C21 Investments: Annual Report for Fiscal Year Ending March 31, 2026 (Form 20-F)

Operating and Financial Review and Prospects

A. Operating Results

The Company previously presented its financial statements in conformity with the International Financial Reporting Standards, as issued by the International Accounting Standards Board ("IFRS"). Beginning for the fiscal year ended January 31, 2022, the Company changed the accounting principles governing the presentation of its consolidated financial statements to the U.S. generally accepted accounting principles ("U.S. GAAP").

Financial statements included in this Annual Report for the fiscal year ended March 31, 2026, March 31, 2025 and two months ended March 31, 2024, were prepared in conformity with U.S. GAAP.

Financial Information for three years to FY 2026 in accordance with U.S. GAAP

The following table presents selected financial information for the year ended March 31, 2026, March 31, 2025 and two months ended March 31, 2024.

All the current and comparative figures are in U.S. GAAP.

"Revenue" includes retail revenues from our three stores and wholesale revenue from our cultivation operations. Financial Year ("FY") and the year ended March 31, 2026 ("FY2026") and the year ended March 31, 2025 ("FY2025") are defined here. FY 2026 revenues increased versus FY 2025 by 8.3% to $32.6 million. This increase is mainly due to a full year of operations in our third store. State of Nevada sales were down 10.0% over the comparative period.

"Cost of Sales" includes the costs directly attributable to cultivating and processing cannabis plus the cost of product purchases from third parties, for sale in our stores. With the expansion of our cultivation facility our cost of production has come down due to economies of scale. We use an average costing model which captures and averages costs over several quarters.

"Gross profit" increased by $1.05 million in FY 2026 to $13.61 million (41.7% of Revenue) versus FY 2025 of $12.56 million (41.7% of Revenue), mainly due to economies of scale with the added third store.

"Income from operations" Income from operations for FY 2026 increased to $2.3 million, up 78% versus FY 2025 of $1.3 million. This result is due to increased gross profit of $1.0 million, a decrease in share-based compensation expense (a non-cash expense) of $0.6 million, offset by small increases in other expenses.

Expenses

"General and administration" includes all overhead costs that have not otherwise been allocated to cost of sales. These include salaries and wages, professional fees including legal and accounting, insurance and some local taxes. FY 2026 costs were $8,234,388 versus $7,728,838 (FY2025), an increase of $505,550 (6.5%) due to increased salaries, wages and professional fees.

"Operating lease cost" is the cost of our facility leases not included in cost of sales and were $834,421 in FY 2026 versus $785,241 in FY 2025. The increase is due to the addition of our third store.

"Depreciation and amortization" include provisions for fixed assets and intangibles not included in cost of sales. The total depreciation and amortization in FY2026 was $1,780,182 versus $1,706,012 in FY 2025.

"Share based compensation" is a non-cash item and reflects the issuance of stock options to employees, officers, and directors. The decrease of $612,780 in FY 2026 is due to no issuance of stock options in FY2026.

Other Items

"Interest expense" in FY2026 decreased to $187,241 versus $293,675 in FY 2025 due to repayment of the 12% convertible debentures during the year.

"Accretion expense" in FY2026 decreased to $372,018 versus $509,871 in FY2025 due to repayment of the 12% convertible debentures during the year.

"Other income (loss)" in FY2026 is a loss of $369,398 versus a loss of $135,446 in FY 2025. This is due mainly to the settlement of the Eco Firma Farms litigation.

"Change in fair value of derivative liabilities" is a periodic revaluation of the earn out shares outstanding to vendors of businesses purchased by the Company. These earn-out shares are revalued using a Monte Carlo simulation. The fair value of this liability will increase with an increase in the stock price of the Company and vice versa. The change in fair value must be recorded through the Company's profit or loss statement. As a result, a share price increase period-over-period will result in a reduction in net income and vice versa. In February and March 2023, the Company entered into cancelation agreements with the majority of the Swell Vendors who had rights to Swell Earn-Out shares, canceling those rights for a one-time cash payment. Of the 6.0 million original Swell Earn-Out shares 1.2 million remain outstanding as at year end March 31, 2026. Of the original 10.5 million of earn out shares to both Phantom and Swell, 1.2 million remain. As of March 31, 2026, the fair value of the remaining shares making up the derivative liability have been written down to zero.

The Swell Earn-Out shares expired May 24, 2026.

"Provision for income taxes" for FY 2026 of $4,614,428 is up from $4,151,650 in FY2025. The Company had more taxable income in the current year as well as interest and penalties relating to prior years.

"Other comprehensive income (loss)" specifically the cumulative translation adjustment, comes about in GAAP when translating the balances between the parent company (recorded in C$) and the US subsidiaries (US$). These foreign exchange gains or losses at each reporting date result from the translation of C$ amounts to US$ (which is our reporting currency).

"Net income (loss) from discontinued operations" the Company has classified all of its Oregon operations to 'discontinued operations'. The revenues and expenses pertaining to the Oregon operations are shown in this line item. We have had no active business in Oregon since early 2022. There is no effect of this treatment on our revenues (FY2026 -$nil, FY2025-$nil) and our gross profit (FY2026-$nil, FY2025-$nil) and an increase to our income from operations and net income of (FY 2026-$8,080, FY2025-$212,813). There is no effect of discontinuing the Oregon operations on our Nevada operations as the cannabis business in each state is unique and separate, which is due to the regulation of the cannabis industry. Our remaining two properties in Oregon were both sold to third parties in FY 2025.

Fourth Quarter

Revenues continued to grow in the last 12 months with the opening of our third store in South Reno on June 26, 2024. Inventory balance at March 31, 2026, increased by $1.3 million since June 30, 2024 due mainly to the opening of our third store. Adjusted EBITDA for quarter-ended March 31, 2026, was up slightly from the quarter-ended December 31, 2025. See non-GAAP financial measures below.

Federal corporate income taxes are very high in the cannabis industry due to the restrictions of Section 280E of the U.S Internal Revenue Code. Share-based compensation is a non-cash expense. Therefore, the measure of income from operations (before taxes), adding back share-based compensation is a useful measure.

Adjusted EBITDA for the full year ended March 31, 2026 (FY 2026) is $5.52 million, an increase of $650,461 from FY 2025 of $4.87 million. See explanation of non-GAAP financial measures below.

Non-GAAP Financial Measures

"Adjusted EBITDA" is supplemental, non-GAAP financial measures. The Company defines EBITDA as earnings before depreciation and amortization, depreciation and interest in cost of sales, income taxes, and interest. Additionally, the Company's Adjusted EBITDA presented above excludes accretion, loss from discontinued operations, one-time transaction costs and all other non-cash items. The Company has presented "Adjusted EBITDA" because its management believes it is a useful measure for investors when assessing and considering the Company's continuing operations and prospects for the future. Furthermore, "Adjusted EBITDA" is a commonly used measurement in the financial community when evaluating the market value of similar companies. "Adjusted EBITDA" is not a measure of performance calculated in accordance with GAAP, and these metrics should not be considered in isolation of, or as a substitute for, the measurement of the Company's performance prepared in accordance with GAAP. "Adjusted EBITDA," as calculated and reconciled in the table above, may not be comparable to similarly titled measurements used by other issuers and is not necessarily a measure of the Company's ability to fund its cash needs. Figures have been restated to match the current presentation.

Selected Annual Information

The following table summarizes selected information for the most recent three fiscal year ends.

"Total Assets" decreased in the past year due to amortization of fixed assets offset by the increase in inventory. Inventory has increased in the past couple of years due to the addition of our third dispensary in June 2024 for consideration of $3.5 million. This acquisition reduced our cash balance, increased inventory to stock the new store, and increased intangibles.

"Current liabilities" has decreased mainly due to the change in our position on the 280E income taxes. This change in position has moved much of the income tax payable balance to long term included in Uncertain tax position. The convertible debenture balance increased with the issuance of 12% convertible debentures to assist in funding the acquisition of the third dispensary. Reduction of current income taxes is due to making cash payment of income taxes during the year of $2.4 million (FY March 31, 2025 - $1.5 million).

"Non-current financial liabilities" has increased in the past couple of years with the change in our position on 280E income taxes. Uncertain tax position is $13.4 million versus nil two years ago.

B. Liquidity and Capital Resources

Liquidity risk is the risk that the Company will not be able to meet its obligations as they become due. The Company manages its liquidity risk by forecasting cash flows from operations and anticipating any investing and financing activities. Management of the Company and the Board are actively involved in the review, planning and approval of significant expenditures and commitments.

The Company's consolidated financial statements for year ended March 31, 2026, have been prepared on a going concern basis, which assumes that the Company will be able to continue its operations and realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.

At March 31, 2026, the Company had cash of $2,234,306, a working capital surplus of $1,920,024 which we believe, but can provide no guarantee, will be sufficient to meet our anticipated operating expenses and capital expenditures requirements through at least the next 12 months. The Company has generated significant positive cash flow for the year ended March 31, 2026, and the fiscal year ended March 31, 2025. The Statement of Cash Flows for the year ended March 31, 2026, shows cash provided by continuing operations of $1.4 million ($1.4 million - year ended March 31, 2025).

The Company closed on the purchase of the South Reno Dispensary on June 7, 2024, which was paid for from cash on hand and the May 2024 Private Placement.

The Company acquired, for $3.5 million, a third retail dispensary as of June 7, 2024. This store located in South Reno, Nevada opened for business on June 26, 2024. The acquisition was paid for with cash on hand generated by the Company and a C$4.0 million financing completed in May 2024. The Company is repaying C$160,000 per month plus interest on this debt. The Company is also making periodic payments against its corporate income tax payable.

The Company does not have any other significant capital expenditure plans in the next 12 months. While operations' cash flow has slowed as our local markets in general have slowed, we expect to continue to generate positive operations cash flow, and the addition of the third dispensary has improved our cash flow.

Additionally, as at March 31, 2026, the Company had current income tax payable of $1,654,854, and an uncertain tax position of $13,362,009. See income tax discussion below. To manage liquidity risk, the Company endeavors to ensure it has sufficient cash resources to meet its financial obligations. The Company's ability to service its debt depends on sustaining the profitability of its operations and obtaining sufficient financing on acceptable terms.

There remains uncertainty about the U.S. federal government's position on cannabis with respect to cannabis-legal states. A change in its enforcement policies could impact the ability of the Company to continue as a going concern and have a material adverse impact on the business.

The following table is a summary of C21's balance sheet exposure to U.S. cannabis-related activities as of March 31, 2026:

The following represents the portion of certain assets on C21's consolidated balance sheet that pertain to U.S. Cannabis activity as of March 31, 2026:

• Inventory: 100%
  
• Property plant & equipment: 100%
  
• Intangible assets and goodwill: 100%
  
• Notes receivable and deposits: 84%

The Company's objectives when managing its capital are to ensure there are enough capital resources to continue operating as a going concern and maintain the Company's ability to ensure sufficient levels of funding to support its ongoing operations and development. The purpose of these objectives is to provide continued returns and benefits to the Company's shareholders. The Company's capital structure includes items classified in debt and shareholders' equity.

The Company manages its capital structure and makes adjustments to it in light of economic conditions and financial needs. The Company, upon approval from its Board, will balance its overall capital structure through new share issues or by undertaking other activities as deemed appropriate under the specific circumstances.

The Board does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company's management to sustain future development of the business considering changes in economic conditions and the risk characteristics of the Company's underlying assets.

The Company works with its capital advisors CB1 Capital Advisors, LLC ("CB1"), organized in Delaware and based in New York, to identify the best strategic options to execute our corporate growth plans, as well as increasing financial flexibility in managing our debt.

The continued development of the Company may require additional financing. There is no guarantee that the Company will be able to achieve its business objectives. The Company intends to fund its business objectives by way of additional offerings of equity and/or debt financing. The failure to raise or procure such additional funds could result in the delay or indefinite postponement of current business objectives. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, will be on terms acceptable to the Company, especially in the current higher interest rate environment. If additional funds are raised by offering equity securities or convertible debt, existing shareholders could suffer significant dilution. Any debt financing secured in the future could involve the granting of security against assets of the Company and also contain restrictive covenants relating to capital raising activities and other financial and operational matters, which may make it more difficult for the Company to obtain additional capital and to pursue business opportunities, including potential acquisitions.

For further information, see Management's Discussion and Analysis, attached hereto as Exhibit 15.1, and incorporated by reference herein.

C. Research and Development, Patents and Licenses, etc.

Through its research and development activities, the Company expects to create proprietary genetics, processes, technologies, and products from its existing Nevada operations, as well as from future expansion in new markets. The Company may license these genetics, processes, technologies, and products as part of its future business. The Company may also seek appropriate federal patent, trademark, copyright, and other customary intellectual property protections when the same become available and/or are appropriate.

D. Trend Information

United States Industry Background and Trends

The emergence of the legal cannabis sector in the United States, both for medical and adult-use, has been rapid as more states adopt regulations for its production and sale. Today an estimated 79% of Americans live in a state where cannabis is legal in some form and 54% of the population lives in states where it is fully legalized for adult-use.

The use of cannabis and cannabis derivatives to treat or alleviate the symptoms of a wide variety of chronic conditions has been generally accepted by a majority of citizens with a growing acceptance by the medical community as well. A review of the research, published in 2015 in the Journal of the American Medical Association, found evidence that cannabis can treat pain and muscle spasms. The pain component is particularly important, because other studies have suggested that cannabis can replace patients' use of highly addictive, potentially deadly opiates - meaning cannabis legalization literally improves lives.

Polls throughout the United States consistently show overwhelming support for the legalization of medical cannabis, together with strong majority support for the full legalization of recreational adult-use cannabis. According to a January 2026 Pew Research Center survey, around nine-in-ten Americans favor some form of cannabis legalization, with only 11% saying cannabis should not be legal in any form. In that survey, 89% of U.S. adults support legalizing cannabis either for medical and recreational use (55%) or medical use only (33%). These are large increases in public support over the past 40 years in favor of legalized cannabis use.

Notwithstanding that 42 states and the District of Columbia have now legalized adult-use and/or medical cannabis, state-legal cannabis remains illegal under U.S. federal law as such operations are not completely compliant with the CSA.

Currently the Company only operates in the state of Nevada. The Company may expand into other states within the United States that have legalized cannabis use either medicinally or recreationally.

United States Regulatory Environment

Under U.S. federal law, adult-use marijuana is currently a Schedule I drug while FDA-approved marijuana and state-legal medical marijuana are Schedule III. The CSA has five different tiers or schedules. A Schedule I drug means the DEA considers it to have a high potential for abuse, no accepted medical treatment, and lack of accepted safety for the use of it even under medical supervision. Other Schedule I drugs are heroin, LSD and ecstasy. Schedule III drugs have currently accepted medical use in treatment in the United States and abuse of the drug may lead to moderate or low physical dependence or high psychological dependence. The Company believes the CSA categorization of adult-use marijuana as a Schedule I drug is not reflective of the medicinal properties of marijuana or the public perception thereof, and numerous studies show cannabis is not able to be abused in the same way as other Schedule I drugs, has medicinal properties, and can be safely administered. Additionally, while some studies show cannabis is less harmful than alcohol, alcohol is not classified under the CSA.

Forty-two (42) states and the District of Columbia have now legalized adult-use and/or medical marijuana. The federal government sought to provide guidance to enforcement agencies and banking institutions with the introduction of the U.S. Department of Justice Memorandum drafted by former Deputy Attorney General James Michael Cole in 2013 (the "Cole Memo") and FinCEN guidance in 2014.

The Cole Memo offered guidance to federal enforcement agencies as to how to prioritize civil enforcement, criminal investigations and prosecutions regarding marijuana in all states. The memo put forth eight prosecution priorities:

• preventing the distribution of marijuana to minors;
  
• preventing revenue from the sale of marijuana from going to criminal enterprises, gangs and cartels;
  
• preventing the diversion of marijuana from states where it is legal under state law in some form to other states;
  
• preventing the state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;

• preventing the violence and the use of firearms in the cultivation and distribution of marijuana;
  
• preventing the drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use;
  
• preventing the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands; and,
  
• preventing marijuana possession or use on federal property.

In January 2018, the then United States Attorney General, Jeff Sessions, by way of issuance of a new U.S. Department of Justice Memorandum (the "Sessions Memo"), rescinded the Cole Memo and thereby created a vacuum of guidance for U.S. enforcement agencies and the DOJ. Rather than establish national enforcement priorities particular to marijuana-related crimes in jurisdictions where certain marijuana activity was legal under State law, the Sessions Memo instructs that "[i]n deciding which marijuana activities to prosecute... with the [DOJ's] finite resources, prosecutors should follow the well-established principles that govern all federal prosecutions." Namely, these include the seriousness of the offense, history of criminal activity, deterrent effect of prosecution, the interests of victims, and other principles.

Former United States Attorney General Sessions resigned on November 7, 2018, and was replaced by William Barr on February 14, 2019. On December 14, 2020, former President Trump announced that Mr. Barr would be resigning from his post as Attorney General, effective December 23, 2020. Merrick Garland, President Biden's nominee to succeed Mr. Barr, was sworn in as the current United States Attorney General on March 11, 2021. During his campaign, President Biden stated a policy goal to decriminalize possession of cannabis at the federal level, but he has not publicly supported the full legalization of cannabis. In response to questions posed by Senator Cory Booker, Merrick Garland stated during February 2021 congressional testimony that he would reinstitute a version of the Cole Memo. He reiterated the statement that the Justice Department under his leadership would not pursue cases against Americans "complying with the laws in states that have legalized and are effectively regulating marijuana", in written responses to the Senate Judiciary Committee provided around March 1. President Donald J. Trump was sworn in as the 47th United ‎States President on January 20, 2025, nominating Pamela Bondi to serve as Attorney ‎General in his administration. Bondi served as the Attorney General from February 4, 2025 until April 2, 2026. Todd Blanche is currently the Acting Attorney General. It is not yet known whether the DOJ under President Trump will re-adopt the Cole Memorandum or announce a ‎substantive cannabis enforcement policy in addition or in relation to the Rescheduling Rule.

Due to the CSA categorization of marijuana, U.S. federal law makes it illegal for financial institutions that depend on the Federal Reserve's money transfer system to take any proceeds from marijuana sales as deposits. Banks and other financial institutions could be prosecuted and possibly convicted of money laundering for providing services to cannabis businesses under the Bank Secrecy Act. Under U.S. federal law, banks or other financial institutions that provide a cannabis business with a checking account, debit or credit card, small business loan, or any other service could be found guilty of money laundering or conspiracy.

While there has been no change in U.S. federal banking laws to account for the trend towards legalizing medical and recreational marijuana by U.S. states, FinCEN has issued guidance advising prosecutors of money laundering and other financial crimes not to focus their enforcement efforts on banks and other financial institutions that serve marijuana-related businesses, so long as that business is legal in their state and none of the federal enforcement priorities are being violated (such as keeping marijuana away from children and out of the hands of organized crime). The "FinCEN Guidance" also clarifies how financial institutions can provide services to marijuana-related businesses consistent with the Bank Secrecy Act obligations, including thorough customer due diligence, but makes it clear that they are doing so at their own risk.

The customer due diligence steps include:

• verifying with the appropriate state authorities whether the business is duly licensed and registered;
  
• reviewing the license application (and related documentation) submitted by the business for obtaining a state license to operate its marijuana-related business;
  
• requesting from state licensing and enforcement authorities available information about the business and related parties;

• developing an understanding of the normal and expected activity for the business, including the types of products to be sold and the type of customers to be served (e.g., medical versus recreational customers);
  
• ongoing monitoring of publicly available sources for adverse information about the business and related parties;
  
• ongoing monitoring for suspicious activity, including for any of the red flags described in this guidance; and
  
• refreshing information obtained as part of customer due diligence on a periodic basis and commensurate with the risk. With respect to information regarding state licensure obtained in connection with such customer due diligence, a financial institution may reasonably rely on the accuracy of information provided by state licensing authorities, where states make such information available.

Due to the fear by financial institutions of being implicated in or prosecuted for money laundering, cannabis businesses are often forced into becoming "cash-only" businesses. As banks and other financial institutions in the U.S. are generally unwilling to risk a potential violation of federal law without guaranteed immunity from prosecution, most refuse to provide any kind of services to cannabis businesses. Despite the attempt by FinCEN to legitimize cannabis banking, in practice its guidance has not made banks much more willing to provide services to cannabis businesses. This is because, as described above, the current law does not guarantee banks immunity from prosecution, and it also requires banks and other financial institutions to undertake time-consuming and costly due diligence on each cannabis business they take on as a customer. Over the last 18 months, some banks that have been servicing cannabis businesses have been closing accounts operated by cannabis businesses and are now refusing to open accounts for new cannabis businesses for the reasons enumerated above.

The few credit unions who have agreed to work with cannabis businesses are limiting those accounts to no more than 5% of their total deposits to avoid creating a liquidity risk. Since the federal government could change the banking laws as it relates to cannabis businesses at any time and without notice, these credit unions must keep sufficient cash on hand to be able to return the full value of all deposits from cannabis businesses in a single day, while also servicing the need of their other customers. Those state-chartered banks and credit unions that do have customers in the cannabis industry charge marijuana businesses high fees to pass on the added cost of ensuring compliance with the FinCEN Guidance. Unlike the Cole Memo, however, the FinCEN Guidance from 2014 has not been rescinded.

The U.S. Treasury Department has publicly stated they were not informed of the then Attorney General Jeff Sessions' desire to rescind the Cole Memo and do not have a desire to rescind the FinCEN Guidance for financial institutions. The former Secretary of the U.S. Department of the Treasury, Stephen Mnuchin, publicly stated that he did not have a desire to rescind the FinCEN Guidance. The newly appointed Secretary of the Treasury, Janet Yellen, has not yet articulated an official Treasury Department position with regard to the FinCEN Guidance and thus as an industry best practice and consistent with its standard operating procedures, the Company adheres to all customer due diligence steps in the FinCEN Guidance.

Because the DOJ memorandums serve as discretionary agency guidance and do not constitute a force of law, cannabis related businesses have worked to continually renew the Rohrabacher-Blumenauer Amendment (originally the Rohrabacher-Farr Amendment) that has been included in federal annual spending bills since 2014. This amendment restricts the DOJ from using federals funds to prevent states with medical cannabis regulations from implementing laws that authorize the use, distribution, possession or cultivation of medical cannabis.

An additional challenge to cannabis-related businesses is that the provisions of Section 280E of the Code are being applied by the IRS to businesses operating in the adult-use cannabis industry. Section 280E of the Code prohibits cannabis businesses from deducting their ordinary and necessary business expenses, forcing them to pay higher effective federal tax rates than similar companies in other industries. The effective tax rate on a cannabis business depends on how large its ratio of non-deductible expenses is to its total revenues. Therefore, businesses in the legal cannabis industry may be less profitable than they would otherwise be. Although the Reschuling Rule makes 280E inapplicable to state-legal medical marijuana, it is unlcear how that will impact the Company's operations.

Another aspect of federal law is that it provides that cannabis and cannabis products may not be transported across state lines in the United States. As a result, all cannabis consumed in a state must be grown and produced in that same state. This dynamic could make it more difficult for the Company, in the short term, to maintain a balance between supply and demand. If excess cultivation and production capacity is created in any given state and this is not matched by increased demand in that state, then this could exert downward pressure on the retail price for the products the Company sells. If too many retail licenses are offered by state authorities in any given state, then this could result in increased competition and exert downward pressure on the retail price for the products the Company sells. On the other hand, if cultivation and production in a state fails to match growing demand then, in the short term, there could be insufficient supply of product in a state to meet demand and while the Company may be able to raise its prices there could be inadequate product availability in the short term, causing the Company's revenue in that state to fall.

Progressive federal legislation has been both introduced in the U.S. House of Representatives ("U.S. House") and received positive votes in recent years. There have been numerous proposals but two of the most prominent are the SAFE Banking Act and the MORE Act (both defined herein).

On September 26, 2019, the U.S. House passed the Secure and Fair Enforcement Banking Act of 2019 (commonly known as the "SAFE Banking Act"), which aims to provide safe harbor and guidance to financial institutions that work with legal U.S. cannabis businesses. In the subsequent years, the SAFE Banking Act and the related SAFER Banking has been reintroduced numerous times but has not been signed into law. While Congress may introduce and consider this and other legislation in the future that may address issues that are important to the Company, there can be no assurance of the content of any proposed legislation or that any pending legislation will ever be passed.

Further, the Marijuana Opportunity Reinvestment and Expungement Act, also known as the "MORE Act", is a proposal to legalize cannabis and expunge prior cannabis related convictions. Like the SAFE Banking Act, the MORE Act has been reintroduced multiple times but has not yet been signed into law. There can be no assurance that it will be passed in its current form or at all.

The Company continues to monitor U.S. federal law and the law in all jurisdictions where it is active, with respect to (a) compliance with applicable state regulatory frameworks, and (b) potential exposure and implications arising from U.S. federal law.

On October 6, 2022, President Biden requested that the Secretary of Health and Human Services ("HHS") and the Attorney General initiate a review of cannabis scheduling pursuant to the Controlled Substances Act and federal law. Ultimately, this Rescheduling effort stalled indefinitely on January 13, 2025, the hearing was canceled by Chief Administrative Law Judge ("ALJ") John Mulrooney, and the proceedings were stayed indefinitely pending an interlocutory appeal brought by two private movants who sought to remove the DEA from its role as proponent of the proposed rescheduling through a motion which was denied. ALJ Mulrooney later retired.

However, under President Trump, the Rescheduling Rule moved forward. On April 28, 2026, the DEA issued rules in the Federal Register rescheduling FDA-approved marijuana products and products containing medical marijuana from a state medical marijuana license from Schedule I to Schedule III of the CSA. The Rescheduling Rule also created an expedited process for state medical marijuana licensees to register with the DEA enabling these entities holding state medical marijuana licenses to engage in the manufacture, distribution, and/or dispensing of marijuana for medical purposes under federal law. The Rescheduling Rule did not appear to address or amend the legality of adult-use marijuana which are subject to the new administrative hearings beginning on June 29, 2026.

It remains to be seen how the Rescheduling Rule will apply to Company as its operations are not limited to medical marijuana and it is unclear as to whether Company can or will register with DEA. The Company continues to monitor the impacts and options in light of the Rescheduling Rule.

Nevada Regulatory Environment

The following sections describe the legal and regulatory landscape in Nevada, the only state in which the Company currently operates. The Company believes that its operations are in full compliance with all applicable state laws, regulations and licensing requirements. Nonetheless, for the reasons described above and the risks further described under the heading "Risk Factors" herein, there are significant risks associated with the business of the Company. Readers are strongly encouraged to carefully read all of the risk factors contained under the heading "Risk Factors" herein.

Nevada Summary

Nevada has a medical marijuana program and passed an adult-use (21 and older) legalization through the ballot box in November 2016. In 2000, Nevada voters passed a medical marijuana initiative allowing physicians to recommend cannabis for an inclusive set of qualifying conditions, including severe pain and created a limited non-commercial medical marijuana patient/caregiver system. Senate Bill 374, which passed the legislature and was signed by the Governor in 2013, expanded this program and established a for-profit regulated medical marijuana industry.

The Nevada Division of Public and Behavioral Health licensed medical marijuana establishments up until July 1, 2017, when the state's medical marijuana program merged with adult-use marijuana enforcement under the Nevada Department of Taxation ("NDOT"). In 2014, Nevada accepted medical marijuana business applications and a few months later the Division approved 182 cultivation licenses, 118 licenses for the production of edibles and infused products, 17 independent testing laboratories, and 55 medical marijuana dispensary licenses. The number of dispensary licenses was then increased to 66 by legislative action in 2015. The application process is merit-based, competitive, and is currently closed. Nevada residency is not required to own or invest in a Nevada medical cannabis business. In addition, vertical integration is neither required nor prohibited. Nevada's medical law includes patient reciprocity, which permits medical patients from certain other states to purchase medical marijuana from Nevada dispensaries. Nevada also allows dispensaries to deliver medical marijuana to patients.

Under Nevada's adult-use marijuana law, the NDOT licensed marijuana cultivation facilities, product manufacturing facilities, distributors, retail stores and testing facilities. After merging medical and adult-use marijuana regulation and enforcement, the single regulatory agency is now known as the Marijuana Enforcement Division of the NDOT. Until November 2018, applications to the NDOT for adult-use establishment licenses were being accepted from existing medical marijuana establishments and existing liquor distributors for the adult-use distribution license.

In February 2017, the NDOT announced plans to issue "early start" adult-use marijuana establishment licenses in the summer of 2017. These licenses, beginning on July 1, 2017, allowed marijuana establishments holding both a retail marijuana store and dispensary license to sell their existing medical marijuana inventory as either medical or adult-use marijuana, and expired 90 days after January 1, 2018 (per Sec. 24 of LCB File No. T002-17). Starting July 1, 2017, medical and adult-use marijuana have incurred a 15% excise tax on the first wholesale sale (calculated on the fair market value) and adult-use cannabis have incurred an additional 10% special retail marijuana sales tax in addition to any general state and local sales and use taxes.

On January 16, 2018, the Marijuana Enforcement Division of the NDOT issued final rules governing its adult-use marijuana program, pursuant to which up to sixty-six (66) permanent adult-use marijuana dispensary licenses will be issued. Existing adult-use marijuana licensees under the "early start" regulations must re-apply for licensure under the permanent rules in order to continue adult-use sales.

In May of 2019, Governor Steve Sisolak signed into law Senate Bill 32, that increased transparency in the licensing process by releasing certain information about license applicants, as well as methods used to issue licenses. In June 2019, Governor Sisolak approved Assembly Bill 132 making Nevada the first state to ban employers from refusing to hire job applicants who test positive for marijuana during the hiring process.

As of August 23, 2019, as a result of discrepancies discovered in the application process by the State of Nevada, a court issued a partial preliminary injunction against the State of Nevada from moving forward with the numerous holders of provisional licenses awarded under the December 5, 2018, provisional license awards. In addition to the preliminary injunction, the State of Nevada and various intervenors remain subject to ongoing litigation.

In early 2019, Nevada legislature passed Nevada Assembly Bill 533 ("AB 533"), which authorized the formation of the Cannabis Compliance Board (the "CCB") to be vested with the authority to license and regulate persons and establishments engaged in cannabis activities within Nevada. The CCB consists of an executive director and five board members appointed by the Governor Steve Sisolak. Board members must have expertise in a range of fields, including financial and accounting, law enforcement, medicine, regulatory and legal compliance, and cannabis. AB 533 also established the Cannabis Advisory Commission (the "CAC") which serves to study cannabis-related issues and make recommendations to the CCB. The CAC consists of 12-members appointed by the governor representing relevant state agencies and members of the cannabis industry and the public. Pursuant to AB 533, the CCB is mandated with studying the feasibility and safe implementation of licensing for lounges, in addition to their general authority and oversight of cannabis operations in Nevada. The CCB held its first meeting in July 2021, and regularly meets regarding public health and safety, license suspensions, and held public workshops regarding, and moved forward with licensing, cannabis consumption lounges.

Nevada Regulatory Framework

Nevada Revised Statues 678C and 678D regulate the Medical and Adult-Use of cannabis in Nevada. Nevada Administrative Code 453D provides a regulatory framework that outlines the function of the CCB Marijuana program. Subsections of this chapter outline licensing and enforcement guidelines which guide the CCB.

Nevada Licensing Requirements

Licenses issued by CCB can be renewed annually so long as the licensee continues to demonstrate compliance with local and state law and pays the renewal fee. Dispensary/Retail store licenses have a set statutory "cap" (per NRS 453D.210 & NRS 453A.324), other license types do not. Moreover, statutory license caps can only be changed by the Nevada legislature, which meets bi-annually. Marijuana businesses in Nevada may also be governed by local ordinances, which can include caps on the number of marijuana businesses, zoning limitations, and additional screening of business owners and investors. Applicants must demonstrate (and license holders must maintain) that: (i) they are registered with the Nevada Secretary of State to do business in Nevada, (ii) they have contributed to the advancement of the State of Nevada via regular tax payments, (iii) they do not have interests in the Casino or Alcohol industries, (iv) they have the operational expertise required by the individual license type, demonstrated by submission of an operation plan, (v) they have the ability to secure the premises, resources, and personnel necessary to operate the license, (vi) they have the ability to maintain accountability of all cannabis and cannabinoid products and by-products via the state mandated "seed-to-sale" CTS to prevent diversion or unlawful access to these materials, (vii) they have the financial ability to maintain operations for the duration of the license, (viii) all owners have passed background screening, inclusive of fingerprinting, and (ix) all local land use, zoning, and planning notices have been followed in the development of the licensed site.

Nevada Security Requirements

A licensee must maintain a fully operational alarm and video monitoring system at all times. The alarm system must secure all points of ingress and egress and be equipped with motion detectors. The 24-hour video surveillance system must record at a high-resolution format approved by the CCB and have camera coverage which covers all areas of the facility without any blind spots. Video footage must be backed up for a minimum of 30 days in hard form. Cultivation and product manufacturing sites are not open to the public.

Nevada Transportation and Storage Requirements

Cannabis and cannabis goods must be stored in a lockable safe or vault at any time that employees are not on location. Any storage container that is large enough to allow an employee to walk into it must have cameras placed inside. Goods to be transported to another licensee must be fully manifested via the state mandated "seed-to-sale" CTS prior to being transported.

Nevada Department of Taxation Inspections

The CCB conducts announced and unannounced inspections of all licensed facilities to determine compliance with laws and rules. The CCB will inspect a licensee in the event of a complaint indicating that the licensee has or is actively violating existing statute. The CCB will also inspect at the time of any modification, as well as at the time of annual renewal.

Nevada Product Testing and Packaging Requirements

Both medical and adult-use marijuana and marijuana products are subject to stringent testing and packaging requirements. Before usable marijuana, concentrated marijuana, or marijuana products may be packaged for further processing or for transfer to a dispensary or retail store, an independent testing laboratory licensed by the CCB must collect samples from each homogenized lot or production run for testing. These samples are tested by the independent testing laboratory for compliance with specified limits on contaminants such as yeast and mold, heavy metals and pesticides, and microbes. Testing is also done to determine the potency of the sample. Cultivation and product manufacturing facilities are also subject to random quality assurance compliance testing at the discretion of the CCB. Generally, if a sample fails any of the tests conducted by the testing laboratory, the entire lot or production run must be destroyed.

All marijuana or marijuana products intended to be sold to consumers must be individually packaged, sealed, and labeled. Edible products must be packaged in opaque, child-resistant containers. Depending on the type of marijuana product, the CCB places limit on the amount of THC that a single package of marijuana may contain or the number of ounces of product a package may contain. All packages of marijuana or marijuana product sold to consumers must have detailed labels that include, inter alia, various warnings about the effects and risks of marijuana use; the name, license number, and contact information of the dispensary or retail store conducting the sale; the name and license number of the cultivation or product manufacturing facility that harvested or produced the marijuana or marijuana product; the potency levels of the marijuana or marijuana product; and the date the marijuana or marijuana product was harvested or produced.

In June 2025, Senate Bill 168 ("SB 168") was signed into law. SB 168 revised cannabis related product packing, granted CCB the authority to place holds on unapproved cannabis products, allowed adult-use and medical production facilities to engage in the acquisition, possession, packaing, supplying or selling of usable cannabis to adult-use retail stores or medical marijuana dispensaries, removed cannabis seeds from the definition of "usable cannabis", and authorizes cannabis cultivation facilities and cannabis production facilities to acquire, possess, deliver, transfer, supply or sell seeds of a plant, branded merchandise and supplies related to cannabis to persons located within and outside Nevada. Additionally, SB 168, prohibits packaging and laebling requirements from requiring: (1) a package of cannabis or cannabis products which is sold at wholesale to contain any label or tag other than a label or tag necessary for the functionality of any computer software used for the seed-to-sale tracking of cannabis adopted by the Board; and (2) a cannabis establishment to include any information on the label for any cannabis or a cannabis product that is already included on the packaging for the cannabis or cannabis product. The Bill also allows information required to be included on a label to instead be included on the packaging and revises the definition of the terms "label" and "packaging. SB 168 requires that CCB to put together a "frequently asked questions" webpage. Finally, SB 168 requires that a single package containing an infused pre-roll, to contain a net weight of not more than seven (7) grams.

Public Opinion

The increase in state legalization of cannabis use is largely a result of changing public opinion in the United States. According to an October 2025 poll conducted by Gallup, 64% of Americans think that the use of cannabis should be made legal. A January 2026 Pew Research Center survey found that 63% of adults under 30 support legalization for both uses. That compares with 50% of those ages 65 to 74 and 34% of Americans ages 75 and older. A 2025 Gallup poll found that 64% of adults supported legalization. That's a slight decrease from the 70% who favored legalization in 2023. But it's about double the 31% who favored it in 2000.

Industry Outlook

Due to increases in state legalization, shifting public opinion, and recent rescheduling of state licensed medical marijuana to Schedule III, state-legal cannabis industry sales have grown substantially in recent years. According to projections from Statista, total revenue from cannabis is expected to reach $47 billion in 2026. With an estimated annual growth rate of 3.36%, the market volume is projected to reach $55.43 billion by 2030.

Other than as disclosed here and elsewhere in this Annual Report, we are not aware of any trends, uncertainties, demands, commitments or events for the period from April 1, 2025 to March 31, 2026 that are reasonably likely to have a material adverse effect on our net revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause our reported financial information not necessarily to be indicative of future operating results or financial condition.

E. Critical Accounting Estimates

The preparation of the Company's financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management's experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from those estimates and judgments.

Areas requiring a significant degree of estimation and judgment relate to the determination of business combinations, impairment of long-lived assets and inventory, fair value measurements, useful lives, depreciation and amortization of property, equipment and intangible assets, the recoverability and measurement of deferred tax assets and liabilities and share-based compensation.

i. Business combinations

Judgment is used in determining whether the Company's acquisition is considered a business combination or an asset acquisition. Additionally, judgment is required to assess whether any amounts paid on the achievement of agreed upon milestones represents contingent consideration or compensation for post-acquisition services. Judgment is also required to assess whether contingent consideration arising from an acquisition should be classified as a liability or equity. Contingent consideration classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement by the Company is accounted for within equity. Contingent consideration classified as a liability is remeasured at reporting period ends in accordance with the Company's accounting policies for financial liabilities.

ii. Assets and liabilities held for resale

Non-current assets, or disposal groups comprising assets and liabilities, are classified as held for sale if it is highly probable that they will be recovered primarily through sale rather than through continuing use. Such assets, or disposal groups, are measured at the lower of their carrying amount and fair value less costs to sell. The comparative consolidated balance sheet is re-presented to classify assets as held for sale in the period that the respective assets are classified as held for sale.

iii. Income taxes and deferred tax assets/liabilities

The Company uses the asset and liability method to account for income taxes. Deferred income tax assets and liabilities are determined based on enacted tax rates and laws for the years in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The Company recognizes uncertain income tax positions at the largest amount that is more-likely-than-not to be sustained upon examination by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Recognition or measurement is reflected in the period in which the likelihood changes. Any interest and penalties related to unrecognized tax liabilities are presented within income tax expense in the consolidated statements of loss and comprehensive loss.

iv. Impairment of long-lived assets

Long-lived assets include property and equipment, right-of-use assets, and intangible assets with finite useful lives. At the end of each fiscal year, the Company reviews the intangible assets estimated useful lives and amortization methods, with the effect of any changes in estimates accounted for on a prospective basis. Long-lived assets are reviewed for indicators of impairment at each statement of balance sheet date or whenever events or changes in circumstances indicate that a potential impairment has occurred. The Company groups assets at the lowest level for which cash flows are separately identifiable, referred to as an asset group. When indicators of potential impairment are present the Company prepares a projected undiscounted cash flow analysis to determine the recoverable amount for the respective asset or asset group. An impairment loss is recognized whenever the carrying amount of the asset exceeds its recoverable amount and is recorded as in profit or loss equal to the amount by which the carrying amount exceeds the fair value.

v. Inventories

Inventory consists of raw materials, consumables and packaging supplies used in the process to prepare inventory for sale; work in process consisting of pre-harvested cannabis plants, by-products to be extracted, oils and terpenes; and finished goods. Inventory is valued at the lower of cost and net realizable value, with cost determined using the weighted average cost method. Net realizable value is calculated as the estimated selling price in the ordinary course of business, less any estimated costs to complete and sell the goods. Costs are capitalized to inventory, until substantially ready for sale. Costs include direct and indirect labor, raw materials, consumables, packaging supplies, utilities, facility costs, quality and testing costs, production related depreciation and other overhead costs. The Company records inventory reserves for obsolete and slow-moving inventory. Inventory reserves are based on inventory obsolescence trends, and the historical and professional experience of management. The Company classifies cannabis inventory as a current asset, although, due to the duration of the cultivation, drying, and conversion process, certain inventory items may not be realized in cost of sales within one year.

vi. Fair value measurements

Certain assets and liabilities held by the Company are measured at fair value. In measuring fair value, management estimates the price at which assets or liabilities could be exchanged between knowledgeable, willing parties in an orderly transaction. The Company uses market-observable data to the extent that such data is available. The Company follows the fair value hierarchy, utilizing Level 1, Level 2, or Level 3 inputs depending on their availability. In situations where Level 1 inputs are not available, the Company makes an estimate or engages qualified, third-party valuators to perform the valuation.

vii. Estimated useful lives and depreciation and amortization of property, equipment and intangible assets

The Company's depreciation and amortization of property, equipment and intangible assets are dependent on the estimation of the assets' useful lives, which requires management to exercise judgment. The Company's assessment of any impairment of assets is dependent on its estimation of recoverable amounts that consider various factors, including market and economic conditions and the assets' useful lives.

viii. Share-based compensation

The Company measures equity settled share-based payments based on their fair value at their grant date and recognizes share-based compensation expense over the vesting period based on the Company's estimate of equity instruments that will eventually vest. Consideration paid to the Company on the exercise of stock options is recorded as common stock.

ix. Convertible Instruments

The Company accounts for convertible debt as a single unit of account, unless the conversion feature requires bifurcation and recognition as a derivative. Additionally, the Company uses the if-converted method for all convertible instruments in the diluted earnings per share calculation and includes the effect of potential share settlement for instruments that may be settled in cash or shares.

x. Financial Instruments

Financial instruments are contracts that give rise to a financial asset of one party and a financial liability or equity instrument of another party. Financial instruments are recorded initially at fair value, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Subsequent measurement depends on how the financial instrument has been classified and may be at fair value or amortized cost. For financial instruments subsequently measured at fair value, the Company calculates the estimated fair value of financial instruments using quoted market prices whenever available. When quoted market prices are not available, the Company uses standard pricing models including the Black-Scholes option pricing model.

Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:

Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2 - Inputs other than quoted prices that are observable for the asset or liability either directly (i.e., as prices) or indirectly (i.e., derived from prices); and

Level 3 - Inputs that are not based on observable market data.

There have been no transfers between fair value hierarchy levels during the years ended March 31, 2026, March 31, 2025 and March 31, 2024

The Company's measures the derivative liability at fair value using Level 3 inputs.

The Company's cash, receivables, accounts payable and accrued liabilities, and income taxes payable are recorded at cost. The carrying values of these financial instruments approximate their fair value due to their short-term maturities. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments.

Financial instruments subsequently measured at amortized cost include promissory note payable, and reclamation obligation.