TREES Corp (Colorado) 10-Q

ITEM 1. FINANCIAL STATEMENTS TREES CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS March 31, 2024 (unaudited) December 31, 2023 Assets Current assets Cash and cash equivalents $ 414,225 $ 969,676 Accounts receivable, net of allowance of $ 41,000 and $ 42,000 , respectively 81,455 111,863 Inventories, net 801,022 860,918 Prepaid expenses and other current assets 394,086 411,911 Total current assets 1,690,788 2,354,368 Right-of-use operating lease asset 1,866,226 1,979,833 Property and equipment, net 1,355,424 1,395,104 Intangible assets, net 1,507,465 1,637,491 Goodwill 15,880,097 15,880,097 Total assets $ 22,300,000 $ 23,246,893 Liabilities and Stockholders’ Equity (Deficit) Current liabilities Accounts payable and accrued expenses $ 2,814,450 $ 2,617,536 Interest payable 1,823,447 1,570,077 Income tax payable 529,748 392,765 Operating lease liability, current 849,686 846,201 Finance lease liability, current 79,259 205,400 Accrued stock payable 60,900 60,900 Accrued dividends 123,900 106,200 Warrant derivative liability 3,223 4,716 Accrued legal fees 90,000 102,000 Notes payable - current 990,067 1,092,382 Contingent Earnout Liability 469,907 367,056 Total current liabilities 7,834,587 7,365,233 Operating lease liability, non-current 1,106,199 1,218,392 Finance lease liability, non-current 610,238 501,248 Notes payable - non-current (net of unamortized discount) 13,993,311 14,013,861 Total liabilities 23,554,335 23,098,734 Commitments and contingencies (Note 12) Stockholders’ equity (deficit) Preferred stock, no par value; 5,000,000 and 5,000,000 shares authorized; 1,180 and 1,180 issued and outstanding, respectively 1,073,446 1,073,446 Common stock, $ 0.001 par value; 200,000,000 and 200,000,000 shares authorized; 108,746,520 and 108,746,520 shares issued and outstanding, respectively 108,746 108,746 Additional paid-in capital 99,465,275 99,450,307 Accumulated deficit ( 101,891,802 ) ( 100,484,340 ) Total stockholders’ equity (deficit) ( 1,244,335 ) 148,159 Total liabilities and stockholders’ equity (deficit) $ 22,300,000 $ 23,246,893 See Notes to unaudited condensed consolidated financial statements. 1 TREES CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three months ended March 31, 2024 2023 Revenue Retail sales $ 3,685,881 $ 5,110,619 Total revenue 3,685,881 5,110,619 Costs and expenses Cost of sales 2,189,095 3,057,714 Selling, general and administrative 1,445,249 2,296,240 Stock-based compensation 14,968 27,396 Professional fees 323,573 607,544 Depreciation and amortization 190,344 292,842 Total costs and expenses 4,163,229 6,281,736 Operating loss ( 477,348 ) ( 1,171,117 ) Other income (expenses) Amortization of debt discount ( 120,330 ) ( 181,677 ) Interest expense ( 553,743 ) ( 449,311 ) Gain on derivative liability 1,493 1,307 Loss on contingent earnout ( 102,851 ) — Total other income (expenses) ( 775,431 ) ( 629,681 ) Net loss before income taxes ( 1,252,779 ) ( 1,800,798 ) Provision for income taxes 136,983 85,736 Net loss $ ( 1,389,762 ) ( 1,886,534 ) Accrued preferred stock dividend ( 17,700 ) ( 17,700 ) Net loss attributable to common stockholders $ ( 1,407,462 ) ( 1,904,234 ) Per share data - basic and diluted Net loss attributable to common stockholders per share $ ( 0.01 ) $ ( 0.02 ) Weighted average number of common shares outstanding 108,746,520 118,664,094 See Notes to unaudited condensed consolidated financial statements. 2 TREES CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three months ended March 31, 2024 2023 Cash flows from operating activities Net loss $ ( 1,389,762 ) $ ( 1,886,534 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Amortization of debt discount 120,330 181,677 Depreciation and amortization 190,344 292,842 Non-cash lease expense 113,607 19,421 Loss (gain) on contingent earnout 102,851 — Loss (gain) on derivative liability ( 1,493 ) ( 1,307 ) Stock-based compensation 14,968 27,396 Changes in operating assets and liabilities, net of acquisitions Accounts receivable 30,408 ( 21,468 ) Prepaid expenses and other assets 17,825 ( 3,035 ) Inventories 59,896 ( 346,453 ) Income taxes 136,893 85,742 Accounts payable, accrued liabilities, and interest payable 438,284 1,148,754 Operating lease liabilities ( 108,708 ) — Net cash used in operating activities ( 274,467 ) ( 502,965 ) Cash flows from investing activities Purchase of property and equipment ( 20,638 ) ( 24,310 ) Acquisition of Station 2 assets — ( 256,582 ) Net cash used in investing activities ( 20,638 ) ( 280,892 ) Cash flows from financing activities Payments on notes payable and finance lease ( 260,346 ) ( 339,814 ) Net cash (used in) financing activities ( 260,346 ) ( 339,814 ) Net (decrease) in cash and cash equivalents ( 555,451 ) ( 1,123,671 ) Cash and cash equivalents, beginning of period 969,676 2,583,833 Cash and cash equivalents, end of period $ 414,225 $ 1,460,162 Supplemental schedule of cash flow information Cash paid for interest $ — $ 28,425 Cash paid for taxes $ — $ 6 Non-cash investing & financing activities Non-cash debt issuance for acquisition of Station 2 assets $ — $ 333,953 Issuance of accrued stock 17,700 17,700 See Notes to unaudited condensed consolidated financial statements. 3 TREES CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY For the three months ended March 31, 2024 Preferred Stock Common Stock Additional Paid- Accumulated Shares Amount Shares Amount in Capital Deficit Total January 1, 2024 1,180 $ 1,073,446 108,746,520 $ 108,746 $ 99,450,307 $ ( 100,484,340 ) $ 148,159 Share-based compensation — — — — 14,968 — 14,968 Dividend on Preferred Stock — — — — — ( 17,700 ) ( 17,700 ) Net loss — — — — — ( 1,389,762 ) ( 1,389,762 ) March 31, 2024 1,180 $ 1,073,446 108,746,520 $ 108,746 $ 99,465,275 $ ( 101,891,802 ) $ ( 1,244,335 ) For the three months ended March 31, 2023 Preferred Stock Common Stock Additional Paid- Accumulated Shares Amount Shares Amount in Capital Deficit Total January 1, 2023 1,180 $ 1,073,446 118,664,094 $ 118,664 $ 98,598,761 $ ( 93,384,382 ) $ 6,406,489 Share-based compensation — — — — 27,396 — 27,396 Dividend on Preferred Stock — — — — — ( 17,700 ) ( 17,700 ) Net loss — — — — — ( 1,886,534 ) ( 1,886,534 ) March 31, 2023 1,180 $ 1,073,446 118,664,094 $ 118,664 $ 98,626,157 $ ( 95,288,616 ) $ ( 4,529,651 ) See Notes to unaudited condensed consolidated financial statements. 4 TREES CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1. NATURE OF OPERATIONS, HISTORY, AND PRESENTATION Nature of Operations TREES Corporation, a Colorado Corporation (the “Company,” “we,” “us,” or “our,”) is a cannabis retailer and cultivator in the States of Colorado and Oregon. We presently operate six (6) cannabis dispensaries as follows: ● Englewood, Colorado o 5005 S Federal Boulevard – Recreational license only ● Denver, Colorado o East Hampden Avenue (formerly Green Man) – Recreational license only ● Longmont, Colorado o 12626 N. 107 th Street (formerly Green Tree/Ancient Alternatives) – Medical and Recreational licenses ● Three (3) in Oregon o SW Corbett Avenue, Portland, OR – Medical and Recreational licenses o NE 102 nd Avenue, Portland, OR – Medical and Recreational licenses o 7050 NE MLK, Portland, OR – Medical and Recreational licenses We also operate two (2) cultivation facilities in Colorado as follows: ● SevenFive Farm – 3705 N. 75 th Street, Boulder – Retail cultivation license only ● 6859 N. Foothills Highway E-100 (formerly Green Tree/Hillside Enterprises) – Retail cultivation license only Our principal business model is to acquire, integrate and optimize cannabis companies in the retail and cultivation segments utilizing the combined experience of entrepreneurs and synergistic operations of our vertically integrated network. Basis of Presentation The accompanying unaudited condensed consolidated financial statements include all accounts of the Company and its wholly owned subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation. These unaudited condensed consolidated financial statements have been prepared following the requirements of the Securities and Exchange Commission for interim reporting. As permitted under those rules, certain footnotes and other financial information that are normally required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) can be condensed or omitted. The condensed consolidated balance sheet for the year ended December 31, 2023, was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. The information included in this quarterly report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and notes thereto of the Company for the year ended December 31, 2023, which were included in the annual report on Form 10-K filed by the Company on April 10, 2024. In the opinion of management, these unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and notes thereto of the Company and include all adjustments, consisting only of normal recurring adjustments, considered necessary for the fair presentation of the Company’s financial position and operating results. The results for the three months ended March 31, 2024, are not necessarily indicative of the operating results for the year ending December 31, 2024, or any other interim or future periods. Since the date of the Annual Report, there have been no material changes to the Company’s significant accounting policies. 5 Use of Estimates The preparation of our unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management 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. Concentrations of Credit Risk Financial instruments that potentially subject us to significant concentrations of credit risk consisted primarily of cash and accounts receivable. Customer and Revenue Concentrations – Cultivation Segment During the three months ended March 31,2024 and 2023, 100 % of SevenFive’s revenue was with three customers and 88 % of SevenFive’s revenue was with three customers, respectively. Three of the customers with sales in the three months ended March 31, 2024 are related party dispensaries and the revenues associated with these customers are eliminated in consolidation. During the three months ended March 31, 2024 and 2023, 100 % of Green Tree’s revenue was with three customers, and 88 % of Green Tree’s revenue was with three customers, respectively. The customers in 2024 are related party dispensaries and the revenues associated with these customers are eliminated in consolidation. Going Concern We incurred net losses of $ 1,389,762 during the three months ended March 31, 2024 and $ 1,886,534 during the three months ended March 31, 2023 and had an accumulated deficit of $ 101,891,802 as of March 31, 2024. We had cash and cash equivalents of $ 414,225 and $ 969,676 as of March 31, 2024 and December 31, 2023, respectively. The accompanying unaudited condensed 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. Our unaudited condensed 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. Summary of Significant Accounting Policies See our Annual Report on Form 10-K for the year ended December 31, 2023, as amended, for discussion of the Company’s significant accounting policies. Recently Issued Accounting Standards The Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements. The Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its consolidated financial position or results of operations. NOTE 2. INVENTORIES, NET Our inventories consisted of the following: March 31, December 31, 2024 2023 Raw materials $ 264,744 $ 351,241 Work-in-progress and finished goods 536,278 509,677 Inventories, net $ 801,022 $ 860,918 6 NOTE 3. LEASES The Company’s leases consist primarily of real estate leases for retail and cultivation facilities. All but one of the Company’s leases are classified as operating leases. 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 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. Operating lease expense is as follows: For the three months ended March 31, 2024 2023 Straight-line operating lease expense $ 217,024 $ 393,265 Variable lease cost 53,610 202,826 Total operating lease expense $ 270,634 $ 596,091 The finance lease expense for the three months ended March 31, 2024, and March 31, 2023, was approximately $ 41,823 and $ 50,000 , respectively. Related party lease s During the three months ended March 31, 2024, 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. During the three months ended March 31, 2024, the related party operating leases consisted of one cultivation facility lease. As of March 31, 2024, the ROU asset, operating lease liability, current, and operating lease liability, non-current for the related party leases were $ 119,034 , $ 120,000 and $ 3,637 , respectively. Lease expense for related party leases was $ 30,000 and $ 127,790 for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, the weighted average remaining term of the Company’s operating leases is 4.85 years, and the remaining term on the finance lease is 8.75 years. None of the Company’s leases contain residual value guarantees or restrictive covenants. 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 2024 (remaining nine months) $ 686,642 $ 154,050 2025 708,439 171,043 2026 452,948 136,940 2027 302,095 143,102 2028 245,456 149,542 Thereafter 667,154 668,558 Total 3,134,734 1,423,235 Less: Present value adjustment ( 1,178,849 ) ( 733,738 ) Lease liability 1,955,885 689,497 Less: Lease liability, current ( 849,686 ) ( 79,259 ) Lease liability, non-current $ 1,106,199 $ 610,238 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. As of March 31, 2024, the weighted average remaining term of the Company’s operating leases is 4.84 years and the remaining term on the finance lease is 8.75 years. None of the Company’s leases contain residual value guarantees or restrictive covenants. Supplemental cash flow information For the three months ended March 31, 2024 2023 Supplemental cash flow information Cash paid for amounts included in operating lease liability $ 270,634 $ 373,840 Cash paid for amounts included in finance lease liability $ 41,823 $ 50,000 Supplemental lease disclosures of non-cash transactions: ROU assets obtained in exchange for operating lease liabilities $ — $ 348,825 7 NOTE 4. ACCRUED STOCK PAYABLE The following tables summarize the changes in accrued common stock payable: Number of Amount Shares Balance as of December 31, 2022 $ 60,900 100,000 Stock issued — — Balance as of December 31, 2023 $ 60,900 100,000 Stock issued — — Balance as of March 31, 2024 $ 60,900 100,000 The outstanding balance of accrued stock payable as of March 31, 2024 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 March 31, 2024, none of the stock had been issued. NOTE 5. NOTES PAYABLE Our notes payable consisted of the following: March 31, 2024 December 31, 2023 Third-party Related-party Total Third-party Related-party Total 2022 12% Notes $ 13,167,796 332,204 13,500,000 $ 13,167,796 $ 332,204 $ 13,500,000 Trees Transaction Notes — 264,639 264,639 — 326,811 326,811 Green Tree Acquisition Notes — 508,476 508,476 — 562,000 562,000 Green Man Acquisition Notes 1,427,500 — 1,427,500 1,555,000 — 1,555,000 Working Capital Note 500,000 — 500,000 500,000 — 500,000 Unamortized debt discount ( 1,194,346 ) ( 22,891 ) ( 1,217,237 ) ( 1,312,427 ) ( 25,141 ) ( 1,337,568 ) Total debt 13,900,950 1,082,428 14,983,378 13,910,369 1,195,874 15,106,243 Less: Current portion ( 725,428 ) ( 264,639 ) ( 990,067 ) ( 605,000 ) ( 487,382 ) ( 1,092,382 ) Long-term portion $ 13,175,522 $ 817,789 $ 13,993,311 $ 13,305,369 $ 708,492 $ 14,013,861 Trees Transaction Notes 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. As of March 31, 2024 and 2023, the debt balance of this note was $ 264,639 and $ 224,508.96 , respectively. 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 monthly installments over a period of 18 months. The 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 $ 31,146 and $ 37,250 for the three months ended March 31, 2024 and 2023, respectively. 12% Notes – 2023 Modification On December 15, 2023, the Company entered into Amended and Restated Senior Secured Convertible Notes with certain accredited investors to modify the original terms of the 12 % Notes. We recorded amortization of debt discount expense from the 12 % Notes of $ 89,184 and $ 76,699 for the years ended March 31, 2024 and 2023, respectively. 8 NOTE 6. COMMITMENTS AND CONTINGENCIES Legal 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. NOTE 7. STOCKHOLDERS’ EQUITY 2021 Preferred stock dividends The Company’s Series A Preferred is convertible into 300 shares of common stock per share of Series A Preferred Stock upon the consummation of a capital raise of not less than $ 5,000,000 . Series A Preferred Stock has no par value per share and has the following rights, restrictions, preferences and privileges summarized as follows: ● Authorized Number of Shares – 5,000 ● Voting Rights – None ● Dividends – 6 % per annum, ‘paid in kind’ in shares of Series A Preferred ● Conversion – Each share of Series A Preferred is mandatorily convertible into 300 shares of Common Stock upon a minimum capital raise of $ 5,000,000 ; sale, merger or business combination of the Company; or the Company listing on a national securities exchange. ● Redemption – No rights of redemption by 2021 Investors, nor mandatory redemption As of March 31, 2024 and December 31, 2023, we have recorded accrued dividends of $ 123,900 and $ 106,200 , respectively. Dividends were $ 17,700 and $ 17,700 for the three months ended March 31, 2024 and 2023, respectively. Stock-based compensation Stock-based Awards As of March 31, 2024, 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 March 31, 2024, stock-based awards for approximately 17.5 million shares are available to be issued under the Stock Incentive Plans. Stock Options The following summarizes Employee Awards activity: Weighted- Weighted- Average Average Remaining Number of Exercise Price Contractual Aggregate Shares per Share Term (in years) Intrinsic Value Outstanding as of December 31, 2023 4,796,825 $ 1.08 4.4 $ 22,000 Granted — — Forfeited or expired — — Outstanding as of March 31, 2024 4,796,825 $ 1.08 4.2 $ 22,000 Exercisable as of March 31, 2024 4,796,825 $ 1.08 4.2 $ 22,000 As of March 31, 2024, there was no unrecognized compensation expense related to unvested employee awards. We recorded nil in compensation expense for the three months ended March 31, 2024 and 2023, respectively. 9 Restricted Stock Awards During the three months ended March 31, 2024, the Company granted 429,630 Restricted Stock Units pursuant to the 2020 Omnibus Incentive Plan to directors and an employee (“2024 RSUs”). The 2024 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 2024 RSUs is determined based on the closing price of the Company’s common stock on the grant date. The Company recorded $ 14,968 and $ 13,894 in compensation expense during the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024 none of the RSU’s have vested. A summary of the Company’s grants of restricted stock units under the 2020 Omnibus Incentive Plan is presented below: Weighted- Average Number of Grant Shares Date Value Outstanding as of December 31, 2023 2,240,462 $ 0.04 Granted 429,630 0.07 Forfeited or expired — — Outstanding as of March 31, 2024 2,670,092 $ 0.5 Contingent Earnout Liability 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 . 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. In November 2023, the Company transferred a majority of the Green Tree Entities back to the original owners. 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. The fair value of the contingent earnout liability was $ 469,907 and $ 367,056 at March 31, 2024 and December, 31 2023, respectively. The change in fair value in the three months ended March 31, 2024 resulted in a loss on change in fair value of $ 102,851 . The contingent earnout liability remained after the Green Tree Acquisition was partially reversed in Q3 2023. NOTE 8. RELATED PARTY TRANSACTIONS 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 party. 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 $ 50,000 and $ 50,000 for the three months ended March 31, 2024 and 2023, 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 an executive-level employee of the Company. This acquisition was subsequently reversed in Q3 of 2023. 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. The owner of Dalton Adventures, LLC is a principal shareholder and former board member of the Company. We have incurred $ 30,000 and $ 75,848 in related party lease expense for the three months ended March 31, 2024 and 2023, respectively. See Note 3 for further discussion of the Company’s obligations associated with related party leases. 10 NOTE 9. SEGMENT INFORMATION Our operations are organized into two segments: Retail and Cultivation. 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. Three months ended March 31, 2024 Retail Cultivation Eliminations Total Revenues $ 3,685,881 $ 248,642 $ ( 248,642 ) $ 3,685,881 Costs and expenses ( 3,116,260 ) ( 608,286 ) 248,642 ( 3,475,904 ) Segment operating income $ 569,621 $ ( 359,644 ) $ — 209,977 Corporate expenses ( 1,462,756 ) ERC Credits — Net loss from continuing operations before income taxes $ ( 1,252,779 ) 2023 Retail Cultivation Eliminations Total Revenues $ 5,110,619 $ 684,017 $ ( 684,017 ) $ 5,110,619 Costs and expenses ( 4,535,568 ) ( 1,139,573 ) 684,017 ( 4,991,124 ) Segment operating income $ 575,051 $ ( 455,556 ) $ — 119,495 Corporate expenses ( 1,920,293 ) Net loss from continuing operations before income taxes $ ( 1,800,798 ) March 31, December 31, Total assets 2024 2023 Retail $ 20,017,565 $ 20,491,961 Cultivation 1,888,387 1,736,685 Corporate 394,048 1,018,247 Total assets – segments 22,300,000 23,246,893 Intercompany eliminations — — Total assets – consolidated $ 22,300,000 $ 23,246,893 11