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Our Products, Services and Customers
−Removed: Through our one reporting segment Cultivation, we provide products to the regulated cannabis industry, which include the following:
+Added: Through our two reporting segments, Retail and Cultivation, we provide products to the regulated cannabis industry, which include the following:
+Added: Retail (“Retail Segment”)
+Added: Through our acquisition of TDM, LLC (“TREES Englewood”), we operate a retail dispensary store in Englewood, Colorado.
Cultivation (“Cultivation Segment”)
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We believe our production capability is sufficient to meet the diverse needs of our recreational consumers in Colorado, from cost-effective, high-yield inputs to sophisticated and dried cannabis flower.
−Removed: During the three and six months ended June 30, 2021, 11% of SevenFive’s revenue was with one customer.
+Added: During the three and nine months ended September 30, 2021, 24% and 12% of SevenFive’s revenue was with two and one customer, respectively.
Discontinued Operations - Operations Consulting and Products
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NBC also provides operational support for our internal cultivation.
−Removed: In June 2021, we began talks with an individual to begin the sale of NBC.
On July 16, 2021, we entered into an Asset Purchase Agreement with this individual to sell substantially all of 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.
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The tables and the discussion below should be read in conjunction with the accompanying condensed consolidated financial statements and the notes thereto in this report.
−Removed: Three months ended June 30,
+Added: Three months ended September 30,
Costs and expenses
3 unchanged sentences
Loss from operations before income taxes
−Removed: Six months ended June 30,
+Added: Nine months ended September 30,
Costs and expenses
3 unchanged sentences
Loss from operations before income taxes
−Removed: Revenue increased for our Cultivation Segment due to a full three and six months of revenue in 2021, as SevenFive was acquired in May 2020.
+Added: The addition of our Retail segment contributed to the significant increase in revenues for the three and nine months ended September 30, 2021.
See Segment discussions below for further details.
Costs and expenses
−Removed: Three months ended June 30,
+Added: Three months ended September 30,
Cost of sales
3 unchanged sentences
Depreciation and amortization
−Removed: Six months ended June 30,
+Added: Nine months ended September 30,
Cost of sales
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Depreciation and amortization
−Removed: Cost of sales includes costs associated with cultivation sales, which fluctuates with the changes in cultivation revenues.
+Added: Cost of sales increased year over year due to the addition of the Retail Segment in the third quarter.
See Segment discussions below for further details.
−Removed: Selling, general and administrative expense decreased for the three months and six months ended June 30, 2021 as compared to June 30, 2020 due to a reduction in employees throughout 2021 and a concerted effort by management to reduce expenses.
+Added: Selling, general and administrative expense decreased for the three months and nine months ended September 30, 2021 as compared to September 30, 2020 due to a reduction in employees throughout 2021 and a concerted effort by management to reduce expenses.
+Added: Professional fees consist primarily of accounting and legal expenses and decreased for the three and nine months ended September 30, 2021 as compared to the three and nine months ended September 30, 2020 due to the hiring of internal counsel to be more cost effective.
Stock-based compensation included the following:
−Removed: Three months ended June 30,
+Added: Three months ended September 30,
Employee awards
−Removed: Consulting awards
−Removed: Six months ended June 30,
+Added: Nine months ended September 30,
Employee awards
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Expense varies primarily due to the number of stock options granted and the share price on the date of grant.
−Removed: The decrease in expense for the three and six months ended June 30, 2021 as compared to June 30, 2020 is due to the decrease in the number of options we grant on a quarterly basis and an increase in forfeitures in 2021 due to the departure of our Chief Executive Officer in May 2021 and a reduction in workforce in 2020 and 2021.
−Removed: Professional fees consist primarily of accounting and legal expenses and decreased for the three and six months ended June 30, 2021 as compared to the three and six months ended June 30, 2020 due to the hiring of internal counsel to be more cost effective.
+Added: The decrease in expense for the three and nine months ended September 30, 2021 as compared to September 30, 2020 is due to the decrease in the number of options we grant on a quarterly basis and an increase in forfeitures in 2021 due to the departure of our Chief Executive Officer in May 2021, the departure of our Chief Financial Officer in September 2021 and a reduction in workforce in 2020 and 2021.
Other Expense
−Removed: Three months ended June 30,
+Added: Three months ended September 30,
Amortization of debt discount and equity issuance costs
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Gain on sale of assets
−Removed: Six months ended June 30,
+Added: Nine months ended September 30,
Amortization of debt discount
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Other expense (income), net
−Removed: Amortization of debt discount increased during the three and six months ended June 30, 2021 as compared to June 30, 2020 due to the senior convertible promissory notes with warrants (“10% Notes”) issued in December 2020, February 2021 and April 2021.
−Removed: Interest expense increased during the three and six months ended June 30, 2021 as compared to June 30, 2020 due to the addition of the 10% Notes with an interest rate of 10%.
+Added: Amortization of debt discount increased during the three and nine months ended September 30, 2021 as compared to September 30, 2020 due to the senior convertible promissory notes with warrants (“10% Notes”) issued in December 2020, February 2021 and April 2021.
+Added: Interest expense increased during the three and nine months ended September 30, 2021 as compared to September 30, 2020 due to the addition of the 10% Notes with an interest rate of 10%.
The gain on warrant derivative liability reflects the change in the fair value of the 2019 Warrants.
−Removed: The loss on extinguishment of debt is due to the conversion and extension of the SBI debt, and the exchange of the 12% Notes into the 15% Notes that occurred during the first quarter of 2020.
+Added: The loss on extinguishment of debt for the three and nine months ended September 30, 2021 was due to the modification of warrants that occurred on the 15% Warrants during the third quarter.
+Added: The loss on extinguishment of debt during 2020 is due to the conversion and extension of the SBI debt, and the exchange of the 12% Notes into the 15% Notes that occurred during the first quarter of 2020.
See Note 7 of the accompanying unaudited condensed consolidated financial statements for further information.
The other expense (income) in 2020 relates to the gain on the sale of the building we recognized as a result of the sale of our corporate office building in March 2020.
−Removed: Three months ended June 30,
+Added: Three months ended September 30,
Costs and expenses
−Removed: Six months ended June 30,
+Added: Nine months ended September 30,
Costs and expenses
−Removed: The increase in revenues for the three and six months ended June 30, 2021 over prior year is due to the acquisition of SevenFive Farm occurring in May 2020.
+Added: Segment operating income
+Added: With the addition of the TREES Englewood dispensary on September 2, 2021, we have established our retail footprint in the Colorado market and have become a vertically integrated company.
+Added: The Retail Segment will provide consistent positive cash flows which will significantly contribute to our working capital position.
+Added: The negative margin reported in the third quarter is primarily due to the inventory being marked to fair market value as of the acquisition date, September 2 nd , 2021.
+Added: The company expects this inventory to mostly turn over before year end and start recognizing a positive margin in the 4 th quarter of 2021.
+Added: Three months ended September 30,
+Added: Costs and expenses
+Added: Nine months ended September 30,
+Added: Costs and expenses
+Added: The increase in revenues for the three and nine months ended September 30, 2021 over prior year is due to selling premium blunts that command a higher price than traditional wholesale cannabis.
The decrease in gross margin is due to lower yields caused by several environmental factors.
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We anticipate our significant uses of resources will include funding operations and developing infrastructure.
+Added: In September 2021, we received $1,180,000 in cash in a private placement with certain accredited investors pursuant to the Series A Convertible Preferred Stock to be used for the acquisition of dispensaries and for operating capital.
+Added: (See Note 10 of the accompanying unaudited condensed consolidated financial statements).
In April 2021, we received $2,300,000 in cash in a private placement with certain accredited investors pursuant to the 10% Notes to be used for the acquisition of dispensaries (See Note 13 of the accompanying unaudited condensed consolidated financial statements).
1 unchanged sentence
Sources and uses of cash
−Removed: We had cash of $2,307,604 and $750,218 as of June 30, 2021 and December 31, 2020, respectively.
+Added: We had cash of $2,459,453 and $750,218 as of September 30, 2021 and December 31, 2020, respectively.
Our cash flows from operating, investing and financing activities were as follows:
−Removed: Six months ended June 30,
+Added: Nine months ended September 30,
Net cash used in operating activities
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Net cash provided by financing activities
−Removed: Net cash used in operating activities decreased in 2021 due to the acquisition of SevenFive Farm which provides positive operating cash flows and adjustments relating to non-cash activities.
−Removed: Net cash provided by investing activities for the six months ended June 30, 2021 decreased from June 30, 2020 due to the sale of the building in the first quarter of 2020.
−Removed: Net cash used in investing activities for the six months ended June 30, 2021 consisted of purchase of property and equipment for SevenFive Farms, offset by the sale of our investment during the first quarter and repayment of our notes receivable in the second quarter.
−Removed: Net cash provided by financing activities for the six months ended June 30, 2021 related to the payment on notes payable of $200,000, proceeds from notes payable of $3,960,000 and proceeds from the exercise of stock options of $181,709.
+Added: Net cash used in operating activities decreased in 2021 due to the acquisition of SevenFive Farm and TREES Englewood which provides positive operating cash flows and adjustments relating to non-cash activities.
+Added: Net cash provided by investing activities for the nine months ended September 30, 2021 decreased from September 30, 2020 due to the sale of the building in the first quarter of 2020.
+Added: Net cash used in investing activities for the nine months ended September 30, 2021 consisted of purchase of, Trees Colorado, LLC and the purchase of property and equipment for SevenFive Farms, offset by the sale of our investment during the first quarter and repayment of our notes receivable in the second quarter.
+Added: Net cash provided by financing activities for the nine months ended September 30, 2021 related to the payment on notes payable of $200,000, proceeds from notes payable of $3,960,000, proceeds of the preferred stock offering of $1,180,000 and proceeds from the exercise of stock options of $194,634.
Capital Resources
−Removed: We had no material commitments for capital expenditures as of June 30, 2021.
+Added: We had no material commitments for capital expenditures as of September 30, 2021.
Part of our growth strategy, however, is to acquire operating businesses.
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The following table reconciles Adjusted EBITDA to the most directly comparable GAAP measure, which is net loss.
−Removed: Three months ended June 30,
−Removed: Six months ended June 30,
+Added: Three months ended September 30,
+Added: Nine months ended September 30,
Loss from operations before income taxes
23 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.