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Item 1. Financial Statements

2024-08-09 compared with 2024-05-14 · 389 added, 304 removed, 197 unchanged (78% of the section changed)

FINANCIAL STATEMENTS

TREES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS

June 30, 2024

December 31, 2023

Current assets

40 unchanged sentences

Total liabilities and stockholders’ equity (deficit)

See Notes to unaudited condensed consolidated

financial statements.

TREES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Notes to unaudited condensed consolidated financial statements.

CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended

Six months ended

Cultivation sales

Total revenue

6 unchanged sentences

Total costs and expenses

Operating loss

Operating income (loss)

( 1,470,733 )

( 2,641,850 )

Other income (expenses)

1 unchanged sentence

Interest expense

( 1,010,915 )

( 1,166,039 )

Gain on derivative liability

Loss on contingent earnout

Gain on contingent earnout

Loss on sale of assets

Total other income (expenses)

Net loss before income taxes

( 1,195,103 )

Net income (loss) from operations before income taxes

( 2,036,155 )

( 1,197,324 )

( 3,836,953 )

Provision for income taxes

1 unchanged sentence

( 1,327,070 )

Loss from operations

( 1,134,632 )

( 2,036,155 )

( 2,524,394 )

( 3,922,689 )

Accrued preferred stock dividend

2 unchanged sentences

$ ( 2,036,155 )

Per share data - basic and diluted

$ ( 2,542,094 )

$ ( 3,940,389 )

Basic and diluted loss per common share

Net loss attributable to common stockholders’ per share

Weighted average number of common shares outstanding

See Notes to unaudited condensed consolidated

financial statements.

TREES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three months ended March 31,

Basic and diluted weighted average common shares outstanding

Notes to unaudited condensed consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six months ended June 30,

Cash flows from operating activities

2 unchanged sentences

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

Amortization of debt discount

Amortization of debt discount and equity issuance costs

Depreciation and amortization

Amortization of right of use lease assets

Non-cash lease expense

Bad debt expense

Loss (gain) on disposal of property and equipment

Loss (gain) on contingent earnout

12 unchanged sentences

Cash flows from financing activities

Payments on notes payable and finance lease

Net cash (used in) financing activities

Payments on notes payable

Payments on finance lease

Proceeds from notes payable

Net cash (used in) provided by financing activities

Net decrease in cash and cash equivalents

6 unchanged sentences

Non-cash investing & financing activities

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

Non-cash debt issuance for acquisition of Station 2 assets

Issuance of accrued stock

See Notes to unaudited condensed consolidated

financial statements.

TREES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

IN STOCKHOLDERS’ EQUITY

For the three months ended March 31, 2024

Accrued dividends

Non-cash extinguishment of debt for Trees MLK Assets

Notes to unaudited condensed consolidated financial statements.

CONSOLIDATED STATEMENTS OF CHANGES

STOCKHOLDERS’ EQUITY

For the three months ended June 30, 2024

Preferred Stock

April 1, 2024

$ ( 101,891,802 )

$ ( 1,244,335 )

Share-based compensation

Capital contribution related to the forgiveness of the Trees MLK Note

( 1,134,632 )

June 30, 2024

$ ( 103,026,434 )

$ ( 2,114,328 )

For the three months ended June 30, 2023

Preferred Stock

April 1, 2023

$ ( 95,288,616 )

Share-based compensation

( 2,036,155 )

June 30, 2023

$ ( 97,324,771 )

For the six months ended June 30, 2024

Preferred Stock

January 1, 2024

1 unchanged sentence

Share-based compensation

Capital contribution related to the forgiveness of the Trees MLK Note

Dividend on Preferred Stock

1 unchanged sentence

( 2,524,394 )

March 31, 2024

June 30, 2024

$ ( 103,026,434 )

$ ( 2,114,328 )

For the three months ended March 31, 2023

For the six months ended June 30, 2023

Preferred Stock

5 unchanged sentences

( 3,922,689 )

March 31, 2023

$ ( 95,288,616 )

June 30, 2023

$ ( 97,324,771 )

See Notes to unaudited condensed consolidated

financial statements.

TREES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

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

● Englewood, Colorado

o 5005 S Federal Boulevard – Recreational license only

● Denver, Colorado

o East Hampden Avenue (formerly Green Man) – Recreational license only

● Longmont, Colorado

107 th Street (formerly Green Tree/Ancient Alternatives) – Medical and Recreational

● 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.

Notes to unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NATURE OF OPERATIONS, HISTORY, AND PRESENTATION

of Operations

Corporation, a Colorado Corporation (the “Company,” “we,” “us,” or “our,”) is a cannabis

retailer and cultivator in the States of Colorado and Oregon.

presently operate six (6) cannabis dispensaries as follows:

S Federal Boulevard – Recreational license only

Hampden Avenue (formerly Green Man) – Recreational license only

107 th Street (formerly Green Tree/Ancient Alternatives) – Medical

and Recreational licenses

(3) in Oregon

Corbett Avenue, Portland, OR – Medical and Recreational licenses

102 nd Avenue, Portland, OR – Medical and Recreational licenses

NE MLK, Portland, OR – Medical and Recreational licenses

also operate two (2) cultivation facilities in Colorado as follows:

Farm – 3705 N.

75 th Street, Boulder – Retail cultivation license only

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.

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.

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.

the date of the Annual Report, there have been no material changes to the Company’s significant accounting policies.

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,

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.

of Presentation

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.

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.

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 six

months ended June 30, 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.

Reclassifications

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

These reclassifications had no effect on

the reported results of operations.

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

instruments that potentially subject us to significant concentrations of credit risk consisted primarily of cash and accounts receivable.

and Revenue Concentrations – Cultivation Segment

During the three months ended June 30, 2024 and 2023, 100 % of SevenFive’s

revenue was with three customers and 81 % of SevenFive’s revenue was with two customers, respectively.

During the six months ended

June 30, 2024 and 2023, 100 % of SevenFive’s revenue was with three customers and 77 % of SevenFive’s revenue was with two customers,

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.

our operating losses to continue into the foreseeable future as we continue to execute our acquisition and growth strategy.

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.

INVENTORIES, NET

The customers in 2024 are related party dispensaries and the revenues associated with these customers are eliminated in

consolidation.

During the three months ended June 30, 2024 and 2023, 100 % of Hillside

Cultivation’s (formerly noted as Green Tree) revenue was with three customers, and 90 % of Hillside Cultivation’s (formerly

noted as Green Tree) revenue was with four customers, respectively.

During the six months ended June 30, 2024 and 2023, 100 % of Hillside

Cultivation’s (formerly noted as Green Tree) revenue was with three customers, and 83 % of Hillside Cultivation’s (formerly

noted as Green Tree) 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.

and Diluted Loss Per Share

presents basic earnings per share (EPS) on the face of the statements of operation.

Basic EPS is computed by dividing net income (loss)

available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period.

EPS gives effect to all dilutive potential common shares outstanding during the period including convertible debt, stock options, and

warrants, using the treasury stock method, and convertible debt instrument, using the if-converted method.

In computing diluted EPS,

the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock

options or warrants.

Diluted EPS excludes all dilutive potential shares as their effect is anti-dilutive.

The calculation

of basic and diluted net income (loss) per share is as follows:

For the three months ended June

For the six months ended

Loss Per Share:

$ ( 1,134,632 )

$ ( 2,036,155 )

$ ( 2,542,094 )

$ ( 3,940,389 )

Weighted-Average common shares outstanding

Basic net income (loss) per share

dilutive securities excluded from the basic and diluted net income per share are as follows:

For the three months ended June 30,

For the six months ended

Convertible Debt

Warrants to purchase common stock

Options to purchase common stock

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.

The Company has incurred recurring losses and negative cash flows from operations since inception

and have primarily funded its operations with proceeds from the issuance of debt and equity.

The Company incurred a net loss of $ 2,524,394

and lost $ 580,632 in cash from operations during the six months ended June 30, 2024, respectively, and had an accumulated deficit of $ 103,026,434

as of June 30, 2024.

We had cash and cash equivalents of $ 383,029 as of June 30, 2024.

The Company expects our operating losses to continue

into the foreseeable future as we continue to execute our acquisition and growth strategy.

As a result, The Company has concluded

that there is substantial doubt about its ability to continue as a going concern.

The Company’s unaudited condensed consolidated

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

The Company’s ability to continue as a going concern is dependent

upon its ability to raise additional capital to fund operations, support our planned investing activities,

and repay its debt obligations as they become due.

If the Company is unable to obtain additional

funding, the Company would be forced to delay, reduce, or eliminate some or all of our acquisition

efforts, which could adversely affect its growth plans.

of Significant Accounting Policies

our Annual Report on Form 10-K for the year ended December 31, 2023, as amended, for discussion of the Company’s significant accounting

Issued Accounting Standards

The Company does not believe that there are any new accounting pronouncements that have been issued that might have a material impact on its consolidated financial position or

results of operations.

Our inventories consisted of the following:

Raw materials

Work-in-progress and finished goods

Inventories, net

The Company’s leases consist primarily of

real estate leases for retail and cultivation facilities.

Work-in-progress

and finished goods

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

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.

lease expense is as follows:

For the three months ended March 31,

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 condensed 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 condensed 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 for the three and six months ended June 30, 2024, and June 30, 2023, is as follows:

For the three months ended June 30,

For the six months ended

Straight-line operating lease expense

1 unchanged sentence

Total operating lease expense

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:

finance lease expense for the three months ended June 30, 2024, and June 30, 2023, was approximately $ 41,824 and $ 41,823 , respectively.

The finance lease expense for the six months ended June 30, 2024, and June 30, 2023 was approximately $ 83,647 and $ 83,647 , respectively.

party lease s

of June 30, 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.

As of June 30, 2024, the ROU asset, operating lease liability, current,

and operating lease liability, non-current for the related party leases were $ 94,816 , $ 110,000 and ($ 10,581 ), respectively.

For the three

months ended June 30, 2024 and 2023, the total lease expense for related party leases was $ 30,000 and $ 127,790 , respectively.

six months ended June 30, 2024 and 2023, the total lease expense for related party leases was $ 60,000 and $ 255,580 , respectively.

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

Year ending December 31,

1 unchanged sentence

Finance lease

2024 (remaining nine months)

2024 (remaining six months)

Present value adjustment

3 unchanged sentences

Lease liability, non-current

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,

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.

of June 30, 2024, the weighted average remaining term of the Company’s operating leases is 4.75 years, and the remaining term on

the finance lease is 8.5 years.

of the Company’s leases contain residual value guarantees or restrictive covenants.

cash flow information

For the six months ended June 30,

Supplemental cash flow information

4 unchanged sentences

ACCRUED STOCK PAYABLE

The following tables summarize the changes in

accrued common stock payable:

following tables summarize the changes in accrued common stock payable:

Balance as of December 31, 2022

Balance as of December 31, 2023

Balance as of March 31, 2024

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.

Balance as of June 30, 2024

outstanding balance of accrued stock payable as of June 30, 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

As of June 30, 2024, none of the stock had been issued.

NOTES PAYABLE

Our notes payable consisted of the following:

March 31, 2024

notes payable consisted of the following:

June 30, 2024

December 31, 2023

5 unchanged sentences

Green Man Acquisition Notes

Working Capital Note

Working Capital Notes

Unamortized debt discount

6 unchanged sentences

Long-term portion

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.

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.

Transaction Notes

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 June 30, 2024 and 2023, the debt balance of this note was nil and $ 224,509 , respectively.

During the year, the Trees MLK Seller forgave the remaining principal balance $ 264,639 owed from the Trees MLK acquisition.

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

Man Acquisition Notes

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.

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 $ 36,656 and $ 38,379 for the three months ended June 30, 2024 and 2023, respectively, and $ 67,802 and $ 75,629 for the

six months ended June 30, 2024 and 2023, respectively.

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,

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 $ 117,648 and $ 77,551

for the three months ended June 30, 2024 and 2023, respectively and $ 206,832 and $ 154,250 for the six months ended June 30, 2024 and

2023, respectively.

addition to the Amended Notes, the Lead Investor agreed to provide an additional $ 250,000 in a separate note (the “2023 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 2023 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 2023 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.

June 15 th , 2024 the Lead Investor agreed to provide an additional $ 250,000 in a separate note (the “2024 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 2024 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 2024 Working Capital Note bears interest at

12 % per annum and is due and payable on September 15, 2026.

As of June 30, 2024, the balance of the Working Capital Note was $ 500,000 ,

as the Company requested and received the additional $ 250,000 optional amount.

COMMITMENTS AND CONTINGENCIES

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.

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.

STOCKHOLDERS’ EQUITY

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

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

1 unchanged sentence

● 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 ;

● 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:

Exercise Price

Term (in years)

Intrinsic Value

or the Company listing on an exchange

– No rights of redemption by 2021 Investors, nor mandatory redemption

of June 30, 2024 and December 31, 2023, we have recorded accrued dividends of $ 123,900 and $ 106,200 , respectively.

Dividends were nil

for the three months ended June 30, 2024 and 2023 and $ 17,700 and $ 17,700 for the six months ended June 30, 2024 and 2023, respectively.

of June 30, 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 June 30, 2024, stock-based awards for

approximately 17.5 million shares are available to be issued under the Stock Incentive Plans.

following summarizes Employee Awards activity:

Weighted- Average

Average Remaining

Number of Exercise Price Contractual

Shares per Share Term (in years)

Outstanding as of December 31, 2023 4,796,825 $ 1.05 2.3

Forfeited or expired ( 235,000 ) 1.53 —

Outstanding as of March 31, 2024

Exercisable as of March 31, 2024

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.

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

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:

Outstanding as of June 30, 2024 4,561,825 $ 1.00 1.94

Exercisable as of June 30, 2024 4,561,825 $ 1.00 1.94

intrinsic value of the exercisable warrants as of June 30, 2024 was $ 22,000 .

of June 30, 2024, there was no unrecognized compensation expense related to unvested employee awards.

recorded nil in compensation expense for the three months ended June 30, 2024 and 2023, respectively and nil in compensation expense

for the six months ended June 30, 2024 and 2023, respectively.

During the three months ended June 30, 2024, the Company

did not grant any Restricted Stock Units.

During the six months ended June 30, 2024, the Company granted 429,630 Restricted Stock Units

with a fair value of $ 28,656 pursuant to the 2020 Omnibus Incentive Plan to directors and an employee (“2024 RSUs”).

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.

Company recorded nil and $ 18,054 in compensation expense during the three months ended June 30, 2024, and 2023, respectively, and $ 14,968

and $ 45,450 in compensation expense during the six months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024, none of the

RSU’s have vested.

summary of the Company’s grants of restricted stock units under the 2020 Omnibus Incentive Plan is presented below:

Outstanding as of December 31, 2023

Forfeited or expired

Outstanding as of March 31, 2024

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

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

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

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.

Outstanding as of June 30, 2024

Earnout Liability

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

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.

fair value of the contingent earnout liability was $ 0 and $ 367,056 at June 30, 2024 and December, 31 2023, respectively.

The change in

fair value in the three months and six months ended June 30, 2024 resulted in a gain on change in fair value of $ 469,907 and $ 367,056 ,

respectively.

The contingent earnout liability remained after the Green Tree Acquisition was partially reversed in Q3 2023 and expired

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

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.

September 16, 2022, the Company entered into a new consulting agreement with Adam Hershey, its Interim Chief Executive Officer, pursuant

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,

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.

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 June 30, 2024 and 2023, respectively, and $ 100,000 and $ 100,000 for the six months ended June 30, 2024 and 2023, respectively.

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 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.

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.

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 $ 75,849 in related party lease expense for the three months ended June 30, 2024 and 2023, respectively,

and $ 60,000 and $ 151,698 in related party lease expense for the six months ended June 30, 2024 and 2023, respectively.

See Note 3 for

further discussion of the Company’s obligations associated with related party leases.

SEGMENT INFORMATION

Our operations are organized into two segments:

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,

All revenue originates, and all assets are located in the United

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.

months ended June 30,

Costs and expenses

( 2,981,932 )

( 2,849,552 )

Segment operating income

Corporate expenses

Net loss from continuing operations before income taxes

$ ( 926,400 )

Costs and expenses

1 unchanged sentence

( 1,046,274 )

( 5,467,142 )

Segment operating income

$ ( 267,704 )

$ ( 101,444 )

Corporate expenses

2 unchanged sentences

$ ( 2,036,155 )

months ended June 30,

Costs and expenses

( 6,098,192 )

( 6,325,483 )

Segment operating income

$ ( 227,291 )

Corporate expenses

( 2,246,844 )

Net loss from continuing operations before income taxes

$ ( 1,197,324 )

$ ( 1,610,417 )

Costs and expenses

12 unchanged sentences

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-Q

Item 1. Financial Statements