Common use of No Operating History Clause in Contracts

No Operating History. While Grown Rogue's principals have operated other successful cannabis companies, Grown Rogue is recently formed and has a limited operating history and has no record of prior performance as a separate enterprise. Grown Rogue faces the general risks associated with any new business operating in a competitive industry, including the ability to fund operations from unpredictable cash flow and capital-raising transactions. There can be no assurance that Grown Rogue will achieve its anticipated investment objectives or operate profitably. Grown Rogue's business must be considered in light of the risks, expenses, and problems frequently encountered by companies in their early stages of development. Specifically, such risks may include, among others: ● Grown Rogue's inability to fund operations from unpredictable cash flows; ● Grown Rogue's failure to anticipate and adapt to developing markets; ● Grown Rogue's inability to attract, retain and motivate qualified personnel; and ● Grown Rogue's failure to operate profitably in a competitive industry. There can be no assurance that Grown Rogue will be successful in addressing these risks. To the extent it is unsuccessful in addressing these risks, Grown Rogue and the Purchaser may be materially and adversely affected. There can be no assurance that Grown Rogue or the Purchaser will ever achieve or sustain profitability. Grown Rogue's ability to implement its business plan will depend on the Purchaser's ability to obtain additional financing. The Purchaser cannot provide assurance that it will be able to secure additional financing on terms favorable to the Purchaser or at all. If adequate funds are not available on acceptable terms, Grown Rogue's ability to continue and grow its businesses would be dependent on the cash flow, if any, from its operations, which may not be sufficient. If additional funds are raised through the issuance of shares, the percentage ownership of then- current shareholders may be reduced, such holders may experience additional dilution and such new securities may have rights, preferences or privileges senior to those of the Purchaser's previously issued shares. Under Section 280E of the US Internal Revenue Code ("Section 280E"), many normal business expenses incurred in the trafficking of marijuana and its derivatives are not deductible in calculating federal and Oregon income tax liability. A result of Section 280E is that an otherwise profitable business may in fact operate at a loss, after taking into account its income tax expenses. Although Grown Rogue has accounted for Section 280E in its financial projections and models, the application of Section 280E may have a material adverse effect on Grown Rogue.