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Item 8. Financial Statements and Supplementary Data

2024-04-10 compared with 2023-04-17 · 1328 added, 640 removed, 490 unchanged (80% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of TREES Corporation

of TREES Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of TREES Corporation (the Company) as of December 31, 2022 and 2021, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years ended December 31, 2022 and 2021, and the related notes (collectively referred to as the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years ended, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a negative working capital that raise substantial doubt about its ability to continue as a going concern.

We have audited the accompanying consolidated

balance sheets of TREES Corporation (the Company) as of December 31, 2023 and 2022, and the related consolidated statements of operations,

stockholders’ equity, and cash flows for each of the years ended December 31, 2023 and 2022, and the related notes (collectively

referred to as the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial

position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years ended

December 31, 2023 and 2022, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt about the Company’s

Ability to Continue as a Going Concern

The accompanying financial statements

have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the financial statements, the

Company has suffered recurring losses from operations and has a negative working capital that raise substantial doubt about its ability

to continue as a going concern.

Management's plans in regard to these matters are also described in Note 1.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The financial statements do

not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

These financial statements are the

responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements

based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)

and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance

with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether

the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were

we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an

understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the

Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audits included performing procedures

to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that

respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as

evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Business Combination – Refer to Note 2 to the financial statements

As discussed in Note 2 to the consolidated financial statements, the Company acquired several entities as follows:

Trees Englewood on September 2, 2021, Trees Portland, LLC and Trees Waterfront, LLC on December 30, 2021, Trees MLK

on January 5, 2022, Green Tree entities on December 12, 2022, and Green Man Cannabis on December 19, 2022, in separate business combinations.

Management of the Company estimated the preliminary allocation of the purchase price to cash, fixed assets, inventory, trade names, and goodwill based on the industry experience and values until the formal third-party valuation is completed.

The accounting for the purchase price allocation is complex due to the significant estimation uncertainty in determining the fair values of identified intangibles.

The Company’s third-party valuation was completed for Trees Englewood, Trees Portland, LLC, Trees Waterfront, LLC, and Trees MLK Inc.

as of the year ended December 31, 2022.

The Company’s third-party valuation of the rest of the entities is yet to be completed.

We deem the purchase price allocation as a significant audit matter because of the significant estimates and assumptions made by management to estimate the fair value of trade names and allocation to goodwill.

These estimates include the impact of forecasted growth and the consideration of comparable transactions in their industry.

The critical audit matters communicated

below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated

to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved

our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our

opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate

opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Business Combination – Refer

to Note 2 to the consolidated financial statements

As discussed in Note 2 to the consolidated financial

statements, the Company acquired several entities as follows:

Trees MLK Inc.

on January 5, 2022, Green Tree entities on December 12, 2022,

and Green Man Cannabis on December 19, 2022, in separate business combinations.

Management of the Company estimated the allocation of

the purchase price to cash, fixed assets, inventory, trade names, and goodwill based on formal valuation prepared by a third-party.

accounting for the purchase price allocation is complex due to the significant estimation uncertainty in determining the fair values of

identified intangibles.

We deem the purchase price allocation

as a significant audit matter because of the significant estimates and assumptions made by management to estimate the fair value of trade

names and allocation to goodwill.

These estimates include the impact of forecasted growth and the consideration of comparable transactions

in their industry.

This required a high degree of auditor judgment and an increased extent of effort, including the use of valuation specialists.

Addressing the matter involved obtaining the purchase agreements and interpreting the terms are in agreement with the assumptions used by the Company.

We obtained the Company’s purchase price allocation and tested the inputs used in their calculation.

In evaluating the Company’s assumptions, we compared them to other similar transactions in their industry.

For valuations completed by the third-party specialist, we evaluated the expertise, qualifications, and independence of the management’s specialist engaged to complete the evaluation.

Finally, we used professionals inside our firm with specialized skills and knowledge to assess the Company’s methodology.

Goodwill — Refer to Note 9 to the consolidated financial statements

As discussed in Note 9 to the financial statements, the Company has goodwill of $18,384,974 on December 31, 2022, after recognizing impairment expense of $2,450,941 during the year then ended.

The Company evaluates its goodwill at least annually or more frequently when events or changes in circumstances indicate the carrying value may not be recoverable.

The Company performed a goodwill analysis by calculating the fair value by operating segment using primarily an income approach and comparing it to the carrying amount of its goodwill.

The income approach employed a discounted cash flow using a forecast developed by management.

This valuation method requires management to make significant estimates and assumptions related to projected cash flows.

We identified goodwill as a critical audit matter because of the significant estimates and assumptions made by management to estimate fair value, including the impact of forecasted growth, and the difference between the fair values and the carrying values as of December 31, 2022.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialist, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to certain assumptions within the projected cash flows.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements.

These procedures included, among others, gaining an understanding of management's process for developing the fair value estimate.

We also evaluated the expertise, qualifications, and independence of the management’s specialist engaged to complete the evaluation.

We used professionals inside our firm with specialized skills and knowledge to assess the Company’s methodology and assumptions used such as discount rate used.

Addressing the matter involved obtaining

the purchase agreements and interpreting the terms are in agreement with the assumptions used by the Company.

For valuations completed

by the third-party specialist, we evaluated the expertise, qualifications, and independence of the management’s specialist engaged

to complete the evaluation.

Finally, we used professionals inside our firm with specialized skills and knowledge to assess the Company’s

Goodwill — Refer to Note 10

to the consolidated financial statements

As discussed in Note 10 to the consolidated

financial statements, the Company has goodwill of $15,880,097 on December 31, 2023, after recognizing impairment expense of $1,516,000

during the year then ended.

The Company evaluates its goodwill at least annually or more frequently when events or changes in circumstances

indicate the carrying value may not be recoverable.

The Company performed a goodwill analysis by calculating the fair value by operating

segment using primarily an income approach and comparing it to the carrying amount of its goodwill.

The income approach employed a discounted

cash flow using a forecast developed by management.

This valuation method requires management to make significant estimates and assumptions

related to projected cash flows.

We identified goodwill as a critical

audit matter because of the significant estimates and assumptions made by management to estimate fair value, including the impact of forecasted

growth, and the difference between the fair values and the carrying values as of December 31, 2023.

This required a high degree of auditor

judgment and an increased extent of effort, including the need to involve our fair value specialist, when performing audit procedures

to evaluate the reasonableness of management’s estimates and assumptions related to certain assumptions within the projected cash

Addressing the matter involved performing

procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

procedures included, among others, gaining an understanding of management's process for developing the fair value estimate.

We also evaluated

the expertise, qualifications, and independence of the management’s specialist engaged to complete the evaluation.

We used professionals

inside our firm with specialized skills and knowledge to assess the Company’s methodology and assumptions used such as discount

In evaluating the Company’s assumptions, we compared them to historical results.

/s/ Haynie & Company

Haynie & Company

Salt Lake City, Utah

April 10, 2024

We have served as the Company’s auditor since 2021.

(PCAOB ID 457 )

We have served as the Company’s

auditor since 2021.

TREES CORPORATION

CONSOLIDATED BALANCE SHEETS

December 31, 2022

December 31, 2021

Current assets

Cash and cash equivalents

Accounts receivable, net of allowance of $ 42,000 and $ 61,000 , respectively

Current portion of notes receivable, net of allowance of nil and $ 43,108 , respectively

Accounts receivable, net of allowance for credit losses of $ 41,000 and $ 42,000 , respectively

Prepaid expenses and other current assets

13 unchanged sentences

Warrant derivative liability

Accrued legal fees

Notes payable - current

Contingent Earnout Liability

Total current liabilities

7 unchanged sentences

5,000,000 shares authorized;

1,180 issued and outstanding, respectively

1,180 issued and outstanding

Common stock, $ 0.001 par value;

200,000,000 shares authorized;

118,664,094 shares and 89,551,993 shares issued and outstanding , respectively

108,746,520 and 118,664,094 shares issued and outstanding, respectively

Additional paid-in capital

4 unchanged sentences

Total liabilities and stockholders’ equity

The accompanying notes are an integral part of these consolidated financial statements.

The accompanying notes are an integral part of

these consolidated financial statements.

TREES CORPORATION

18 unchanged sentences

Loss on impairment of assets

(Gain) loss on derivative liability

Other expense (income), net

Gain on derivative liability

Gain on change in fair value of contingent earnout

Other (income) expense, net

Total other expenses, net

6 unchanged sentences

( 9,480,545 )

Income (loss) from discontinued operations, net of tax

Income from discontinued operations, net of tax

$ ( 7,082,258 )

9 unchanged sentences

Weighted average number of common shares outstanding

The accompanying notes are an integral part of these consolidated financial statements.

The accompanying notes are an integral part of

these consolidated financial statements.

TREES CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended December 31,

Cash flows from operating activities

1 unchanged sentence

$ ( 9,475,067 )

Adjustments to reconcile net loss to net cash used in operating activities:

Amortization of debt discount and equity issuance costs

Adjustments to reconcile net loss to net cash used in provided by operating activities:

Amortization of debt discount

Depreciation and amortization

Amortization of right-of-use lease assets

Loss on extinguishment of debt

Lease expense in excess of lease payments

Provision for bad debt

Provision for credit losses

Impairment of assets

Loss on disposal of property and equipment

(Gain) loss on warrant derivative liability

Loss (gain) on disposal of property and equipment

Gain on derivative liability

Gain on change in fair value of contingent earnout

Stock-based compensation

Gain on investment

Changes in operating assets and liabilities, net of acquisitions

1 unchanged sentence

Prepaid expenses and other assets

Accounts payable and accrued liabilities

Accounts payable, accrued liabilities, and interest payable

Operating lease liabilities

( 1,753,566 )

Net cash used in operating activities

3 unchanged sentences

Purchase of property and equipment

Acquisition of Station 2 assets

Proceeds for sale of equipment

Lending on note receivable

Proceeds on notes receivable

Acquisition of TDM, LLC

( 1,122,015 )

Acquisition of Trees MLK

Acquisition of Trees Portland, net of cash acquired

Acquisition of Trees Waterfront, net of cash acquired

Acquisition of Green Tree Entities, net of cash acquired

1 unchanged sentence

( 1,216,406 )

Net proceeds from sale of Next Big Crop

Proceeds from sale of investment

Net cash used in investing activities

1 unchanged sentence

Cash flows from financing activities

Proceeds from exercise of stock options

Proceeds from preferred stock offering

Proceeds from notes payable

1 unchanged sentence

( 1,898,094 )

Net cash provided by financing activities

Net increase in cash and cash equivalents

Net cash (used in) provided by financing activities

Net (decrease) increase in cash and cash equivalents

( 1,614,157 )

Cash and cash equivalents, beginning of period

2 unchanged sentences

Cash paid for interest

Cash paid for taxes

Non-cash investing & financing activities

Non-cash settlement of notes payable netted against proceeds from new notes issuance

Operating lease right-of-use asset obtained in exchange for new operating lease liabilities

Reduction of operating lease liabilities and right-of-use assets related to lease modifications

$ ( 376,053 )

Issuance of accrued stock

Non-cash debt issuance for acquisition of Station 2 assets

Non-cash extinguishment of debt for the surrender of Station 2 assets

$ ( 356,152 )

Accrued dividends on preferred stock

12 % Warrants recorded as a debt discount and additional paid-in capital

12 % Warrants recorded as a loss on extinguishment of debt and additional paid-in capital

Accrued dividends on preferred stock

Cashless warrant exercise

Beneficial conversion feature

10 % Warrants recorded as a loss on extinguishment of debt and additional paid-in capital

Issuance of Common Stock to a consultant

The accompanying notes are an integral part of these consolidated financial statements.

The accompanying notes are an integral part of

these consolidated financial statements.

TREES CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

2 unchanged sentences

$ ( 83,820,815 )

Common Stock issued to consultants

Common Stock issued upon exercise of stock options

Common Stock issued for acquisition of Trees Englewood

Common Stock issued for acquisition of Trees Portland

Warrants issued with 10 % Notes

Beneficial conversion feature

Cashless exercise of warrants

Stock-based compensation

Preferred shares issued

Warrants issued with preferred stock

Modification of Warrants

Modification of Options

( 8,869,379 )

December 31, 2021

( 83,820,815 )

Common stock issued for acquisition of Trees Waterfront LLC

9 unchanged sentences

( 93,384,382 )

The accompanying notes are an integral part of these consolidated financial statements.

Share-based compensation

Redeemed shares related to Green Tree settlement

( 9,917,574 )

( 1,626,482 )

( 1,636,400 )

Capital transaction related to the Green Tree Note restructuring

Capital transaction related to the forgiveness of the Trees Englewood Note

Modification of warrants issued with 12 % Notes

Dividends on preferred stock

( 7,082,258 )

December 31, 2023

$ ( 100,484,340 )

The accompanying notes are an integral part of

these consolidated financial statements.

TREES CORPORATION

2 unchanged sentences

Nature of Operations

TREES Corporation, a Colorado Corporation (the “Company,” “we,” “us,” “our,” or “TREES”) (formerly, General Cannabis Corp), was incorporated on June 3, 2013, and provides services and products to the regulated cannabis industry.

We currently trade on the OTCQB® Market under the trading symbol CANN.

TREES Corporation, a Colorado Corporation (the

“Company,” “we,” “us,” “our,” or “TREES”) (formerly, General Cannabis Corp),

was incorporated on June 3, 2013, and provides services and products to the regulated cannabis industry.

We currently trade on the OTCQB®

Market under the trading symbol CANN.

As of December 31, 2023, our operations are segregated into the following segments:

Retail (“Retail Segment”)

Through a series of acquisitions in 2021 and 2022, we operated four retail dispensaries in Colorado and three retail dispensaries in Oregon as of December 31, 2022.

See Note 2 for details of the acquisitions.

We acquired the license for an additional dispensary in Colorado in February of 2023, and opened that location in April 2023.

Through a series of acquisitions in 2021 and 2022,

we operated three retail dispensaries in Colorado and three retail dispensaries in Oregon as of December 31, 2023.

See Note 2 for details

of the acquisitions.

Cultivation (“Cultivation Segment”)

Through our acquisition of SevenFive Farm in May 2020, we operate a licensed 17,000 square foot light deprivation greenhouse cultivation facility.

We acquired additional cultivation facilities in December 2022 through the Green Tree acquisition.

During 2022, there was one customer that accounted for over 10% of our third-party cultivation revenue, and during 2021 there were two customers that each accounted for over 10% of , of third -party cultivation revenue.

Through our acquisition of SevenFive Farm in

May 2020, we operate a licensed 17,000 square foot light deprivation greenhouse cultivation facility.

During 2023, there was one

customer that accounted for over 10 % of our third-party cultivation revenue, and during 2022 there was one customer that accounted

for over 10 % of third -party cultivation revenue.

Discontinued Operations

Through Next Big Crop, LLC (“NBC”), we delivered comprehensive consulting services to the cannabis industry that included obtaining licenses, compliance, cultivation, retail operations, logistical support, facility design and construction, and expansion of existing operations.

NBC oversaw our wholesale equipment and supply business, operating under the name “GC Supply,” which provided turnkey sourcing and stocking services to cultivation, retail, and infused products manufacturing facilities.

Our products included building materials, equipment, consumables, and compliance packaging.

Next Big Crop, LLC (“NBC”), we delivered comprehensive consulting services to the cannabis industry that included obtaining

licenses, compliance, cultivation, retail operations, logistical support, facility design and construction, and expansion of existing

our wholesale equipment and supply business, operating under the name “GC Supply,” which provided turnkey sourcing and stocking

services to cultivation, retail, and infused products manufacturing facilities.

Our products included building materials, equipment, consumables,

and compliance packaging.

NBC also provided operational support for our internal cultivation.

On July 16, 2021, we entered into an Asset Purchase Agreement with an individual to sell substantially all the assets of NBC for a total of $ 150,000 and 10 % of profits generated by the buyer in the states of Michigan, Mississippi, and Massachusetts for a period of twelve months from the closing.

On July 16, 2021, we entered into an Asset

Purchase Agreement with an individual to sell substantially all the assets of NBC for a total of $ 150,000 and 10 % of profits

generated by the buyer in the states of Michigan, Mississippi, and Massachusetts for a period of twelve months from the closing.

On August 2, 2021, the sale of NBC was completed.

Pursuant to an amendment to the Asset Purchase Agreement, the buyer paid an additional

$ 75,000 in March 2022, and the 10 % profit share described above was eliminated.

Basis of Presentation

The accompanying consolidated financial statements include the results of TREES and its nine wholly-owned (direct and indirect) subsidiary companies, each a Colorado corporation or limited liability company:

The accompanying consolidated financial statements include the results

of TREES and its nine wholly-owned (direct and indirect) subsidiary companies, each a Colorado corporation or limited liability company:

Evans Owner LLC

11 unchanged sentences

● Green Man Cannabis, LLC

Intercompany accounts and transactions have been eliminated.

The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses.

Although these estimates are based on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ from these estimates and assumptions.

Furthermore, when testing assets for impairment in future periods, if management uses different assumptions or if different conditions occur, impairment charges may result.

Intercompany accounts and transactions have been

The preparation of our consolidated financial

statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses.

Although these estimates are based on our knowledge of current events and actions we may undertake in the future, actual results may ultimately

differ from these estimates and assumptions.

Furthermore, when testing assets for impairment in future periods, if management uses different

assumptions or if different conditions occur, impairment charges may result.

Going Concern

The consolidated financial statements have been prepared on a going concern basis, which assumes we will be able to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future.

Our cash of $ 2,583,833 as of December 31, 2022 is not sufficient to absorb our operating losses and retire our debt and lease obligations of $ 22,540,136 and other obligations as they come due.

Our ability to continue as a going concern is dependent upon our generating profitable operations in the future and/or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due.

Management believes that (a) we will be successful in obtaining additional capital and (b) actions presently being taken to further implement our business plan and generate additional revenues provide the opportunity for the Company to continue as a going concern.

While we believe in the viability of our strategy to generate additional revenues and our ability to raise additional funds, there can be no assurances to that effect.

Accordingly, there is substantial doubt about our ability to continue as a going concern.

The accompanying consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

The Company incurred net losses of $ 9.5 million and $ 8.9 million in the years ended December 31, 2022 and 2021, respectively, and had an accumulated deficit of $ 93.4 million as of December 31, 2022.

The Company had cash and cash equivalents of $ 2.6 million and $ 2.1 million as of December 31, 2022 and 2021, respectively.

The accompanying consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets, and the satisfaction of liabilities and commitments in the ordinary course of business.

The Company has incurred recurring losses and negative cash flows from operations since inception and has primarily funded its operations with proceeds from the issuance of convertible debt.

The Company expects its operating losses and negative operating cash flows to continue into the foreseeable future as it continues to execute its acquisition and growth strategy.

The Company believes that its cash and cash equivalents as of December 31, 2022 will be sufficient to fund its operating expenses and capital expenditure requirements for at least twelve months from the date of filing this Annual Report on Form 10-K.

The Company may need additional funding to support its planned investing activities.

If the Company is unable to obtain additional funding, it would be forced to delay, reduce, or eliminate some or all of its acquisition efforts, which could adversely affect its business prospects.

We incurred net losses of $ 7.1 million and $ 9.5

million during the years ended December 31, 2023 and 2022 , respectively, and had an accumulated

deficit of $ 100.5 million and $ 93.4 million as of December 31, 2023 and December 31,

We had cash and cash equivalents of $ 1.0 million and $ 2.6 million as of December 31,

2023 , and December 31, 2022, respectively.

The consolidated financial statements, have been

prepared on the basis of continuity of operations, realization of assets, and the satisfaction of liabilities and commitments in the ordinary

course of business.

We have incurred recurring losses and negative cash flows from operations since inception and have primarily funded

our operations with proceeds from the issuance of debt and equity.

We expect our operating losses to continue into the foreseeable future

as we continue to execute our acquisition and growth strategy.

As a result, we have concluded that there is substantial doubt about our

ability to continue as a going concern.

The accompanying consolidated financial statements do not include any adjustments that might result

from the outcome of this uncertainty.

Our ability to continue as a going concern is

dependent upon our ability to raise additional capital to fund operations, support our planned investing activities, and repay our debt

obligations as they become due.

If we are unable to obtain additional funding, we would be forced to delay, reduce, or eliminate some

or all of our acquisition efforts, which could adversely affect our growth plans.

incurred net losses of $ 7.1 million and $ 9.5 million

in the years ended December 31, 2023 and 2022, respectively, and had an accumulated deficit of $ 100.5 million

as of December 31, 2023.

The Company had cash and cash equivalents of $ 1.0 million as of December 31, 2023 .

believes that its cash and cash equivalents as of December 31, 2023 will not be sufficient

to fund its operating expenses and capital expenditure requirements for at least twelve months from the date of filing this Annual Report

on Form 10-K.

The Company will need additional funding to support its planned investing activities.

If the Company is unable to obtain

additional funding, it would be forced to delay, reduce, or eliminate some or all of its planned operations and acquisition efforts, which

could adversely affect its business prospects.

Reclassifications

Certain prior year amounts have been reclassified for consistency with current year presentation.

These reclassifications had no effect on the reported results of operations.

prior year amounts have been reclassified for consistency with current year presentation.

These reclassifications had no effect on the

reported results of operations.

Significant Accounting Policies

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits with banks, and investments that are highly liquid and have maturities of three months or less at the date of purchase.

Inventories consist of raw materials, supplies, growing and harvested plants (work-in-process), and finished goods, and are stated at the lower of cost or net realizable value.

All direct and indirect costs of growing plants are accumulated until the time of harvest and allocated to the plants during the growing process.

Cash and cash equivalents include cash on hand,

deposits with banks, and investments that are highly liquid and have maturities of three months or less at the date of purchase.

Inventories consist of raw materials, supplies,

growing and harvested plants (work-in-process), and finished goods, and are stated at the lower of cost or net realizable value.

and indirect costs of growing plants are accumulated until the time of harvest and allocated to the plants during the growing process.

All direct and indirect costs of finished goods are accumulated and allocated to the products between the harvest and completion stages.

The Company uses an average costing method to allocate costs.

Net realizable value is determined as the estimated selling price in the ordinary course of business less the estimated costs of completion and estimated costs necessary to make the sale.

Net realizable value is determined as the estimated

selling price in the ordinary course of business less the estimated costs of completion and estimated costs necessary to make the sale.

The Company periodically reviews physical inventory for excess, obsolete, and potentially impaired items.

Write-downs and write-offs are charged to cost of sales.

Write-downs and write-offs are

charged to cost of sales.

Accounts Receivable, net

Accounts receivable are recorded at the original invoiced amount due from our customers less an allowance for any potential uncollectible amounts.

We control credit risk related to accounts receivable through credit approvals, credit limits, and monitoring processes.

In making the determination of the appropriate allowance for doubtful accounts, management considers prior experience with customers, analysis of accounts receivable aging reports, changes in customer payment patterns, and historical write-offs.

Accounts receivable are recorded at the original

invoiced amount due from our customers less an allowance for any potential uncollectible amounts.

We control credit risk related to accounts

receivable through credit approvals, credit limits, and monitoring processes.

In making the determination of the appropriate allowance

for credit losses, management considers prior experience with customers, analysis of accounts receivable aging reports, changes in customer

payment patterns, and historical write-offs.

Right-of-use Asset / Lease Liability

Right of use (“ROU”) assets represent our right to use an underlying asset in which we obtain substantially all the economic benefits and the right to direct the use of the asset during the lease term.

Right of use (“ROU”) assets represent

our right to use an underlying asset in which we obtain substantially all the economic benefits and the right to direct the use of the

asset during the lease term.

Lease liabilities represent our obligation to make lease payments arising from the lease.

We recognize ROU assets and lease liabilities on the balance sheet for leases with a lease term of greater than one year.

The Company elected to combine the lease and related non-lease components (common area maintenance and operating costs) and treat them as a single lease component.

ROU assets and lease liabilities are recognized at the commencement date of the lease based on the present value of the fixed lease payments over the lease term.

The Company’s operating leases include options to extend or terminate the lease, which are not included in the determination of the ROU asset or lease liability unless reasonably certain to be exercised.

Payments that are not fixed at the commencement of the lease are considered variable and are excluded from the measurement of the ROU asset and lease liability and are expensed as incurred in the statement of operations.

Variable payments typically included payment for common area maintenance and reimbursement of the landlords operating costs as the amounts change from year to year based on actual costs incurred.

In the measurement of our ROU assets and lease liabilities, the fixed lease payments in the agreement are discounted using a secured incremental borrowing rate for a term similar to the duration of the lease, as our leases do not provide implicit rates.

Operating lease expense is recognized on a straight-line basis over the lease term.

For the Company’s finance lease, interest expense is recognized on the lease liability using the effective interest method and depreciation of the finance lease ROU asset is recognized on a straight-line basis over the lease term.

We recognize ROU

assets and lease liabilities on the balance sheet for leases with a lease term of greater than one year .

The Company elected to combine

the lease and related non-lease components (common area maintenance and operating costs) and treat them as a single lease component.

assets and lease liabilities are recognized at the commencement date of the lease based on the present value of the fixed lease payments

over the lease term.

The Company’s operating leases include options to extend or terminate the lease, which are not included in

the determination of the ROU asset or lease liability unless reasonably certain to be exercised.

Payments that are not fixed at the commencement

of the lease are considered variable and are excluded from the measurement of the ROU asset and lease liability and are expensed as incurred

in the statement of operations.

Variable payments typically included payment for common area maintenance and reimbursement of the landlords

operating costs as the amounts change from year to year based on actual costs incurred.

In the measurement of our ROU assets and lease

liabilities, the fixed lease payments in the agreement are discounted using a secured incremental borrowing rate for a term similar to

the duration of the lease, as our leases do not provide implicit rates.

Operating lease expense is recognized on a straight-line basis

over the lease term.

For the Company’s finance lease, interest expense is recognized on the lease liability using the effective

interest method and depreciation of the finance lease ROU asset is recognized on a straight-line basis over the lease term.

Property and Equipment, net

Property and equipment are recorded at historical cost, less accumulated depreciation.

Major additions and improvements are capitalized, while replacements, maintenance, and repairs, which do not improve or extend the life of the respective assets, are expensed as incurred.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets:

thirty years for buildings, the lesser of ten years or the life of the lease for leasehold improvements, and one to fifteen years for furniture, fixtures and equipment, software, vehicles, and biological assets.

Land is not depreciated.

When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected in operations.

Property and equipment are recorded at historical

cost, less accumulated depreciation.

Major additions and improvements are capitalized, while replacements, maintenance, and repairs, which

do not improve or extend the life of the respective assets, are expensed as incurred.

Depreciation is computed using the straight-line

method over the estimated useful lives of the assets:

thirty years for buildings, the lesser of ten years or the life of the lease for

leasehold improvements, and one to fifteen years for furniture, fixtures and equipment, software, vehicles, and biological assets.

is not depreciated.

When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed

from the respective accounts with the resulting gain or loss reflected in operations.

Business Combinations

Amounts paid for acquisitions are allocated to the assets acquired and liabilities assumed based on their estimated fair value at the date of acquisition.

The fair value of identifiable intangible assets is based on detailed valuations that use information and assumptions provided by management, including expected future cash flows.

Amounts paid for acquisitions are allocated to

the assets acquired and liabilities assumed based on their estimated fair value at the date of acquisition.

The fair value of identifiable

intangible assets is based on detailed valuations that use information and assumptions provided by management, including expected future

We allocate any excess purchase price over the fair value of the net assets and liabilities acquired to goodwill.

Identifiable intangible assets with finite lives are amortized over their useful lives.

Acquisition-related costs, including advisory, legal, accounting, valuation, and other costs, are expensed in the periods in which the costs are incurred.

The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition date.

intangible assets with finite lives are amortized over their useful lives.

Acquisition-related costs, including advisory, legal, accounting,

valuation, and other costs, are expensed in the periods in which the costs are incurred.

The results of operations of acquired businesses

are included in the consolidated financial statements from the acquisition date.

Goodwill and Intangibles

Goodwill represents the excess of purchase price over the fair value of identifiable net assets acquired in a business combination.

Goodwill and long-lived intangible assets are tested for impairment at least annually in accordance with the provisions of ASC No.

Goodwill represents the excess of purchase price

over the fair value of identifiable net assets acquired in a business combination.

Goodwill and long-lived intangible assets are tested

for impairment at least annually in accordance with the provisions of ASC No.

350, Intangibles-Goodwill and Other (“ASC No.

350 requires that goodwill be tested for impairment at the reporting unit level (operating segment or on level below an operating segment) on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carry value.

Application of the goodwill impairment test requires judgement, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit.

We test goodwill and long-lived intangible assets annually in December, unless an event occurs that would cause us to believe the value is impaired at an interim date.

Intangible assets with finite useful lives are amortized over their respective estimated useful lives and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

We issue debt that may have separate warrants, conversion features, or no equity-linked attributes.

Debt with warrants – When we issue debt with warrants, we treat the warrants as a debt discount, record as a contra-liability against the debt, and amortize the balance over the life of the underlying debt as amortization of debt discount expense in the consolidated statements of operations.

The offset to the contra-liability is recorded as additional paid in capital in our consolidated balance sheets.

If the debt is retired early, the associated debt discount is then recognized immediately as amortization of debt discount expense in the consolidated statement of operations.

350 requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below

an operating segment) on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than

not reduce the fair value of a reporting unit below its carry value.

Application of the goodwill impairment test requires judgement, including

the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units,

and determination of the fair value of each reporting unit.

We test goodwill and long-lived intangible assets annually in December, unless

an event occurs that would cause us to believe the value is impaired at an interim date.

Intangible assets with finite useful lives are

amortized over their respective estimated useful lives and reviewed for impairment whenever events or changes in circumstances indicate

that the carrying amount of the asset may not be recoverable.

We issue debt that may have separate warrants,

conversion features, or no equity-linked attributes.

Debt with warrants – When we

issue debt with warrants, we treat the warrants as a debt discount, record as a contra-liability against the debt, and amortize the balance

over the life of the underlying debt as amortization of debt discount expense in the consolidated statements of operations.

to the contra-liability is recorded as additional paid in capital in our consolidated balance sheets.

If the debt is retired early, the

associated debt discount is then recognized immediately as amortization of debt discount expense in the consolidated statement of operations.

The debt is treated as conventional debt.

We determine the value of the non-complex warrants using the Black-Scholes Option Pricing Model (“Black-Scholes”) using the stock price on the date of issuance, the risk-free interest rate associated with the life of the debt, and the volatility of our stock.

For warrants with complex terms, we use the binomial lattice model to estimate their fair value.

Modification and Extinguishment of Debt - When we change the terms of existing notes payable, we evaluate the amendments under ASC 470-50, Debt Modification and Extinguishment to determine whether the change should be treated as a modification or as a debt extinguishment.

This evaluation includes analyzing whether there are significant and consequential changes to the economic substance of the note.

If the change is deemed insignificant then the change is considered a debt modification, whereas if the change is substantial the change is reflected as a debt extinguishment.

Convertible Debt - When we issue debt with a conversion feature, we must first assess whether the conversion feature meets the requirements to be treated as a derivative.

If the conversion feature within convertible debt meets the requirements to be treated as a derivative, we estimate the fair value of the convertible debt derivative using Black-

Scholes upon the date of issuance, using the stock price on the date of issuance, the risk-free interest rate associated with the life of the debt, and the estimated volatility of our stock.

If the conversion feature is not treated as a derivative, we assess whether it is a beneficial conversion feature (“BCF”).

A BCF exists if the effective conversion price of the convertible debt instrument is less than the stock price on the commitment date.

This typically occurs when the effective conversion price is less than the fair value of the stock on the date the instrument was issued.

The value of a BCF is equal to the intrinsic value of the feature, the difference between the effective conversion price and the fair value of the Common Stock into which it is convertible.

We determine the value of the non-complex warrants

using the Black-Scholes Option Pricing Model (“Black-Scholes”) using the stock price on the date of issuance, the risk-free

interest rate associated with the life of the debt, and the volatility of our stock.

For warrants with complex terms, we use the binomial

lattice model to estimate their fair value.

Modification and Extinguishment of Debt -

When we change the terms of existing notes payable, we evaluate the amendments under ASC 470-50, Debt Modification and Extinguishment

to determine whether the change should be treated as a modification or as a debt extinguishment.

This evaluation includes analyzing whether

there are significant and consequential changes to the economic substance of the note.

If the change is deemed insignificant then the

change is considered a debt modification, whereas if the change is substantial the change is reflected as a debt extinguishment.

Convertible Debt - When we issue debt with

a conversion feature, we must first assess whether the conversion feature meets the requirements to be treated as a derivative.

conversion feature within convertible debt meets the requirements to be treated as a derivative, we estimate the fair value of the convertible

debt derivative using Black-Scholes upon the date of issuance, using the stock price on the date of issuance, the risk-free interest rate

associated with the life of the debt, and the estimated volatility of our stock.

Fair Value of Financial Instruments

generally accepted accounting principles (“GAAP”) requires disclosing the fair value of financial instruments to the extent practicable for financial instruments which are recognized or unrecognized in the consolidated balance sheet.

The fair value of the financial instruments disclosed herein is not necessarily representative of the amount that could be realized or settled, nor does the fair value amount consider the tax consequences of realization or settlement.

In assessing the fair value of financial instruments, the Company uses a variety of methods and assumptions, which are based on estimates of market conditions and risks existing at the time.

For certain instruments, including accounts receivable and accounts payable, the Company estimated that the carrying amount approximated fair value because of the short maturities of these instruments.

All debt is based on current rates at which the Company could borrow funds with similar remaining maturities and approximates fair value.

GAAP establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use on unobservable inputs by requiring that the most observable inputs be used when available.

Observable inputs consist of items that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company.

Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

generally accepted accounting principles

(“GAAP”) requires disclosing the fair value of financial instruments to the extent practicable for financial instruments which

are recognized or unrecognized in the consolidated balance sheet.

The fair value of the financial instruments disclosed herein is not

necessarily representative of the amount that could be realized or settled, nor does the fair value amount consider the tax consequences

of realization or settlement.

In assessing the fair value of financial instruments,

the Company uses a variety of methods and assumptions, which are based on estimates of market conditions and risks existing at the time.

For certain instruments, including accounts receivable and accounts payable, the Company estimated that the carrying amount approximated

fair value because of the short maturities of these instruments.

All debt is based on current rates at which the Company could borrow

funds with similar remaining maturities and approximates fair value.

GAAP establishes a hierarchy for inputs used in

measuring fair value that maximizes the use of observable inputs and minimizes the use on unobservable inputs by requiring that the most

observable inputs be used when available.

Observable inputs consist of items that market participants would use in pricing the asset or

liability developed based on market data obtained from sources independent of the Company.

Unobservable inputs are inputs that reflect

the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based

on the best information available in the circumstances.

The hierarchy is described below:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

There are no fair valued assets or liabilities classified under Level 1 as of December 31, 2022 and 2021.

Level 2 – Observable prices that are based on inputs not quoted on active markets but corroborated by market data.

There are no fair valued assets or liabilities classified under Level 2 as of December 31, 2022 and 2021.

Level 3 – Unobservable inputs are used when little or no market data is available.

Level 1 – Quoted prices in active markets

for identical assets or liabilities.

There are no fair valued assets or liabilities classified under Level 1 as of December 31, 2023.

Level 2 – Observable prices that are

based on inputs not quoted on active markets but corroborated by market data.

There are no fair valued assets or liabilities classified

under Level 2 as of December 31, 2023.

Level 3 – Unobservable inputs are used

when little or no market data is available.

The fair value hierarchy gives the lowest priority to Level 3 inputs (see Note 15).

Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the liabilities.

For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s accounting, and finance department, which reports to the Chief Financial Officer, determines its valuation policies and procedures.

The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s accounting and finance department and are approved by the Chief Financial Officer.

Level 3 liabilities are valued using unobservable

inputs to the valuation methodology that are significant to the measurement of the fair value of the liabilities.

For fair value measurements

categorized within Level 3 of the fair value hierarchy, the Company’s accounting, and finance department, which reports to the Chief

Financial Officer, determines its valuation policies and procedures.

The development and determination of the unobservable inputs for

Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s accounting and finance department

and are approved by the Chief Financial Officer.

Level 3 Valuation Techniques

Level 3 financial liabilities consist of the derivative liabilities for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation.

Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate.

The Company deems financial instruments which do not have fixed settlement provisions to be derivative instruments.

In accordance with GAAP the fair value of these warrants is classified as a liability on the Company’s consolidated balance sheets because, according to the terms of the warrants, a fundamental transaction could give rise to an obligation of the Company to pay cash to its warrant holders.

Such instruments do not have fixed settlement provisions and have also been recorded as derivative liabilities.

Corresponding changes in the fair

value of the derivative liabilities are recognized in earnings on the Company’s consolidated statements of operations in each subsequent period.

The Company’s derivative liabilities are carried at fair value and were classified as Level 3 in the fair value hierarchy due to the use of significant unobservable inputs.

Level 3 financial liabilities consist of the derivative

liabilities for which there is no current market for these securities such that the determination of fair value requires significant judgment

or estimation.

Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based

on changes in estimates or assumptions and recorded as appropriate.

The Company deems financial instruments which do not have fixed settlement

provisions to be derivative instruments.

In accordance with GAAP the fair value of these warrants is classified as a liability on the

Company’s consolidated balance sheets because, according to the terms of the warrants, a fundamental transaction (as defined) could

give rise to an obligation of the Company to pay cash to its warrant holders.

Corresponding changes in the fair value of the derivative

liabilities are recognized in earnings on the Company’s consolidated statements of operations in each subsequent period.

The Company’s derivative liabilities are

carried at fair value and were classified as Level 3 in the fair value hierarchy due to the use of significant unobservable inputs.

Warrant Instruments

Warrants with derivative features – When we raise capital by issuing warrants that do not have complex terms, they are recorded as additional paid in capital in our consolidated balance sheet.

When we issue warrants that have complex terms, such as a clause in which the warrant agreements contain a cash settlement provision whereby the holders could settle the warrants for cash upon a fundamental transaction that is considered outside of the control of management, such as a change of control, the warrants are considered to be a derivative that are recorded as a liability at fair value.

The warrant derivative liability is adjusted to its fair value at the end of each reporting period, with the change being recorded as other expense or gain.

Warrants with derivative features –

When we raise capital by issuing warrants that do not have complex terms, they are recorded as additional paid in capital in our consolidated

balance sheet.

When we issue warrants that have complex terms, such as a clause in which the warrant agreements contain a cash settlement

provision whereby the holders could settle the warrants for cash upon a fundamental transaction that is considered outside of the control

of management, such as a change of control, the warrants are considered to be a derivative that is recorded as a liability at fair value.

The warrant derivative liability is adjusted to its fair value at the end of each reporting period, with the change being recorded as

a loss or gain.

Revenue Recognition

We have two main revenue streams:

(i) retail product sales;

product sales;

and (ii) wholesale cultivation sales.

Product sales are recorded at the time that control of the product is transferred to customers.

In evaluating the timing of the transfer of control of products to customers, we consider several indicators, including significant risks and rewards of products, our right to payment, and the legal title of the products.

Based on the assessment of control indicators, sales are generally recognized when products are delivered to customers.

Revenue from cultivation sales is recognized when the products are delivered to the customer.

ASU 2014-09, Revenue from Contracts with Customers (“ ASC Topic 606”) is a comprehensive revenue recognition model that requires revenue to be recognized when control of the promised goods or services are transferred to our customers at an amount that reflects the consideration that we expect to receive.

Application of ASC Topic 606 requires us to use more judgment and make more estimates than under former guidance.

Product sales are recorded at the time that control

of the product is transferred to customers.

In evaluating the timing of the transfer of control of products to customers, we consider

several indicators, including significant risks and rewards of products, our right to payment, and the legal title of the products.

on the assessment of control indicators, sales are generally recognized when products are delivered to customers.

Revenue from cultivation sales is recognized when

the products are delivered to the customer.

ASU 2014-09, Revenue

from Contracts with Customers (“ ASC Topic 606”) is a comprehensive revenue recognition model that requires

revenue to be recognized when control of the promised goods or services are transferred to our customers at an amount that reflects the

consideration that we expect to receive.

Application of ASC Topic 606 requires us to use more judgment and make more estimates than under

former guidance.

Application of ASC Topic 606 requires a five-step model applicable to all product offerings revenue streams as follows:

Identification of the contract, or contracts, with a customer

A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance, and (iii) we determine that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.

We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit or financial information pertaining to the customer.

Identification of the performance obligations in the contract

Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the goods or service either on its own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract.

When a contract includes multiple promised goods or services, we apply judgment to determine whether the promised goods or services are capable of being distinct and are distinct within the context of the contract.

If these criteria are not met, the promised goods or services are accounted for as a combined performance obligation.

Identification of the contract, or contracts,

with a customer

A contract with a customer exists when (i) we

enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred

and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance, and (iii) we

determine that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s

intent and ability to pay the promised consideration.

We apply judgment in determining the customer’s

ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or,

in the case of a new customer, published credit or financial information pertaining to the customer.

Identification of the performance obligations

in the contract

Performance obligations promised in a contract

are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby

the customer can benefit from the goods or service either on its own or together with other resources that are readily available from

third parties or from us, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately

identifiable from other promises in the contract.

When a contract includes multiple promised goods

or services, we apply judgment to determine whether the promised goods or services are capable of being distinct and are distinct within

the context of the contract.

If these criteria are not met, the promised goods or services are accounted for as a combined performance

Determination of the transaction price

The transaction price is determined based on the consideration to which we will be entitled to receive in exchange for transferring goods or services to our customer.

We estimate any variable consideration included in the transaction price using the expected value method that requires the use of significant estimates for discounts, cancellation periods, refunds and returns.

The transaction price is determined based on the

consideration to which we will be entitled to receive in exchange for transferring goods or services to our customer.

We estimate any

variable consideration included in the transaction price using the expected value method that requires the use of significant estimates

for discounts, cancellation periods, refunds and returns.

Variable consideration is described in detail below.

Allocation of the transaction price to the performance obligations in the contract

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation.

Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative Stand-Alone Selling Price (“SSP,”) basis.

Allocation of the transaction price to the

performance obligations in the contract

If the contract contains a single performance

obligation, the entire transaction price is allocated to the single performance obligation.

Contracts that contain multiple performance

obligations require an allocation of the transaction price to each performance obligation based on a relative Stand-Alone Selling Price

(“SSP,”) basis.

We determine SSP based on the price at which the performance obligation would be sold separately.

If the SSP is not observable, we estimate the SSP based on available information, including market conditions and any applicable internally approved pricing guidelines.

Recognition of revenue when, or as, we satisfy a performance obligation

We recognize revenue at the point in time that the related performance obligation is satisfied by transferring the promised goods or services to our customer.

is not observable, we estimate the SSP based on available information, including market conditions and any applicable internally approved

pricing guidelines.

Recognition of revenue when, or as, we satisfy

a performance obligation

We recognize revenue at the point in time that

the related performance obligation is satisfied by transferring the promised goods or services to our customer.

Principal versus Agent Considerations

When another party is involved in providing goods or services to our customer, we apply the principal versus agent guidance in ASC Topic 606 to determine if we are the principal or an agent to the transaction.

When we control the specified goods or services before they are transferred to our customer, we report revenue gross, as principal.

If we do not control the goods or services before they are transferred to our customer, revenue is reported net of the fees paid to the other party, as agent.

Our evaluation to determine if we control the goods or services within ASC Topic 606 includes the following indicators:

We are primarily responsible for fulfilling the promise to provide the specified good or service.

When we are primarily responsible for providing the goods and services, such as when the other party is acting on our behalf, we have indication that we are the principal to the transaction.

When another party is involved in providing goods

or services to our customer, we apply the principal versus agent guidance in ASC Topic 606 to determine if we are the principal or an

agent to the transaction.

When we control the specified goods or services before they are transferred to our customer, we report revenue

gross, as principal.

If we do not control the goods or services before they are transferred to our customer, revenue is reported net of

the fees paid to the other party, as agent.

Our evaluation to determine if we control the goods or services within ASC Topic 606 includes

the following indicators:

We are primarily responsible for fulfilling

the promise to provide the specified good or service.

When we are primarily responsible for providing

the goods and services, such as when the other party is acting on our behalf, we have indication that we are the principal to the transaction.

We consider if we may terminate our relationship with the other party at any time without penalty or without permission from our customer.

We have risk before the specified good or service have been transferred to a customer or after transfer of control to the customer.

We may commit to obtaining the services of another party with or without an existing contract with our customer.

In these situations, we have risk of loss as principal for any amount due to the other party regardless of the amount(s) we earn as revenue from our customer.

The entity has discretion in establishing the price for the specified good or service.

We have discretion in establishing the price our customer pays for the specified goods or services.

We have risk before the specified good or service

have been transferred to a customer or after transfer of control to the customer.

We may commit to obtaining the services of another

party with or without an existing contract with our customer.

In these situations, we have risk of loss as principal for any amount due

to the other party regardless of the amount(s) we earn as revenue from our customer.

The entity has discretion in establishing the

price for the specified good or service.

We have discretion in establishing the price our

customer pays for the specified goods or services.

Shipping and Handling

Payments by customers to us for shipping and handling

costs are included in revenue on the consolidated statements of operations, while our expense is included in cost of sales.

handling for inventory are included as a component of inventory on the consolidated balance sheets, and in cost of sales in the consolidated

statements of operations when the product is sold.

Advertising costs are expensed as incurred and are included in selling,

general and administrative expenses in the consolidated statements of operations.

The Company did not incur any significant advertising

costs for the years ended December 31, 2023 and 2022.

Stock-based Payments

Employee and non-employee awards – We account for stock-based compensation in accordance with the fair value recognition provisions of ASC 718 , Compensation – Stock Compensation , and ASC 505 , Equity , which require all stock-

based compensation to employees and non-employees, including grants of employee stock options, to be recognized as an expense in the consolidated financial statements based on their fair values.

The fair value of stock options is estimated using the Black-Scholes option pricing formula that requires assumptions for expected volatility, expected dividends, the risk-free interest rate, and the expected term of the option.

The Company accounts for forfeitures of stock-based grants as they occur.

If any of the assumptions used in the Black-Scholes model or the anticipated number of shares to be awarded change significantly, stock-based compensation expense may differ materially in the future from that recorded in the current period.

Market price-based awards – We may issue stock-based payments that vest when certain market conditions are met, such as our Common Stock trading above a certain value for a specific number of days.

We recognize expense for market price-based options at the estimated fair value of the options using the binomial lattice model over the estimated life of the options used in the model, or immediately upon the market conditions being met.

Employee and non-employee awards –

We account for stock-based compensation in accordance with the fair value recognition provisions of ASC 718 , Compensation –

Stock Compensation , and ASC 505 , Equity , which require all stock-based compensation to employees and

non-employees, including grants of employee stock options, to be recognized as an expense in the consolidated financial statements based

on their fair values.

The fair value of stock options is estimated using the Black-Scholes option pricing formula that requires assumptions

for expected volatility, expected dividends, the risk-free interest rate, and the expected term of the option.

The Company accounts for

forfeitures of stock-based grants as they occur.

If any of the assumptions used in the Black-Scholes model or the anticipated number of

shares to be awarded change significantly, stock-based compensation expense may differ materially in the future from

that recorded in the current period.

Market price-based awards –

We may issue stock-based payments that vest when certain market conditions are met, such as our Common Stock trading above a certain value

for a specific number of days.

We recognize expense for market price-based options at the estimated fair value of the options using

the binomial lattice model over the estimated life of the options used in the model, or immediately upon the market conditions being met.

We use historical data to estimate the expected price volatility, the expected stock option life and expected forfeiture rate.

The risk-free interest rate is based on the United States Treasury yield curve in effect at the time of grant for the estimated life of the stock option.

Shipping and Handling

Payments by customers to us for shipping and handling costs are included in revenue on the consolidated statements of operations, while our expense is included in cost of sales.

Shipping and handling for inventory are included as a component of inventory on the consolidated balance sheets, and in cost of sales in the consolidated statements of operations when the product is sold.

We recognize deferred income tax assets and liabilities for the expected future tax consequences of temporary differences between the income tax and financial reporting carrying amount of our assets and liabilities.

We monitor our deferred tax assets and evaluate the need for a valuation allowance based on the estimate of the amount of such deferred tax assets that we believe do not meet the more-likely-than-not recognition criteria.

We also evaluate whether we have any uncertain tax positions and would record a reserve if we believe it is more-likely-than-not our position would not prevail with the applicable tax authorities and would be recorded in income tax expense.

Our assessment of tax positions as of December 31, 2022 and 2021, determined that there were no material uncertain tax positions.

In general, the tax returns for the years ending December 31, 2019 through 2021 are open to examination by federal and state authorities.

Reportable Segments

The risk-free

interest rate is based on the United States Treasury yield curve in effect at the time of grant for the estimated life of the stock option.

We recognize deferred income tax assets and liabilities

for the expected future tax consequences of temporary differences between the income tax and financial reporting carrying amount of our

assets and liabilities.

We monitor our deferred tax assets and evaluate the need for a valuation allowance based on the estimate of the

amount of such deferred tax assets that we believe do not meet the more-likely-than-not recognition criteria.

We also evaluate whether

we have any uncertain tax positions and would record a reserve if we believe it is more-likely-than-not our position would not prevail

with the applicable tax authorities and would be recorded in income tax expense.

Our assessment of tax positions as of December 31, 2023

and 2022, determined that there were no material uncertain tax positions.

Tax returns for the years ending December 31,

2020 through 2022 are open to examination by federal and state authorities.

ASC 280, Segment Reporting (“ASC

280”), establishes standards for reporting information about operating segments.

Operating segments are defined as components of

an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker,

or decision-making group, in deciding how to allocate resources and in assessing performance.

Our Chief Executive Officer has been identified

as the chief decision maker.

Our reporting segments consist of:

and b) Cultivation.

Our Chief Executive Officer has been identified as the chief decision maker.

Our operations are conducted within the United States of America.

Our operations are conducted within the

United States of America.

Recently Issued Accounting Standards

FASB ASU 2020-06 – “Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”- In June 2020, the Financial Accounting Standards Board (“FASB”) issued guidance which simplifies accounting for convertible instruments by removing major separation models required under current GAAP.

This Accounting Standards Update (“ASU”) also removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and simplifies the diluted earnings per share calculation in certain areas.

The amendments in this ASU are effective for annual and interim periods beginning after December 15, 2021, although early adoption is permitted.

We adopted this ASU in the first quarter of 2022, and the adoption did not have a material effect on our financial statements.

On September 2, 2021, we completed the acquisition of substantially all of the assets of Trees Englewood, representing a portion of the overall Trees transaction (“Trees Transaction”) previously disclosed pursuant to that certain First Amended and Restated Agreement and Plan of Reorganization and Liquidation dated May 28, 2021 by and among the Company, seller and certain other sellers party thereto, that consists of the assets relating to the Trees dispensary located in Englewood, Colorado (“Englewood Closing”).

We paid $ 1,155,256 in cash in connection with the Englewood Closing and stock consideration of 22,380,310 shares of our Common Stock.

The closing price of our Common Stock on September 2, 2021, the date of license transfer, was $ 0.47 per share, as such, fair value of the equity consideration is $ 10,518,746 .

Further, cash equal to $ 1,732,884 will be paid to the seller in equal monthly installments over a period of 24 months from the Englewood Closing.

The table below reflects the Company’s final estimates of the acquisition date fair values of the assets acquired:

Compared to the estimated purchase price allocation reported in our financial statements included in Item 8 of our Form 10-K for the year ended December 31, 2021 filed with the SEC on March 25, 2022, the final purchase price estimate resulted in a reduction of tradename intangible assets and a corresponding increase to goodwill of $ 3.6 million.

The accompanying consolidated financial statements include the results of Trees Englewood from the date of acquisition for financial reporting purposes, September 2, 2021.

The pro forma effects of the acquisition on the results of operations as if the transaction had been completed on January 1, 2021, are as follows:

Total revenues

Net income (loss) attributable to Common Stockholders

( 8,110,671 )

Net income (loss) per common share

Weighted average number of basic and diluted common shares outstanding

The unaudited proforma results of operations are presented for information purposes only.

The unaudited pro-forma results are not intended to present actual results that would have been attained had the acquisition been completed as of January 1, 2020, or to project potential operating results as of any future date or for any future periods.

On December 30, 2021, we completed the acquisition of substantially all the assets of Trees Portland, LLC and Trees Waterfront, LLC (together “Trees Oregon”), representing a portion of the overall Trees Transaction, that consists of the assets relating to certain Trees dispensaries located in Portland, Oregon ("Oregon Closing”).

We paid cash in the amount of $ 331,581 in connection with the Oregon Closing and stock consideration of 6,423,575 shares of our Common Stock.

The closing price of our Common Stock on December 30, 2021, the date of license transfer, was $ 0.23 per share, as such, the fair value of the equity consideration is $ 1,477,422 .

Further, cash equal to $ 497,371 will be paid to the sellers in equal monthly installments over a period of 24 months from the Oregon Closing.

The table below reflects the Company’s final estimates of the acquisition date fair values of the assets acquired:

The accompanying consolidated financial statements include the results of Trees Oregon from the date of acquisition for financial reporting purposes, December 30, 2021.

The pro forma effects of the acquisition on the results of operations as if the transaction had been completed on January 1, 2020, are as follows:

Total revenues

Net income (loss) attributable to Common Stockholders

( 8,664,841 )

Net income (loss) per common share

Weighted average number of basic and diluted common shares outstanding

The unaudited proforma results of operations are presented for information purposes only.

On January 5, 2022, we completed the acquisition of substantially all of the assets of Trees MLK Inc.

(“MLK”), representing the remaining Oregon dispensary in connection with the overall Trees transaction.

FASB ASU 2020-06 – “Debt-Debt with

Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40):

for Convertible Instruments and Contracts in an Entity’s Own Equity”- In June 2020, the Financial Accounting Standards

Board (“FASB”) issued guidance which simplifies accounting for convertible instruments by removing major separation models

required under current GAAP.

This Accounting Standards Update (“ASU”) also removes certain settlement conditions that are

required for equity contracts to qualify for the derivative scope exception and simplifies the diluted earnings per share calculation

in certain areas.

The amendments in this ASU are effective for annual and interim periods beginning after December 15, 2021, although

early adoption is permitted.

We adopted this ASU in the first quarter of 2022, and the adoption did not have a material effect on our

consolidated financial statements.

FASB ASU 2016-13 – “Financial Instruments

– Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments” – In June 2016, the FASB issued guidance

that replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss

(“CECL”) methodology.

The measurement of expected credit losses under the CECL methodology is applicable to financial assets

measured at amortized cost, including loan receivables and held-to-maturity debt securities.

It also applies to off-balance sheet credit

exposures not accounted for as insurance (loan commitments, standby letters of credits, financial guarantees, and other similar instruments)

and net investments in leases recognized by a lessor in accordance with Topic 842 on leases.

ASC 326 requires enhanced disclosures related

to the significant estimates and judgments used in estimating credit losses as well as the credit quality and underwriting standards of

a company’s portfolio.

In addition, ASC 326 made changes to the accounting for available-for-sale debt securities.

One such change

is to require credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities the Company

does not intend to sell or believes that it is more likely than not they will be required to sell.

The ASU can be adopted no later than

January 1, 2020 for SEC filers and January 1, 2023 for private companies and smaller reporting companies.

The adoption of the new standard

did not have a material effect on our consolidated financial statements.

FASB ASU 2017-04 – “Intangibles

– Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment” – In January 2017, the FASB issued ASU

2017-04, which simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment

Under ASU 2017-04, goodwill impairment will be tested by comparing the fair value of a reporting unit with its carrying amount,

and recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value.

guidance must be applied on a prospective basis and is effective for periods beginning after December 15, 2022, with early adoption permitted.

The adoption of the new standard did not have a material effect on our consolidated financial statements.

Recent Accounting Pronouncements

FASB ASU 2023-07 – “Segment Reporting

– Improvements to Reportable Segment Disclosures” - In November 2023, the FASB issued ASU No.

2023-07, which requires

disclosure of more detailed information about a reportable segment’s expenses.

The new standard is effective for fiscal years beginning

after December 15, 2023 and interim periods beginning after December 15, 2024.

The amendments must be applied retrospectively, and early

adoption is permitted.

The Company is currently assessing the effects of adoption on its consolidated financial statements.

BUSINESS ACQUISITIONS

On January 5, 2022, we completed the acquisition

of substantially all of the assets of Trees MLK Inc.

(“MLK”), representing the remaining Oregon dispensary in connection with

the overall Trees transaction.

We paid cash in the amount of $ 256,582 and stock consideration of 4,970,654 shares of our Common Stock.

The closing price of our Common Stock on January 5, 2022, the date of license transfer, was $ 0.27 per share, as such, fair value of the equity consideration is $ 1,346,076 .

Further, cash equal to $ 384,873 will be paid to the sellers in equal monthly installments over a period of 24 months beginning on June 15, 2022.

The closing price of our Common Stock on January 5, 2022, the date of license transfer, was $ 0.27 per share, as such, fair value of the

equity consideration is $ 1,346,076 .

Further, cash equal to $ 384,873 will be paid to the sellers in equal monthly installments over a period

of 24 months beginning on June 15, 2022.

When we closed on MLK it was a non-operating dispensary.

We opened the dispensary in the second quarter of 2022.

The table below reflects the Company’s final estimates of the acquisition date fair values of the assets acquired:

As the MLK dispensary was not operating until the second quarter of 2022, the were no material results of operations prior to the acquisition date.

As such, there would be no material proforma impact on the Company’s operating results.

On December 12, 2022, we completed the Green Tree Acquisition which consisted of the acquisition of substantially all of the assets of Ancient Alternatives LLC, Natural Alternatives For Life, LLC, Mountainside Industries, LLC, Hillside Enterprises, LLC, and GT Creations, LLC, each a Colorado limited liability company (collectively, the "Green Tree Entities”).

We paid cash in the amount of $ 500,000 and stock consideration of 17,977,528 shares of our Common Stock.

The closing price of our Common Stock on December 12, 2022, the date of license transfer, was $ 0.165 per share, as

such, fair value of the equity consideration is $ 2,966,292 .

An additional $ 3,500,000 in cash will be paid to the sellers in fifteen (15) equal monthly payments commencing on the 9-month anniversary of the closing.

Based on a discount rate of 12 %, the fair value of these additional monthly payments is approximately $ 3,017,510 .

This liability is included in Notes payable- current and Notes payable- non-current in the accompanying consolidated balance sheets.

We opened the dispensary in the second

quarter of 2022.

The table below reflects the Company’s final

estimates of the acquisition date fair values of the assets acquired:

As the MLK dispensary was not operating until

the second quarter of 2022, the were no material results of operations prior to the acquisition date.

As such, there would be no material

proforma impact on the Company’s operating results.

On December 12, 2022, we completed the Green Tree

Acquisition which consisted of the acquisition of substantially all of the assets of Ancient Alternatives LLC, Natural Alternatives For

Life, LLC, Mountainside Industries, LLC, Hillside Enterprises, LLC, and GT Creations, LLC, each a Colorado limited liability company (collectively,

the “Green Tree Entities”).

We paid cash in the amount of $ 500,000 and stock consideration of 17,977,528 shares of our Common

Additionally, we had a potential obligation to issue additional stock consideration up to 4,879,615 shares of our Common Stock

on the achievement of certain performance indicators on or before June 12, 2024.

The closing price of our Common Stock on December 12,

2022, the date of license transfer, was $ 0.165 per share, as such, fair value of the equity consideration is $ 2,966,292 .

An additional

$ 3,500,000 in cash was to be paid to the sellers in fifteen (15) equal month ly payments commencing on the 9-month anniversary of

the closing, which based on a discount rate of 12 %, resulted in the fair value of these additional monthly payments to be approximately

$ 3,017,510 .

In November 2023, the Company transferred a majority of the Green Tree Entities back to the original owners (see Note 6).

Subsequent to this transfer, the aforementioned debt was modified.

This liability is included in Notes payable- current and Notes payable-

non-current in the accompanying consolidated balance sheets.

See Note 14 for additional details.

The table below reflects the Company’s preliminary estimates of the acquisition date fair values of the assets acquired:

We have not completed the allocation of the purchase price for the Green Tree Acquisition.

As of December 31, 2022, the consolidated balance sheet includes a preliminary allocation of fixed assets, inventory, intangible assets, and goodwill.

Management anticipates completing the purchase price allocation as soon as possible, but no later than one year from the acquisition date.

The accompanying consolidated financial statements include the results of the Green Tree Entities from the date of acquisition for financial reporting purposes, December 12, 2022.

The pro forma effects of the acquisition on the results of operations as if the transaction had been completed on January 1, 2021, are as follows:

The table below reflects the Company’s final estimates of the

acquisition date fair values of the assets acquired:

Compared to the estimated purchase price allocation

reported in our financial statements included in Item 8 of our Form 10-K year ended December 31, 2022 filed with the SEC on April 17,

2023, the final purchase price allocation resulted in a reduction of tradename intangible assets of $ 273,000 and an increase in goodwill

of $ 995,702 .

Additionally, as part of the measurement adjustments, the fair value of the installment payments was remeasured using a 16 %

discount rate, resulting in a decrease of debt of $ 136,502 for the purchase consideration.

Additionally, a contingent earnout liability

with a fair value of $ 859,204 was recognized which increased the purchase consideration and resulting goodwill.

The fair value of the

contingent earnout liability decreased to $ 367,056 at December 31, 2023, resulting in a gain on change in fair value of $ 492,148 .

The accompanying consolidated financial statements

include the results of the Green Tree Entities from the date of acquisition for financial reporting purposes, December 12, 2022.

forma effects of the acquisition on the results of operations as if the transaction had been completed on January 1, 2022, are as follows:

Total revenues

1 unchanged sentence

$ ( 9,558,189 )

( 8,957,542 )

Net income (loss) per common share

Weighted average number of basic and diluted common shares outstanding

The unaudited pro-forma results of operations are presented for information purpose only.

The unaudited pro-forma results are not intended to present actual results that would have been attained had the acquisition been completed as of January 1, 2021, or to project potential operating results as of any future date or for any future periods.

On December 19, 2022, we completed the Green Man Acquisition, consisting of the acquisition of substantially all of the assets of Green Man.

We paid cash in the amount of $ 1,225,000 and stock consideration of 4,494,382 shares of Common Stock.

The closing price of our Common Stock on December 19, 2022, the date of license transfer, was $ 0.18 per share, as such, fair value of the equity consideration is $ 808,989 .

An additional $ 1,500,000 in cash will be paid to the sellers in eighteen (18) equal monthly payments commencing on the 12-month anniversary of the closing.

Based on a discount rate of 12 %, the fair value of these additional monthly payments is approximately $ 1,224,846 .

This liability is included in Notes payable-current and Notes payable-non-current in the accompanying consolidated balance sheets.

The unaudited pro-forma results of operations

are presented for information purpose only.

The unaudited pro-forma results are not intended to present actual results that would have

been attained had the acquisition been completed as of January 1, 2022, or to project potential operating results as of any future date

or for any future periods.

In July 2023, the Company entered into an agreement to transfer the Green Tree Entities back to the original

owners of these entities (see Note 6).

On December 19, 2022, we completed the Green Man

Acquisition, consisting of the acquisition of substantially all of the assets of Green Man.

We paid cash in the amount of $ 1,225,000 and

stock consideration of 4,494,382 shares of Common Stock.

The closing price of our Common Stock on December 19, 2022, the date of license

transfer, was $ 0.18 per share, as such, fair value of the equity consideration is $ 808,989 .

An additional $ 1,500,000 in cash will be paid

to the sellers in eighteen (18) equal month ly payments commencing on the 12-month anniversary of the closing.

Based on a discount

rate of 12 %, the fair value of these additional monthly payments is approximately $ 1,224,846 .

This liability is included in Notes payable-current

and Notes payable-non-current in the accompanying consolidated balance sheets.

See Note 14 for additional details.

The table below reflects the Company’s preliminary estimates of the acquisition date fair values of the assets acquired:

We have not completed the allocation of the purchase price for the Green Man Acquisition.

As of December 31, 2022, the consolidated balance sheet includes a preliminary allocation of fixed assets, inventory, intangible assets, and goodwill.

Management anticipates completing the purchase price allocation as soon as possible, but no later than one year from the acquisition date.

The accompanying consolidated financial statements include the results of Green Man from the date of acquisition for financial reporting purposes, December 19, 2022.

The pro forma effects of the acquisition on the results of operations as if the transaction had been completed on January 1, 2021, are as follows:

The table below reflects the Company’s final

estimates of the acquisition date fair values of the assets acquired:

Compared to the estimated purchase price allocation

reported in our financial statements included in Item 8 of our Form 10-K year ended December 31, 2022 filed with the SEC on April 17,

2023, the final purchase price allocation resulted in an increase of tradename intangible assets of $ 123,000 and a decrease in goodwill

of $ 227,198 .

Additionally, as part of the measurement adjustments, the fair value of the installment payments was remeasured using a 16 %

discount rate, resulting in a decrease of debt of $ 104,198 for the purchase consideration.

The accompanying consolidated financial statements

include the results of Green Man from the date of acquisition for financial reporting purposes, December 19, 2022.

The pro forma effects

of the acquisition on the results of operations as if the transaction had been completed on January 1, 2022, are as follows:

Total revenues

1 unchanged sentence

$ ( 9,641,205 )

( 10,307,060 )

Net income (loss) per common share

Weighted average number of basic and diluted common shares outstanding

The unaudited pro-forma results of operations are presented for information purpose only.

The unaudited pro-forma results of operations

are presented for information purpose only.

The unaudited pro-forma results are not intended to present actual results that would have

been attained had the acquisition been completed as of January 1, 2022, or to project potential operating results as of any future date

or for any future periods.

ASSET ACQUISITION

In February 2023, we completed the acquisition

of the assets of Station 2, LLC (“Station 2”).

The assets consist of a medical and retail cannabis license for a dispensary

located in Denver, CO.

We also assumed responsibility of the operating lease for the dispensary and recorded the relating ROU asset which

is disclosed separately on the accompanying consolidated balance sheets.

The consideration paid by the Company consists of cash at closing

equal to $ 256,582 plus an additional note equal to $ 384,873 .

The relative fair value of the note issued resulted in a debt discount of

As the dispensary was not in operation and there

was no assembled workforce at the time of acquisition, the acquisition was accounted for as an asset acquisition of a license.

Subsequently,

during the year ended December 31, 2023, the license was transferred as part of a settlement agreement and was derecognized (see

Timothy Brown, a

current member of the Company’s Board of Directors and its Chief Visionary Officer, is the sole owner of Station 2.

DISCONTINUED OPERATIONS

On July 16, 2021, we entered into an Asset Purchase Agreement with an individual to sell substantially all the assets of our NBC for a total of $ 150,000 and 10 % of profits generated by the buyer in the states of Michigan, Mississippi, and Massachusetts for a period of twelve months from the closing.

On August 2, 2021, the sale of the NBC was completed.

Pursuant to amendment, the buyer paid the additional $ 75,000 in March 2022, and the 10 % profit share described above was eliminated.

A breakdown of the results of discontinued operations related to the sale of NBC are presented as follows:

On July 16, 2021, we entered into an Asset Purchase

Agreement with an individual to sell substantially all the assets of NBC for a total of $ 150,000 and 10 % of profits generated

by the buyer in the states of Michigan, Mississippi, and Massachusetts for a period of twelve months from the closing.

2, 2021, the sale of NBC was completed.

Pursuant to amendment, the buyer paid the additional $ 75,000 in March 2022, and the 10 % profit

share described above was eliminated.

A breakdown of the results of discontinued operations

related to the sale of NBC are presented as follows:

Year Ended December 31,

Product revenues

1 unchanged sentence

Total revenues

Cost of sales

Selling, general and administrative

Professional fees

Depreciation and amortization

Total costs and expenses

Income (loss) from discontinued operations

The cash flows related to discontinued operations have not been segregated and are included in the consolidated statements of cash flows.

The following table provides selected information on cash flows related to discontinued operations for the years ended December 31, 2022 and 2021.

Accounts receivables

Prepaid expenses and other current assets

Depreciation and amortization

Capital expenditures

Accounts payable and accrued expenses

Customer deposits

ACCOUNTS RECEIVABLE

Income from discontinued operations

ACCOUNTS RECEIVABLE, NET

Our accounts receivable consisted of the following:

Accounts receivable

Allowance for doubtful accounts

We record bad debt expense when we conclude the credit risk of a customer indicates the amount due under the contract is not collectible.

We recorded bad debt expense of $ 6,280 and $ 53,386 during the years ended December 31, 2022 and 2021, respectively.

NOTES RECEIVABLE

On August 2, 2021, as part of the closing of the sale of NBC, we agreed to a note receivable of $ 75,000 due August 2, 2022.

This note receivable was collected in full in 2022.

INVENTORIES, NET

Our inventories consistent of the following:

Allowance for credit losses

We record credit loss expense when we conclude

the credit risk of a customer indicates the amount due under the contract is not collectible.

We recorded credit loss expense of $ 114

and $ 6,280 during the years ended December 31, 2023 and 2022, respectively.

LICENSE TRANSFER AGREEMENTS

In August 2023, we entered into an Assignment

of Assets (“Assignment”), pursuant to which we agreed to transfer and assign to Station 2 and Timothy Brown (“Brown”

and collectively with Station 2, “Assignees”), a board member, shareholder, and executive level employee of the Company, a

State of Colorado and corresponding City and County of Denver retail marijuana store cannabis license and related assets owned related

to the licensed cannabis dispensary located at 468 S.

Federal Boulevard.

Timothy Brown is the sole owner of Station 2.

In exchange for

the transfer to Assignees of the transferred assets, the Assignees agreed to extinguishment and satisfaction of, and unconditional waiver

by each of Station 2 and Brown of any claims in respect of, any and all debt or other obligations of the Company, Trees Colorado, and

any of their respective affiliates, directors, officers or agents, pursuant to that certain Asset Purchase Agreement dated October 14,

2022, as amended, by and among the Company, Trees Colorado and Assignees, which was issued upon closing of the transaction in February

2023 (“468 Debt”).

This transaction closed in October 2023, and the Company recognized a loss on this transfer of $ 202,397 ,

located in loss on extinguishment of debt on the consolidated statements of operations.

A summary of the license transfer is presented as follows:

Balance as of August 17, 2023

Asset to be transferred:

Intangible assets - License

Accumulated amortization - License

Consideration:

Extinguishment of 468 debt

In July 2023, we and our subsidiaries Green Tree

Colorado, LLC, Green Tree Cultivation LLC, GT Retail LLC, and Green Tree MIP LLC, entered into a settlement agreement (“Settlement

Agreement”), (“GT Retail”), (“GT MIP”), with Allyson Feiler Downing (“Downing”) and Loree Schwartz

(“Schwartz” and together with Downing, “Green Tree Parties”), pursuant to which the Company and the Green Tree

Parties agreed to transfer and assign to new entities controlled by the Green Tree Parties, cannabis licenses and related assets owned

by (i) GT Retail relating to a cultivation facility and a retail dispensary located in Berthoud, Colorado;

(ii) GT MIP relating to a ‘marijuana

infused product’ dispensary located in Boulder County, Colorado;

and (iii) certain intellectual property in respect thereof.

Company retained accounts payable and certain cannabis inventory in respect of the transferred assets.

Closing of the transaction is subject

to approval of the license transfers by the Colorado Marijuana Enforcement Division as well as local regulatory authorities.

2023, the transfer was approved.

As the transfer represented a non-reciprocal transfer between the Company and certain of its shareholders

in connection with the settlement of a prior business combination, we recognized the difference between the carrying values of the assets

transferred, equity redeemed, and debt exchanged as a capital contribution to the Company.

See Note 14 for additional information.

In exchange for the transfer to the Green Tree

Parties of the transferred assets, the Company and the Green Tree Parties agreed that upon closing, the Green Tree Parties shall transfer

and assign to the Company, and the Company shall redeem, 9,917,574 shares of the Company’s Common Stock owned by the Green Tree

Parties and originally issued to the Green Tree Parties in the acquisition consummated in December 2022 pursuant to that certain Asset

Purchase Agreement dated September 13, 2022, as amended, by and among the Company, Downing, Schwartz and various other parties thereto

The asset transfers disclosed herein did not qualify

for reporting as discontinued operations, as each of these transactions did not represent a strategic shift that had a major effect on

the Company’s operations and financial results.

Our inventories consist of the following:

Raw materials

4 unchanged sentences

Prepaid insurance

ERC Receivable

Other current assets

Total prepaids and other current assets

6 unchanged sentences

Total property and equipment, net

Depreciation expense was $ 182,838 and $ 192,232 , respectively, for the years ended December 31, 2022 and 2021.

Depreciation expense was $ 221,940 and $ 182,838 , respectively, for the

years ended December 31, 2023 and 2022.

INTANGIBLE ASSETS AND GOODWILL

Intangible assets

During the years ended December 31, 2022 and 2021, the Company acquired trade name intangible assets through several acquisitions.

Intangible assets, net

During the years ended December 31, 2023 and 2022,

the Company acquired tradename intangible assets through several acquisitions.

See Note 2 for further details of these acquisitions.

The amount of trade name intangible assets acquired in each transaction is shown in the table below.

amount of tradename intangible assets acquired in each transaction is shown in the table below.

Acquisition Date

10 unchanged sentences

September 2021

(1) The purchase price allocation for this acquisition has not been finalized, therefore this amount could be subsequently adjusted.

Note that the useful life takes into account that management plans to re-brand the acquired stores under the TREES tradename.

(2) The trade name intangible asset for these acquisitions was fully impaired in 2022.

trade name intangible asset for these acquisitions was fully impaired in 2022.

See discussion of impairment charges below in this footnote.

The following table summarizes the change in the Company’s tradename intangible assets from December 31, 2021 to December 31, 2022:

Accumulated Amortization

The following table summarizes the change in the Company’s tradename

intangible assets from December 31, 2022 to December 31, 2023:

Balance as of December 31, 2021

$ ( 323,967 )

Purchase price allocation adjustments (see Note 2)

3 unchanged sentences

Balance as of December 31, 2022

Purchase price allocation adjustments (see Note 2)

Station 2 license intangibles acquired

Transfer of Station 2 license

Transfer of Green Tree assets

Balance as of December 31, 2023

$ ( 1,124,977 )

Estimated amortization expense for the next five years is as follows:

Year ending December 31,

Amortization expense was $ 148,538 and $ 308,342 for the years ended December 31, 2022 and 2021, respectively.

The following represents a summary of changes in the carry amount of goodwill for the years ended December 31, 2022 and 2021 on a consolidated basis and by segment:

Gross Goodwill

Accumulated Impairment

Year Ended December 31,

Amortization expense was $ 652,472 and $ 148,538 for the years ended

December 31, 2023 and 2022, respectively.

The following represents a summary of changes in the carrying amount

of goodwill for the years ended December 31, 2023 and 2022 on a consolidated basis and by segment:

Balance as of December 31, 2021

$ ( 2,484,200 )

Goodwill acquired

Purchase price allocation adjustment

( 2,450,941 )

2 unchanged sentences

( 4,935,141 )

Goodwill acquired

Transfer of Green Tree assets

( 1,757,381 )

Purchase price allocation adjustment

4 unchanged sentences

Retail Segment

Gross Goodwill

Accumulated Impairment

Balance as of December 31, 2021

Goodwill acquired

Purchase price allocation adjustment

( 2,450,941 )

Balance as of December 31, 2022

Goodwill acquired

( 2,450,941 )

Transfer of Green Tree assets

( 1,757,381 )

Purchase price allocation adjustment

4 unchanged sentences

Cultivation Segment

Gross Goodwill

Accumulated Impairment

Balance as of December 31, 2021

Goodwill acquired

$ ( 2,484,200 )

( 2,484,200 )

Goodwill acquired

Balance as of December 31, 2022

4 unchanged sentences

Cultivation Segment Impairments

As of the annual testing date of December 31, 2021, the Company utilized a third-party valuation firm to estimate the fair value of our Cultivation segment, which consisted of a single reporting unit, using a combination of a discounted cash flow approach and market multiple approach.

As a result, the Company determined that the fair value of the Cultivation segment was less than the less than the carrying value and recognized a full impairment of goodwill in the Cultivation segment in the amount of $ 2,484,200 during the year ended December 31, 2021.

Due to the impairment of the goodwill and the price declines of marijuana flower in 2021, the Company also tested its intangible assets with finite lives for impairment using the same valuation methodology and assumptions that we used for the goodwill impairment test.

As a result, the Company recorded an impairment of $ 526,220 during the year ended December 31, 2021.

As of December 31, 2022, due to the continued declines in the wholesale price of marijuana flower in Colorado, the Company determined that the remaining intangible asset balance in the Cultivation segment was not recoverable based on current cash flow projections and that there was no longer value in the tradename value given the economic conditions in the cultivation sector.

Therefore, an impairment of the remaining balance of $ 278,878 was recorded during the year ended December 31, 2022.

As of December 31, 2022, due to the continued

declines in the wholesale price of marijuana flower in Colorado, the Company determined that the remaining intangible asset balance in

the Cultivation segment was not recoverable based on current cash flow projections and that there was no longer value in the tradename

given the economic conditions in the cultivation sector.

Therefore, an impairment of the remaining balance of $ 278,878 was recorded during

the year ended December 31, 2022.

Retail Segment Impairments

As of December 31, 2021, the goodwill balance and intangible assets balances in the Retail segment related to acquisitions completed in the third and fourth quarters of 2021.

The final purchase price allocations for these acquisitions had not been completed as of December 31, 2021.

Therefore, no impairment testing was required.

As of annual testing date on December 31, 2022, the Company utilized a third-party valuation firm to estimate the fair value of each reporting unit within the Retail segment using a combination of a discounted cash flow approach and market multiple approach.

Each dispensary location is considered a separate reporting unit.

As a result, the Company determined that the fair value of each of the dispensary locations in Oregon was less than the less than its carrying value.

Therefore, the Company recognized goodwill impairments in the Retail segment in the amount of $ 2,450,941 during the year ended December 31, 2022.

Due to the impairment of the goodwill in the Retail segment and sales levels that were below management’s expectations, the Company also tested its intangible assets with finite lives for impairment using

the same valuation methodology and assumptions that we used for the goodwill impairment test.

The resulting fair value estimates indicated that the fair value of the tradename intangible was less than the carrying value for the Trees MLK and Trees Waterfront dispensaries in Oregon.

Therefore, the Company recognized an impairment of $ 274,500 during the year ended December 31, 2022.

The Company’s leases consist primarily of real estate leases for retail, cultivation, and manufacturing facilities.

All but one of the Company’s leases are classified as operating leases.

As of annual testing date on December 31, 2022,

the Company utilized a third-party valuation firm to estimate the fair value of the intangible assets with finite lives and, subsequently,

the fair value of each reporting unit within the Retail segment using a combination of a discounted cash flow approach and market multiple

The resulting fair value estimates indicated that the fair value of the tradename intangible was less than the carrying value

for the Trees MLK and Trees Waterfront dispensaries in Oregon.

Therefore, the Company recognized an impairment of $ 274,500 during the

year ended December 31, 2022.

For goodwill, each dispensary location is considered

a separate reporting unit.

As a result, the Company determined that the fair value of each of the dispensary locations in Oregon was less

than its carrying value.

Therefore, the Company recognized goodwill impairments in the Retail segment in the amount of $ 2,450,941 during

the year ended December 31, 2022.

As of annual testing date on December 31,

2023, the Company utilized a third-party valuation firm to estimate the fair value of each reporting unit within the Retail segment using

a combination of a discounted cash flow approach and market multiple approach.

Each dispensary location is considered a separate reporting

As a result, the Company determined that the fair value of each of the dispensary locations in Oregon was less than its carrying

Therefore, the Company recognized goodwill impairments in the Retail segment in the amount of $ 1,516,000 during the year ended

December 31, 2023.

The Company’s leases consist primarily of

real estate leases for retail, cultivation, and manufacturing facilities.

All but one of the Company’s leases are classified as operating

The lease for the retail dispensary acquired in the Green Man transaction is classified as a finance lease.

The current and non-current portions of the operating lease liabilities and finance lease liabilities are disclosed separately on the accompanying consolidated balance sheets.

The finance lease ROU asset is included in property and equipment, net (see Note 8) and the operating lease ROU asset is disclosed separately on the accompanying consolidated balance sheets.

As the rate implicit in the Company’s leases is not readily determinable, we used an estimated incremental borrowing rate of 20 % in determining the present value of lease payments.

The operating lease expense for the years ended December 31, 2022 and December 31, 2021 is as follows:

The current and non-current

portions of the operating lease liabilities and finance lease liabilities are disclosed separately on the accompanying consolidated balance

The finance lease ROU asset is included in property and equipment, net (see Note 9) and the operating lease ROU asset is disclosed

separately on the accompanying consolidated balance sheets.

As the rate implicit in the Company’s

leases is not readily determinable, we used an estimated incremental borrowing rate of 20 % in determining the present value of lease payments.

The operating lease expense for

the years ended December 31, 2023 and December 31, 2022 is as follows:

For the year ended December 31,

1 unchanged sentence

Variable lease cost

Short-term lease cost

Total operating lease expense

The expense associated with the finance lease cost was not material for the year ended December 31, 2022 as the commencement date of the lease was December 19, 2022.

The finance lease expense for the year ended December

31, 2023 and December 31, 2022, was approximately $ 167,293 and $ 5,846 ,

respectively.

Related party lease s

As of December 31, 2022, three of the Company’s operating leases, one retail dispensary lease, one cultivation facility lease, and one lease that includes both cultivation and retail, are related party leases as the landlords are current board members or employees.

Another retail dispensary lease was with a related party through May 2022 when the building was sold to an unaffiliated third-party.

During the year ended December 31, 2021, the related party operating leases consisted of one dispensary lease and one cultivation facility.

As of December 31, 2022, the ROU asset, operating lease liability, current, and operating lease liability, non-current for the related party leases are $ 1,074,958 , $ 526,378 , and $ 618,617 , respectively.

For the years ended December 31, 2022 and December 31, 2021, the total lease expense for related party leases was $ 434,437 and $ 516,383 , respectively.

As of December 31, 2023, one of the Company’s

operating leases, a cultivation facility lease, is a related party lease as the landlord is a principal shareholder and former board member

of the Company.

A retail dispensary lease and a lease that included both cultivation and retail were with related parties until November

2023, when these leases were transferred to the Green Tree parties (see Note 6).

Prior to the transfer of these leases to the Green Tree

Parties, the Green Tree Parties had consisted of a board member and executive level employee of the Company.

During the year ended December

31, 2022, the related party operating leases consisted of one retail dispensary lease, one cultivation facility lease, and one lease that

included both cultivation and retail.

Another retail dispensary lease was with a related party through May 2022 when the building was

sold to an unaffiliated third-party.

As of December 31, 2023, the ROU asset, operating lease liability, current, and operating lease liability,

non-current for the related party leases are $ 142,080 , $ 120,000 , and $ 26,683 , respectively.

For the years ended December 31, 2023 and

December 31, 2022, the total lease expense for related party leases was $ 390,884 and $ 434,437 , respectively.

Lease Maturities

Future remaining minimum lease payments on our operating leases and finance lease are as follows:

Year ending December 31,

Operating leases

Finance lease

Future remaining minimum lease payments on our operating leases and

finance lease are as follows:

Year Ended December 31,

Present value adjustment

2 unchanged sentences

Lease liability, current

( 1,433,184 )

Lease liability, non-current

The total remaining lease payments in the table above include $ 2,995,100 related to renewal option periods that management is reasonably certain will be exercised.

The majority of this amount relates to the flagship Trees location in Englewood, Colorado and the retail and certain cultivation facilities that were acquired in the Green Tree Acquisition and are eligible for renewal in 2023.

The total remaining minimum lease payments in the table above exclude $ 474,574 related to leases that are fully executed but have not yet commenced as of December 31, 2022.

As of December 31, 2022, the weighted average remaining term of the Company’s operating leases is 5 years and the remaining term on the finance lease is 10 years .

None of the Company’s leases contain residual value guarantees or restrictive covenants.

The total remaining lease payments in the table

above include $ 772,051 related to renewal option periods that management is reasonably certain will be exercised.

The majority of this

amount relates to the flagship Trees location in Englewood, Colorado and the retail and certain cultivation facilities that were acquired

in the Green Tree Acquisition and are eligible for renewal in 2023.

As of December 31, 2023, the weighted average

remaining term of the Company’s operating leases is 4.98 years and the remaining term on the finance lease is 9 years.

None of the Company’s leases contain residual value guarantees

or restrictive covenants.

Supplemental cash flow information

8 unchanged sentences

$ ( 1,097,651 )

(1) In April 2022, the lease for Seven-Five Farm, a cultivation facility, was amended and the remaining lease payments were reduced.

Upon modification, management reassessed the lease term and concluded that it was not reasonably certain that any of the renewal option periods in the lease would be exercised.

This conclusion was different than the conclusion reached at the initial commencement of the lease in 2020.

The significant drop in the wholesale cost of marijuana flower and the current economic environment in the cannabis industry, particularly in the cultivation sector, is the primary driver of this change.

As a result, the measurement of the ROU asset and operating lease liability no longer includes the payments associated with the renewal option periods.

(1) In April 2022, the lease for Seven-Five Farm, a cultivation facility, was amended

and the remaining lease payments were reduced.

Upon modification, management reassessed the lease term and concluded that it was not reasonably

certain that any of the renewal option periods in the lease would be exercised.

This conclusion was different than the conclusion reached

at the initial commencement of the lease in 2020.

The significant drop in the wholesale cost of marijuana flower and the current economic

environment in the cannabis industry, particularly in the cultivation sector, is the primary driver of this change.

As a result, the measurement

of the ROU asset and operating lease liability no longer includes the payments associated with the renewal option periods.

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

4 unchanged sentences

ACCRUED STOCK PAYABLE

The following tables summarize the changes in accrued Common Stock payable:

Balance as of December 31, 2020

Trees Waterfront acquisition stock accrual

The following tables summarize the changes in accrued Common Stock

Balance as of December 31, 2021

1 unchanged sentence

Balance as of December 31, 2022

Balance as of December 31, 2023

In December 2021, we completed the acquisition of Trees Waterfront.

As part of the transaction, we granted 1,669,537 shares of our Common Stock.

As of December 31, 2021 this stock had not been issued.

The stock was subsequently issued on January 6, 2022.

The outstanding balance of accrued stock payable as of December 31, 2022 relates to a February 18, 2020 grant of 100,000 fully vested shares for consulting services.

Based on a stock price of $ 0.61 on the date of grant, the consultant will receive $ 60,900 worth of our Common Stock.

As of December 31, 2022, none of the stock had been issued.

The outstanding balance of accrued stock payable as of December 31,

2023 relates to a February 18, 2020 grant of 100,000 fully vested shares for consulting services.

Based on a stock price of $ 0.61

on the date of grant, the consultant will receive $ 60,900 worth of our Common Stock.

As of December 31, 2023, none of the stock

had been issued.

NOTES PAYABLE

5 unchanged sentences

2022 12% Notes

2020 10% Notes

Trees Transaction Notes

1 unchanged sentence

Green Man Acquisition Notes

Working Capital Note

Unamortized debt discount

7 unchanged sentences

( 1,903,344 )

( 1,094,398 )

Long-term portion

Aggregate Maturities

As of December 31, 2022, aggregate future contractual maturities of long-term debt (excluding issue discounts) are as follows:

Year ending December 31,

As of December 31, 2023, aggregate future contractual

maturities of long-term debt (excluding issue discounts) are as follows:

Year ended December 31, 2023

Trees Transaction Notes

In September 2021, with the completion of the Englewood acquisition, we are obligated to pay the Seller cash equal to $ 1,732,884 in equal monthly installments over a period of 24 months .

The monthly payments began on October 15, 2021, and the payment is equal to $ 72,204 per month.

In December 2021, with the completion of the Trees Portland and Trees Waterfront acquisitions, we are obligated to pay the Seller cash equal to $ 497,371 in equal monthly installments over a period of 24 months .

The payments began on February 15, 2022, and the payment is equal to $ 20,724 per month.

In January 2022, with the completion of the Trees MLK acquisition, we are obligated to pay the Seller cash equal to $ 384,873 in equal monthly installments over a period of 24 months .

The payments began on June 15, 2022, and the payment is equal to $ 16,036 per month.

In December 2022, with the completion of the Green Tree Acquisition, we are obligated to pay the Seller cash equal to $ 3,500,000 in equal monthly installments over a period of 15 months .

The payments begin in September 2023, and the payment is equal to $ 233,333 per month.

In December 2022, with the completion of the Green Man Acquisition, we are to pay the Seller cash equal to $ 1,500,000 in equal monthly installments over a period of 18 months .

The payments begin in December 2023, and the payment is equal to $ 83,333 per month.

On September 15, 2022, we entered into a Securities Purchase Agreement with certain accredited investors (the "

12 % Investors”), pursuant to which we agreed to issue and sell senior secured convertible notes (the "

12 % Notes”) with an aggregate principal amount of $ 13,500,000 to such 12 % Investors, in exchange for payment by certain 12 % Investors of an aggregate amount of $ 10,587,250 in cash, as well as cancellation of outstanding indebtedness in the aggregate amount of $ 2,912,750 represented by the 10 % Notes discussed below.

In connection with the 12 % Notes, the 12 % Investors received warrants (the "

12 % Warrants”) to purchase shares of our Common Stock equal to 20 % coverage of the aggregate principal amount with an exercise price of $ 0.70 per share, which equals an aggregate of warrants to purchase 3,857,150 shares of Common Stock.

The lead 12 % Investor received an additional 10 % warrant coverage on the aggregate principal amount of 12 % Notes for total additional warrants to purchase 1,928,571 shares of our Common Stock.

The lead 12 % Investor also will receive a five percent fee on the aggregate principal amount of the 12 % Notes.

This total fee in the amount of $ 675,000 was recorded as a debt discount and will be amortized over the life of the loan.

In January 2022, with the completion of the Trees

MLK acquisition, we are obligated to pay the Seller cash equal to $ 384,873 in equal month installments over a period of 24 months.

payments began on June 15, 2022 and the payment is equal to $ 16,036 per month.

As of December 31, 2023 and 2022, the debt balance of this

note was $ 200,495 and $ 272,618 , respectively.

In December 2021, with the completion of the TREES

Portland and TREES Waterfront acquisitions, we are obligated to pay the Seller cash equal to $ 497,371 .

This note calls for monthly payments

of $ 20,724 , which began on February 15, 2022.

As of December 31, 2023 and 2022, the debt balance of this note was $ 126,316 and $ 269,409 ,

respectively.

In September 2021, with the completion of the

Englewood acquisition, we are obligated to pay the Seller cash equal to $ 1,732,884 .

This note calls for monthly payments of $ 72,204 , which

began on October 15, 2021.

There is no interest associated with this note.

As of December 31, 2022, the debt balance of this note was

During the year, the Englewood Seller forgave the remaining principal balance $ 256,582 owed from the Englewood acquisition.

As the debt holder is also a shareholder of the Company, the effect of this debt forgiveness was accounted for as a capital contribution

in paid-in capital.

Green Man Acquisition Notes

In December 2022, with the completion of the Green

Man Acquisition, we are obligated to pay the Seller cash equal to $ 1,500,000 in equal month installments over a period of 18 months.

payments begin in December 2023 and the payment is equal to $ 83,333 per month.

The relative fair value of this obligation resulted in

a debt discount of $ 275,154 .

We recorded amortization of debt discount expense from this obligation of $ 133,970 and nil for the years

ended December 31, 2023 and 2022, respectively.

In December 2023, as part of the remeasurement of the Green Man acquisition, the fair

value of the installment payments were remeasured (see Note 2), resulting in a decrease of the fair value of the debt of $ 104,198 .

Green Tree Acquisition Notes

In December 2022, with the completion of the Green

Tree Acquisition, we were obligated to pay the Sellers cash equal to $ 3,500,000 in equal month installments over a period of 15 months.

Payments of $ 233,333 were due monthly and were set to begin in September 2023, however, this debt was restructured as part of the settlement

with the Green Tree entities (see Note 6 for the transfer and below for details of the restructuring).

The relative fair value of the

original obligation resulted in a debt discount of $ 482,490 .

We recorded amortization of debt discount from this obligation of $ 345,354

and nil for the years ended December 31, 2023 and 2022, respectively.

In December 2023, as part of the final determination of purchase

accounting for the Green Tree acquisition, the fair value of the installment payments were remeasured (see Note 2), resulting in a decrease

of the fair value of the debt of $ 136,502 .

Green Tree Acquisition Notes Restructuring

Upon the transfer of the Green Tree assets to

the Green Tree entities (see Note 6), we signed a settlement agreement with the Sellers to eliminate the amounts due and payable under

the Green Tree Acquisition Notes, with the exception certain amounts due to one of the Sellers.

As part of this settlement, we signed

a letter amendment with this seller, who is a shareholder of the Company, to modify the terms of the monthly installments due to this

Pursuant to the amended terms, we shall make (i) thirty-three (33) equal monthly installments (“Installment Payments”),

totaling $ 441,571 , commencing within five (5) business days of January 4, 2024 and continuing on

or before the 15th day of each successive month thereafter;

plus (ii) a single balloon payment equal to $ 120,429 (“Balloon Payment”)

on or before September 15, 2026 (“Balloon Payment Date”), for a total of $ 562,000 .

The Balloon Payment may be paid in cash

or, at the sole option of the Company, common stock of the Company, the per share of which to be determined utilizing the “volume

weighted average price” of the common stock for the five-trading day period immediately preceding the Balloon Payment Date.

Upon agreement

of these amended terms, we and the Sellers acknowledged that we lacked the financial means to make the remain ing installment payments

previously due, forecasting that we would default on the installment payments due to the Sellers .

Additionally, we determined the effective interest rate for the amounts due under the amended installment payments was lower than the

effective interest rate of the previous installment payments, evidencing that the Sellers have granted a concession related to this amendment.

These factors resulted in the amendment of the debt being considered a troubled debt restructuring under ASC 470.

Further, as the parties

to the amendment were shareholders of the Company, this transaction is considered a non-reciprocal transfer with owners and is accounted

for within equity (with no gain or loss recognized related to the restructuring).

Accordingly, a capital contribution of $ 1,974,384 was

recognized in paid-in capital as of December 31, 2023, calculated as 1) the forgiveness of amounts due under the original Green Tree

Acquisition Notes totaling $ 3,244,467 and 2) the redemption of the Seller’s equity consideration by the Company of $1,636,400,

offset by 3) the derecognition of Green Tree fixed assets, tradename intangible assets, goodwill, and inventory assets transferred from

the Company to the Sellers totaling $2,344,483 and 4) assumption of new amounts due under the amended terms discussed above of $562,000 .

12% Notes - 2022 Modification

On September 15, 2022, we entered into a Securities

Purchase Agreement with certain accredited investors (the “ 12 % Investors”), pursuant to which we agreed to issue and sell senior

secured convertible notes (the “ 12 % Notes”) with an aggregate principal amount of $ 13,500,000 to such 12 % Investors, in exchange

for payment by certain 12 % Investors of an aggregate amount of $ 10,587,250 in cash, as well as cancellation of outstanding indebtedness

in the aggregate amount of $ 2,912,750 represented by the 10 % Notes discussed below.

On December 15, 2023, the 12 % Notes were restructured,

as discussed below.

In connection with the 12 % Notes, the 12 % Investors

received warrants (the “ 12 % Warrants”) to purchase shares of our Common Stock equal to 20 % coverage of the aggregate principal

amount with an exercise price of $ 0.70 per share, which equals an aggregate of warrants to purchase 3,857,150 shares of Common Stock.

The Lead 12 % Investor received an additional 10 % warrant coverage on the aggregate principal amount of 12 % Notes for total additional

warrants to purchase 1,928,571 shares of our Common Stock.

The Lead 12 % Investor also received a five percent fee on the aggregate principal

amount of the 12 % Notes.

This total fee in the amount of $ 675,000 was recorded as a debt discount and will be amortized over the life

The 12 % Notes bear interest at an annual rate of 12 % and will mature on September 16, 2026 .

The 12 % Investors have the option to convert up to 50 % of the outstanding unpaid principal and accrued interest of the 12 % Notes into Common Stock at a fixed conversion price equal to $ 1.00 per share.

The relative fair value of the new funding on the 12 % Warrants was recorded as a debt discount and additional paid-in capital of $ 569,223 .

The relative fair value of the cancellation of the outstanding indebtedness was recorded as an extinguishment of debt and additional paid-in capital of $ 103,577 .

We recorded amortization of debt discount expense

from the 12 % Notes of $ 90,334 and nil for the year ended December 31, 2022 and 2021, respectively.

We determined there was no beneficial conversion feature on the 12 % Notes issued.

The 12 % Investors have the option

to convert up to 50 % of the outstanding unpaid principal and accrued interest of the 12 % Notes into Common Stock at a fixed conversion

price equal to $ 1.00 per share.

the 12 % Notes are treated as conventional debt.

For purposes of determining the debt discount, the underlying assumptions used in the black-scholes model to determine the fair value of the 12 % Warrants as of September 15, 2022, were:

The fair value of the 12 % Warrants was recorded

as a debt discount and additional paid-in capital of $ 569,223 was recorded in 2022.

The relative fair value of the cancellation of the

outstanding indebtedness was recorded as an extinguishment of debt and additional paid-in capital of $ 103,577 in 2022.

For purposes of determining the debt discount,

the underlying assumptions used in the Black-Scholes model to determine the fair value of the 12 % Warrants as of September 15, 2022, were:

Current stock price

4 unchanged sentences

Expected volatility

In December 2020, we entered into a Securities Purchase Agreement (the “Securities Purchase Agreement’) with certain accredited investors (the “ 10 % Investors”), pursuant to which we issued and sold senior convertible promissory notes (the “ 10 % Notes”) with an aggregate principal amount of $ 2,940,000 in exchange for payment to us by certain 10 % Investors of an aggregate amount of $ 1,940,000 in cash, as well as cancellation of outstanding indebtedness of the 15 % Notes (defined below) in the aggregate amount of $ 1,000,000 .

In connection with the issuance of the 10 % Notes, the holders of the 10 % notes received warrants (the “ 10 % Warrants”) to purchase shares of our Common Stock equal to 20 % coverage of the aggregate principal amount at $ 0.56 per share.

In the aggregate, this equals 1,050,011 shares of our Common Stock.

The 10 % Notes will bear interest at an annual rate of 10 % and will mature on December 23, 2023.

The 10 % Investors have the option at any time to convert up to 50 % of the outstanding unpaid principal and accrued interest of the Notes into Common Stock at a variable price of 80 % of the market price but no less than $ 0.65 per share and no more than $ 1.00 per share.

The 10 % Warrants are exercisable at an exercise price of $ 0.56 per 10 % Warrant.

The relative fair value of the new funding on the 10 % Warrants was recorded as a debt discount and additional paid-in capital of $ 254,400 .

The relative fair value of the cancellation of the outstanding indebtedness was recorded as an extinguishment of debt and additional paid-in capital of $ 131,000 .

For the years ended December 31, 2022 and 2021, amortization of debt discount expense was $ 84,375 and $ 86,759 , respectively, from the 10 % Notes.

We determined there was no beneficial conversion feature on the 10 % Notes.

The 10 % Notes are treated as conventional debt.

For purposes of determining the debt discount, the underlying assumptions used in the binomial lattice model to determine the fair value of the 10 % Warrants as of December 31, 2020, were:

On December 15, 2023, the 12% Warrants were modified to reduce the

exercise price of the 12 % Warrants to $ 0.40 per share, as discussed below.

12% Notes - 2023 Modification

On December 15, 2023, the Company entered into

Amended and Restated Senior Secured Convertible Notes (“Amended Notes”) with certain accredited investors (“Investors”)

to modify the original terms of the 12 % Notes.

The material terms of the Amended Notes include no changes to the aggregate principal amount,

the maturity date, or the interest rate.

Material changes to the Amended Notes are discussed in the following sections:

Mandatory Conversion Feature

In accordance with the Amended Notes, up to $ 3,375,000

(the “Convertible Amount”) of the principal balance will be mandatorily convertible at a price per share equal to $ 0.50 .

Additionally,

the Convertible Amount contains different terms than the remaining principal balance, as discussed below.

The principal balance of the Convertible Amount is mandatorily convertible

at any time during term upon occurrence of a trigger event.

Additionally, in the event a trigger event occurs,

interest on the Convertible Amount is subject to optional conversion by the Company.

The first 50% of the Convertible Amount, or $1,687,500,

shall convert to common stock upon the occurrence of the 1) our common stock having a closing price equal to or greater than $0.50 per

share for five (5) consecutive trading days as reported on the OTCQB Market;

and 2) the aggregate dollar amount of the common tock traded,

starting on the first day of the five (5) day span referred above and for up to ninety day thereafter (“Trading Value”) is

equal to or greater than $1,687,500.

The remaining 50% of the Convertible Amount, or $1,687,500, shall convert to common stock upon the

occurrence of 1) our common stock having a closing price equal to or greater than $0.50 per share for five (5) consecutive trading days

as reported on the OTCQB Market, 2) the aggregate Trading Value is equal to or greater than $1,687,000, and 3) the Common Stock converted

upon the occurrence of the First Trigger Event has been registered with the SEC, by filing a registration statement on Form S-1 or otherwise.

Optional Conversion Feature

In accordance with the Amended Notes, an additional

$ 3,375,000 of the principal balance plus unpaid accrued interest on this principal will be convertible at Investors’ option at a

price per share equal to $ 0.50 .

Deferral of Interest Payments

Current interest payments on the entire principal

balance are deferred until March 2024.

Further, the Company shall make ‘catch-up’ interest payments beginning in December

2024 for deferred interest.

Amendments to Warrants

The exercise price of previously granted warrants

issued in connection with the 12 % note offerings was reduced to $ 0.40 per share and the warrant expiration date was extended to September

We also recognized an increase to the debt discount of $ 128,447 related to the increase in fair value of the 12 % Warrants resulting

from the reduction in exercise price and the extension of the exercise period.

For purposes of determining the debt discount,

the underlying assumptions used in the Black-Scholes model to determine the fair value of the amended 12 % Warrants as of December 15,

Current stock price

4 unchanged sentences

Expected volatility

On February 8, 2021, we entered into a Securities Purchase Agreement with an accredited 10 % Investor, pursuant to which we issued and sold 10 % Notes with an aggregate principal amount of $ 1,660,000 to such 10 % Investor.

The 10 % Notes are part of an over-allotment option exercised by us in connection with the convertible note offering consummated on December 23, 2020, as discussed above.

In connection with the issuance of the 10 % Notes, the holder received warrants to purchase shares of our Common Stock equal to 20 % coverage of the aggregate principal amount at $ 0.56 per share.

In the aggregate, this equals 592,858 shares of our Common Stock.

Working Capital Note

In addition to the Amended Notes, the Lead Investor

agreed to provide an additional $ 250,000 in a separate note (the “Working Capital Note”) which includes a liquidation preference

to recover 1.25x the original investment in the event that the Company commences any dissolution, liquidation, or winding up.

At our option,

the Lead Investor shall provide up to an additional $ 250,000 , and, in such event, the Working Capital Note shall have a liquidation preference

of 1.5x the original investment, applicable to the full $ 500,000 , in the event that the Company commences any dissolution, liquidation,

or winding up.

The Working Capital Note bears interest at 12 % per annum and is due and payable on September 15, 2026 .

As of December 31,

2023, the balance of the Working Capital Note was $ 500,000 , as the Company requested and received the additional $ 250,000 optional amount.

The restructuring was deemed to be a debt modification

under ASC 470, as the change in the present value of the cash flows related to the 12 % Notes before and after the restructuring was less

Therefore, we will record debt obligations using the new effective interest rate as of the date of the modification.

We recorded amortization of debt discount expense

from the 12 % Notes of $ 310,201 and nil for the years ended December 31, 2023 and 2022, respectively.

In December 2020, we entered into a Securities

Purchase Agreement (the “Securities Purchase Agreement’) with certain accredited investors (the “ 10 % Investors”),

pursuant to which we issued and sold senior convertible promissory notes (the “ 10 % Notes”) with an aggregate principal amount

of $ 2,940,000 in exchange for payment to us by certain 10 % Investors of an aggregate amount of $ 1,940,000 in cash, as well as cancellation

of outstanding indebtedness of the 15 % Notes (defined below) in the aggregate amount of $ 1,000,000 .

In connection with the issuance of

the 10 % Notes, the holders of the 10 % notes received warrants (the “ 10 % Warrants”) to purchase shares of our Common Stock

equal to 20 % coverage of the aggregate principal amount at $ 0.56 per share.

In the aggregate, this equals 1,050,011 shares of our Common

The 10 % Notes will bear interest at an annual rate of 10 % and matured on December 23, 2023.

The 10 % Investors have the option at

any time to convert up to 50 % of the outstanding unpaid principal and accrued interest of the Notes into Common Stock at a variable price

of 80 % of the market price but no less than $ 0.65 per share and no more than $ 1.00 per share.

The 10 % Warrants are exercisable at an exercise

price of $ 0.56 per 10 % Warrant.

The fair value of the 10 % Warrants issued in 2022

was recorded as a debt discount and additional paid-in capital of $ 254,400 .

The relative fair value of the cancellation of the outstanding

indebtedness was recorded as an extinguishment of debt and additional paid-in capital of $ 131,000 .

For the years ended December 31, 2023 and 2022,

amortization of debt discount expense was nil and $ 84,375 , respectively, from the 10 % Notes.

The 10 % Notes are treated as conventional

For purposes of determining the debt discount,

the underlying assumptions used in the binomial lattice model to determine the fair value of the 10 % Warrants as of December 31, 2020,

Current stock price

Exercise price

Risk-free interest rate

Expected dividend yield

Expected term (in years)

Expected volatility

8, 2021, we entered into a Securities Purchase Agreement with an accredited 10 % Investor, pursuant to which we issued and sold 10 %

Notes with an aggregate principal amount of $ 1,660,000 to such 10 % Investor.

The 10 % Notes are part of an over-allotment

option exercised by us in connection with the convertible note offering consummated on December 23, 2020, as discussed above.

connection with the issuance of the 10 % Notes, the holder received warrants to purchase shares of our Common Stock equal to

20 % coverage of the aggregate principal amount at $ 0.56 per share.

In the aggregate, this equals 592,858 shares

of our Common Stock.

The 10 % Notes bear interest at an annual rate of 10 % and will mature on February 8, 2024 .

The 10 % Investor has the option to convert up to 50 % of the outstanding unpaid principal and accrued interest of the 10 % Notes into Common Stock at a variable price of 80 % of the market price but no less than $ 0.65 per share and no more than $ 1.00 per share.

Investor has the option to convert up to 50 % of the outstanding unpaid principal and accrued interest of the 10 % Notes into

Common Stock at a variable price of 80 % of the market price but no less than $ 0.65 per share and no more than $ 1.00 per

The 10 % Warrants are exercisable at an exercise price of $ 0.56 per warrant.

The relative fair value of the new funding on the 10 % Warrants was recorded as a debt discount and additional paid-in capital of $ 429,300 .

We determined that this 10 % Note had a beneficial conversion feature and is calculated at its intrinsic value (that is, the difference between the effective conversion price of $ 0.66 at the date of the note issuance and the fair value of the Common Stock into which the debt is convertible at the commitment date, per share being $ 0.90 , multiplied by the number of shares into which the debt is convertible).

fair value of the new funding on the 10 % Warrants was recorded as a debt discount and additional paid-in capital of $ 429,300 .

determined that this 10 % Note had a beneficial conversion feature and is calculated at its intrinsic value (that is, the difference between

the effective conversion price of $ 0.66 at the date of the note issuance and the fair value of the Common Stock into which the debt

is convertible at the commitment date, per share being $ 0.90 , multiplied by the number of shares into which the debt is convertible).

The valuation of the beneficial conversion feature recorded cannot be greater than the face value of the note issued.

For the years ended December 31, 2022 and 2021, amortization of debt discount expense was $ 594,721 and $ 252,118 , respectively.

the years ended December 31, 2023 and 2022 , amortization of debt discount expense was nil and $ 594,721 ,

respectively.

The 10 % Notes are treated as conventional debt.

For purposes of determining the debt discount, the underlying assumptions used in the binomial lattice model to determine the fair value of the 10 % Warrants as of February 8, 2021, were:

For purposes of determining the

debt discount, the underlying assumptions used in the binomial lattice model to determine the fair value of the 10 % Warrants as of February

8, 2021, were:

Current stock price

4 unchanged sentences

Expected volatility

On April 20, 2021, we entered into a Securities Purchase Agreement with accredited 10 % Investors, pursuant to which we issued and sold 10 % Notes with an aggregate principal amount of $ 2,300,000 to such 10 % Investors.

The 10 % Notes are part of an over-allotment approved by the existing noteholders in connection with the original convertible note offering of $ 4,600,000 consummated on December 23, 2020 and February 8, 2021.

In connection with the issuance of the 10 % Notes, each holder received warrants to purchase shares of our Common Stock equal to 20 % coverage of the aggregate principal amount at $ 0.56 per share, except that the warrants coverage to one Investor acting as lead investor in the raise received approximately 35.5 % of the aggregate principal amount invested.

The 10 % Notes bear interest at an annual rate of 10 % and will mature on April 20, 2024.

The 10 % Investors have the option to convert up to 50 % of the outstanding unpaid principal and accrued interest of the 10 % Notes into Common Stock at a variable price of 80 % of the market price but no less than $ 0.65 per share and no more than $ 1.00 per share.

20, 2021, we entered into a Securities Purchase Agreement with accredited 10 % Investors, pursuant to which we issued and sold 10 %

Notes with an aggregate principal amount of $ 2,300,000 to such 10 % Investors.

The 10 % Notes are part of an over-allotment approved

by the existing noteholders in connection with the original convertible note offering of $ 4,600,000 consummated on December 23, 2020 and

February 8, 2021.

In connection with the issuance of the 10 % Notes, each holder received warrants to purchase shares of our Common Stock

equal to 20 % coverage of the aggregate principal amount at $ 0.56 per share, except that the warrants coverage to one Investor acting as

lead investor in the raise received approximately 35.5 % of the aggregate principal amount invested.

The 10 % Notes bear interest at an

annual rate of 10 % and will mature on April 20, 2024 .

The 10 % Investors have the option to convert up to 50 % of the outstanding unpaid

principal and accrued interest of the 10 % Notes into Common Stock at a variable price of 80 % of the market price but no less than $ 0.65

per share and no more than $ 1.00 per share.

The 10% Warrants are exercisable at an exercise price of $ 0.56 per warrant.

The relative fair value of the new funding on the 10 % Warrants was recorded as a debt discount and additional paid-in capital of $ 810,000 .

We determined that these 10 % Notes had a beneficial conversion feature and is calculated at its intrinsic value (that is, the difference between the effective conversion price of $ 0.49 at the date of the note issuance and the fair value of the Common Stock into which the debt is convertible at the commitment date, per share being $ 0.83 , multiplied by the number of shares into which the debt is convertible).

15, 2023, the 10 % Warrants were modified to reduce the exercise price of the 12 % Warrants to $ 0.40 per share, as previously discussed.

fair value of the new funding on the 10% Warrants was recorded as a debt discount and additional paid-in capital of $ 810,000 .

determined that these 10% Notes had a beneficial conversion feature and is calculated at its intrinsic value (that is, the difference

between the effective conversion price of $ 0.49 at the date of the note issuance and the fair value of the Common Stock into which

the debt is convertible at the commitment date, per share being $ 0.83 , multiplied by the number of shares into which the debt is convertible).

The valuation of the beneficial conversion feature recorded cannot be greater than the face value of the note issued.

We recorded $ 692,500 as additional paid in capital and a debt discount and included in our consolidated statement of operations.

For the years ended December 31, 2022 and 2021, amortization of debt discount expense was $ 1,024,442 and $ 350,471 , respectively.

The 10 % Notes are treated as conventional debt.

For purposes of determining the debt discount, the underlying assumptions used in the binomial lattice model to determine the fair value of the 10 % Warrants as of April 20, 2021, were:

recorded $ 692,500 as additional paid in capital and a debt discount and included in our consolidated statement of operations.

years ended December 31, 2023 and 2022, amortization of debt discount expense was nil and $ 1,024,442 , respectively.

The 10% Notes are

treated as conventional debt.

For purposes of determining the debt discount, the underlying assumptions

used in the binomial lattice model to determine the fair value of the 10% Warrants as of April 20, 2021, were:

Current stock price

4 unchanged sentences

Expected volatility

See Note 17 for a summary of the outstanding warrants issued in conjunction with our debt.

In September 2022, $ 2,912,750 of the 10% Notes

were exchanged for the 12% Notes (see above) and the remaining $ 3,987,250 was paid in full.

Of the remaining debt discount, $ 207,045

was expensed to extinguishment of debt and $ 1,125,844 was expensed to amortization of debt discount.

2023 Amendments to Warrant

On December 15, 2023, the exercise price of some

of the previously granted warrants issued in connection with the 10 % note offerings was reduced to $ 0.40 per share and the warrant expiration

date was extended to September 15, 2029.

We also recognized an increase to the debt discount of $ 49,544 related to the increase in fair

value of the 10 % Warrants resulting from the reduction in exercise price and the extension of the exercise period.

For purposes of determining the debt discount,

the underlying assumptions used in the Black-Scholes model to determine the fair value of the amended 10 % Warrants as of December 15,

Current stock price

Exercise price

Risk-free interest rate

Expected dividend yield

Expected term (in years)

Expected volatility

See Note 19 for a summary of the outstanding

warrants issued in conjunction with our debt.

WARRANT DERIVATIVE LIABILITY

On May 31, 2019, we received gross proceeds of $ 3 million by issuing three million shares of our Common Stock and three million warrants (“2019 Warrants”) to purchase shares of our Common Stock (“2019 Units”) in a registered direct offering for $ 1.00 per 2019 Unit (collectively defined as the “2019 Capital Raise”).

The 2019 Warrants, issued with the 2019 Capital Raise, are accounted for as a derivative liability.

The 2019 Warrant agreements contain a cash settlement provision whereby the holders could settle the warrants for cash based on the Black-Scholes value, upon certain fundamental transactions, as defined in the 2019 Warrant agreement, that are considered outside of the control of management, such as a change of control.

On May 31, 2019, we received gross proceeds of

$ 3,000,000 by issuing three million shares of our Common Stock and three million warrants (“2019 Warrants”)

to purchase shares of our Common Stock (“2019 Units”) in a registered direct offering for $ 1.00 per 2019 Unit (collectively

defined as the “2019 Capital Raise”).

The 2019 Warrants, issued with the 2019 Capital Raise, are accounted for as a derivative

The 2019 Warrant agreements contain a cash settlement provision whereby the holders could settle the warrants for cash based

on the Black-Scholes value, upon certain fundamental transactions, as defined in the 2019 Warrant agreement, that are considered outside

of the control of management, such as a change of control.

The original exercise price of the 2019 Warrants was $ 1.30 per share.

The 2019 Warrants contain certain anti-dilution adjustment provisions with respect to subsequent issuances of securities by the Company at a price below the exercise price of such warrants.

As a result of such subsequent issuances of securities by the Company through 2020, at a price lower than the original exercise price, the exercise price of the 2019 Warrants had decreased to $ 0.40 per share and the number of shares subject to the 2019 Warrants increased to 9,591,614 shares of Common Stock as of December 31, 2020.

In February 2020, one of the warrant holders exercised 200,000 warrants.

We received $ 90,000 in cash for the exercise and booked an adjustment to the derivative liability of $ 82,241 as a result of the transaction.

During the year ended December 31, 2020 the warrant holders exercised 7,945,807 warrants into 2,443,641 shares of our Common Stock through cashless exercise.

We booked an adjustment to the derivative liability of $ 3,241,188 as a result.

During the first quarter of 2021 the warrant holders exercised 1,323,000 warrants into 747,208 shares of our Common Stock through cashless exercise.

We recorded an adjustment to the derivative liability of $ 1,523,117 as a result.

During the year ended December 31, 2022 and 2021, we recognized a $ 22,809 gain and a $ 990,066 loss on the change in fair value of the derivative liability, respectively.

As of December 31, 2022, there were 322,807 of the 2019 Warrants outstanding.

The following are the key assumptions that were used to determine the fair value of the 2019 Warrants:

The 2019 Warrants contain certain anti-dilution adjustment provisions with respect to subsequent issuances of securities by the Company

at a price below the exercise price of such warrants.

As a result of such subsequent issuances of securities by the Company during the

fourth quarter 2019, the exercise price of the 2019 Warrants decreased to $ 0.45 per share and the number of shares subject to the 2019

Warrants increased to 8,666,666 shares of common stock as of December 31, 2019.

In May 2020, we issued securities at a price lower than

the $ 0.45 per share above.

As a result, the exercise price of the 2019 Warrants decreased to $ 0.3983 per share and the number of shares

subject to the 2019 Warrants increased to 9,591,614 shares of common stock.

During the years ended December 31, 2023 and

2022, we recognized a $ 792 gain and a $ 22,809 gain on the change in fair value of the derivative liability, respectively.

December 31, 2023, there were 322,807 of the 2019 Warrants outstanding.

The following are the key assumptions that were used to determine

the fair value of the 2019 Warrants:

Number of shares underlying the warrants

3 unchanged sentences

Warrant life (years)

The following table sets forth a summary of the changes in the fair value of the warrant derivative liability, our Level 3 financial liabilities that are measured at fair value on a recurring basis:

The following table sets forth a summary of the changes in the fair

value of the warrant derivative liability, our Level 3 financial liabilities that are measured at fair value on a recurring basis:

Beginning balance

Warrant exercise

( 1,523,117 )

Change in fair value of warrants derivative liability

Ending balance

Under the provisions of the Coronavirus Aid Relief,

and Economic Security Act (the “CARES Act”) signed into law on March 27, 2020, and the subsequent extension of the CARES

Act, the Company, with the guidance from a third-party specialist, determined it was eligible for a refundable employee retention credit

(“ERC”) subject to certain criteria.

The Company applied for the ERC for the last three

quarters’ wages paid in calendar year 2020 and the first three quarters’ wages paid in calendar year 2021.

The Company recognized

an ERC benefit of $ 1,085,939 , net of third-party specialist fees of $ 217,188 , which is included in Other Income on the accompanying Consolidated

Statement of Operations for the year ended December 31, 2023.

As of December 31, 2023, the Company received $ 909,282 in ERC payments reducing

the receivable within Other Current Assets on the Consolidated Balance Sheet to $ 176,657 .

COMMITMENTS AND CONTINGENCIES

From time to time, the Company is a party to various litigation matters incidental to the conduct of its business.

The Company is not presently a party to any legal proceedings that would have a material adverse effect on its business, operating results, financial condition, or cash flows, except as set forth below.

In July 2021, we were served with a Complaint in the District Court, County of Denver, Colorado, by plaintiff 2353 SB, LLC (“Plaintiff”).

We entered into a lease with Plaintiff for the premises at 2353 South Broadway, Denver, CO with a term of three (3) years to commence on November 1, 2020.

Monthly lease payments were to be $ 12,866.66 .

In 2020, we made initial payments (first month’s rent, last month’s rent, and security deposit) of $ 39,633.32 ;

but subsequently did not take possession of the premises and have made no further payments in respect thereof, as a direct result of the COVID-19 pandemic.

The lease contains a ‘force majeure’ clause which includes a provision that neither party is liable for failure to perform its obligations under the lease which have become practicably impossible because of circumstances beyond the reasonable control of the applicable party, including ‘pandemics or outbreak of communicable disease.’

We have taken the position that our failure to take possession and make any further payments under the lease is directly related to the COVID-19 pandemic.

We are vigorously defending this action and believe that the above-referenced force majeure clause presents a complete defense to Plaintiff’s claims.

We filed a motion to dismiss or a motion for summary judgment in the alternative.

Plaintiff filed a response and cross-motion for summary judgment thereafter.

In October 2022, the court denied the motion to dismiss on the basis that Plaintiff sufficiently pled facts that raise a plausible claim for relief, notwithstanding our possible defenses, but has not specifically made any rulings on either party’s motion for summary judgment.

On November 14, 2022, we timely filed a formal answer to the complaint, denying each of Plaintiff’s substantive claims.

We also asserted appropriate affirmative defenses, including the force majeure clause of the lease, which provides that we are not liable under the lease in the event of a variety of events outside our control, including “pandemics.” In addition, we have asserted a counterclaim against Plaintiff for breach of contract to recover the initial payments made under the lease as well as attorneys’ fees and costs.

The trial is currently scheduled for September 2023.

From time to time, we may be involved in various claims and legal

actions in the ordinary course of business.

We are not currently subject to any material legal proceedings outside the ordinary course

of our business.

DEFERRED TAXES

Income tax expense was $ 204,917 and nil for the years ended December 31, 2022 and 2021, respectively.

Significant components of the Company’s deferred tax assets and liabilities at December 31, 2022 and 2021 are shown below.

A valuation allowance has been established as realization of such net deferred tax assets has not met the more likely-than-not threshold requirement.

The Company has determined it is not more likely than not that its net deferred tax assets will be recovered.

If the Company’s judgment changes and it is determined that the Company will be able to realize these deferred tax assets, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets will be accounted for as a reduction to income tax expense.

As of December 31, 2022 and 2021, the Company had federal operating loss carryforwards of approximately $ 32.1 million and $ 36.0 million, respectively, and $ 41.1 and $ 41.4 million of state net operating loss carryforwards, respectively.

Of the current net operating loss carryforwards, $ 24.1 million expire starting in 2033 through 2037, $ 3.1 million will expire starting in 2041, $ 3.7 million will expire in 2042, and $ 42.3 million do not expire.

Income tax expense was $ 187,848 and $ 204,917 for the years ended December

31, 2023 and 2022, respectively.

Significant components of the Company’s

deferred tax assets and liabilities at December 31, 2023 and 2022 are shown below.

A valuation allowance has been established as realization

of such net deferred tax assets has not met the more likely-than-not threshold requirement.

If the Company’s judgment changes and

it is determined that the Company will be able to realize these deferred tax assets, the tax benefits relating to any reversal of the

valuation allowance on deferred tax assets will be accounted for as a reduction to income tax expense.

As of December 31, 2023 and 2022, the Company

had federal operating loss carryforwards of approximately $ 25.6 million and $ 32.1 million, respectively, and $ 42.1 and $ 41.1 million of

state net operating loss carryforwards, respectively.

Of the current net operating loss carryforwards, $ 25.8 million expire starting in

2034 through 2043, and $ 41.9 million do not expire.

The Company has evaluated ownership changes pursuant to IRC Sections 382 and 383.

The annual Section 382 base limit is approximately $ 461 thousand.

The additional deemed RBIG pursuant to Notice 2003-65 is approximately $ 2 million per year for a 5-year recognition period through December 31, 2026.

The additional deemed RBIG pursuant to Notice 2003-65 is approximately

$ 2 million per year for a 5-year recognition period through December 31, 2026.

The components of net deferred tax assets and liabilities are as follows:

12 unchanged sentences

Net deferred tax asset

A reconciliation of our income tax provision and the amounts computed by applying statutory rates to income before income taxes is as follows:

Year ended December 31,

A reconciliation of our income tax provision and the amounts computed

by applying statutory rates to income before income taxes is as follows:

Income tax benefit at statutory rate

7 unchanged sentences

Goodwill and intangible impairment

Non-taxable cancellation of debt income

Valuation allowance

( 1,592,450 )

STOCKHOLDERS’ EQUITY

2021 Preferred stock offering

On September 10, 2021, we entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with various accredited investors (the “2021 Investors), pursuant to which we issued and sold Units consisting of Series A Convertible Preferred Stock (“Series A Preferred”) and warrants (the “Preferred Warrants”) to purchase shares of our Common Stock.

On September 10, 2021, we entered into a Securities

Purchase Agreement (the “Securities Purchase Agreement”) with various accredited investors (the “2021 Investors), pursuant

to which we issued and sold Units consisting of Series A Convertible Preferred Stock (“Series A Preferred”) and warrants

(the “Preferred Warrants”) to purchase shares of our Common Stock.

The total number of Units sold was 1,180 .

Each Unit consists of one share of Series A Preferred and 354,000 Preferred Warrants.

The purchase price of each Unit was $ 1,000 , for an aggregate amount sold of $ 1,180,000 .

Each share of Series A Preferred is convertible into 1,000 shares of Common Stock upon the consummation of a capital raise of not less than $ 5,000,000 .

The Certificate of Designation of the Series A Preferred Stock (“Certificate of Designation”) was filed with the Secretary of the State of Colorado on September 14, 2021.

The Certificate of Designations established the new preferred series entitled “Series A Convertible Preferred Stock” with no par value per share, and sets forth the rights, restrictions, preferences, and privileges of the Series A Preferred, summarized as follows:

Each Unit consists

of one share of Series A Preferred and 354,000 Preferred Warrants.

The purchase price of each Unit was $ 1,000 , for an aggregate amount

sold of $ 1,180,000 .

Each share of Series A Preferred is convertible into 1,000 shares of Common Stock upon the consummation of a capital

raise of not less than $ 5,000,000 .

The Certificate of Designation of the Series A Preferred Stock (“Certificate of Designation”)

was filed with the Secretary of the State of Colorado on September 14, 2021.

The Certificate of Designations established the new preferred

series entitled “Series A Convertible Preferred Stock” with no par value per share, and sets forth the rights, restrictions,

preferences, and privileges of the Series A Preferred, summarized as follows:

● Authorized Number of Shares – 5,000

4 unchanged sentences

or the Company listing on an exchange

● Redemption – No rights of redemption by 2021 Investors, nor mandatory redemption

The Preferred Warrants have a five-year term and an exercise price per Preferred Warrant share of $ 1.05 .

The warrants contain an anti-dilution provision pursuant to which upon we do a future capital raise at less than $ 1.00 per shares, each Preferred Investor will be granted additional Preferred Warrants on a ‘full-ratchet’ basis.

The proceeds received in the sale of the Series A Preferred totaled $ 1,180,000 , for the issuance of 1,180 Series A Preferred, plus 354,000 warrants.

The warrants were valued using a Black Scholes model, at $ 117,131 and per the relative fair value allocation, $ 1,073,446 was allocated to the Series A proceeds.

In addition to the Preferred Warrants, the Company has outstanding warrants related to prior equity offerings.

● Redemption – No rights of redemption

by 2021 Investors, nor mandatory redemption

The Preferred Warrants have a five -year term

and an exercise price per Preferred Warrant share of $ 1.05 .

The warrants contain an anti-dilution provision pursuant to which upon a

future capital raise at less than $ 1.00 per share, each Preferred Investor will be granted additional Preferred Warrants on a ‘full-ratchet’

The proceeds received in the sale of the Series

A Preferred totaled $ 1,180,000 , for the issuance of 1,180 Series A Preferred, plus 354,000 warrants.

The warrants were valued using a

Black Scholes model, at $ 117,131 and per the relative fair value allocation, $ 1,073,446 was allocated to the Series A proceeds.

As of December 31, 2023 we have recorded accrued

dividends of $ 106,200 .

As of December 31, 2022 we have recorded accrued dividends of $ 88,500 .

In addition to the Preferred Warrants, the Company has outstanding

warrants related to prior equity offerings.

The table below summarizes the warrants issued in conjunction with our equity offerings:

7 unchanged sentences

The Company has also issued warrants in conjunction with debt issuances,

as discussed in Note 14.

The following summarizes warrants issued in conjunction with our debt issuances:

6 unchanged sentences

( 1,800,000 )

Outstanding and exercisable as of December 31, 2022

Outstanding as of December 31, 2023

Stock-based Compensation

Stock-based Awards

As of December 31, 2022, the Company has two active plans, the 2020 Omnibus Incentive Plan approved by the Board in November 2020 (“2020 Plan”) and the 2014 Equity Incentive Plan approved by the Board in October 2014 (“2014

Plan” and collectively with the 2020 Plan the “Stock Incentive Plans”) that allow the Board of Directors to grant stock-based awards to eligible employees, non-employee directors, and consultants of the Company and its subsidiaries.

Under the Stock Incentive Plans, the Board may grant non-statutory and incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units, deferred stock units, performance awards, non-employee director awards, and other stock-based awards.

Subject to adjustment, the maximum number of shares of our common stock to be authorized for issuance under the Stock Incentive Plans is 25 million shares.

As of December 31, 2022, stock-based awards for approximately 17.5 million shares are available to be issued under the Stock Incentive Plans.

As of December 31, 2023, the Company has two

active plans, the 2020 Omnibus Incentive Plan approved by the Board in November 2020 (“2020 Plan”) and the 2014 Equity Incentive

Plan approved by the Board in October 2014 (“2014 Plan” and collectively with the 2020 Plan the “Stock Incentive Plans”)

that allow the Board of Directors to grant stock-based awards to eligible employees, non-employee directors, and consultants of the Company

and its subsidiaries.

Under the Stock Incentive Plans, the Board may grant non-statutory and incentive stock options, stock appreciation

rights, restricted stock awards, restricted stock units, deferred stock units, performance awards, non-employee director awards, and

other stock-based awards.

Subject to adjustment, the maximum number of shares of our common stock to be authorized for issuance under

the Stock Incentive Plans is 25 million shares.

As of December 31, 2023, stock-based awards for approximately 17.5 million shares are

available to be issued under the Stock Incentive Plans.

Stock Options

The following summarizes stock option activity for the years ended December 31, 2022 and 2021:

The following summarizes Employee Awards activity for the years ended

December 31, 2023 and 2022:

Exercise Price

2 unchanged sentences

Outstanding as of December 31, 2022

Forfeited or expired

( 3,126,205 )

Outstanding as of December 31, 2023

Forfeited or expired

Outstanding as of December 31, 2022

Exercisable as of December 31, 2023

The options granted in 2022 and 2021 expire five years from the date of grant and vest over a period of one year.

The grant date fair value of the awards granted in 2022 and 2021, totaled $ 56,348 and $ 628,496 , respectively.

The following summarizes the Black-Scholes assumptions used to value the Employee Awards granted:

Year ended December 31,

Exercise price

Stock price on date of grant

Risk-free interest rate

Expected life (years)

Dividend yield

As of December 31, 2022, there was approximately $ 13,172 of total unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of four months .

The Company recognized $ 69,071 and $ 188,330 of

expense related to stock-based awards during the years ended December 31, 2023 and 2022, respectively.

As of December 31, 2023,

there was no unrecognized compensation expense related to unvested employee awards.

Restricted Stock Awards

On April 1, 2022 we entered into a Restricted Stock Unit Agreement with four participants.

The Restricted Stock Unit’s (“RSU”) were granted pursuant to our 2020 Omnibus Incentive Plan.

Four separate executives were each granted 300,000 RSU’s, for a total grant of 1,200,000 RSU’s.

The 300,000 RSU’s are divided into three equal tranches of 100,000 RSU’s.

Each tranche of RSU will vest immediately if and upon the market price reaching a certain minimum market price of our Common Stock as reported on the OTCQB market.

Each tranche will

vest as the market price reaches $ 1.00 , $ 2.00 and $ 3.00 .

Upon the RSU’s vesting, the participant will be promptly issued shares of our Common Stock.

If there is a change in control, all unvested RSU’s granted under this agreement will become fully vested and the vested RSU’s will be paid out or settled.

The grant date fair value of these instruments is $ 535,976 and was calculated using the Monte Carlo model.

The fair value of the RSU’s is recognized over the requisite service period.

As these RSU’s do not have a service period, we used the requisite service period derived from the valuation of 10 years .

On April 1, 2022 the Company entered into a Restricted

Stock Unit Agreement with four participants.

The Restricted Stock Units (“2022 RSUs”) were granted pursuant to the Company’s

2020 Omnibus Incentive Plan.

Four executives were each granted 300,000 units, for a total grant of 1,200,000 2022 RSUs.

The 2022 RSUs

were divided into three equal tranches.

Each tranche will vest as the market price of the Company’s common stock reaches $ 1.00 ,

$ 2.00 and $ 3.00 , respectively, as reported on the OTCQB market.

Upon the 2022 RSUs vesting, each participant will be promptly issued shares

of the Company’s common stock.

If there is a change in control, all unvested 2022 RSUs granted under this agreement will fully vest

and be paid out or settled.

The fair value of these instruments is $ 535,976 and was calculated using the Monte Carlo model.

The fair value

of the 2022 RSUs is recognized over the requisite service period.

As the 2022 RSUs do not have a service period, the Company used the

requisite service period derived from the valuation of 10 years.

During 2023, the Company granted 1,040,462 Restricted

Stock Units pursuant to the 2020 Omnibus Incentive Plan to directors and an employee (“2023 RSUs”).

The 2023 RSUs vest seven

years from the grant date, or earlier upon certain triggering events as defined in the agreement, and upon vesting convert into one share

of the Company’s common stock.

The fair value of the 2023 RSUs is determined based on the closing price of the Company’s common

stock on the grant date.

The Company recorded $ 55,074 and $ 40,506 in compensation

expense during the years ended December 31, 2023 and 2022, respectively.

As of December 31, 2023 none of the RSU’s have vested.

The Company recognized $ 188,330 and $ 307,963 of expense related to stock-based awards during the years ended December 31, 2022 and December 31, 2021, respectively.

A summary of the Company’s grants of restricted stock units

under the 2020 Omnibus Incentive Plan is presented below:

Outstanding as of December 31, 2022

Forfeited or expired

Outstanding as of December 31, 2023

NET LOSS PER SHARE

Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the reporting period.

Diluted net loss per share is computed similarly to basic loss per share, except that it includes the potential dilution that could occur if dilutive securities are exercised.

Outstanding stock options and Common Stock warrants are considered anti-dilutive because we are in a net loss position.

Accordingly, the number of weighted average shares outstanding for basic and fully diluted net loss per share are the same.

The following summarizes equity instruments that may, in the future, have a dilutive effect on earnings per share:

Basic net loss per share is computed by dividing net loss by the weighted-average

number of common shares outstanding during the reporting period.

Diluted net loss per share is computed similarly to basic loss per share,

except that it includes the potential dilution that could occur if dilutive securities are exercised.

Outstanding stock options and Common Stock warrants are considered

anti-dilutive because we are in a net loss position.

Accordingly, the number of weighted average shares outstanding for basic and fully

diluted net loss per share are the same.

The following summarizes equity instruments that may, in the future,

have a dilutive effect on earnings per share:

Stock options

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RELATED PARTY TRANSACTIONS

On June 3, 2020, the Company entered into a consulting agreement with Adam Hershey, a board member and investor, pursuant to which he would act as a strategic consultant for the Company, including aiding with the sourcing and evaluation of merger and acquisition deals, strategic capital and strategic partnerships or joint ventures.

Hershey $ 125,000 and $ 99,996 during the years ended December 31, 2022 and 2021, respectively.

We currently have a lease agreement with Dalton Adventures, LLC in which we rent a greenhouse cultivation facility in Boulder, Colorado.

The owner of Dalton Adventures, LLC is a principal shareholder and board member of the Company.

We incurred approximately $ 362,000 and $ 458,000 of rent expense related to this lease for the years ended December 31, 2022 and 2021, respectively.

See Note 10 for further discussion of the Company’s obligations associated with related-party leases.

We currently have a lease agreement with JLA Enterprises, LLC in which we rent a retail dispensary in Longmont, Colorado.

A board member and an executive level employee of the Company are owners of JLA Enterprises, LLC.

We also have a lease agreement with ALJ 1090, LLC in which we rent a building that has a retail dispensary and cultivation facility in Berthoud, Colorado.

The same board member is an owner of ALJ 1090, LLC.

These leases were assumed as part of the Green Tree Acquisition on December 12, 2022, and as such, the expense related to these leases was not

material for the year ended December 31, 2022.

See Note 10 for further discussion of the Company’s obligations associated with related-party leases.

We previously had a lease agreement with Bellewood Holdings, LLC in which we leased the retail space for the Trees Englewood dispensary in Englewood, Colorado.

The owner of Bellewood Holdings, LLC is a principal shareholder and board member of the Company.

This lease was assigned to a new landlord (unaffiliated with the Company or such principal shareholder and board member) when the building was sold in June 2022.

We incurred approximately $ 66,000 and $ 47,000 of related-party lease expense for this lease for the years ended December 31, 2022 and December 31, 2021, respectively.

On September 16, 2022, the Company entered into

a new consulting agreement with Adam Hershey, its Interim Chief Executive Officer, pursuant to which Mr.

Hershey will continue to serve

as the Company’s Interim Chief Executive Officer with compensation equal to $ 200,000 per annum, payable by the Company, monthly.

The term of the consulting agreement is for a period of one year, with automatic six-month renewals thereafter unless terminated by either

As part of the new consulting agreement, the Company has also agreed to extend warrants to purchase 7,280,007 shares of Common

Stock, held by an affiliate of Mr.

Hershey, for an additional two years until, May 29, 2027.

The exercise price and all other terms and

conditions of such warrants remain unchanged.

We paid $ 200,000 and $ 125,000 under this consulting a for the years ended December 31,

2023 and 2022, respectively.

In February 2023, the Company completed the acquisition

of Station 2, LLC’s assets.

Station 2, LLC is owned by a board member, who is also a shareholder and executive level employee of

See Note 3 for additional information regarding the Station 2 asset acquisition and Note 6 for the license transfer.

On July 7, 2023, the Company entered into a Transaction

Services Agreement with Allyson Feiler Downing and Loree Schwartz as a result of the Settlement Agreement entered into with the Green

Tree Parties as described in Note 3.

Downing was a former officer of the Company and member of the Board of Directors, however, she

had continued to serve on the Board under the Transaction Services Agreement.

Under this Agreement, Ms.

Downing and Ms.

Schwartz provided

certain administrative and management services related to the transferred assets in exchange for all revenue generated by the transferred

The Transaction Services Agreement was effective until the transferred assets were officially transferred to the Green Tree Parties,

which took place in November 2023 (see Note 6 ) .

On August 3, 2023, Ms.

Downing resigned from the Company’s Board of Directors.

The Company currently has a lease agreement with

Dalton Adventures, LLC in which the Company leases 17,000 square feet of greenhouse space in Boulder, Colorado for $ 29,691 a month, of

which $ 27,000 is base rent and $ 2,691 is property taxes.

The base rent decreased to $ 10,000 per month starting in May 2023.

of Dalton Adventures, LLC is a principal shareholder and former board member of the Company.

We have incurred $ 181,132 and $ 362,000 in

related party lease expense for the years ended December 31, 2023 and 2022, respectively.

See Note 11 for further discussion of the Company’s

obligations associated with related party leases.

The Company had a lease agreement with JLA Enterprises,

LLC in which the Company leased a retail dispensary in Longmont, Colorado.

A former board member and a former executive level employee

of the Company are owners of JLA Enterprises, LLC.

The Company also had a lease agreement with ALJ 1090, LLC in which the Company leased

a building that has a retail dispensary and cultivation facility in Berthoud, Colorado.

The same former board member is an owner of ALJ

These leases were assumed as part of the Green Tree Acquisition on December 12, 2022.

In November 2023, these leases were transferred

back to the former board member and former executive level employee and these individuals ceased employment with the Company, ending the

related party relationship with the Company.

We have incurred $ 209,752 and nil for the years ended December 31, 2023 and 2022, respectively.

See Note 11 for further discussion of the Company’s obligations associated with related party leases.

As of December 31, 2022, four of our current board members hold senior convertible promissory notes from the Company for an aggregate amount of $ 320,000 .

These notes are included in the 12 % Notes discussed in Note 13.

Accrued interest earned and owed to the board members was $ 11,738 as of December 31, 2022.

One of the sellers in the Trees Transaction is a principal shareholder and board member of the Company and another seller is an executive level employee of the Company.

As of December 31, 2022, the Company has outstanding debt related to the Trees Transaction payable to these individuals.

See Note 13 for disclosure of the Trees Transaction Notes.

One former owner of the Green Tree Entities is a current board member and another former owner is currently an executive level employee of the Company.

As of December 31, 2022, the Company has outstanding debt related to the Green Tree Acquisition that is payable to these individuals.

See Note 13 for disclosure of the Green Tree Acquisition Notes.

In addition, the Company made one-item bonus payments of approximately $ 383,000 to each former owner as part of employment agreements to remain with the Company.

These payments are included in selling, general, and administrative expenses in the accompanying consolidated statements of operations.

The Company had a lease agreement with Bellewood

Holdings, LLC in which the Company leased retail space for the Trees Englewood retail store in Englewood, Colorado for $ 11,287 per month,

of which $ 10,000 is base rent and $ 1,287 is property taxes.

The owner of Green Tree Holdings, LLC is a principal shareholder and board

member of the Company.

In June 2022, the building was sold to an unrelated party.

We incurred nil and $ 66,000 of related party lease

expense for the for the years ended December 31, 2023 and 2022, respectively.

See Note 11 for further discussion of the Company’s

obligations associated with related-party leases.

SEGMENT INFORMATION

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Retail and Cultivation.

All revenue originates in, and all assets are located in the United States.

Segment information is presented in accordance with ASC 280, Segments Reporting.

This standard is based on a management approach that requires segmentation based upon the Company’s internal organization and disclosure of revenue and certain expenses based upon internal accounting methods.

The Company’s financial reporting systems present various data for management to run the business, including internal profit and loss statements prepared on a basis not consistent with GAAP.

The following information is presented net of discontinued operations.

For more information see Note 3.

All revenue originates, and all assets are located in the United States.

Segment information is presented in

accordance with ASC 280, “Segments Reporting.” This standard is based on a management approach that requires segmentation based

upon our internal organization and disclosure of revenue and certain expenses based upon internal accounting methods.

Our financial reporting

systems present various data for management to run the business, including internal profit and loss statements prepared on a basis not

consistent with GAAP.

Year ended December 31,

Total revenues

$ ( 2,117,084 )

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( 19,919,904 )

Segment operating income

Segment operating income (loss)

$ ( 1,937,259 )

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$ ( 6,894,410 )

Total revenues

$ ( 1,273,671 )

Costs and expenses

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( 15,190,343 )

Segment operating income

Segment operating income (loss)

$ ( 182,135 )

$ ( 1,563,666 )

( 1,745,801 )

Corporate expenses

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SUBSEQUENT EVENTS

In February 2023, we completed the acquisition of Station 2, LLC, the assets of which consist of a dispensary located in Denver, CO.

The consideration paid by the Company consists of cash at closing equal to $ 256,582 plus an additional $ 385,873 in twenty-four (24) equal monthly payments commencing May 2023.

Timothy Brown, one of our Board members, was the sole owner of Station 2 and has and will receive all consideration described above.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

The Company evaluated the impact of subsequent

events through the date that the accompanying financial statements were issued.

Subsequent to December 31, 2023 and prior to the

issuance of these financial statements, there were no subsequent events that have occurred that would require recognition or disclosure

in the financial statements.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING

AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data