategic business plan as well as Ayr’s ability to pursue further investment and opportunities in Ayr.

Government policy changes or public opinion may also result in a significant influence over the regulation of the cannabis industry in Canada, the U.S. or elsewhere. A negative shift in the public’s perception of medical and/or adult-use cannabis in the U.S. or any other applicable jurisdiction could affect future legislation or regulation. Among other things, such a shift could cause State jurisdictions to abandon initiatives or proposals to legalize medical and/or adult-use cannabis, thereby limiting the number of new State jurisdictions into which Ayr could expand. Any inability to fully implement Ayr’s expansion strategy may result in a material adverse effect on Ayr’s business, financial condition, results of operations or prospects.

Regulatory scrutiny of Ayr’s industry may negatively impact its ability to raise additional capital.

Ayr’s business activities rely on newly established and/or developing laws and regulations in the various States in which Ayr operates. These laws and regulations are rapidly evolving and subject to change with minimal notice. Regulatory changes may adversely affect Ayr’s profitability or cause it to cease operations entirely. The cannabis industry may come under the scrutiny or further scrutiny by the FDA, Securities and Exchange Commission, the U.S. DOJ, the Financial Industry Regulatory Advisory or other federal, State or non-governmental regulatory authorities or self-regulatory organizations that supervise or regulate the production, distribution, sale or use of cannabis for medical and/or adult-use purposes in the U.S. It is impossible to determine the extent of the impact of any new laws, regulations or initiatives that may be proposed, or whether any proposals will become law. The regulatory uncertainty surrounding Ayr’s industry may adversely affect the business and operations of Ayr, including without limitation, the costs to remain compliant with applicable laws and the impairment of its ability to raise additional capital, create a public trading market in the U.S. for securities of Ayr or to find a suitable acquirer, which could reduce, delay or eliminate any return on investment in Ayr.

Ayr’s investments in the U.S. are subject to applicable anti-money laundering laws and regulations.

Because the manufacture, distribution, and dispensation of cannabis remains illegal under the Controlled Substances Act, banks and other financial institutions providing services to cannabis-related businesses risk violation of federal anti-money laundering statutes (18 U.S.C. §§ 1956 and 1957), the unlicensed money-remitter statute (18 U.S.C. § 1960) and the U.S. Bank Secrecy Act, as amended by

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Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada), as amended and the rules and regulations thereunder, the Criminal Code (Canada) and other related or similar rules, regulations or guidelines, issued, administered or enforced by governmental authorities in the United States and Canada. These statutes can impose criminal liability for engaging in certain financial and monetary transactions with the proceeds of a “specified unlawful activity” such as distributing controlled substances which are illegal under U.S. federal law, including cannabis, and for failing to identify or report financial transactions that involve the proceeds of cannabis-related violations of the Substances Act. As a result, a majority of the United States’ banks and financial institutions have refused to open bank accounts for the deposit of funds from businesses involved with the cannabis industry. Others have agreed to accept deposits from medical cannabis sales, but not recreational cannabis sales. The inability to open bank accounts with certain institutions could materially and adversely affect the business of Ayr. See “Risk Factors – Ayr may be subject to restricted access to banking in the United States and Canada”.

In February 2014, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network issued the FinCEN Memorandum providing instructions to banks seeking to provide services to cannabis-related businesses. The FinCEN Memorandum states that in some circumstances, it is permissible for banks to provide services to cannabis-related businesses without risking prosecution for violation of federal money laundering laws. It refers to supplementary guidance that Deputy Attorney General Cole issued to federal prosecutors in the 2014 Cole Memorandum relating to the prosecution of money laundering offenses predicated on cannabis-related violations of the Substances Act. It is unclear at this time whether the current administration will follow the guidelines of the FinCEN Memorandum.

In the event that any of Ayr’s operations, or any proceeds thereof, any dividends or distributions therefrom, or any profits or revenues accruing from such operations in the U.S. were found to be in violation of money laundering legislation or otherwise, such transactions may be viewed as proceeds of crime under one or more of the statutes noted above or any other applicable legislation. This could restrict or otherwise jeopardize the ability of Ayr to declare or pay dividends, effect other distributions or subsequently repatriate such funds back to Canada. Furthermore, while Ayr has no current intention to declare or pay dividends on the Equity Shares in the foreseeable future, in the event that a determination was made that Ayr’s proceeds from operations (or any future operations or investments in the U.S.) could reasonably be shown to constitute proceeds of crime, Ayr may decide or be required to suspend declaring or paying dividends without advance notice and for an indefinite period of time.

Any re-classification of cannabis or changes in U.S. controlled substance laws and regulations may affect Ayr’s business.

If cannabis and/or CBD is re-categorized as a Schedule II or lower controlled substance, the ability to conduct research on the medical benefits of cannabis would most likely be simpler and more accessible; however, if cannabis is re-categorized as a Schedule II or other controlled substance, the resulting re-classification would result in the requirement for FDA approval if medical claims are made for Ayr’s products such as medical cannabis. As a result, the manufacture, importation, exportation, domestic distribution, storage, sale and use of such products may be subject to a significant degree of regulation by the Drug Enforcement Administration (“DEA”). In that case, Ayr may be required to be registered (licensed) to perform these activities and have the security, control, recordkeeping, reporting and inventory mechanisms required by the DEA to prevent drug loss and diversion. Obtaining the necessary registrations may result in delay of the manufacturing or distribution of Ayr’s anticipated products. The DEA conducts periodic inspections of certain registered establishments that handle controlled substances. Failure to maintain compliance could have a material adverse effect on Ayr’s business, financial condition and results of operations. The DEA may seek civil penalties, refuse to renew necessary registrations, or initiate proceedings to restrict, suspend or revoke those registrations. In certain circumstances, violations could lead to criminal proceedings.

The availability of favorable locations may be severely restricted.

In Massachusetts and other States, the local municipality has authority to choose where any cannabis establishment will be located. These authorized areas are frequently removed from other retail operations.

Because the cannabis industry remains illegal under U.S. federal law, the disadvantaged tax status of businesses deriving their income from cannabis, and the reluctance of the banking industry to support cannabis businesses, it may be difficult for Ayr to locate and obtain the rights to operate at various preferred locations. Property owners may violate their mortgages by leasing to Ayr, and those property owners that are willing to allow use of their facilities may require payment of above fair market value rents to reflect the scarcity of such locations and the risks and costs of providing such facilities.

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U.S. border officials could deny entry of non-U.S. citizens into the U.S. to employees of or investors in companies with cannabis operations in the United States and Canada.

Because cannabis remains illegal under U.S. federal law, those employed at or investing in legal and licensed Canadian cannabis companies could face detention, denial of entry or lifetime bans from the U.S. for their business associations with U.S. cannabis businesses. Entry happens at the sole discretion of CBP officers on duty, and these officers have wide latitude to ask questions to determine the admissibility of a non-U.S. citizen or foreign national. The government of Canada has started warning travelers on its website that previous use of cannabis, or any substance prohibited by U.S. federal laws, could mean denial of entry to the U.S. Business or financial involvement in the legal cannabis industry in Canada or in the United States could also be reason enough for U.S. border guards to deny entry. On September 21, 2018, CBP released a statement outlining its current position with respect to enforcement of the laws of the United States. It stated that Canada’s legalization of cannabis will not change CBP enforcement of United States laws regarding controlled substances and because cannabis continues to be a controlled substance under United States law, working in or facilitating the proliferation of the legal marijuana industry in U.S. States where it is deemed legal or Canada may affect admissibility to the U.S. As a result, CBP has affirmed that, employees, directors, officers, managers and investors of companies involved in business activities related to cannabis in the U.S. or Canada (such as Ayr), who are not U.S. citizens face the risk of being barred from entry into the United States for life. On October 9, 2018, CBP released an additional statement regarding the admissibility of Canadian citizens working in the legal cannabis industry. CBP stated that a Canadian citizen working in or facilitating the proliferation of the legal cannabis industry in Canada coming into the U.S. for reasons unrelated to the cannabis industry will generally be admissible to the U.S.; however, if such person is found to be coming into the U.S. for reasons related to the cannabis industry, such person may be deemed inadmissible and/or banned from entry for life.

Business Structure Risks

Ayr’s multi-class structure will have the effect of concentrating voting control and the ability to influence corporate matters with the Founders.

The Multiple Voting Shares have 25 votes per share, whereas the Equity Shares have one vote per share except that the Limited Voting Shares have no rights to vote for the election of directors. As of December 31, 2021, Mercer holds 3,677,626 Multiple Voting Shares and approximately 62.0% of the voting power of the outstanding voting shares of Ayr (which omits Exchangeable Shares and includes Limited Voting Shares) and a higher percentage in respect of the election of directors and would therefore have significant influence over the management and affairs of Ayr and over all matters requiring shareholder approval, including the election of directors and significant corporate transactions. In addition, because of the 25-to-1 voting ratio between the Multiple Voting Shares and Equity Shares, the holders of Multiple Voting Shares will control a majority of the combined voting power of Ayr’s voting shares even though the Multiple Voting Shares will represent a substantially reduced percentage of the total outstanding shares of Ayr. The concentrated voting control of the holders of Multiple Voting Shares will limit the ability of the holders of Equity Shares to influence corporate matters for the foreseeable future, including the election of directors (other than in respect of the Limited Voting Shares, which do not have any entitlement to vote in respect of the election of directors) as well as with respect to Ayr’s decisions to amend its share capital, create and issue additional classes of shares, make significant acquisitions, sell significant assets or parts of its business, merge with other companies and/or undertake other significant transactions. As a result, holders of Multiple Voting Shares will have the ability to influence or control many matters affecting Ayr and actions may be taken that the holders of Equity Shares may not view as beneficial. The market price of the Equity Shares could be adversely affected due to the significant influence and voting power of the holders of Multiple Voting Shares. Additionally, the significant voting interest of the holders of Multiple Voting Shares could discourage transactions involving a change of control, including transactions in which an investor, as a holder of the Equity Shares, might otherwise receive a premium for the Equity Shares over the then-current market price, or discourage competing proposals if a going private transaction is proposed by one or more holders of Multiple Voting Shares.

At the holder’s option, the Multiple Voting Shares will be convertible, on a one-for-one basis, into Equity Shares. In addition, the Multiple Voting Shares will be automatically converted, without further act or formality, into Equity Shares on the earliest of (i) the fifth (5th) anniversary of May 24, 2019, (ii) the date on which such Multiple Voting Shares are held or controlled by a person who is not a Permitted Holder (as defined in the Company’s articles) under the Company’s articles, and (iii) the date on which the aggregate number of Multiple Voting Shares issued and outstanding represents less than one-third of the number of Multiple Voting Shares issued and outstanding at the close of business on the first date of issuance, being May 24, 2019.

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Loss of Foreign Private Issuer status.

The Company is a “foreign private issuer” (“FPI”) as defined in Rule 405 under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”), and Rule 3b-4 under the U.S. Securities Exchange Act of 1934, as amended (the “U.S. Exchange Act”). If, as of the last business day of the Company’s second fiscal quarter for any year, more than 50% of the Company’s outstanding voting securities (as determined under Rule 405 of the U.S. Securities Act) are directly or indirectly held of record by residents of the United States, the Company will no longer meet the definition of an FPI, which may have adverse consequences on the Company’s ability to raise capital in private placements or Canadian prospectus offerings. In addition, the loss of the Company’s FPI status may result in increased reporting requirements and increased audit, legal and administration costs. These increased costs may significantly affect the Company’s business, financial condition and results of operations.

The term “foreign private issuer” is defined as any non-U.S. corporation, other than a foreign government, except any issuer meeting the following conditions:

(a)more than 50% of the outstanding voting securities of such issuer are, directly or indirectly, held of record by residents of the United States; and
(b)any one of the following:
(i)the majority of the executive officers or directors are United States citizens or residents, or
(ii)more than 50% of the assets of the issuer are located in the United States, or
(iii)the business of the issuer is administered principally in the United States.

A “holder of record” is defined by Rule 12g5-1 under the U.S. Exchange Act. Generally speaking, the holder identified on the record of security holders is considered as the record holder. In December 2016, the United States Securities and Exchange Commission (the “SEC”) issued a Compliance and Disclosure Interpretation to clarify that issuers with multiple classes of voting stock carrying different voting rights may, for the purposes of calculating compliance with this threshold, examine either (i) the combined voting power of its share classes, or (ii) the number of voting securities, in each case held of record by U.S. residents. Based on this interpretation, each issued and outstanding Multiple Voting Share is counted as one voting security and each issued and outstanding Subordinate Voting Share and Restricted Voting Share is counted as one voting security for the purposes of determining the 50% U.S. resident threshold, and the Company is a “foreign private issuer”. The Limited Voting Shares are not counted as “voting securities” under the definition of “foreign private issuer” as they do not have any entitlement to vote for the election of directors of the Company. Should the SEC’s guidance and interpretation change, the Company may lose its FPI status.

The Company‘s Status as an “Emerging Growth Company” under United States securities laws.

The Company is an “emerging growth company” as defined in section 3(a) of the U.S. Exchange Act (as amended by the Jumpstart Our Business Startups Act (the “JOBS Act”), enacted on April 5, 2012), and the Company will continue to qualify as an emerging growth company until the earliest to occur of: (i) the last day of the fiscal year during which the Company has total annual gross revenues of $1.07 billion (as such amount is indexed for inflation every five years by the SEC) or more; (ii) the last day of the fiscal year of the Company following the fifth (5th) anniversary of the date of the first sale of common equity securities of the Company pursuant to an effective registration statement under the U.S. Securities Act; (iii) the date on which the Company has, during the previous three (3)-year period, issued more than $1 billion in non-convertible debt; and (iv) the date on which the Company is deemed to be a “large accelerated filer”, as defined in Rule 12b–2 under the U.S. Exchange Act. The Company will qualify as a large accelerated filer (and would cease to be an emerging growth company) at such time when on the last business day of its second fiscal quarter of such year the aggregate worldwide market value of its common equity held by non-affiliates will be $700 million or more.

For so long as the Company remains an emerging growth company, it is permitted to and intends to rely upon exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include not being required to comply with the auditor attestation requirements of Section 404 of the JOBS Act. The Company takes advantage of some, but not all, of the available exemptions available to emerging growth companies. The Company cannot predict whether investors will find the Equity Shares less attractive because the Company relies upon certain of these exemptions. If some investors find the Equity Shares less attractive as a result, there may be a less active trading market for the Equity Shares and the price per Equity Share may be more volatile. On the other hand, if the Company no longer qualifies as an emerging growth company, the Company would be required to divert additional management time and attention from the Company’s development and other business activities and incur increased legal and financial costs to comply with the additional associated reporting requirements, which could negatively impact the Company’s business, financial condition and results of operations.

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Our internal controls over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.

As a U.S. public company, we are required to evaluate our internal controls over financial reporting. Furthermore, in June 2022 when we cease to be an “emerging growth company”, we shall also be required to comply with the auditor attestation requirements of Section 404 of the JOBS Act. In addition, if we fail to achieve and maintain the adequacy of our internal controls, as such standards are modified, supplemented, or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404. We cannot be certain as to the timing of completion of our evaluation, testing and any remediation actions or the impact of the same on our operations. If we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance, our independent registered public accounting firm may issue an adverse opinion due to ineffective internal controls over financial reporting and we may be subject to sanctions or investigation by regulatory authorities, such as the SEC. As a result, there could be a negative reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. In addition, we may be required to incur costs in improving our internal control system and the hiring of additional personnel. Any such action could negatively affect our results of operations and cash flows.

General Regulatory and Legal Risks

Ayr may be subject to the risk of civil asset forfeiture.

Because the cannabis industry remains illegal under U.S. federal law, any property owned by participants in the cannabis industry which are either used in the course of conducting such business, or are the proceeds of such business, could be subject to seizure by law enforcement and subsequent civil asset forfeiture. Even if the owner of the property were never charged with a crime, the property in question could still be seized and subject to an administrative proceeding by which, with minimal due process, it could be subject to forfeiture.

Ayr may lack access to U.S. bankruptcy protections.

Because the use of cannabis is illegal under U.S. federal law, many courts have denied cannabis businesses bankruptcy protections, thus making it very difficult for lenders to recoup their investments in the cannabis industry in the event of a bankruptcy. If Ayr was to experience a bankruptcy, there is no guarantee that U.S. federal bankruptcy protections would be available to Ayr’s U.S. operations, which could have a material adverse effect on Ayr.

Ayr may be subject to the risk of an inability to enforce its contracts.

It is a fundamental principle of law that a contract will not be enforced if it involves a violation of law or public policy. Because cannabis remains illegal at a federal level, judges in multiple States have on a number of occasions refused to enforce contracts for the repayment of money when the loan was used in connection with activities that violate federal law, even if there is no violation of State law. There remains doubt and uncertainty that Ayr will be able to legally enforce contracts it enters into if necessary. Ayr cannot be assured that it will have a remedy for breach of contract, which would have a material adverse effect on Ayr.

Ayr may be subject to the risk of changes in Canadian laws or regulations, or a failure to comply with any such laws and regulations.

Ayr is subject to laws and regulations enacted by the federal and provincial governments of Canada. In particular, Ayr will be required to comply with certain Canadian securities law, income tax law and the CSE and other legal and regulatory requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application also may change from time to time and those changes could have a material adverse effect on Ayr’s business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could result in a material adverse effect on Ayr’s business, financial condition, results of operations or prospects.

Ayr is subject to general regulatory and licensing risks.

The Company is subject to a variety of laws, regulations and guidelines relating to the manufacture, management, transportation, storage and disposal of marijuana, including laws and regulations relating to health and safety, the conduct of operations and the protection of the environment. Achievement of Ayr’s business objectives is contingent, in part, upon compliance with applicable regulatory

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requirements and obtaining all requisite regulatory approvals. Changes to such laws, regulations and guidelines due to matters beyond the control of Ayr may result in a material adverse effect on Ayr’s business, financial condition, results of operations or prospects.

Certain of the Company’s businesses may be required to obtain or renew further government permits and licenses for its current and contemplated operations. Obtaining, amending or renewing the necessary governmental permits and licenses can be a time-consuming process potentially involving numerous regulatory agencies, public hearings and costly undertakings on the Company’s part. The duration and success of the Company’s efforts to obtain, amend and renew permits and licenses are contingent upon many variables not within its control, including the interpretation of applicable requirements implemented by the relevant permitting or licensing authority. The Company may not be able to obtain, amend or renew permits or licenses that are necessary to its operations or to achieve the growth of its business. Any unexpected delays or costs associated with the permitting and licensing process could impede the ongoing or proposed operations of the Company. To the extent necessary, permits or licenses are not obtained, amended or renewed, or are subsequently suspended or revoked, the Company may be curtailed or prohibited from proceeding with ongoing operations or planned development and commercialization activities. Such curtailment or prohibition may result in a material adverse effect on Ayr’s business, financial condition, results of operations or prospects.

Several of the licenses held by the Company are subject to renewal on an annual or periodic basis; however, they are generally renewed, as a matter of course, if the license holder continues to operate in compliance with applicable legislation and regulations and without any material change to its operations. For example, Massachusetts’ medical and adult-use cannabis programs each require annual renewal of registrations. These renewals are contingent upon the registration holder’s past and continued ability to meet the statutory and regulatory requirements of the given program. Compliance personnel of each of the Company’s businesses check renewal dates for licenses to ensure that licenses are renewed as and when required. Ayr has implemented an additional centralized review of such renewal process.

While Ayr believes that its compliance controls have been developed to mitigate the risk of any violations of any licenses they hold arising, there is no assurance that the Company’s licenses will be renewed by each applicable regulatory authority in the future in a timely manner. Any unexpected delays or costs associated with the licensing renewal process for any of the licenses held by the Company could impede the ongoing or planned operations of the Company and have a material adverse effect on Ayr’s business, financial condition, results of operations or prospects.

Ayr may become involved in a number of government or agency proceedings, investigations and audits. The outcome of any regulatory or agency proceedings, investigations, audits, and other contingencies could harm Ayr’s reputation, require Ayr to take, or refrain from taking, actions that could harm its operations or require Ayr to pay substantial amounts of money, harming its financial condition. There can be no assurance that any pending or future regulatory or agency proceedings, investigations and audits will not result in substantial costs or a diversion of management’s attention and resources or have a material adverse impact on Ayr’s business, financial condition, results of operations or prospects.

Nevada Regulatory Regime and Transfer and Grant of Licenses.

The business and activities of Ayr are heavily regulated in Nevada. Ayr’s operations are subject to various laws, regulations and guidelines by governmental authorities, relating to the manufacture, marketing, management, transportation, storage, sale, pricing and disposal of medical marijuana and cannabis oil, and also including laws and regulations relating to health and safety, insurance coverage, the conduct of operations and the protection of the environment. Laws and regulations, applied generally, grant the Nevada Cannabis Compliance Board (as successor regulatory agency to the Nevada Taxation Department over the Nevada cannabis industry) and self-regulatory bodies broad administrative discretion over the activities of Ayr in Nevada, including the power to limit or restrict business activities as well as impose additional disclosure requirements on Ayr’s products and services. Achievement of Ayr’s business objectives is contingent, in part, upon compliance with regulatory requirements enacted by the Nevada Cannabis Compliance Board and other governmental authorities and obtaining all regulatory approvals from the Nevada Cannabis Compliance Board and other governmental authorities, where necessary, for the sale of its cannabis products.

Ayr will incur ongoing costs and obligations related to regulatory compliance and obtaining new licenses. Failure to comply with regulations may lead to possible sanctions including the revocation or imposition of additional conditions on licenses to operate Ayr’s business, the suspension or expulsion from the Nevada cannabis market or of its key personnel, and the imposition of fines and censures. In addition, changes in regulations, more vigorous enforcement thereof or other unanticipated events could require extensive changes to Ayr’s operations, increased compliance costs or give rise to material liabilities, which could have a material adverse effect on the business, results of operations and financial condition of Ayr.

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Limitations on ownership of licenses.

In certain States, the cannabis laws and regulations limit not only the number of cannabis licenses issued, but also the number of cannabis licenses that one person may own. For example, in Massachusetts, no person may have an ownership interest, or control over, more than three medical licenses or three adult-use licenses in any category – for example, cultivation, product manufacturing, transport or retail. Ayr believes that, where such restrictions apply, it may still capture significant share of revenue in the market through the provision of management or support services and similar arrangements with other operators. Nevertheless, such limitations on the acquisition of ownership of additional licenses within certain States may limit Ayr’s ability to grow organically or to increase its market share in such States.

Regulatory action and approvals from the Food and Drug Administration.

The Company’s cannabis-based products are supplied to patients diagnosed with certain medical conditions. However, the Company’s cannabis-based products are not approved by the FDA as “drugs” or for the diagnosis, cure, mitigation, treatment, or prevention of any disease. Accordingly, the FDA may regard any promotion of the cannabis-based products as the promotion of an unapproved drug in violation of the Food, Drug and Cosmetic Act (“FDCA”).

In recent years, the FDA has issued letters to a number of companies selling products that contain CBD oil derived from hemp warning them that the marketing of their products violates the FDCA. FDA enforcement action against the Company  could result in a number of negative consequences, including fines, disgorgement of profits, recalls or seizures of products, or a partial or total suspension of the Company’s production or distribution of its products. Any such event could have a material adverse effect on Ayr’s business, prospects, financial condition, and operating results.

Risks related to acquisitions.

Material acquisitions, dispositions and other strategic transactions involve a number of risks, including: (i) potential disruption of the Company’s ongoing business; (ii) distraction of management; (iii) the Company may become more financially leveraged; (iv) the anticipated benefits and cost savings of those transactions may not be realized fully or at all or may take longer to realize than expected; (v) increasing the scope and complexity of the Company’s operations; and (vi) loss or reduction of control over certain of the Company’s assets. Additionally, Ayr may issue additional Equity Shares in connection with such transactions, which would dilute an Ayr shareholder’s holdings in Ayr or indirect holdings in Ayr.

The Company could incur additional transaction and integration related costs or other factors such as the failure to realize all of the benefits from the acquisition of businesses or strategic assets. All of these factors could cause dilution to the Company’s earnings per share or decrease or delay the anticipated accretive effect of the acquisition and cause a decrease in the market price of the Company’s securities.

The Company may not be able to successfully integrate and combine the operations, personnel and technology infrastructure of any such acquired company with its existing operations. If integration is not managed successfully by the Company’s management, the Company may experience interruptions in its business activities, deterioration in its employee and customer relationships, increased costs of integration and harm to its reputation, all of which could have a material adverse effect on the Company’s business, financial condition and results of operations. The Company may experience difficulties in combining corporate cultures, maintaining employee morale and retaining key employees. The integration of any such acquired companies may also impose substantial demands on management. There is no assurance that these acquisitions will be successfully integrated in a timely manner.

Such transactions could involve other risks, including the assumption of unidentified or unknown liabilities, disputes or contingencies, for which the Company, as a successor owner, may be responsible, and/or changes in the industry, location, or regulatory or political environment in which these investments are located, that the Company’s due diligence review may not adequately uncover and that may arise after entering into such transactions. Although the Company has and expects to continue to realize strategic, operational and financial benefits as a result of the Company’s mergers and acquisitions, the Company cannot predict whether and to what extent such benefits will be achieved.

Furthermore, any future merger or acquisition may result in diversion of management’s attention from other business concerns, and such transactions may be dilutive to the Company’s financial results and/or result in impairment charges and write-offs.

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The presence of one or more material liabilities of an acquired company that are unknown to Ayr at the time of acquisition could have a material adverse effect on the business, results of operations, prospects and financial condition of Ayr. A strategic transaction may result in a significant change in the nature of Ayr’s business, operations and strategy. In addition, Ayr may encounter unforeseen obstacles or costs in implementing a strategic transaction or integrating any acquired business into Ayr’s operations.

Risks related to expansion strategy.

There is no guarantee that the Company’s expansion strategy will be completed, nor is there any guarantee that the Company will be able to expand into additional jurisdictions. There is also no guarantee that the Company’s intentions to acquire and/or construct additional cannabis production, manufacturing, distribution or sales facilities, and to expand the Company’s marketing and sales initiatives will be successful. Any such activities will require, among other things, various regulatory approvals, licenses and permits and there is no guarantee that all required approvals, licenses and permits will be obtained in a timely fashion or at all. There is also no guarantee that the Company will be able to complete any of the foregoing activities as anticipated or at all.

The Company’s failure to successfully execute its expansion strategy (including receiving required regulatory approvals, licenses and permits) could adversely affect the Company’s business, financial condition and results of operations and may result in the Company failing to meet anticipated or future demand for its cannabis products, when and if it arises.

Risks related to evaluating prospective target businesses.

Although the Company has identified specific criteria and guidelines for evaluating prospective target businesses, it is possible that a target business with which the Company enters into a transaction will not have all of these positive attributes. If the Company consummates a transaction with a target that does not meet some or all of these guidelines, such transaction may not prove to be successful. In addition, there is no guarantee that an investment that meets the criteria and guidelines established by the Company will prove to be successful.

Risks related to transactions that are not consummated.

The Company anticipates that the investigation of each specific target business and the negotiation, drafting, and execution of relevant agreements, disclosure documents, and other instruments will require substantial management time and attention and substantial costs for accountants, attorneys and other experts. If the Company decides not to complete a specific transaction, the costs incurred up to that point for the proposed transaction likely would not be recoverable. Furthermore, if the Company reaches an agreement relating to a specific target business, the Company may fail to consummate the transaction for any number of reasons, including those beyond its control. Any such event will result in losses to the Company of the related costs incurred which could materially adversely affect subsequent attempts to locate and acquire or merge with another business.

Risks related to loss of officers and directors.

The Company’s operations are dependent upon a relatively small group of individuals and, in particular, its officers and directors. The Company believes that its success will depend on the continued service of its officers and directors. In addition, the Company’s officers and directors are not required to commit any specified amount of time to the Company’s affairs and, accordingly, may have conflicts of interest in allocating management time among various business activities, including identifying potential acquisitions and monitoring the related due diligence. The Company does not have key-man insurance on the life of any of its directors or officers. The unexpected loss of the services of one or more of its directors or officers could have a detrimental effect on the Company, its operations and its ability to make acquisitions.

Risks related to conflicts of interest.

The Company engages in the business of identifying and combining with one or more businesses. The Company’s officers and directors may now be, or may in the future become, affiliated with entities that are engaged in a similar business.

The Company’s officers and directors also may become aware of business opportunities which may be appropriate for presentation to the Company and the other entities to which it owes duties. In the course of its other business activities, the Company’s officers and directors may owe similar or other duties, and may have obligations, to other entities or pursuant to other outside business arrangements, including seeking and presenting investment and business opportunities. Accordingly, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented. These conflicts may not be resolved in the Company’s favor, as

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the Company’s officers and directors are not required to present investment and business opportunities to the Company in priority to other entities with which they are affiliated or to which they owe duties.

The Company has not adopted a policy that expressly prohibits its directors, officers, security holders, affiliates or associates from having a direct or indirect financial interest in any investment to be acquired or disposed of by the Company or in any transaction to which it is a party or has an interest. In fact, even though it is not the Company’s current intentions to do so, they may enter into a transaction with a target business that is affiliated with the Company’s directors or officers.

Business Risks Related to the Cannabis Industry

Scientific research related to the benefits of marijuana remains in early stages, is subject to a number of important assumptions and may prove to be inaccurate.

Research in Canada, the U.S. and internationally reg