What changed in this filing

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Item 1. Financial Statements

2022-08-12 compared with 2022-05-13 · 173 added, 80 removed, 481 unchanged (34% of the section changed)

FINANCIAL STATEMENTS

GENERAL CANNABIS CORP

TREES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, 2022

June 30, 2022

December 31, 2021

11 unchanged sentences

Current liabilities

Accounts payable

Interest payable

23 unchanged sentences

See Notes to condensed consolidated financial statements.

GENERAL CANNABIS CORP

TREES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended

Six months ended

Cultivation sales

7 unchanged sentences

Total costs and expenses

Operating loss

Operating income (loss)

( 1,753,869 )

Other expenses (income)

1 unchanged sentence

Interest expense

Loss on derivative liability

Other expenses, net

(Gain) loss on derivative liability

(Gain) loss on sale of assets

Total other expenses, net

1 unchanged sentence

( 1,053,176 )

( 1,049,287 )

( 3,398,792 )

Provision for income taxes

1 unchanged sentence

( 1,053,176 )

( 1,049,287 )

( 3,398,792 )

Income (loss) from discontinued operations, net of tax

( 1,376,253 )

( 1,044,004 )

( 3,735,321 )

Per share data - basic and diluted

4 unchanged sentences

See Notes to condensed consolidated financial statements.

GENERAL CANNABIS CORP

TREES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three months ended March 31,

Six months ended June 30,

Cash flows from operating activities

( 1,044,004 )

( 3,735,321 )

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

3 unchanged sentences

Bad debt expense

Loss on disposal of property and equipment

(Gain) loss on disposal of property and equipment

Loss on warrant derivative liability

4 unchanged sentences

Accounts payable and accrued liabilities

( 1,034,883 )

Operating lease liabilities

Net cash provided by (used) in operating activities:

Net cash used in operating activities:

( 2,698,971 )

1 unchanged sentence

Purchase of property and equipment

Proceeds for sale of equipment

Proceeds on notes receivable

1 unchanged sentence

Proceeds from sale of investment

Net cash used in investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities

16 unchanged sentences

See Notes to condensed consolidated financial statements.

GENERAL CANNABIS CORP

TREES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

IN STOCKHOLDERS’ EQUITY (DEFICIT)

For the three months ended March 31, 2022

For the three months ended June 30, 2022

Preferred Stock

Paid-in Capital

April 1, 2022

( 84,681,871 )

Share-based compensation

June 30, 2022

( 84,864,819 )

For the three months ended June 30, 2021

Preferred Stock

Paid-in Capital

April 1, 2021

( 77,310,504 )

Common stock issued upon exercise of stock options

Warrants issued with 10 % Notes

Beneficial conversion feature

Stock-based compensation

( 1,376,253 )

June 30, 2021

( 78,686,757 )

For the six months ended June 30, 2022

Preferred Stock

Paid-in Capital

January 1, 2021

3 unchanged sentences

Share-based compensation

March 31, 2022

( 1,044,004 )

For the three months ended March 31, 2021

( 1,044,004 )

June 30, 2022

( 84,864,819 )

For the six months ended June 30, 2021

Preferred Stock

7 unchanged sentences

Cashless exercise of warrants

Share-based compensation

Stock-based compensation

( 3,735,321 )

March 31, 2021

June 30, 2021

( 78,686,757 )

See Notes to condensed consolidated financial statements.

GENERAL CANNABIS CORP

TREES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1 unchanged sentence

Nature of Operations

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

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

On June 8, 2022, our shareholders, upon recommendation of the Board, approved an amendment to our Amended and Restated Articles of Incorporation at our 2022 Annual Meeting of Stockholders.

The amendment to our Amended and Restated Articles of Incorporation was filed with the Secretary of State of the State of Colorado on June 8, 2022 and formally changed the name of the Company to TREES Corporation.

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

As of March 31, 2022, our operations are segregated into the following segments:

The trading symbol did not change with the name change.

As of June 30, 2022, our operations are segregated into the following segments:

Retail (“Retail Segment”)

Through our acquisition of TDM, LLC (“TREES Englewood”) in September 2021, our acquisition of Trees Portland, LLC, Trees Waterfront, LLC in December 2021 and our acquisition of Trees MLK, LLC in January 2022, we operate a retail dispensary store in Englewood, Colorado and three retail stores in Portland, Oregon.

The Trees MLK location, located in Portland, Oregon, is currently not in operation.

This location should be operational in the second quarter of 2022.

Cultivation (“Cultivation Segment”)

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

During the three months ended March 31, 2022 and 2021, 45 % and 18 % of SevenFive’s revenue was with one customer, respectively.

During the three months ended June 30, 2022 and 2021, 78 % and 11 % of SevenFive’s revenue was with one customer, respectively.

During the six months ended June 30, 2022 and 2021, 59 % and 11 % was with one customer, respectively.

The customer is a related party dispensary and the revenues associated with this customer is eliminated in consolidation.

Discontinued Operations - Operations Consulting and Products (“Operations Segment”)

10 unchanged sentences

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.

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

GAAP") can be condensed or omitted.

The condensed consolidated balance sheet for the year ended December 31, 2021, 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 consolidated

financial statements and notes thereto of the Company for the year ended December 31, 2021, which were included in the annual report on Form 10-K filed by the Company on March 25, 2022.

The information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto of the Company for the year ended December 31, 2021, which were included in the annual report on Form 10-K filed by the Company on March 25, 2022.

In the opinion of management, these 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, 2022, are not necessarily indicative of the operating results for the year ending December 31, 2022, or any other interim or future periods.

The results for the three and six months ended June 30, 2022, are not necessarily indicative of the operating results for the year ending December 31, 2022, 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.

18 unchanged sentences

Going Concern

We incurred net losses of $ 861,056 and $ 2,359,068 during the three months ended March 31, 2022, and 2021, respectively, and had an accumulated deficit of $ 84,681,871 as of March 31, 2022.

We had cash and cash equivalents of $ 1,651,063 and $ 2,054,050 as of March 31, 2022, and December 31, 2021, respectively.

We incurred net losses of $ 182,948 and $ 1,044,004 during the three and six months ended June 30, 2022, respectively, and $ 1,376,253 and $ 3,735,321 for the three and six months ended June 30, 2021, respectively, and had an accumulated deficit of $ 84,864,819 as of June 30, 2022.

We had cash and cash equivalents of $ 1,072,896 and $ 2,054,050 as of June 30, 2022, and December 31, 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.

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 convertible debt.

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 convertible debt.

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

We believe that our cash and cash equivalents as of March 31, 2022, will be sufficient to fund our operating expenses and capital expenditure requirements for at least twelve months from the date of filing this Quarterly Report on Form 10-Q due to the receipt of an additional $ 1.2 million of cash in September 2021 from the issuance of preferred stock and the acquisition of three dispensaries (See Note 2 for further information).

We may need additional funding to support our planned investing activities.

As a result, we have concluded that there is substantial doubt about our ability to continue as a going concern.

Our independent registered public accounting firm, in its report on our consolidated financial statements for the year ended December 31, 2021, has also expressed substantial doubt about our ability to continue as a going concern.

Our 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 support our planned investing activities.

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.

17 unchanged sentences

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.

As of June 30, 2022, we have completed the preliminary allocation of the purchase price.

Based on the preliminary purchase price, there was an adjustment from the tradename to goodwill in the amount of $ 3,601,000 .

As of June 30, 2022, the purchase price allocation is being reviewed and is not yet completed.

Management anticipates completing the final review of the purchase price allocation as soon as possible.

As of June 30, 2022, the condensed consolidated balance sheet includes an allocation of cash, fixed assets, inventory, intangible assets and goodwill.

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

2 unchanged sentences

Three months ended

Six months ended

Total revenues

8 unchanged sentences

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.

As of June 30, 2022, we have completed the preliminary allocation of the purchase price.

Based on the preliminary purchase price, there was an adjustment from the tradename to goodwill in the amount of $ 341,000 .

As of June 30, 2022, the purchase price allocation is being reviewed and is not yet completed.

Management anticipates completing the final review of the purchase price allocation as soon as possible.

As of June 30, 2022, the condensed consolidated balance sheet includes an allocation of cash, fixed assets, inventory, intangible assets and goodwill.

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

2 unchanged sentences

Three months ended

Six months ended

Total revenues

7 unchanged sentences

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 consideration is $ 1,342,076 .

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 consideration is $ 1,342,076 .

Further, cash equal to $ 384,873 will be paid to the sellers in equal monthly installments over a period of 24 months from the MLK closing.

The dispensary is a non-operating dispensary.

We will be opening the store in the second quarter of 2022.

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

We opened the dispensary in the second quarter of 2022.

As of June 30, 2022, we have completed the preliminary allocation of the purchase price.

Based on the preliminary purchase price, there was an adjustment from the tradename to goodwill in the amount of $ 912,000 .

As of June 30, 2022, the purchase price allocation is being reviewed and is not yet completed.

Management anticipates completing the final review of the purchase price allocation as soon as possible.

As of June 30, 2022, the condensed consolidated balance sheet includes an allocation of fixed assets, intangible assets and goodwill.

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

2 unchanged sentences

Three months ended

Six months ended

Total revenues

4 unchanged sentences

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.

We have not completed the allocation of the purchase price for the Trees acquisition.

As of March 31, 2022, the consolidated balance sheets include 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 dates.

DISCONTINUED OPERATIONS

12 unchanged sentences

A summary of the discontinued operations for the Operations Segment is presented as follows:

Three months ended March 31,

Three months ended

Six months ended

Product revenues

8 unchanged sentences

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 Operations Segment for the three months ended March 31, 2022 and 2021.

Three months ended

The following table provides selected information on cash flows related to discontinued operations for the Operations Segment for the six months ended June 30, 2022 and 2021.

Six months ended

Accounts receivables

10 unchanged sentences

Inventories, net

On September 2, 2021, we entered into a commercial real estate lease with a related party (see Note 11) for retail space for our dispensary in Englewood, CO, with an initial term of five years and, at our option, two additional terms of three years each.

On September 2, 2021, we entered into a commercial real estate lease with a related party (see Note 11) for retail space for our dispensary in Englewood, CO, with an initial term of 5 years and, at our option, two additional terms of 3 years each.

Rent is $ 10,000 per month with 3 % annual escalations during the initial term and 4 % annual escalations during the option term.

We also pay our portion of real estate taxes.

We determined the present value of the future lease payments using a discount rate of 20 % over a 11 year term, resulting in a right-of-use asset and lease liability of $ 602,140 which are being applied ratably over the term of the lease.

As of March 31, 2022, the balance of the right-of-use asset and lease liability was $ 578,227 and $ 591,321 , respectively.

In June 2022, we amended the lease to amend the option to renew for two additional terms of 3 years each, amended to one additional term of 5 years .

No other changes to the lease were made.

We accounted for the amendment as a lease modification and remeasured the lease with an incremental borrowing rate of 20 % which resulted in a decrease of $ 25,805 to the right-of-use operating lease asset and lease liability from the initial lease valued on September 2, 2021.

We determined the present value of the future lease payments using a discount rate of 20 % over a 9.25 remaining year term, resulting in a right-of-use asset and lease liability of $ 576,335 which are being applied ratably over the remaining term of the lease.

As of June 30, 2022, the balance of the right-of-use asset and lease liability was $ 564,568 and $ 566,335 , respectively.

Through the acquisition of Trees Englewood, we entered into a commercial real estate lease for office space in Denver, CO.

4 unchanged sentences

We determined the present value of the future lease payments using a discount rate of 20 % over a 15-month term, resulting in a right-of-use asset and lease liability of $ 98,211 which are being applied ratably over the term of the lease.

As of March 31, 2022, the balance of the right-of-use asset and lease liability was $ 54,496 and $ 54,724 , respectively.

As of June 30, 2022, the balance of the right-of-use asset and lease liability was $ 34,903 and $ 35,046 , respectively.

Through the acquisition of Trees Portland, we entered into a commercial real estate lease in Portland, OR.

3 unchanged sentences

We determined the present value of the future lease payments using a discount of 20 % over a 5.5 -year term, resulting in a right-of-use asset and lease liability of $ 229,501 .

As of March 31, 2022 , the balance of the right-of-use asset and lease liability was $ 219,275 and $ 221,586 , respectively.

As of June 30, 2022 , the balance of the right-of-use asset and lease liability was $ 212,596 and $ 216,706 , respectively.

Through the acquisition of Trees Waterfront, we entered into a commercial real estate lease in Portland, OR.

4 unchanged sentences

We determined the present value of the future lease payments using a discount rate of 20 % over a 10-year term, resulting in a right-of-use asset and lease liability of $ 381,272 .

As of March 31, 2022 , the balance of the right-of-use asset and lease liability was $ 370,529 and $ 373,702 , respectively.

As of June 30, 2022 , the balance of the right-of-use asset and lease liability was $ 365,959 and $ 371,705 , respectively.

Through the acquisition of Trees MLK, we entered into a commercial real estate lease in Portland, OR.

5 unchanged sentences

As of March 31, 2022 , the balance of the right-of-use asset and lease liability was $ 163,310 and $ 167,170 , respectively.

In April 2022, we entered into an Amendment to Lease with Dalton Farms, LLC, the landlord of our grow facility.

Pursuant to the Lease Amendment, commencing April 1, 2022, base rent decreases to $ 27,000 per month for the

remainder of 2022.

Increases in base rent become effective January 1, 2023 and are as otherwise provided for in the original lease.

We accounted for the amendment as a lease modification and remeasured the lease with an incremental borrowing rate of 20 % which resulted in a decrease of $ 173,716 to the right-of-use operating lease asset and lease liability from the first amended lease valued in December 2021.

We determined the present value of the future lease payments using a discount rate of 20 % over a 13 remaining year term, resulting in a right-of-use asset and lease liability of $ 1,703,707 which are being applied ratably over the remaining term of the lease.

As of June 30, 2022, the balance of the right-of-use asset and lease liability was $ 1,664,144 and $ 1,678,613 , respectively.

Future remaining minimum lease payments were as follows:

Year ending December 31,

2022 (remaining nine months)

2022 (remaining six months)

Present value adjustment

7 unchanged sentences

( 1,669,537 )

Balance as of March 31, 2022

Balance as of June 30, 2022

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

13 unchanged sentences

Long-term portion

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 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 previously issued 15 % notes 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.

1 unchanged sentence

The 10 % Notes 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

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 % Investors have the option at any time 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.

1 unchanged sentence

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 .

We recorded amortization of debt discount expense from the 10 % Notes of $ 21,393 for the three months ended March 31, 2022 and 2021, respectively.

We recorded amortization of debt discount expense from the 10 % Notes of $ 21,630 for the three months ended June 30, 2022 and 2021 and $ 43,023 during the six months ended June 30, 2022 and 2021.

We determined there was no beneficial conversion feature on the 10 % Notes issued in December 2020.

18 unchanged sentences

We recorded $ 417,539 as additional paid in capital and a debt discount and included in our consolidated statement of operations.

We recorded amortization of debt discount expense from the 10 % Notes issued in February 2021 of $ 69,603 and $ 28,531 for the three months ended March 31, 2022 and 2021, respectively.

We recorded amortization of debt discount expense from the 10 % Notes issued in February 2021 of $ 70,377 for the three months ended June 30, 2022 and 2021 and $ 139,980 and $ 109,818 during the six months ended June 30, 2022 and 2021, respectively.

The 10 % Notes are treated as conventional debt.

7 unchanged sentences

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.

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.

6 unchanged sentences

We recorded $ 692,500 as additional paid in capital and a debt discount and included in our consolidated statement of operations.

We recorded amortization of debt discount expense from the 10 % Notes issued in April 2021 of $ 123,285 and nil for the three months ended March 31, 2022 and 2021, respectively.

We recorded amortization of debt discount expense from the 10 % Notes issued in April 2021 of $ 124,654 and $ 100,949 for the three months ended June 30, 2022 and 2021, respectively and $ 247,939 and $ 100,949 for the six months ended June 30, 2022 and 2021, respectively.

The 10 % Notes are treated as conventional debt.

12 unchanged sentences

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.

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.

2 unchanged sentences

We booked an adjustment to the derivative liability of $ 1,523,117 as a result.

As of March 31, 2022, there were 322,807 of the 2019 Warrants outstanding.

As of June 30, 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

5 unchanged sentences

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:

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

Beginning balance

20 unchanged sentences

Feinsod's resignation was voluntary, and that any such potential claims, if asserted, would be without substantial merit.

Although the outcome of legal proceedings is subject to uncertainty, the Company will vigorously defend any future claims made by Mr.

Although the outcome of legal proceedings is

subject to uncertainty, the Company will vigorously defend any future claims made by Mr.

Feinsod alleging a "Good Reason"

23 unchanged sentences

We use the fair value method to account for stock-based compensation.

We recorded $ 76,117 and $ 103,932 in compensation expense for the three months ended March 31, 2022 and 2021, respectively.

We recorded $ 28,886 and $( 41,648 ) in compensation expense for the three months ended June 30, 2022 and 2021, respectively and $ 105,001 and $ 62,284 for the six months ended June 30, 2022 and 2021, respectively.

This includes expense related to options issued in prior years for which the requisite service period for those options includes the current period as well as options issued in the current period.

3 unchanged sentences

As a result of the modification, we recognized an additional $ 21,525 in compensation expense during the third quarter of 2021.

During the three months ended March 31, 2022, we granted options to purchase 125,000 common shares to directors.

During the six months ended June 30, 2022, we granted options to purchase 250,000 common shares to directors.

The options expire five years from the date of grant and vest over a period of one year .

6 unchanged sentences

Forfeited or expired

Outstanding as of March 31, 2022

Exercisable as of March 31, 2022

As of March 31, 2022, there was approximately $ 66,574 of total unrecognized compensation expense related to unvested employee awards, which is expected to be recognized over a weighted-average period of two months .

Outstanding as of June 30, 2022

Exercisable as of June 30, 2022

As of June 30, 2022, there was approximately $ 55,997 of total unrecognized compensation expense related to unvested employee awards, which is expected to be recognized over a weighted-average period of two months .

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 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 .

The expense recognized in relation to the RSU’s for the three and six months ended June 30, 2022 was $ 13,500 .

As of June 30, 2022, none of the RSU’s have vested.

RELATED PARTY TRANSACTIONS

1 unchanged sentence

Hershey is paid an initial monthly rate of $ 8,333 for the services, subject to certain adjustments.

We paid $ 24,999 for the three months ended March 31, 2022 and 2021, respectively.

We paid $ 24,999 for the three months ended June 30, 2022 and 2021 and $ 49,998 for the six months ended June 30, 2022 and 2021.

We currently have a lease agreement with Dalton Adventures, LLC in which we rent 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 owner of Dalton Adventures, LLC is a principal shareholder and board member of the Company.

We incurred approximately $ 112,000 and $ 115,000 in rent expense for the three months ended March 31, 2022 and 2021, respectively.

In April 2022, we amended the lease agreement with Dalton Adventures, LLC.

See Note 13 for discussion.

We currently have a lease agreement with Bellewood Holdings, LLC in which we rent retail space for the Trees Englewood retail store in Englewood, Colorado for $ 10,000 per month.

We have paid approximately $ 89,073 and $ 115,000 in rent for the three months ended June 30, 2022 and 2021, respectively and $ 192,627 and $ 230,000 in rent for the six months ended June 30, 2022 and 2021, respectively.

We had a lease agreement with Bellewood Holdings, LLC in which we rented 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 Bellewood Holdings, LLC is a principal shareholder and board member of the Company.

We incurred approximately $ 36,000 and nil of rent expense for the three months ended March 31, 2022 and 2021, respectively.

In June 2022, the building was sold to an unrelated party.

We paid approximately $ 22,574 and nil of rent expense for the three months ended June 30, 2022 and 2021, respectively and $ 52,287 and nil for the six months ended June 30, 2022 and 2021, respectively.

On December 23, 2020, four of our current board members purchased senior convertible promissory notes from the Company for an aggregate amount of $ 320,000 .

These notes are included in the 10 % Notes discussed in Note 7.

Accrued interest earned and owed to the board members was $ 41,435 as of March 31, 2022.

Accrued interest earned and owed to the board members was $ 37,344 as of June 30, 2022.

SEGMENT INFORMATION

6 unchanged sentences

The following information is presented net of discontinued operations.

Three months ended March 31

Three months ended June 30,

Costs and expenses

11 unchanged sentences

( 1,053,176 )

Six months ended June 30,

Total revenues

Costs and expenses

( 4,755,913 )

( 1,122,281 )

( 5,363,732 )

Operating (loss) income

Corporate expenses

( 2,494,590 )

Net loss from continuing operations before income taxes

( 1,049,287 )

Total revenues

Costs and expenses

( 1,475,423 )

( 1,458,553 )

Operating income

Corporate expenses

( 3,288,180 )

Net loss from continuing operations before income taxes

( 3,398,792 )

Total assets - segments

2 unchanged sentences

SUBSEQUENT EVENTS

On April 5, 2022, we entered into an Amendment to Lease with Dalton Farms, LLC, the landlord of our grow facility.

Pursuant to the Lease Amendment, commencing April 1, 2022, base rent is decreased to $ 27,000 per month for the remainder of 2022.

Increase in base rent become effective January 1, 2023 and are as otherwise provided for in the original lease.

We performed an evaluation of subsequent events through the date of filing of these condensed consolidated financial statements with the SEC.

There were no material subsequent events which affected, or could affect, the amounts or disclosures in the condensed consolidated financial statements.

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