TREES Corp (Colorado) 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ​ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ​ To the Board of Directors and Stockholders of TREES Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of TREES Corporation (the Company) as of December 31, 2022 and 2021, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years ended December 31, 2022 and 2021, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years ended, in conformity with accounting principles generally accepted in the United States of America. Substantial Doubt about the Company’s Ability to Continue as a Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a negative working capital that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Business Combination – Refer to Note 2 to the financial statements As discussed in Note 2 to the consolidated financial statements, the Company acquired several entities as follows: Trees Englewood on September 2, 2021, Trees Portland, LLC and Trees Waterfront, LLC on December 30, 2021, Trees MLK 35 Table of Contents Inc. on January 5, 2022, Green Tree entities on December 12, 2022, and Green Man Cannabis on December 19, 2022, in separate business combinations. Management of the Company estimated the preliminary allocation of the purchase price to cash, fixed assets, inventory, trade names, and goodwill based on the industry experience and values until the formal third-party valuation is completed. The accounting for the purchase price allocation is complex due to the significant estimation uncertainty in determining the fair values of identified intangibles. The Company’s third-party valuation was completed for Trees Englewood, Trees Portland, LLC, Trees Waterfront, LLC, and Trees MLK Inc. as of the year ended December 31, 2022. The Company’s third-party valuation of the rest of the entities is yet to be completed. We deem the purchase price allocation as a significant audit matter because of the significant estimates and assumptions made by management to estimate the fair value of trade names and allocation to goodwill. These estimates include the impact of forecasted growth and the consideration of comparable transactions in their industry. This required a high degree of auditor judgment and an increased extent of effort, including the use of valuation specialists. Addressing the matter involved obtaining the purchase agreements and interpreting the terms are in agreement with the assumptions used by the Company. We obtained the Company’s purchase price allocation and tested the inputs used in their calculation. In evaluating the Company’s assumptions, we compared them to other similar transactions in their industry. For valuations completed by the third-party specialist, we evaluated the expertise, qualifications, and independence of the management’s specialist engaged to complete the evaluation. Finally, we used professionals inside our firm with specialized skills and knowledge to assess the Company’s methodology. Goodwill — Refer to Note 9 to the consolidated financial statements As discussed in Note 9 to the financial statements, the Company has goodwill of $18,384,974 on December 31, 2022, after recognizing impairment expense of $2,450,941 during the year then ended. The Company evaluates its goodwill at least annually or more frequently when events or changes in circumstances indicate the carrying value may not be recoverable. The Company performed a goodwill analysis by calculating the fair value by operating segment using primarily an income approach and comparing it to the carrying amount of its goodwill. The income approach employed a discounted cash flow using a forecast developed by management. This valuation method requires management to make significant estimates and assumptions related to projected cash flows. We identified goodwill as a critical audit matter because of the significant estimates and assumptions made by management to estimate fair value, including the impact of forecasted growth, and the difference between the fair values and the carrying values as of December 31, 2022. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialist, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to certain assumptions within the projected cash flows. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included, among others, gaining an understanding of management's process for developing the fair value estimate. We also evaluated the expertise, qualifications, and independence of the management’s specialist engaged to complete the evaluation. We used professionals inside our firm with specialized skills and knowledge to assess the Company’s methodology and assumptions used such as discount rate used. In evaluating the Company’s assumptions, we compared them to historical results. ​ ​ ​ ​ ​ ​ ​ Haynie & Company Salt Lake City, Utah April 17, 2023 ​ ​ We have served as the Company’s auditor since 2021. ​ (PCAOB ID 457 ) ​ ​ ​ 36 Table of Contents ​ ​ ​ ​ ​ ​ ​ TREES CORPORATION CONSOLIDATED BALANCE SHEETS ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ December 31, 2021 Assets ​ ​ Current assets ​ ​ Cash and cash equivalents ​ $ 2,583,833 ​ $ 2,054,050 Accounts receivable, net of allowance of $ 42,000 and $ 61,000 , respectively ​ 41,373 ​ 80,188 Current portion of notes receivable, net of allowance of nil and $ 43,108 , respectively ​ ​ — ​ ​ 73,000 Inventories ​ ​ 2,066,662 ​ ​ 1,123,083 Prepaid expenses and other current assets ​ 259,598 ​ 149,075 Total current assets ​ 4,951,466 ​ 3,479,396 ​ ​ ​ ​ ​ ​ ​ Right-of-use operating lease asset ​ ​ 3,866,406 ​ ​ 3,065,152 Property and equipment, net ​ ​ 1,947,969 ​ ​ 680,327 Intangible assets, net ​ ​ 2,543,898 ​ ​ 5,999,813 Goodwill ​ ​ 18,384,974 ​ ​ 8,799,657 Total assets ​ $ 31,694,713 ​ $ 22,024,345 ​ ​ ​ ​ ​ ​ ​ Liabilities and Stockholders' Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current liabilities ​ ​ ​ Accounts payable and accrued expenses ​ $ 1,899,450 ​ $ 1,170,708 Interest payable ​ 488,813 ​ 621,085 Income tax payable ​ ​ 204,917 ​ ​ — Operating lease liability, current ​ ​ 1,433,184 ​ ​ 721,809 Finance lease liability, current ​ ​ 55,777 ​ ​ — Accrued stock payable ​ 60,900 ​ 444,894 Accrued dividends ​ ​ 88,500 ​ ​ — Warrant derivative liability ​ 5,508 ​ 28,317 Notes payable - current ​ ​ 1,903,344 ​ ​ 1,094,398 Total current liabilities ​ 6,140,393 ​ 4,081,211 ​ ​ ​ ​ ​ ​ ​ Operating lease liability, non-current ​ ​ 2,541,590 ​ ​ 2,427,762 Finance lease liability, non-current ​ ​ 706,653 ​ ​ — Notes payable - non-current (net of unamortized discount) ​ ​ 15,899,588 ​ ​ 5,907,799 Total liabilities ​ ​ 25,288,224 ​ ​ 12,416,772 ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies (Note 9) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders’ equity ​ ​ Preferred stock, no par value; 5,000,000 shares authorized; 1,180 issued and outstanding, respectively ​ ​ 1,073,446 ​ ​ 1,073,446 Common stock, $ 0.001 par value; 200,000,000 shares authorized; 118,664,094 shares and 89,551,993 shares issued and outstanding , respectively ​ ​ 118,664 ​ ​ 89,550 Additional paid-in capital ​ 98,598,761 ​ 92,265,392 Accumulated deficit ​ ( 93,384,382 ) ​ ( 83,820,815 ) Total stockholders’ equity ​ 6,406,489 ​ 9,607,573 Total liabilities and stockholders’ equity ​ $ 31,694,713 ​ $ 22,024,345 ​ ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 37 Table of Contents TREES CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ ​ 2022 ​ 2021 ​ Revenue ​ ​ ​ ​ ​ ​ ​ Retail sales ​ $ 12,934,904 ​ $ 3,515,761 ​ Cultivation sales ​ ​ 509,638 ​ ​ 2,396,966 ​ Interest ​ ​ — ​ ​ 14,472 ​ Total revenue ​ ​ 13,444,542 ​ ​ 5,927,199 ​ ​ ​ ​ ​ ​ ​ ​ ​ Costs and expenses ​ ​ ​ ​ ​ ​ ​ Cost of sales ​ ​ 8,577,487 ​ ​ 4,439,478 ​ Selling, general and administrative ​ ​ 6,557,992 ​ ​ 2,764,780 ​ Stock-based compensation ​ ​ 188,330 ​ ​ 307,963 ​ Professional fees ​ ​ 964,282 ​ ​ 927,390 ​ Depreciation and amortization ​ ​ 331,376 ​ ​ 500,574 ​ Total costs and expenses ​ ​ 16,619,467 ​ ​ 8,940,185 ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating loss ​ ​ ( 3,174,925 ) ​ ​ ( 3,012,986 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Other expenses (income) ​ ​ ​ ​ ​ ​ ​ Amortization of debt discount ​ ​ 1,817,334 ​ ​ 689,348 ​ Interest expense ​ ​ 983,181 ​ ​ 622,469 ​ Loss on extinguishment of debt ​ ​ 310,622 ​ ​ 233,374 ​ Loss on impairment of assets ​ ​ 3,004,319 ​ ​ 3,010,420 ​ (Gain) loss on derivative liability ​ ​ ( 22,809 ) ​ ​ 990,066 ​ Other expense (income), net ​ ​ 8,056 ​ ​ ( 131,512 ) ​ Total other expenses, net ​ ​ 6,100,703 ​ ​ 5,414,165 ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss from continuing operations before income taxes ​ ​ ( 9,275,628 ) ​ ​ ( 8,427,151 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Provision for income taxes ​ ​ 204,917 ​ ​ — ​ Loss from continuing operations ​ ​ ( 9,480,545 ) ​ ​ ( 8,427,151 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Income (loss) from discontinued operations, net of tax ​ ​ 5,478 ​ ​ ( 442,228 ) ​ Net loss ​ $ ( 9,475,067 ) ​ $ ( 8,869,379 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Accrued preferred stock dividend ​ ​ ( 88,500 ) ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss attributable to Common Stockholders ​ $ ( 9,563,567 ) ​ $ ( 8,869,379 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Per share data - basic and diluted ​ ​ ​ ​ ​ ​ ​ Net loss from continuing operations per share ​ $ ( 0.10 ) ​ $ ( 0.12 ) ​ Net loss from discontinued operations per share ​ $ 0.00 ​ $ ( 0.01 ) ​ Net loss attributable to common stockholders per share ​ $ ( 0.10 ) ​ $ ( 0.13 ) ​ Weighted average number of common shares outstanding ​ ​ 97,166,607 ​ ​ 69,537,731 ​ ​ ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 38 Table of Contents TREES CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2022 ​ 2021 Cash flows from operating activities ​ ​ ​ Net loss ​ $ ( 9,475,067 ) ​ $ ( 8,869,379 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ ​ Amortization of debt discount and equity issuance costs ​ 1,817,334 ​ 689,348 Depreciation and amortization ​ 331,376 ​ 511,933 Loss on extinguishment of debt ​ ​ 310,622 ​ ​ 233,374 Lease expense in excess of lease payments ​ ​ 23,949 ​ ​ 50,794 Provision for bad debt ​ ​ ( 6,280 ) ​ ​ 45,837 Impairment of assets ​ ​ 3,004,319 ​ ​ 3,010,420 Loss on disposal of property and equipment ​ ​ 8,056 ​ ​ 1,467 (Gain) loss on warrant derivative liability ​ ( 22,809 ) ​ 990,066 Stock-based compensation ​ 188,330 ​ 307,963 Gain on investment ​ ​ — ​ ​ ( 132,979 ) Changes in operating assets and liabilities, net of acquisitions ​ ​ ​ ​ Accounts receivable ​ 43,095 ​ 45,402 Prepaid expenses and other assets ​ ( 16,523 ) ​ 595,324 Inventories ​ 753,419 ​ 37,257 Income taxes ​ ​ 204,917 ​ ​ — Accounts payable and accrued liabilities ​ ​ 785,405 ​ ​ ( 168,716 ) Net cash used in operating activities: ​ ( 2,049,857 ) ​ ( 2,651,889 ) ​ ​ ​ ​ ​ ​ ​ Cash flows from investing activities ​ ​ Purchase of property and equipment ​ ( 61,611 ) ​ ( 331,834 ) Proceeds for sale of equipment ​ ​ 13,000 ​ ​ — Lending on note receivable ​ ​ — ​ ​ ( 158,356 ) Proceeds on notes receivable ​ ​ 75,000 ​ ​ 591,717 Acquisition of TDM, LLC ​ ​ — ​ ​ ( 1,122,015 ) Acquisition of Trees MLK ​ ​ ( 256,582 ) ​ ​ — Acquisition of Trees Portland, net of cash acquired ​ ​ — ​ ​ ( 238,187 ) Acquisition of Trees Waterfront, net of cash acquired ​ ​ — ​ ​ ( 78,825 ) Acquisition of Green Tree Entities, net of cash acquired ​ ​ ( 498,987 ) ​ ​ — Acquisition of Green Man Corp, net of cash acquired ​ ​ ( 1,216,406 ) ​ ​ — Net proceeds from sale of Next Big Crop ​ ​ — ​ ​ 150,000 Proceeds from sale of investment ​ ​ — ​ ​ 208,761 Net cash used in investing activities ​ ( 1,945,586 ) ​ ( 978,739 ) ​ ​ ​ ​ ​ ​ ​ Cash flows from financing activities ​ ​ ​ Proceeds from exercise of stock options ​ ​ — ​ ​ 205,519 Proceeds from preferred stock offering ​ ​ — ​ ​ 1,180,000 Proceeds from notes payable ​ ​ 6,423,320 ​ ​ 3,960,000 Payments on notes payable and finance lease ​ ​ ( 1,898,094 ) ​ ​ ( 416,610 ) Net cash provided by financing activities ​ 4,525,226 ​ 4,928,909 ​ ​ ​ ​ ​ ​ ​ Net increase in cash and cash equivalents ​ 529,783 ​ 1,298,281 Cash and cash equivalents, beginning of period ​ 2,054,050 ​ 755,769 Cash and cash equivalents, end of period ​ $ 2,583,833 ​ $ 2,054,050 ​ ​ ​ ​ ​ ​ ​ Supplemental schedule of cash flow information ​ ​ Cash paid for interest ​ $ 589,023 ​ $ 18,174 ​ ​ ​ ​ ​ ​ ​ Non-cash investing & financing activities ​ ​ Non-cash settlement of notes payable netted against proceeds from new notes issuance ​ $ 3,300,000 ​ $ — Issuance of accrued stock ​ $ 383,994 ​ ​ ​ 12 % Warrants recorded as a debt discount and additional paid-in capital ​ $ 569,223 ​ $ — 12 % Warrants recorded as a loss on extinguishment of debt and additional paid-in capital ​ $ 103,577 ​ $ — Accrued dividends on preferred stock ​ $ 88,500 ​ $ — Cashless warrant exercise ​ $ — ​ $ 1,557,078 Beneficial conversion feature ​ $ — ​ $ 1,110,039 10 % Warrants recorded as a loss on extinguishment of debt and additional paid-in capital ​ $ — ​ $ 1,239,300 Issuance of Common Stock to a consultant ​ $ — ​ $ 142,614 The accompanying notes are an integral part of these consolidated financial statements. ​ 39 Table of Contents TREES CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ ​ ​ ​ Preferred Stock ​ Common Stock ​ Paid-in ​ Accumulated ​ ​ ​ ​ Shares ​ Amount ​ Shares Amount Capital Deficit Total January 1, 2021 ​ — ​ $ — ​ 60,813,673 ​ $ 60,813 ​ $ 75,891,414 ​ $ ( 74,951,436 ) ​ $ 1,000,791 Common Stock issued to consultants — ​ ​ — ​ 202,679 ​ ​ 203 ​ ​ 142,412 ​ ​ — ​ ​ 142,615 Common Stock issued upon exercise of stock options ​ — ​ ​ — ​ 394,670 ​ ​ 395 ​ ​ 205,124 ​ — ​ 205,519 Common Stock issued for acquisition of Trees Englewood — ​ ​ — ​ 22,380,310 ​ ​ 22,380 ​ ​ 10,384,464 ​ ​ — ​ ​ 10,406,844 Common Stock issued for acquisition of Trees Portland ​ — ​ ​ — ​ 4,754,038 ​ ​ 4,754 ​ ​ 1,088,675 ​ — ​ 1,093,429 Warrants issued with 10 % Notes — ​ ​ — ​ — ​ ​ — ​ ​ 1,239,300 ​ ​ — ​ ​ 1,239,300 Beneficial conversion feature ​ — ​ ​ — ​ — ​ ​ — ​ ​ 1,110,039 ​ ​ — ​ ​ 1,110,039 Cashless exercise of warrants ​ — ​ ​ — ​ 1,006,623 ​ ​ 1,005 ​ ​ 1,556,073 ​ ​ — ​ ​ 1,557,078 Stock-based compensation ​ — ​ ​ — ​ — ​ ​ — ​ ​ 286,438 ​ ​ — ​ ​ 286,438 Preferred shares issued ​ 1,180 ​ ​ 1,073,446 ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,073,446 Warrants issued with preferred stock ​ — ​ ​ — ​ — ​ ​ — ​ ​ 106,554 ​ ​ — ​ ​ 106,554 Modification of Warrants ​ — ​ ​ — ​ — ​ ​ — ​ ​ 233,374 ​ ​ — ​ ​ 233,374 Modification of Options ​ — ​ ​ — ​ — ​ ​ — ​ ​ 21,525 ​ ​ ​ ​ ​ 21,525 Net loss — ​ ​ — ​ — ​ — ​ — ​ ​ ( 8,869,379 ) ​ ​ ( 8,869,379 ) December 31, 2021 ​ 1,180 ​ ​ 1,073,446 ​ 89,551,993 ​ ​ 89,550 ​ ​ 92,265,392 ​ ​ ( 83,820,815 ) ​ ​ 9,607,573 Common Stock issued for acquisition of Trees Waterfront LLC — ​ ​ — ​ 1,669,537 ​ ​ 1,670 ​ ​ 382,324 ​ ​ — ​ ​ 383,994 Common Stock issued for acquisition of Trees MLK LLC ​ — ​ ​ — ​ 4,970,654 ​ ​ 4,971 ​ ​ 1,337,105 ​ ​ — ​ ​ 1,342,076 Common Stock issued for Green Tree Acquisition — ​ ​ — ​ 17,977,528 ​ ​ 17,978 ​ ​ 2,948,314 ​ ​ — ​ 2,966,292 Common Stock issued Green Man Acquisition ​ — ​ ​ — ​ 4,494,382 ​ ​ 4,495 ​ ​ 804,495 ​ ​ — ​ ​ 808,990 Warrants issued with 12 % Notes ​ — ​ ​ — ​ — ​ ​ — ​ ​ 672,801 ​ ​ — ​ ​ 672,801 Share-based compensation ​ — ​ ​ — ​ — ​ ​ — ​ ​ 188,330 ​ ​ — ​ ​ 188,330 Dividends on preferred stock — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 88,500 ) ​ ( 88,500 ) Net loss — ​ ​ — ​ — ​ — ​ — ​ ( 9,475,067 ) ​ ( 9,475,067 ) December 31, 2022 1,180 ​ $ 1,073,446 ​ 118,664,094 ​ $ 118,664 ​ $ 98,598,761 ​ $ ( 93,384,382 ) ​ $ 6,406,489 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ 40 Table of Contents TREES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. NATURE OF OPERATIONS, HISTORY AND PRESENTATION Nature of Operations TREES Corporation, a Colorado Corporation (the “Company,” “we,” “us,” “our,” or “TREES”) (formerly, General Cannabis Corp), was incorporated on June 3, 2013, and provides services and products to the regulated cannabis industry. We currently trade on the OTCQB® Market under the trading symbol CANN. As of December 31, 2022, our operations are segregated into the following segments: Retail (“Retail Segment”) Through a series of acquisitions in 2021 and 2022, we operated four retail dispensaries in Colorado and three retail dispensaries in Oregon as of December 31, 2022. See Note 2 for details of the acquisitions. We acquired the license for an additional dispensary in Colorado in February of 2023, and opened that location in April 2023. Cultivation (“Cultivation Segment”) Through our acquisition of SevenFive Farm in May 2020, we operate a licensed 17,000 square foot light deprivation greenhouse cultivation facility. We acquired additional cultivation facilities in December 2022 through the Green Tree acquisition. During 2022, there was one customer that accounted for over 10% of our third-party cultivation revenue, and during 2021 there were two customers that each accounted for over 10% of , of third -party cultivation revenue. Discontinued Operations Through Next Big Crop, LLC (“NBC”), we delivered comprehensive consulting services to the cannabis industry that included obtaining licenses, compliance, cultivation, retail operations, logistical support, facility design and construction, and expansion of existing operations. NBC oversaw our wholesale equipment and supply business, operating under the name “GC Supply,” which provided turnkey sourcing and stocking services to cultivation, retail, and infused products manufacturing facilities. Our products included building materials, equipment, consumables, and compliance packaging. NBC also provided operational support for our internal cultivation. On July 16, 2021, we entered into an Asset Purchase Agreement with an individual to sell substantially all the assets of NBC for a total of $ 150,000 and 10 % of profits generated by the buyer in the states of Michigan, Mississippi, and Massachusetts for a period of twelve months from the closing. On August 2, 2021, the sale of NBC was completed. Basis of Presentation The accompanying consolidated financial statements include the results of TREES and its nine wholly-owned (direct and indirect) subsidiary companies, each a Colorado corporation or limited liability company: ● 6565 E. Evans Owner LLC ● GC Corp ● GC Capital Corp, LLC ● GC Security LLC ● General Cannabis Capital Corporation ● Standard Cann, Inc. ● SevenFive Farms Cultivation, LLC ● SevenFive Farms, LLC ● Trees Colorado LLC 41 Table of Contents ● Trees Oregon LLC ● Green Tree Colorado LLC ● GT Cultivation LLC ● GT Retail LLC ● GT MIP LLC ● Green Man Cannabis, LLC ​ Intercompany accounts and transactions have been eliminated. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. Although these estimates are based on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ from these estimates and assumptions. Furthermore, when testing assets for impairment in future periods, if management uses different assumptions or if different conditions occur, impairment charges may result. Going Concern The consolidated financial statements have been prepared on a going concern basis, which assumes we will be able to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future. Our cash of $ 2,583,833 as of December 31, 2022 is not sufficient to absorb our operating losses and retire our debt and lease obligations of $ 22,540,136 and other obligations as they come due. Our ability to continue as a going concern is dependent upon our generating profitable operations in the future and/or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Management believes that (a) we will be successful in obtaining additional capital and (b) actions presently being taken to further implement our business plan and generate additional revenues provide the opportunity for the Company to continue as a going concern. While we believe in the viability of our strategy to generate additional revenues and our ability to raise additional funds, there can be no assurances to that effect. Accordingly, there is substantial doubt about our ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. ​ Liquidity The Company incurred net losses of $ 9.5 million and $ 8.9 million in the years ended December 31, 2022 and 2021, respectively, and had an accumulated deficit of $ 93.4 million as of December 31, 2022. The Company had cash and cash equivalents of $ 2.6 million and $ 2.1 million as of December 31, 2022 and 2021, respectively. The accompanying consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets, and the satisfaction of liabilities and commitments in the ordinary course of business. The Company has incurred recurring losses and negative cash flows from operations since inception and has primarily funded its operations with proceeds from the issuance of convertible debt. The Company expects its operating losses and negative operating cash flows to continue into the foreseeable future as it continues to execute its acquisition and growth strategy. The Company believes that its cash and cash equivalents as of December 31, 2022 will be sufficient to fund its operating expenses and capital expenditure requirements for at least twelve months from the date of filing this Annual Report on Form 10-K. The Company may need additional funding to support its planned investing activities. If the Company is unable to obtain additional funding, it would be forced to delay, reduce, or eliminate some or all of its acquisition efforts, which could adversely affect its business prospects. ​ Reclassifications Certain prior year amounts have been reclassified for consistency with current year presentation. These reclassifications had no effect on the reported results of operations. 42 Table of Contents Significant Accounting Policies Cash and Cash Equivalents Cash and cash equivalents include cash on hand, deposits with banks, and investments that are highly liquid and have maturities of three months or less at the date of purchase. Inventories Inventories consist of raw materials, supplies, growing and harvested plants (work-in-process), and finished goods, and are stated at the lower of cost or net realizable value. All direct and indirect costs of growing plants are accumulated until the time of harvest and allocated to the plants during the growing process. All direct and indirect costs of finished goods are accumulated and allocated to the products between the harvest and completion stages. The Company uses an average costing method to allocate costs. Net realizable value is determined as the estimated selling price in the ordinary course of business less the estimated costs of completion and estimated costs necessary to make the sale. The Company periodically reviews physical inventory for excess, obsolete, and potentially impaired items. Write-downs and write-offs are charged to cost of sales. Accounts Receivable, net Accounts receivable are recorded at the original invoiced amount due from our customers less an allowance for any potential uncollectible amounts. We control credit risk related to accounts receivable through credit approvals, credit limits, and monitoring processes. In making the determination of the appropriate allowance for doubtful accounts, management considers prior experience with customers, analysis of accounts receivable aging reports, changes in customer payment patterns, and historical write-offs. Right-of-use Asset / Lease Liability Right of use (“ROU”) assets represent our right to use an underlying asset in which we obtain substantially all the economic benefits and the right to direct the use of the asset during the lease term. Lease liabilities represent our obligation to make lease payments arising from the lease. We recognize ROU assets and lease liabilities on the balance sheet for leases with a lease term of greater than one year. The Company elected to combine the lease and related non-lease components (common area maintenance and operating costs) and treat them as a single lease component. ROU assets and lease liabilities are recognized at the commencement date of the lease based on the present value of the fixed lease payments over the lease term. The Company’s operating leases include options to extend or terminate the lease, which are not included in the determination of the ROU asset or lease liability unless reasonably certain to be exercised. Payments that are not fixed at the commencement of the lease are considered variable and are excluded from the measurement of the ROU asset and lease liability and are expensed as incurred in the statement of operations. Variable payments typically included payment for common area maintenance and reimbursement of the landlords operating costs as the amounts change from year to year based on actual costs incurred. In the measurement of our ROU assets and lease liabilities, the fixed lease payments in the agreement are discounted using a secured incremental borrowing rate for a term similar to the duration of the lease, as our leases do not provide implicit rates. Operating lease expense is recognized on a straight-line basis over the lease term. For the Company’s finance lease, interest expense is recognized on the lease liability using the effective interest method and depreciation of the finance lease ROU asset is recognized on a straight-line basis over the lease term. Property and Equipment, net Property and equipment are recorded at historical cost, less accumulated depreciation. Major additions and improvements are capitalized, while replacements, maintenance, and repairs, which do not improve or extend the life of the respective assets, are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets: thirty years for buildings, the lesser of ten years or the life of the lease for leasehold improvements, and one to fifteen years for furniture, fixtures and equipment, software, vehicles, and biological assets. 43 Table of Contents Land is not depreciated. When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected in operations. Business Combinations Amounts paid for acquisitions are allocated to the assets acquired and liabilities assumed based on their estimated fair value at the date of acquisition. The fair value of identifiable intangible assets is based on detailed valuations that use information and assumptions provided by management, including expected future cash flows. We allocate any excess purchase price over the fair value of the net assets and liabilities acquired to goodwill. Identifiable intangible assets with finite lives are amortized over their useful lives. Acquisition-related costs, including advisory, legal, accounting, valuation, and other costs, are expensed in the periods in which the costs are incurred. The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition date. Goodwill and Intangibles Goodwill represents the excess of purchase price over the fair value of identifiable net assets acquired in a business combination. Goodwill and long-lived intangible assets are tested for impairment at least annually in accordance with the provisions of ASC No. 350, Intangibles-Goodwill and Other (“ASC No. 350”). ASC No. 350 requires that goodwill be tested for impairment at the reporting unit level (operating segment or on level below an operating segment) on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carry value. Application of the goodwill impairment test requires judgement, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. We test goodwill and long-lived intangible assets annually in December, unless an event occurs that would cause us to believe the value is impaired at an interim date. Intangible assets with finite useful lives are amortized over their respective estimated useful lives and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Debt We issue debt that may have separate warrants, conversion features, or no equity-linked attributes. Debt with warrants – When we issue debt with warrants, we treat the warrants as a debt discount, record as a contra-liability against the debt, and amortize the balance over the life of the underlying debt as amortization of debt discount expense in the consolidated statements of operations. The offset to the contra-liability is recorded as additional paid in capital in our consolidated balance sheets. If the debt is retired early, the associated debt discount is then recognized immediately as amortization of debt discount expense in the consolidated statement of operations. The debt is treated as conventional debt. We determine the value of the non-complex warrants using the Black-Scholes Option Pricing Model (“Black-Scholes”) using the stock price on the date of issuance, the risk-free interest rate associated with the life of the debt, and the volatility of our stock. For warrants with complex terms, we use the binomial lattice model to estimate their fair value. Modification and Extinguishment of Debt - When we change the terms of existing notes payable, we evaluate the amendments under ASC 470-50, Debt Modification and Extinguishment to determine whether the change should be treated as a modification or as a debt extinguishment. This evaluation includes analyzing whether there are significant and consequential changes to the economic substance of the note. If the change is deemed insignificant then the change is considered a debt modification, whereas if the change is substantial the change is reflected as a debt extinguishment. Convertible Debt - When we issue debt with a conversion feature, we must first assess whether the conversion feature meets the requirements to be treated as a derivative. If the conversion feature within convertible debt meets the requirements to be treated as a derivative, we estimate the fair value of the convertible debt derivative using Black- 44 Table of Contents Scholes upon the date of issuance, using the stock price on the date of issuance, the risk-free interest rate associated with the life of the debt, and the estimated volatility of our stock. If the conversion feature is not treated as a derivative, we assess whether it is a beneficial conversion feature (“BCF”). A BCF exists if the effective conversion price of the convertible debt instrument is less than the stock price on the commitment date. This typically occurs when the effective conversion price is less than the fair value of the stock on the date the instrument was issued. The value of a BCF is equal to the intrinsic value of the feature, the difference between the effective conversion price and the fair value of the Common Stock into which it is convertible. Fair Value of Financial Instruments U.S. generally accepted accounting principles (“GAAP”) requires disclosing the fair value of financial instruments to the extent practicable for financial instruments which are recognized or unrecognized in the consolidated balance sheet. The fair value of the financial instruments disclosed herein is not necessarily representative of the amount that could be realized or settled, nor does the fair value amount consider the tax consequences of realization or settlement. In assessing the fair value of financial instruments, the Company uses a variety of methods and assumptions, which are based on estimates of market conditions and risks existing at the time. For certain instruments, including accounts receivable and accounts payable, the Company estimated that the carrying amount approximated fair value because of the short maturities of these instruments. All debt is based on current rates at which the Company could borrow funds with similar remaining maturities and approximates fair value. GAAP establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use on unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs consist of items that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is described below: Level 1 – Quoted prices in active markets for identical assets or liabilities. There are no fair valued assets or liabilities classified under Level 1 as of December 31, 2022 and 2021. Level 2 – Observable prices that are based on inputs not quoted on active markets but corroborated by market data. There are no fair valued assets or liabilities classified under Level 2 as of December 31, 2022 and 2021. Level 3 – Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs (see Note 14). Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the liabilities. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s accounting, and finance department, which reports to the Chief Financial Officer, determines its valuation policies and procedures. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s accounting and finance department and are approved by the Chief Financial Officer. Level 3 Valuation Techniques Level 3 financial liabilities consist of the derivative liabilities for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate. The Company deems financial instruments which do not have fixed settlement provisions to be derivative instruments. In accordance with GAAP the fair value of these warrants is classified as a liability on the Company’s consolidated balance sheets because, according to the terms of the warrants, a fundamental transaction could give rise to an obligation of the Company to pay cash to its warrant holders. Such instruments do not have fixed settlement provisions and have also been recorded as derivative liabilities. Corresponding changes in the fair 45 Table of Contents value of the derivative liabilities are recognized in earnings on the Company’s consolidated statements of operations in each subsequent period. The Company’s derivative liabilities are carried at fair value and were classified as Level 3 in the fair value hierarchy due to the use of significant unobservable inputs. Warrant Instruments Warrants with derivative features – When we raise capital by issuing warrants that do not have complex terms, they are recorded as additional paid in capital in our consolidated balance sheet. When we issue warrants that have complex terms, such as a clause in which the warrant agreements contain a cash settlement provision whereby the holders could settle the warrants for cash upon a fundamental transaction that is considered outside of the control of management, such as a change of control, the warrants are considered to be a derivative that are recorded as a liability at fair value. The warrant derivative liability is adjusted to its fair value at the end of each reporting period, with the change being recorded as other expense or gain. Revenue Recognition We have two main revenue streams: (i) retail product sales; and (ii) wholesale cultivation sales. Product sales are recorded at the time that control of the product is transferred to customers. In evaluating the timing of the transfer of control of products to customers, we consider several indicators, including significant risks and rewards of products, our right to payment, and the legal title of the products. Based on the assessment of control indicators, sales are generally recognized when products are delivered to customers. Revenue from cultivation sales is recognized when the products are delivered to the customer. ASU 2014-09, Revenue from Contracts with Customers (“ ASC Topic 606”) is a comprehensive revenue recognition model that requires revenue to be recognized when control of the promised goods or services are transferred to our customers at an amount that reflects the consideration that we expect to receive. Application of ASC Topic 606 requires us to use more judgment and make more estimates than under former guidance. Application of ASC Topic 606 requires a five-step model applicable to all product offerings revenue streams as follows: Identification of the contract, or contracts, with a customer A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance, and (iii) we determine that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit or financial information pertaining to the customer. Identification of the performance obligations in the contract Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the goods or service either on its own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract. 46 Table of Contents When a contract includes multiple promised goods or services, we apply judgment to determine whether the promised goods or services are capable of being distinct and are distinct within the context of the contract. If these criteria are not met, the promised goods or services are accounted for as a combined performance obligation. Determination of the transaction price The transaction price is determined based on the consideration to which we will be entitled to receive in exchange for transferring goods or services to our customer. We estimate any variable consideration included in the transaction price using the expected value method that requires the use of significant estimates for discounts, cancellation periods, refunds and returns. Variable consideration is described in detail below. Allocation of the transaction price to the performance obligations in the contract If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative Stand-Alone Selling Price (“SSP,”) basis. We determine SSP based on the price at which the performance obligation would be sold separately. If the SSP is not observable, we estimate the SSP based on available information, including market conditions and any applicable internally approved pricing guidelines. Recognition of revenue when, or as, we satisfy a performance obligation We recognize revenue at the point in time that the related performance obligation is satisfied by transferring the promised goods or services to our customer. Principal versus Agent Considerations When another party is involved in providing goods or services to our customer, we apply the principal versus agent guidance in ASC Topic 606 to determine if we are the principal or an agent to the transaction. When we control the specified goods or services before they are transferred to our customer, we report revenue gross, as principal. If we do not control the goods or services before they are transferred to our customer, revenue is reported net of the fees paid to the other party, as agent. Our evaluation to determine if we control the goods or services within ASC Topic 606 includes the following indicators: We are primarily responsible for fulfilling the promise to provide the specified good or service. When we are primarily responsible for providing the goods and services, such as when the other party is acting on our behalf, we have indication that we are the principal to the transaction. We consider if we may terminate our relationship with the other party at any time without penalty or without permission from our customer. We have risk before the specified good or service have been transferred to a customer or after transfer of control to the customer. We may commit to obtaining the services of another party with or without an existing contract with our customer. In these situations, we have risk of loss as principal for any amount due to the other party regardless of the amount(s) we earn as revenue from our customer. The entity has discretion in establishing the price for the specified good or service. We have discretion in establishing the price our customer pays for the specified goods or services. Stock-based Payments Employee and non-employee awards – We account for stock-based compensation in accordance with the fair value recognition provisions of ASC 718 , Compensation – Stock Compensation , and ASC 505 , Equity , which require all stock- 47 Table of Contents based compensation to employees and non-employees, including grants of employee stock options, to be recognized as an expense in the consolidated financial statements based on their fair values. The fair value of stock options is estimated using the Black-Scholes option pricing formula that requires assumptions for expected volatility, expected dividends, the risk-free interest rate, and the expected term of the option. The Company accounts for forfeitures of stock-based grants as they occur. If any of the assumptions used in the Black-Scholes model or the anticipated number of shares to be awarded change significantly, stock-based compensation expense may differ materially in the future from that recorded in the current period. Market price-based awards – We may issue stock-based payments that vest when certain market conditions are met, such as our Common Stock trading above a certain value for a specific number of days. We recognize expense for market price-based options at the estimated fair value of the options using the binomial lattice model over the estimated life of the options used in the model, or immediately upon the market conditions being met. We use historical data to estimate the expected price volatility, the expected stock option life and expected forfeiture rate. The risk-free interest rate is based on the United States Treasury yield curve in effect at the time of grant for the estimated life of the stock option. Shipping and Handling Payments by customers to us for shipping and handling costs are included in revenue on the consolidated statements of operations, while our expense is included in cost of sales. Shipping and handling for inventory are included as a component of inventory on the consolidated balance sheets, and in cost of sales in the consolidated statements of operations when the product is sold. Income Taxes We recognize deferred income tax assets and liabilities for the expected future tax consequences of temporary differences between the income tax and financial reporting carrying amount of our assets and liabilities. We monitor our deferred tax assets and evaluate the need for a valuation allowance based on the estimate of the amount of such deferred tax assets that we believe do not meet the more-likely-than-not recognition criteria. We also evaluate whether we have any uncertain tax positions and would record a reserve if we believe it is more-likely-than-not our position would not prevail with the applicable tax authorities and would be recorded in income tax expense. Our assessment of tax positions as of December 31, 2022 and 2021, determined that there were no material uncertain tax positions. In general, the tax returns for the years ending December 31, 2019 through 2021 are open to examination by federal and state authorities. Reportable Segments Our reporting segments consist of: a) Retail; and b) Cultivation. Our Chief Executive Officer has been identified as the chief decision maker. Our operations are conducted within the United States of America. Recently Issued Accounting Standards FASB ASU 2020-06 – “Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”- In June 2020, the Financial Accounting Standards Board (“FASB”) issued guidance which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. This Accounting Standards Update (“ASU”) also removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and simplifies the diluted earnings per share calculation in certain areas. The amendments in this ASU are effective for annual and interim periods beginning after December 15, 2021, although early adoption is permitted. We adopted this ASU in the first quarter of 2022, and the adoption did not have a material effect on our financial statements. ​ 48 Table of Contents NOTE 2. ACQUISITIONS Trees On September 2, 2021, we completed the acquisition of substantially all of the assets of Trees Englewood, representing a portion of the overall Trees transaction (“Trees Transaction”) previously disclosed pursuant to that certain First Amended and Restated Agreement and Plan of Reorganization and Liquidation dated May 28, 2021 by and among the Company, seller and certain other sellers party thereto, that consists of the assets relating to the Trees dispensary located in Englewood, Colorado (“Englewood Closing”). We paid $ 1,155,256 in cash in connection with the Englewood Closing and stock consideration of 22,380,310 shares of our Common Stock. The closing price of our Common Stock on September 2, 2021, the date of license transfer, was $ 0.47 per share, as such, fair value of the equity consideration is $ 10,518,746 . Further, cash equal to $ 1,732,884 will be paid to the seller in equal monthly installments over a period of 24 months from the Englewood Closing. The table below reflects the Company’s final estimates of the acquisition date fair values of the assets acquired: ​ ​ ​ ​ ​ Cash ​ $ 32,941 Fixed assets ​ 59,335 Inventory ​ ​ 586,495 Tradename ​ ​ 1,399,000 Goodwill ​ 11,216,913 ​ ​ $ 13,294,684 ​ Compared to the estimated purchase price allocation reported in our financial statements included in Item 8 of our Form 10-K for the year ended December 31, 2021 filed with the SEC on March 25, 2022, the final purchase price estimate resulted in a reduction of tradename intangible assets and a corresponding increase to goodwill of $ 3.6 million. The accompanying consolidated financial statements include the results of Trees Englewood from the date of acquisition for financial reporting purposes, September 2, 2021. The pro forma effects of the acquisition on the results of operations as if the transaction had been completed on January 1, 2021, are as follows: ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 31, ​ ​ 2021 Total revenues ​ $ 13,918,865 Net income (loss) attributable to Common Stockholders ​ $ ( 8,110,671 ) Net income (loss) per common share ​ $ ( 0.10 ) Weighted average number of basic and diluted common shares outstanding ​ ​ 84,560,130 ​ The unaudited proforma results of operations are presented for information purposes only. The unaudited pro-forma results are not intended to present actual results that would have been attained had the acquisition been completed as of January 1, 2020, or to project potential operating results as of any future date or for any future periods. On December 30, 2021, we completed the acquisition of substantially all the assets of Trees Portland, LLC and Trees Waterfront, LLC (together “Trees Oregon”), representing a portion of the overall Trees Transaction, that consists of the assets relating to certain Trees dispensaries located in Portland, Oregon ("Oregon Closing”). We paid cash in the amount of $ 331,581 in connection with the Oregon Closing and stock consideration of 6,423,575 shares of our Common Stock. The closing price of our Common Stock on December 30, 2021, the date of license transfer, was $ 0.23 per share, as such, the fair value of the equity consideration is $ 1,477,422 . Further, cash equal to $ 497,371 will be paid to the sellers in equal monthly installments over a period of 24 months from the Oregon Closing. 49 Table of Contents The table below reflects the Company’s final estimates of the acquisition date fair values of the assets acquired: ​ ​ ​ ​ ​ Cash ​ $ 14,568 Fixed assets ​ 56,015 Inventory ​ ​ 202,046 Tradename ​ ​ 509,000 Goodwill ​ 1,524,744 ​ ​ $ 2,306,373 ​ Compared to the estimated purchase price allocation reported in our financial statements included in Item 8 of our Form 10-K for the year ended December 31, 2021 filed with the SEC on March 25, 2022, the final purchase price estimate resulted in a reduction of tradename intangible assets and a corresponding increase to goodwill of $ 341,000 . The accompanying consolidated financial statements include the results of Trees Oregon from the date of acquisition for financial reporting purposes, December 30, 2021. The pro forma effects of the acquisition on the results of operations as if the transaction had been completed on January 1, 2020, are as follows: ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 31, ​ ​ 2021 Total revenues ​ $ 10,606,719 Net income (loss) attributable to Common Stockholders ​ $ ( 8,664,841 ) Net income (loss) per common share ​ $ ( 0.11 ) Weighted average number of basic and diluted common shares outstanding ​ ​ 75,948,281 ​ ​ The unaudited proforma results of operations are presented for information purposes only. The unaudited pro-forma results are not intended to present actual results that would have been attained had the acquisition been completed as of January 1, 2020, or to project potential operating results as of any future date or for any future periods. On January 5, 2022, we completed the acquisition of substantially all of the assets of Trees MLK Inc. (“MLK”), representing the remaining Oregon dispensary in connection with the overall Trees transaction. We paid cash in the amount of $ 256,582 and stock consideration of 4,970,654 shares of our Common Stock. The closing price of our Common Stock on January 5, 2022, the date of license transfer, was $ 0.27 per share, as such, fair value of the equity consideration is $ 1,346,076 . Further, cash equal to $ 384,873 will be paid to the sellers in equal monthly installments over a period of 24 months beginning on June 15, 2022. When we closed on MLK it was a non-operating dispensary. We opened the dispensary in the second quarter of 2022. The table below reflects the Company’s final estimates of the acquisition date fair values of the assets acquired: ​ ​ ​ ​ ​ Fixed assets $ 25,150 Tradename ​ ​ 88,000 Goodwill ​ 1,870,381 ​ ​ $ 1,983,531 ​ As the MLK dispensary was not operating until the second quarter of 2022, the were no material results of operations prior to the acquisition date. As such, there would be no material proforma impact on the Company’s operating results. On December 12, 2022, we completed the Green Tree Acquisition which consisted of the acquisition of substantially all of the assets of Ancient Alternatives LLC, Natural Alternatives For Life, LLC, Mountainside Industries, LLC, Hillside Enterprises, LLC, and GT Creations, LLC, each a Colorado limited liability company (collectively, the "Green Tree Entities”). We paid cash in the amount of $ 500,000 and stock consideration of 17,977,528 shares of our Common Stock. The closing price of our Common Stock on December 12, 2022, the date of license transfer, was $ 0.165 per share, as 50 Table of Contents such, fair value of the equity consideration is $ 2,966,292 . An additional $ 3,500,000 in cash will be paid to the sellers in fifteen (15) equal monthly payments commencing on the 9-month anniversary of the closing. Based on a discount rate of 12 %, the fair value of these additional monthly payments is approximately $ 3,017,510 . This liability is included in Notes payable- current and Notes payable- non-current in the accompanying consolidated balance sheets. See Note 13 for additional details. The table below reflects the Company’s preliminary estimates of the acquisition date fair values of the assets acquired: ​ ​ ​ ​ ​ Cash $ 3,928 Inventory ​ ​ 1,588,454 Fixed assets ​ ​ 688,655 Tradename ​ ​ 950,000 Goodwill ​ 3,255,679 ​ ​ $ 6,486,716 ​ We have not completed the allocation of the purchase price for the Green Tree Acquisition. As of December 31, 2022, the consolidated balance sheet includes a preliminary allocation of fixed assets, inventory, intangible assets, and goodwill. Management anticipates completing the purchase price allocation as soon as possible, but no later than one year from the acquisition date. The accompanying consolidated financial statements include the results of the Green Tree Entities from the date of acquisition for financial reporting purposes, December 12, 2022. The pro forma effects of the acquisition on the results of operations as if the transaction had been completed on January 1, 2021, are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 31, ​ ​ 2022 ​ 2021 Total revenues ​ $ 22,556,789 ​ $ 16,090,839 Net income (loss) attributable to Common Stockholders ​ $ ( 9,558,189 ) ​ $ ( 8,957,542 ) Net income (loss) per common share ​ $ ( 0.08 ) ​ $ ( 0.10 ) Weighted average number of basic and diluted common shares outstanding ​ ​ 114,159,065 ​ ​ 87,515,259 ​ The unaudited pro-forma results of operations are presented for information purpose only. The unaudited pro-forma results are not intended to present actual results that would have been attained had the acquisition been completed as of January 1, 2021, or to project potential operating results as of any future date or for any future periods. On December 19, 2022, we completed the Green Man Acquisition, consisting of the acquisition of substantially all of the assets of Green Man. We paid cash in the amount of $ 1,225,000 and stock consideration of 4,494,382 shares of Common Stock. The closing price of our Common Stock on December 19, 2022, the date of license transfer, was $ 0.18 per share, as such, fair value of the equity consideration is $ 808,989 . An additional $ 1,500,000 in cash will be paid to the sellers in eighteen (18) equal monthly payments commencing on the 12-month anniversary of the closing. Based on a discount rate of 12 %, the fair value of these additional monthly payments is approximately $ 1,224,846 . This liability is included in Notes payable-current and Notes payable-non-current in the accompanying consolidated balance sheets. See Note 13 for additional details. ​ The table below reflects the Company’s preliminary estimates of the acquisition date fair values of the assets acquired: ​ ​ ​ ​ ​ Cash $ 8,594 Inventory ​ ​ 108,543 Fixed assets ​ ​ 23,500 Tradename ​ ​ 150,000 Goodwill ​ 2,968,198 ​ ​ $ 3,258,835 ​ 51 Table of Contents We have not completed the allocation of the purchase price for the Green Man Acquisition. As of December 31, 2022, the consolidated balance sheet includes a preliminary allocation of fixed assets, inventory, intangible assets, and goodwill. Management anticipates completing the purchase price allocation as soon as possible, but no later than one year from the acquisition date. The accompanying consolidated financial statements include the results of Green Man from the date of acquisition for financial reporting purposes, December 19, 2022. The pro forma effects of the acquisition on the results of operations as if the transaction had been completed on January 1, 2021, are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 31, ​ ​ 2022 ​ 2021 Total revenues ​ $ 19,002,698 ​ $ 14,295,386 Net income (loss) attributable to Common Stockholders ​ $ ( 9,641,205 ) ​ $ ( 10,307,060 ) Net income (loss) per common share ​ $ ( 0.09 ) ​ $ ( 0.14 ) Weighted average number of basic and diluted common shares outstanding ​ ​ 101,500,915 ​ ​ 74,032,113 ​ The unaudited pro-forma results of operations are presented for information purpose only. The unaudited pro-forma results are not intended to present actual results that would have been attained had the acquisition been completed as of January 1, 2021, or to project potential operating results as of any future date or for any future periods. NOTE 3. DISCONTINUED OPERATIONS On July 16, 2021, we entered into an Asset Purchase Agreement with an individual to sell substantially all the assets of our NBC for a total of $ 150,000 and 10 % of profits generated by the buyer in the states of Michigan, Mississippi, and Massachusetts for a period of twelve months from the closing. On August 2, 2021, the sale of the NBC was completed. Pursuant to amendment, the buyer paid the additional $ 75,000 in March 2022, and the 10 % profit share described above was eliminated. A breakdown of the results of discontinued operations related to the sale of NBC are presented as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 31, ​ ​ 2022 ​ 2021 Product revenues $ 3,438 $ 614,764 Service revenues ​ ​ — ​ ​ 523,994 Total revenues ​ ​ 3,438 ​ ​ 1,138,758 ​ ​ ​ ​ ​ ​ ​ Cost of sales ​ ​ — ​ ​ 1,157,035 Selling, general and administrative ​ ​ ( 2,040 ) ​ ​ 407,648 Professional fees ​ ​ — ​ ​ 4,944 Depreciation and amortization ​ ​ — ​ ​ 11,359 Total costs and expenses ​ ​ ( 2,040 ) ​ ​ 1,580,986 Income (loss) from discontinued operations ​ $ 5,478 ​ $ ( 442,228 ) ​ 52 Table of Contents ​ The cash flows related to discontinued operations have not been segregated and are included in the consolidated statements of cash flows. The following table provides selected information on cash flows related to discontinued operations for the years ended December 31, 2022 and 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ ​ December 31, ​ ​ 2022 2021 ​ Accounts receivables ​ $ — ​ $ 187,185 ​ Prepaid expenses and other current assets ​ ​ — ​ ​ 519,274 ​ Depreciation and amortization ​ ​ — ​ ​ 11,359 ​ Capital expenditures ​ ​ — ​ ​ — ​ Accounts payable and accrued expenses ​ ​ — ​ ​ ( 169,492 ) ​ Customer deposits ​ ​ — ​ ​ ( 517,931 ) ​ ​ ​ ​ NOTE 4. ACCOUNTS RECEIVABLE Our accounts receivable consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 2021 Accounts receivable ​ $ 83,373 ​ $ 141,188 Less: Allowance for doubtful accounts ​ ​ ( 42,000 ) ​ ​ ( 61,000 ) Total ​ $ 41,373 ​ $ 80,188 ​ We record bad debt expense when we conclude the credit risk of a customer indicates the amount due under the contract is not collectible. We recorded bad debt expense of $ 6,280 and $ 53,386 during the years ended December 31, 2022 and 2021, respectively. ​ ​ NOTE 5. NOTES RECEIVABLE On August 2, 2021, as part of the closing of the sale of NBC, we agreed to a note receivable of $ 75,000 due August 2, 2022. This note receivable was collected in full in 2022. ​ ​ NOTE 6. INVENTORIES, NET ​ Our inventories consistent of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2022 2021 Raw materials ​ $ 8,883 ​ $ 13,343 Work-in-progress and finished goods ​ ​ 2,057,779 ​ ​ 1,109,740 Inventories ​ $ 2,066,662 ​ $ 1,123,083 ​ ​ ​ 53 Table of Contents NOTE 7. PREPAIDS AND OTHER CURRENT ASSETS Our prepaids and other current assets consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 2021 Security deposits ​ $ 140,628 ​ $ 45,000 Prepaid insurance ​ ​ 86,071 ​ ​ 79,897 Other ​ 32,899 ​ 24,178 Total prepaids and other current assets ​ $ 259,598 ​ $ 149,075 ​ ​ NOTE 8. PROPERTY AND EQUIPMENT, NET Property and equipment consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 2021 Furniture, fixtures and equipment ​ $ 1,484,432 ​ $ 950,380 Finance lease ROU -building ​ ​ 766,623 ​ ​ — Software ​ 103,817 ​ 103,817 Biological assets ​ ​ 13,000 ​ ​ 13,000 Total ​ 2,367,872 ​ 1,067,197 Less: Accumulated depreciation ​ ( 419,903 ) ​ ( 386,870 ) Total property and equipment, net ​ $ 1,947,969 ​ $ 680,327 ​ Depreciation expense was $ 182,838 and $ 192,232 , respectively, for the years ended December 31, 2022 and 2021. ​ NOTE 9. INTANGIBLE ASSETS AND GOODWILL ​ Intangible assets ​ During the years ended December 31, 2022 and 2021, the Company acquired trade name intangible assets through several acquisitions. See Note 2 for further details of these acquisitions. The amount of trade name intangible assets acquired in each transaction is shown in the table below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Useful life Transaction ​ Acquisition Date ​ Amount ​ (in years) Green Man Acquisition (1) ​ December 2022 ​ $ 150,000 ​ 1 Green Tree Acquisition (1) ​ December 2022 ​ $ 950,000 ​ 2 Trees MLK Acquisition (2) ​ January 2022 ​ $ 88,000 ​ 10 Trees Portland Acquisition ​ December 2021 ​ $ 292,000 ​ 10 Trees Waterfront Acquisition (2) ​ December 2021 ​ $ 217,000 ​ 10 Trees Englewood Acquisition ​ September 2021 ​ $ 1,399,000 ​ 10 (1) The purchase price allocation for this acquisition has not been finalized, therefore this amount could be subsequently adjusted. Note that the useful life takes into account that management plans to re-brand the acquired stores under the TREES tradename. (2) The trade name intangible asset for these acquisitions was fully impaired in 2022. See discussion of impairment charges below in this footnote. ​ ​ 54 Table of Contents The following table summarizes the change in the Company’s tradename intangible assets from December 31, 2021 to December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Tradename ​ ​ Accumulated Amortization ​ ​ Net Tradename Balance as of December 31, 2021 ​ $ 6,323,780 ​ $ ( 323,967 ) ​ $ 5,999,813 Purchase price allocation adjustments (see Note 2) ​ ​ ( 3,942,000 ) ​ ​ — ​ ​ ( 3,942,000 ) Tradename intangibles acquired ​ ​ 1,188,000 ​ ​ — ​ ​ 1,188,000 Amortization ​ ​ — ​ ​ ( 148,538 ) ​ ​ ( 148,538 ) Impairment ​ ​ ( 553,377 ) ​ ​ — ​ ​ ( 553,377 ) Balance as of December 31, 2022 ​ $ 3,016,403 ​ $ ( 472,505 ) ​ $ 2,543,898 ​ Estimated amortization expense for the next five years is as follows: ​ ​ ​ ​ ​ Year ending December 31, Amount 2023 ​ $ 788,758 2024 ​ ​ 618,073 2025 ​ ​ 169,100 2026 ​ ​ 169,100 2027 ​ ​ 169,100 Thereafter ​ ​ 629,767 Total ​ $ 2,543,898 ​ Amortization expense was $ 148,538 and $ 308,342 for the years ended December 31, 2022 and 2021, respectively. ​ Goodwill ​ The following represents a summary of changes in the carry amount of goodwill for the years ended December 31, 2022 and 2021 on a consolidated basis and by segment: ​ Consolidated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Goodwill ​ ​ Accumulated Impairment ​ ​ Net Goodwill Balance as of December 31, 2020 ​ $ 2,484,200 ​ $ — ​ $ 2,484,200 Goodwill acquired ​ ​ 8,799,657 ​ ​ — ​ ​ 8,799,657 Impairment ​ ​ — ​ ​ ( 2,484,200 ) ​ ​ ( 2,484,200 ) Balance as of December 31, 2021 ​ $ 11,283,857 ​ $ ( 2,484,200 ) ​ $ 8,799,657 Goodwill acquired ​ ​ 8,094,258 ​ ​ ​ ​ ​ 8,094,258 Purchase price allocation adjustment ​ ​ 3,942,000 ​ ​ — ​ ​ 3,942,000 Impairment ​ ​ — ​ ​ ( 2,450,941 ) ​ ​ ( 2,450,941 ) Balance as of December 31, 2022 ​ $ 23,320,115 ​ $ ( 4,935,141 ) ​ $ 18,384,974 ​ ​ ​ 55 Table of Contents Retail Segment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Goodwill ​ ​ Accumulated Impairment ​ ​ Net Goodwill Balance as of December 31, 2020 ​ $ — ​ $ — ​ $ — Goodwill acquired ​ ​ 8,799,657 ​ ​ — ​ ​ 8,799,657 Balance as of December 31, 2021 ​ $ 8,799,657 ​ $ — ​ $ 8,799,657 Goodwill acquired ​ ​ 8,094,258 ​ ​ — ​ ​ 8,094,258 Purchase price allocation adjustment ​ ​ 3,942,000 ​ ​ — ​ ​ 3,942,000 Impairment ​ ​ — ​ ​ ( 2,450,941 ) ​ ​ ( 2,450,941 ) Balance as of December 31, 2022 ​ $ 20,835,915 ​ $ ( 2,450,941 ) ​ $ 18,384,974 ​ Cultivation Segment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Goodwill ​ ​ Accumulated Impairment ​ ​ Net Goodwill Balance as of December 31, 2020 ​ $ 2,484,200 ​ $ — ​ $ 2,484,200 Goodwill acquired ​ ​ — ​ ​ — ​ ​ — Impairment ​ ​ — ​ ​ ( 2,484,200 ) ​ ​ ( 2,484,200 ) Balance as of December 31, 2021 ​ $ 2,484,200 ​ $ ( 2,484,200 ) ​ $ — Goodwill acquired ​ ​ — ​ ​ — ​ ​ — Balance as of December 31, 2022 ​ $ 2,484,200 ​ $ ( 2,484,200 ) ​ $ — ​ ​ Cultivation Segment Impairments ​ As of the annual testing date of December 31, 2021, the Company utilized a third-party valuation firm to estimate the fair value of our Cultivation segment, which consisted of a single reporting unit, using a combination of a discounted cash flow approach and market multiple approach. As a result, the Company determined that the fair value of the Cultivation segment was less than the less than the carrying value and recognized a full impairment of goodwill in the Cultivation segment in the amount of $ 2,484,200 during the year ended December 31, 2021. Due to the impairment of the goodwill and the price declines of marijuana flower in 2021, the Company also tested its intangible assets with finite lives for impairment using the same valuation methodology and assumptions that we used for the goodwill impairment test. As a result, the Company recorded an impairment of $ 526,220 during the year ended December 31, 2021. As of December 31, 2022, due to the continued declines in the wholesale price of marijuana flower in Colorado, the Company determined that the remaining intangible asset balance in the Cultivation segment was not recoverable based on current cash flow projections and that there was no longer value in the tradename value given the economic conditions in the cultivation sector. Therefore, an impairment of the remaining balance of $ 278,878 was recorded during the year ended December 31, 2022. Retail Segment Impairments As of December 31, 2021, the goodwill balance and intangible assets balances in the Retail segment related to acquisitions completed in the third and fourth quarters of 2021. The final purchase price allocations for these acquisitions had not been completed as of December 31, 2021. Therefore, no impairment testing was required. As of annual testing date on December 31, 2022, the Company utilized a third-party valuation firm to estimate the fair value of each reporting unit within the Retail segment using a combination of a discounted cash flow approach and market multiple approach. Each dispensary location is considered a separate reporting unit. As a result, the Company determined that the fair value of each of the dispensary locations in Oregon was less than the less than its carrying value. Therefore, the Company recognized goodwill impairments in the Retail segment in the amount of $ 2,450,941 during the year ended December 31, 2022. Due to the impairment of the goodwill in the Retail segment and sales levels that were below management’s expectations, the Company also tested its intangible assets with finite lives for impairment using 56 Table of Contents the same valuation methodology and assumptions that we used for the goodwill impairment test. The resulting fair value estimates indicated that the fair value of the tradename intangible was less than the carrying value for the Trees MLK and Trees Waterfront dispensaries in Oregon. Therefore, the Company recognized an impairment of $ 274,500 during the year ended December 31, 2022. ​ NOTE 10. LEASES The Company’s leases consist primarily of real estate leases for retail, cultivation, and manufacturing facilities. All but one of the Company’s leases are classified as operating leases. The lease for the retail dispensary acquired in the Green Man Transaction is classified as a finance lease. The current and non-current portions of the operating lease liabilities and finance lease liabilities are disclosed separately on the accompanying consolidated balance sheets. The finance lease ROU asset is included in property and equipment, net (see Note 8) and the operating lease ROU asset is disclosed separately on the accompanying consolidated balance sheets. As the rate implicit in the Company’s leases is not readily determinable, we used an estimated incremental borrowing rate of 20 % in determining the present value of lease payments. ​ The operating lease expense for the years ended December 31, 2022 and December 31, 2021 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, 2022 2021 Straight-line operating lease expense ​ $ 743,156 ​ $ 495,988 Variable lease cost ​ ​ 133,689 ​ ​ 50,197 Short-term lease cost ​ ​ — ​ ​ 68,768 Total operating lease expense ​ $ 876,845 ​ $ 614,953 ​ The expense associated with the finance lease cost was not material for the year ended December 31, 2022 as the commencement date of the lease was December 19, 2022. Related party lease s As of December 31, 2022, three of the Company’s operating leases, one retail dispensary lease, one cultivation facility lease, and one lease that includes both cultivation and retail, are related party leases as the landlords are current board members or employees. Another retail dispensary lease was with a related party through May 2022 when the building was sold to an unaffiliated third-party. During the year ended December 31, 2021, the related party operating leases consisted of one dispensary lease and one cultivation facility. As of December 31, 2022, the ROU asset, operating lease liability, current, and operating lease liability, non-current for the related party leases are $ 1,074,958 , $ 526,378 , and $ 618,617 , respectively. For the years ended December 31, 2022 and December 31, 2021, the total lease expense for related party leases was $ 434,437 and $ 516,383 , respectively. 57 Table of Contents Lease Maturities Future remaining minimum lease payments on our operating leases and finance lease are as follows: ​ ​ ​ ​ ​ ​ ​ ​ Year ending December 31, Operating leases ​ Finance lease 2023 ​ $ 1,433,188 ​ $ 200,000 2024 ​ 1,458,810 ​ 205,400 2025 ​ 1,146,340 ​ 171,043 2026 ​ 820,391 ​ 136,940 2027 ​ ​ 507,871 ​ ​ 143,102 Thereafter ​ 965,356 ​ 818,100 Total ​ 6,331,956 ​ 1,674,585 Less: Present value adjustment ​ ( 2,357,182 ) ​ ( 912,155 ) Lease liability ​ ​ 3,974,774 ​ ​ 762,430 Less: Lease liability, current ​ ​ ( 1,433,184 ) ​ ​ ( 55,777 ) Lease liability, non-current ​ $ 2,541,590 ​ $ 706,653 ​ The total remaining lease payments in the table above include $ 2,995,100 related to renewal option periods that management is reasonably certain will be exercised. The majority of this amount relates to the flagship Trees location in Englewood, Colorado and the retail and certain cultivation facilities that were acquired in the Green Tree Acquisition and are eligible for renewal in 2023. The total remaining minimum lease payments in the table above exclude $ 474,574 related to leases that are fully executed but have not yet commenced as of December 31, 2022. As of December 31, 2022, the weighted average remaining term of the Company’s operating leases is 5 years and the remaining term on the finance lease is 10 years . None of the Company’s leases contain residual value guarantees or restrictive covenants. Supplemental cash flow information ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, 2022 2021 Supplemental cash flow information ​ ​ ​ ​ ​ ​ Cash paid for amounts included in operating lease liability ​ $ 685,214 ​ $ 439,826 Cash paid for amounts included in finance lease liability ​ $ 4,194 ​ $ — Supplemental lease disclosures of non-cash transactions: ​ ​ ​ ​ ​ ​ ROU assets obtained in exchange for operating lease liabilities ​ $ 2,235,798 ​ $ 1,311,124 ROU assets obtained in exchange for finance lease liabilities ​ $ 766,623 ​ $ — Reduction of operating lease ROU asset and operating lease liabilities from remeasurement (1) ​ $ ( 1,097,651 ) ​ $ — ​ (1) In April 2022, the lease for Seven-Five Farm, a cultivation facility, was amended and the remaining lease payments were reduced. Upon modification, management reassessed the lease term and concluded that it was not reasonably certain that any of the renewal option periods in the lease would be exercised. This conclusion was different than the conclusion reached at the initial commencement of the lease in 2020. The significant drop in the wholesale cost of marijuana flower and the current economic environment in the cannabis industry, particularly in the cultivation sector, is the primary driver of this change. As a result, the measurement of the ROU asset and operating lease liability no longer includes the payments associated with the renewal option periods. ​ ​ ​ ​ ​ ​ ​ 58 Table of Contents NOTE 11. ACCOUNTS PAYABLE AND ACCRUED EXPENSES Our accounts payable and accrued expenses consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 2021 Accounts payable ​ $ 1,108,956 ​ $ 621,603 Accrued payroll, taxes, and vacation ​ 683,134 ​ 403,136 Other ​ 107,360 ​ 145,969 Total accounts payable and accrued expenses ​ $ 1,899,450 ​ $ 1,170,708 ​ ​ NOTE 12. ACCRUED STOCK PAYABLE The following tables summarize the changes in accrued Common Stock payable: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ Amount Shares Balance as of December 31, 2020 ​ $ 94,861 ​ ​ 359,415 Trees Waterfront acquisition stock accrual ​ ​ 383,994 ​ ​ 1,669,537 Stock issued ​ ​ ( 33,961 ) ​ ​ ( 259,415 ) Balance as of December 31, 2021 ​ $ 444,894 ​ ​ 1,769,537 Stock issued ​ ​ ( 383,994 ) ​ ​ ( 1,669,537 ) Balance as of December 31, 2022 ​ $ 60,900 ​ ​ 100,000 ​ ​ In December 2021, we completed the acquisition of Trees Waterfront. As part of the transaction, we granted 1,669,537 shares of our Common Stock. As of December 31, 2021 this stock had not been issued. The stock was subsequently issued on January 6, 2022. ​ The outstanding balance of accrued stock payable as of December 31, 2022 relates to a February 18, 2020 grant of 100,000 fully vested shares for consulting services. Based on a stock price of $ 0.61 on the date of grant, the consultant will receive $ 60,900 worth of our Common Stock. As of December 31, 2022, none of the stock had been issued. ​ ​ NOTE 13. NOTES PAYABLE Our notes payable consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ December 31, 2021 ​ Third-party ​ Related-party ​ Total ​ Third-party ​ Related-party ​ Total 2022 12% Notes $ 13,167,796 ​ $ 332,204 ​ $ 13,500,000 ​ $ ​ ​ $ — ​ $ — 2020 10% Notes ​ — ​ ​ — ​ ​ — ​ ​ 6,580,000 ​ ​ — ​ ​ 6,580,000 Trees Transaction Notes ​ — ​ ​ 1,191,865 ​ ​ 1,191,865 ​ ​ — ​ ​ 2,013,644 ​ ​ 2,013,644 Green Tree Acquisition Notes ​ 774,750 ​ ​ 2,725,250 ​ ​ 3,500,000 ​ ​ 320,000 ​ ​ — ​ ​ 320,000 Green Man Acquisition Notes ​ 1,500,000 ​ ​ — ​ ​ 1,500,000 ​ ​ — ​ ​ — ​ ​ — Unamortized debt discount ​ ( 1,527,346 ) ​ ​ ( 361,587 ) ​ ​ ( 1,888,933 ) ​ ​ ( 1,911,447 ) ​ ​ — ​ ​ ( 1,911,447 ) Total debt ​ 13,915,200 ​ ​ 3,887,732 ​ ​ 17,802,932 ​ ​ 4,988,553 ​ ​ 2,013,644 ​ ​ 7,002,197 Less: Current portion ​ ( 179,827 ) ​ ​ ( 1,723,517 ) ​ ​ ( 1,903,344 ) ​ ​ — ​ ​ ( 1,094,398 ) ​ ​ ( 1,094,398 ) Long-term portion $ 13,735,373 ​ $ 2,164,215 ​ $ 15,899,588 ​ $ 4,988,553 ​ $ 919,246 ​ $ 5,907,799 ​ 59 Table of Contents Aggregate Maturities As of December 31, 2022, aggregate future contractual maturities of long-term debt (excluding issue discounts) are as follows: ​ ​ ​ ​ ​ Year ending December 31, Amount 2023 ​ $ 2,340,960 2024 ​ 3,434,238 2025 ​ ​ 416,667 2026 ​ 13,500,000 ​ ​ $ 19,691,865 ​ Trees Transaction Notes In September 2021, with the completion of the Englewood acquisition, we are obligated to pay the Seller cash equal to $ 1,732,884 in equal monthly installments over a period of 24 months . The monthly payments began on October 15, 2021, and the payment is equal to $ 72,204 per month. In December 2021, with the completion of the Trees Portland and Trees Waterfront acquisitions, we are obligated to pay the Seller cash equal to $ 497,371 in equal monthly installments over a period of 24 months . The payments began on February 15, 2022, and the payment is equal to $ 20,724 per month. In January 2022, with the completion of the Trees MLK acquisition, we are obligated to pay the Seller cash equal to $ 384,873 in equal monthly installments over a period of 24 months . The payments began on June 15, 2022, and the payment is equal to $ 16,036 per month. In December 2022, with the completion of the Green Tree Acquisition, we are obligated to pay the Seller cash equal to $ 3,500,000 in equal monthly installments over a period of 15 months . The payments begin in September 2023, and the payment is equal to $ 233,333 per month. In December 2022, with the completion of the Green Man Acquisition, we are to pay the Seller cash equal to $ 1,500,000 in equal monthly installments over a period of 18 months . The payments begin in December 2023, and the payment is equal to $ 83,333 per month. 12 % Notes On September 15, 2022, we entered into a Securities Purchase Agreement with certain accredited investors (the " 12 % Investors”), pursuant to which we agreed to issue and sell senior secured convertible notes (the " 12 % Notes”) with an aggregate principal amount of $ 13,500,000 to such 12 % Investors, in exchange for payment by certain 12 % Investors of an aggregate amount of $ 10,587,250 in cash, as well as cancellation of outstanding indebtedness in the aggregate amount of $ 2,912,750 represented by the 10 % Notes discussed below. In connection with the 12 % Notes, the 12 % Investors received warrants (the " 12 % Warrants”) to purchase shares of our Common Stock equal to 20 % coverage of the aggregate principal amount with an exercise price of $ 0.70 per share, which equals an aggregate of warrants to purchase 3,857,150 shares of Common Stock. The lead 12 % Investor received an additional 10 % warrant coverage on the aggregate principal amount of 12 % Notes for total additional warrants to purchase 1,928,571 shares of our Common Stock. The lead 12 % Investor also will receive a five percent fee on the aggregate principal amount of the 12 % Notes. This total fee in the amount of $ 675,000 was recorded as a debt discount and will be amortized over the life of the loan. The 12 % Notes bear interest at an annual rate of 12 % and will mature on September 16, 2026. The 12 % Investors have the option to convert up to 50 % of the outstanding unpaid principal and accrued interest of the 12 % Notes into Common Stock at a fixed conversion price equal to $ 1.00 per share. The relative fair value of the new funding on the 12 % Warrants was recorded as a debt discount and additional paid-in capital of $ 569,223 . The relative fair value of the cancellation of the outstanding indebtedness was recorded as an extinguishment of debt and additional paid-in capital of $ 103,577 . We recorded amortization of debt discount expense 60 Table of Contents from the 12 % Notes of $ 90,334 and nil for the year ended December 31, 2022 and 2021, respectively. We determined there was no beneficial conversion feature on the 12 % Notes issued. The 12 % Notes are treated as conventional debt. For purposes of determining the debt discount, the underlying assumptions used in the black-scholes model to determine the fair value of the 12 % Warrants as of September 15, 2022, were: ​ ​ ​ ​ ​ Current stock price $ 0.20 Exercise price ​ $ 0.70 Risk-free interest rate ​ ​ 3.66 % Expected dividend yield ​ ​ — Expected term (in years) ​ ​ 5.0 Expected volatility ​ ​ 107 % ​ ​ 10 % Notes In December 2020, we entered into a Securities Purchase Agreement (the “Securities Purchase Agreement’) with certain accredited investors (the “ 10 % Investors”), pursuant to which we issued and sold senior convertible promissory notes (the “ 10 % Notes”) with an aggregate principal amount of $ 2,940,000 in exchange for payment to us by certain 10 % Investors of an aggregate amount of $ 1,940,000 in cash, as well as cancellation of outstanding indebtedness of the 15 % Notes (defined below) in the aggregate amount of $ 1,000,000 . In connection with the issuance of the 10 % Notes, the holders of the 10 % notes received warrants (the “ 10 % Warrants”) to purchase shares of our Common Stock equal to 20 % coverage of the aggregate principal amount at $ 0.56 per share. In the aggregate, this equals 1,050,011 shares of our Common Stock. The 10 % Notes will bear interest at an annual rate of 10 % and will mature on December 23, 2023. The 10 % Investors have the option at any time to convert up to 50 % of the outstanding unpaid principal and accrued interest of the Notes into Common Stock at a variable price of 80 % of the market price but no less than $ 0.65 per share and no more than $ 1.00 per share. The 10 % Warrants are exercisable at an exercise price of $ 0.56 per 10 % Warrant. The relative fair value of the new funding on the 10 % Warrants was recorded as a debt discount and additional paid-in capital of $ 254,400 . The relative fair value of the cancellation of the outstanding indebtedness was recorded as an extinguishment of debt and additional paid-in capital of $ 131,000 . For the years ended December 31, 2022 and 2021, amortization of debt discount expense was $ 84,375 and $ 86,759 , respectively, from the 10 % Notes. We determined there was no beneficial conversion feature on the 10 % Notes. The 10 % Notes are treated as conventional debt. ​ For purposes of determining the debt discount, the underlying assumptions used in the binomial lattice model to determine the fair value of the 10 % Warrants as of December 31, 2020, were: ​ ​ ​ ​ ​ Current stock price $ 0.53 Exercise price ​ $ 0.56 Risk-free interest rate ​ ​ 0.38 % Expected dividend yield ​ ​ — Expected term (in years) ​ ​ 5.0 Expected volatility ​ ​ 115 % ​ On February 8, 2021, we entered into a Securities Purchase Agreement with an accredited 10 % Investor, pursuant to which we issued and sold 10 % Notes with an aggregate principal amount of $ 1,660,000 to such 10 % Investor. The 10 % Notes are part of an over-allotment option exercised by us in connection with the convertible note offering consummated on December 23, 2020, as discussed above. In connection with the issuance of the 10 % Notes, the holder received warrants to purchase shares of our Common Stock equal to 20 % coverage of the aggregate principal amount at $ 0.56 per share. In the aggregate, this equals 592,858 shares of our Common Stock. The 10 % Notes bear interest at an annual rate of 10 % and will mature on February 8, 2024. The 10 % Investor has the option to convert up to 50 % of the outstanding unpaid principal and accrued interest of the 10 % Notes into Common Stock at a variable price of 80 % of the market price but no less than $ 0.65 per share and no more than $ 1.00 per share. The 10 % Warrants are exercisable at an exercise price of $ 0.56 per warrant. 61 Table of Contents The relative fair value of the new funding on the 10 % Warrants was recorded as a debt discount and additional paid-in capital of $ 429,300 . We determined that this 10 % Note had a beneficial conversion feature and is calculated at its intrinsic value (that is, the difference between the effective conversion price of $ 0.66 at the date of the note issuance and the fair value of the Common Stock into which the debt is convertible at the commitment date, per share being $ 0.90 , multiplied by the number of shares into which the debt is convertible). The valuation of the beneficial conversion feature recorded cannot be greater than the face value of the note issued. For the years ended December 31, 2022 and 2021, amortization of debt discount expense was $ 594,721 and $ 252,118 , respectively. The 10 % Notes are treated as conventional debt. For purposes of determining the debt discount, the underlying assumptions used in the binomial lattice model to determine the fair value of the 10 % Warrants as of February 8, 2021, were: ​ ​ ​ ​ Current stock price $ 1.12 Exercise price ​ $ 0.56 Risk-free interest rate ​ ​ 0.48 % Expected dividend yield ​ ​ — Expected term (in years) ​ ​ 5.0 Expected volatility ​ ​ 118 % ​ On April 20, 2021, we entered into a Securities Purchase Agreement with accredited 10 % Investors, pursuant to which we issued and sold 10 % Notes with an aggregate principal amount of $ 2,300,000 to such 10 % Investors. The 10 % Notes are part of an over-allotment approved by the existing noteholders in connection with the original convertible note offering of $ 4,600,000 consummated on December 23, 2020 and February 8, 2021. In connection with the issuance of the 10 % Notes, each holder received warrants to purchase shares of our Common Stock equal to 20 % coverage of the aggregate principal amount at $ 0.56 per share, except that the warrants coverage to one Investor acting as lead investor in the raise received approximately 35.5 % of the aggregate principal amount invested. The 10 % Notes bear interest at an annual rate of 10 % and will mature on April 20, 2024. The 10 % Investors have the option to convert up to 50 % of the outstanding unpaid principal and accrued interest of the 10 % Notes into Common Stock at a variable price of 80 % of the market price but no less than $ 0.65 per share and no more than $ 1.00 per share. The 10 % Warrants are exercisable at an exercise price of $ 0.56 per warrant. The relative fair value of the new funding on the 10 % Warrants was recorded as a debt discount and additional paid-in capital of $ 810,000 . We determined that these 10 % Notes had a beneficial conversion feature and is calculated at its intrinsic value (that is, the difference between the effective conversion price of $ 0.49 at the date of the note issuance and the fair value of the Common Stock into which the debt is convertible at the commitment date, per share being $ 0.83 , multiplied by the number of shares into which the debt is convertible). The valuation of the beneficial conversion feature recorded cannot be greater than the face value of the note issued. We recorded $ 692,500 as additional paid in capital and a debt discount and included in our consolidated statement of operations. For the years ended December 31, 2022 and 2021, amortization of debt discount expense was $ 1,024,442 and $ 350,471 , respectively. The 10 % Notes are treated as conventional debt. For purposes of determining the debt discount, the underlying assumptions used in the binomial lattice model to determine the fair value of the 10 % Warrants as of April 20, 2021, were: ​ ​ ​ ​ Current stock price $ 0.83 Exercise price ​ $ 0.56 Risk-free interest rate ​ ​ 0.81 % Expected dividend yield ​ ​ — Expected term (in years) ​ ​ 5.0 Expected volatility ​ ​ 115 % ​ See Note 17 for a summary of the outstanding warrants issued in conjunction with our debt. ​ ​ 62 Table of Contents NOTE 14. WARRANT DERIVATIVE LIABILITY On May 31, 2019, we received gross proceeds of $ 3 million by issuing three million shares of our Common Stock and three million warrants (“2019 Warrants”) to purchase shares of our Common Stock (“2019 Units”) in a registered direct offering for $ 1.00 per 2019 Unit (collectively defined as the “2019 Capital Raise”). The 2019 Warrants, issued with the 2019 Capital Raise, are accounted for as a derivative liability. The 2019 Warrant agreements contain a cash settlement provision whereby the holders could settle the warrants for cash based on the Black-Scholes value, upon certain fundamental transactions, as defined in the 2019 Warrant agreement, that are considered outside of the control of management, such as a change of control. The original exercise price of the 2019 Warrants was $ 1.30 per share. The 2019 Warrants contain certain anti-dilution adjustment provisions with respect to subsequent issuances of securities by the Company at a price below the exercise price of such warrants. As a result of such subsequent issuances of securities by the Company through 2020, at a price lower than the original exercise price, the exercise price of the 2019 Warrants had decreased to $ 0.40 per share and the number of shares subject to the 2019 Warrants increased to 9,591,614 shares of Common Stock as of December 31, 2020. In February 2020, one of the warrant holders exercised 200,000 warrants. We received $ 90,000 in cash for the exercise and booked an adjustment to the derivative liability of $ 82,241 as a result of the transaction. During the year ended December 31, 2020 the warrant holders exercised 7,945,807 warrants into 2,443,641 shares of our Common Stock through cashless exercise. We booked an adjustment to the derivative liability of $ 3,241,188 as a result. During the first quarter of 2021 the warrant holders exercised 1,323,000 warrants into 747,208 shares of our Common Stock through cashless exercise. We recorded an adjustment to the derivative liability of $ 1,523,117 as a result. During the year ended December 31, 2022 and 2021, we recognized a $ 22,809 gain and a $ 990,066 loss on the change in fair value of the derivative liability, respectively. As of December 31, 2022, there were 322,807 of the 2019 Warrants outstanding. The following are the key assumptions that were used to determine the fair value of the 2019 Warrants: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ ​ 2022 ​ 2021 ​ Number of shares underlying the warrants ​ 322,807 ​ ​ 322,807 ​ ​ Fair market value of stock ​ $ 0.15 ​ $ 0.19 ​ ​ Exercise price ​ $ 0.40 ​ $ 0.40 ​ ​ Volatility ​ ​ 78 % ​ 82 % ​ Risk-free interest rate ​ ​ 3.99 % ​ 4.06 % ​ Warrant life (years) ​ ​ 1.41 ​ 1.66 ​ ​ ​ 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2022 2021 ​ Beginning balance ​ $ 28,317 ​ $ 561,368 ​ Warrant exercise ​ ​ — ​ ​ ( 1,523,117 ) ​ Change in fair value of warrants derivative liability ​ ​ ( 22,809 ) ​ ​ 990,066 ​ Ending balance ​ $ 5,508 ​ $ 28,317 ​ ​ ​ NOTE 15. COMMITMENTS AND CONTINGENCIES Legal From time to time, the Company is a party to various litigation matters incidental to the conduct of its business. The Company is not presently a party to any legal proceedings that would have a material adverse effect on its business, operating results, financial condition, or cash flows, except as set forth below. 63 Table of Contents In July 2021, we were served with a Complaint in the District Court, County of Denver, Colorado, by plaintiff 2353 SB, LLC (“Plaintiff”). We entered into a lease with Plaintiff for the premises at 2353 South Broadway, Denver, CO with a term of three (3) years to commence on November 1, 2020. Monthly lease payments were to be $ 12,866.66 . In 2020, we made initial payments (first month’s rent, last month’s rent, and security deposit) of $ 39,633.32 ; but subsequently did not take possession of the premises and have made no further payments in respect thereof, as a direct result of the COVID-19 pandemic. The lease contains a ‘force majeure’ clause which includes a provision that neither party is liable for failure to perform its obligations under the lease which have become practicably impossible because of circumstances beyond the reasonable control of the applicable party, including ‘pandemics or outbreak of communicable disease.’ We have taken the position that our failure to take possession and make any further payments under the lease is directly related to the COVID-19 pandemic. We are vigorously defending this action and believe that the above-referenced force majeure clause presents a complete defense to Plaintiff’s claims. ​ We filed a motion to dismiss or a motion for summary judgment in the alternative. Plaintiff filed a response and cross-motion for summary judgment thereafter. In October 2022, the court denied the motion to dismiss on the basis that Plaintiff sufficiently pled facts that raise a plausible claim for relief, notwithstanding our possible defenses, but has not specifically made any rulings on either party’s motion for summary judgment. On November 14, 2022, we timely filed a formal answer to the complaint, denying each of Plaintiff’s substantive claims. We also asserted appropriate affirmative defenses, including the force majeure clause of the lease, which provides that we are not liable under the lease in the event of a variety of events outside our control, including “pandemics.” In addition, we have asserted a counterclaim against Plaintiff for breach of contract to recover the initial payments made under the lease as well as attorneys’ fees and costs. The trial is currently scheduled for September 2023. NOTE 16. DEFERRED TAXES Income tax expense was $ 204,917 and nil for the years ended December 31, 2022 and 2021, respectively. Significant components of the Company’s deferred tax assets and liabilities at December 31, 2022 and 2021 are shown below. A valuation allowance has been established as realization of such net deferred tax assets has not met the more likely-than-not threshold requirement. The Company has determined it is not more likely than not that its net deferred tax assets will be recovered. If the Company’s judgment changes and it is determined that the Company will be able to realize these deferred tax assets, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets will be accounted for as a reduction to income tax expense. ​ As of December 31, 2022 and 2021, the Company had federal operating loss carryforwards of approximately $ 32.1 million and $ 36.0 million, respectively, and $ 41.1 and $ 41.4 million of state net operating loss carryforwards, respectively. Of the current net operating loss carryforwards, $ 24.1 million expire starting in 2033 through 2037, $ 3.1 million will expire starting in 2041, $ 3.7 million will expire in 2042, and $ 42.3 million do not expire. The Company has evaluated ownership changes pursuant to IRC Sections 382 and 383. The annual Section 382 base limit is approximately $ 461 thousand. The additional deemed RBIG pursuant to Notice 2003-65 is approximately $ 2 million per year for a 5-year recognition period through December 31, 2026. ​ ​ 64 Table of Contents The components of net deferred tax assets and liabilities are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, Deferred tax assets: 2022 2021 Net operating loss carryforwards ​ $ 8,563,430 ​ $ 9,113,554 Equity-based instruments ​ 366,007 ​ 1,991,225 Long-lived assets and other ​ ( 46,324 ) ​ 192,201 Capital loss carryforward ​ 97,868 ​ 93,218 Total deferred tax assets ​ $ 8,980,981 ​ $ 11,390,198 Deferred tax liabilities: ​ ​ ​ ​ ​ ​ Intangible assets ​ $ ( 566,853 ) ​ $ — Total deferred tax liabilities ​ ​ ( 566,853 ) ​ ​ — Valuation allowance ​ ​ ( 8,414,128 ) ​ ​ ( 11,390,198 ) Net deferred tax asset ​ $ — ​ $ — ​ A reconciliation of our income tax provision and the amounts computed by applying statutory rates to income before income taxes is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ 2022 2021 Income tax benefit at statutory rate ​ $ ( 1,946,731 ) ​ $ ( 1,862,570 ) State income tax benefit, net of Federal benefit ​ — ​ ( 88,898 ) 280E Disallowance ​ ​ 1,834,141 ​ ​ 946,481 Equity-based instruments ​ 14,180 ​ 64,735 Fair market value adjustment/loss on extinguishment – derivative liabilities ​ 65,231 ​ 312,590 Amortization of debt discount ​ 376,895 ​ 176,128 Goodwill and intangible impairment ​ ​ 573,262 ​ ​ ​ Other ​ 107,608 ​ 706,270 Valuation allowance ​ ( 819,669 ) ​ ( 254,736 ) ​ ​ $ 204,917 ​ $ — ​ ​ NOTE 17. STOCKHOLDERS’ EQUITY 2021 Preferred stock offering On September 10, 2021, we entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with various accredited investors (the “2021 Investors), pursuant to which we issued and sold Units consisting of Series A Convertible Preferred Stock (“Series A Preferred”) and warrants (the “Preferred Warrants”) to purchase shares of our Common Stock. The total number of Units sold was 1,180 . Each Unit consists of one share of Series A Preferred and 354,000 Preferred Warrants. The purchase price of each Unit was $ 1,000 , for an aggregate amount sold of $ 1,180,000 . Each share of Series A Preferred is convertible into 1,000 shares of Common Stock upon the consummation of a capital raise of not less than $ 5,000,000 . The Certificate of Designation of the Series A Preferred Stock (“Certificate of Designation”) was filed with the Secretary of the State of Colorado on September 14, 2021. The Certificate of Designations established the new preferred series entitled “Series A Convertible Preferred Stock” with no par value per share, and sets forth the rights, restrictions, preferences, and privileges of the Series A Preferred, summarized as follows: ● Authorized Number of Shares – 5,000 ● Voting Rights – None 65 Table of Contents ● Dividends – 6 % per annum, ‘paid in kind’ in shares of Series A Preferred ● Conversion – Each share of Series A Preferred is mandatorily convertible into 1,000 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 an exchange ● Redemption – No rights of redemption by 2021 Investors, nor mandatory redemption The Preferred Warrants have a five-year term and an exercise price per Preferred Warrant share of $ 1.05 . The warrants contain an anti-dilution provision pursuant to which upon we do a future capital raise at less than $ 1.00 per shares, each Preferred Investor will be granted additional Preferred Warrants on a ‘full-ratchet’ basis. The proceeds received in the sale of the Series A Preferred totaled $ 1,180,000 , for the issuance of 1,180 Series A Preferred, plus 354,000 warrants. The warrants were valued using a Black Scholes model, at $ 117,131 and per the relative fair value allocation, $ 1,073,446 was allocated to the Series A proceeds. In addition to the Preferred Warrants, the Company has outstanding warrants related to prior equity offerings. The table below summarizes the warrants issued in conjunction with our equity offerings: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ ​ ​ Weighted- ​ average ​ ​ ​ ​ ​ ​ ​ average ​ Remaining ​ ​ ​ ​ ​ Number of ​ Exercise Price ​ Contractual ​ Aggregate ​ ​ Shares ​ per Share ​ Term (in years) ​ Intrinsic Value Outstanding as of December 31, 2020 7,602,814 ​ $ 0.54 4.4 $ — Granted 354,000 ​ 1.05 ​ ​ ​ Outstanding as of December 31, 2021 7,956,814 ​ 0.56 4.4 ​ ​ — Granted — ​ — ​ ​ ​ ​ Outstanding and exercisable as of December 31, 2022 ​ 7,956,814 ​ $ 0.56 ​ 4.4 ​ $ — ​ Warrants with Debt The Company has also issued warrants in conjunction with debt issuances. The following summarizes warrants issued in conjunction with our debt issuances: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ ​ ​ Weighted- ​ average ​ ​ ​ ​ ​ ​ ​ average ​ Remaining ​ ​ ​ ​ ​ Number of ​ Exercise Price ​ Contractual ​ Aggregate ​ ​ Shares ​ per Share ​ Term (in years) ​ Intrinsic Value Outstanding as of December 31, 2020 7,421,011 ​ $ 0.46 2.0 $ 478,925 Granted 1,868,518 ​ 0.56 ​ Expired ( 1,204,000 ) ​ 0.65 ​ Outstanding as of December 31, 2021 8,085,529 ​ 0.58 2.8 ​ $ — Granted 5,785,721 ​ 0.70 ​ ​ ​ ​ Expired ( 1,756,000 ) ​ 0.40 ​ ​ ​ ​ Outstanding and exercisable as of December 31, 2022 ​ 12,115,250 ​ $ 0.66 ​ 3.5 ​ $ — ​ Stock-based compensation Stock-based Awards As of December 31, 2022, the Company has two active plans, the 2020 Omnibus Incentive Plan approved by the Board in November 2020 (“2020 Plan”) and the 2014 Equity Incentive Plan approved by the Board in October 2014 (“2014 66 Table of Contents Plan” and collectively with the 2020 Plan the “Stock Incentive Plans”) that allow the Board of Directors to grant stock-based awards to eligible employees, non-employee directors, and consultants of the Company and its subsidiaries. Under the Stock Incentive Plans, the Board may grant non-statutory and incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units, deferred stock units, performance awards, non-employee director awards, and other stock-based awards. Subject to adjustment, the maximum number of shares of our common stock to be authorized for issuance under the Stock Incentive Plans is 25 million shares. As of December 31, 2022, stock-based awards for approximately 17.5 million shares are available to be issued under the Stock Incentive Plans. Stock Options ​ The following summarizes stock option activity for the years ended December 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ ​ ​ ​ Weighted- ​ Average ​ ​ ​ ​ ​ ​ ​ Average ​ Remaining ​ ​ ​ ​ ​ Number of ​ Exercise Price ​ Contractual ​ Aggregate ​ Shares per Share Term (in years) Intrinsic Value Outstanding as of December 31, 2020 ​ 7,266,420 ​ $ 1.03 ​ 5.5 ​ $ 167,000 Granted ​ 1,158,000 ​ ​ 0.82 ​ ​ ​ Exercised ( 394,670 ) ​ 0.52 ​ Forfeited or expired ( 3,126,205 ) ​ 1.04 ​ Outstanding as of December 31, 2021 ​ 4,903,545 ​ $ 1.11 ​ 5.3 ​ $ 22,000 Granted ​ 250,000 ​ ​ 0.34 ​ ​ ​ Forfeited or expired ( 216,720 ) ​ 0.87 ​ Outstanding as of December 31, 2022 4,936,825 $ 1.08 4.4 ​ $ 22,000 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Exercisable as of December 31, 2022 4,564,445 ​ $ 1.15 4.4 ​ $ 4,000 ​ The options granted in 2022 and 2021 expire five years from the date of grant and vest over a period of one year. The grant date fair value of the awards granted in 2022 and 2021, totaled $ 56,348 and $ 628,496 , respectively. The following summarizes the Black-Scholes assumptions used to value the Employee Awards granted: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ 2022 2021 Exercise price ​ $ 0.22 - 0.95 ​ $ 0.31 - 0.67 ​ Stock price on date of grant ​ $ 0.22 - 0.95 ​ $ 0.27 - 0.67 ​ Volatility ​ 100 - 111 % 111 - 114 % Risk-free interest rate ​ 0.29 - 0.97 % 0.16 - 1.53 % Expected life (years) ​ 3.0 ​ 3.0 ​ Dividend yield ​ — ​ — ​ ​ As of December 31, 2022, there was approximately $ 13,172 of total unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of four months . Restricted Stock Awards On April 1, 2022 we entered into a Restricted Stock Unit Agreement with four participants. The Restricted Stock Unit’s (“RSU”) were granted pursuant to our 2020 Omnibus Incentive Plan. Four separate executives were each granted 300,000 RSU’s, for a total grant of 1,200,000 RSU’s. The 300,000 RSU’s are divided into three equal tranches of 100,000 RSU’s. Each tranche of RSU will vest immediately if and upon the market price reaching a certain minimum market price of our Common Stock as reported on the OTCQB market. Each tranche will 67 Table of Contents vest as the market price reaches $ 1.00 , $ 2.00 and $ 3.00 . Upon the RSU’s vesting, the participant will be promptly issued shares of our Common Stock. If there is a change in control, all unvested RSU’s granted under this agreement will become fully vested and the vested RSU’s will be paid out or settled. The grant date fair value of these instruments is $ 535,976 and was calculated using the Monte Carlo model. The fair value of the RSU’s is recognized over the requisite service period. As these RSU’s do not have a service period, we used the requisite service period derived from the valuation of 10 years . As of December 31, 2022, none of the RSU’s have vested. ​ The Company recognized $ 188,330 and $ 307,963 of expense related to stock-based awards during the years ended December 31, 2022 and December 31, 2021, respectively. ​ ​ ​ NOTE 18. NET LOSS PER SHARE Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the reporting period. Diluted net loss per share is computed similarly to basic loss per share, except that it includes the potential dilution that could occur if dilutive securities are exercised. Outstanding stock options and Common Stock warrants are considered anti-dilutive because we are in a net loss position. Accordingly, the number of weighted average shares outstanding for basic and fully diluted net loss per share are the same. The following summarizes equity instruments that may, in the future, have a dilutive effect on earnings per share: ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 2021 Stock options 4,936,825 4,963,545 Restricted stock awards ​ 1,200,000 ​ — Warrants 20,072,064 16,117,343 Accrued stock payable 100,000 1,769,537 Convertible notes ​ 6,750,000 ​ 5,785,450 Preferred stock ​ 1,180,000 ​ 1,180,000 ​ 34,238,889 29,815,875 ​ ​ ​ NOTE 19. RELATED PARTY TRANSACTIONS ​ On June 3, 2020, the Company entered into a consulting agreement with Adam Hershey, a board member and investor, pursuant to which he would act as a strategic consultant for the Company, including aiding with the sourcing and evaluation of merger and acquisition deals, strategic capital and strategic partnerships or joint ventures. We paid Mr. Hershey $ 125,000 and $ 99,996 during the years ended December 31, 2022 and 2021, respectively. We currently have a lease agreement with Dalton Adventures, LLC in which we rent a greenhouse cultivation facility in Boulder, Colorado. The owner of Dalton Adventures, LLC is a principal shareholder and board member of the Company. We incurred approximately $ 362,000 and $ 458,000 of rent expense related to this lease for the years ended December 31, 2022 and 2021, respectively. See Note 10 for further discussion of the Company’s obligations associated with related-party leases. We currently have a lease agreement with JLA Enterprises, LLC in which we rent a retail dispensary in Longmont, Colorado. A board member and an executive level employee of the Company are owners of JLA Enterprises, LLC. We also have a lease agreement with ALJ 1090, LLC in which we rent a building that has a retail dispensary and cultivation facility in Berthoud, Colorado. The same board member is an owner of ALJ 1090, LLC. These leases were assumed as part of the Green Tree Acquisition on December 12, 2022, and as such, the expense related to these leases was not 68 Table of Contents material for the year ended December 31, 2022. See Note 10 for further discussion of the Company’s obligations associated with related-party leases. We previously had a lease agreement with Bellewood Holdings, LLC in which we leased the retail space for the Trees Englewood dispensary in Englewood, Colorado. The owner of Bellewood Holdings, LLC is a principal shareholder and board member of the Company. This lease was assigned to a new landlord (unaffiliated with the Company or such principal shareholder and board member) when the building was sold in June 2022. We incurred approximately $ 66,000 and $ 47,000 of related-party lease expense for this lease for the years ended December 31, 2022 and December 31, 2021, respectively. See Note 10 for further discussion of the Company’s obligations associated with related-party leases. As of December 31, 2022, four of our current board members hold senior convertible promissory notes from the Company for an aggregate amount of $ 320,000 . These notes are included in the 12 % Notes discussed in Note 13. Accrued interest earned and owed to the board members was $ 11,738 as of December 31, 2022. One of the sellers in the Trees Transaction is a principal shareholder and board member of the Company and another seller is an executive level employee of the Company. As of December 31, 2022, the Company has outstanding debt related to the Trees Transaction payable to these individuals. See Note 13 for disclosure of the Trees Transaction Notes. One former owner of the Green Tree Entities is a current board member and another former owner is currently an executive level employee of the Company. As of December 31, 2022, the Company has outstanding debt related to the Green Tree Acquisition that is payable to these individuals. See Note 13 for disclosure of the Green Tree Acquisition Notes. In addition, the Company made one-item bonus payments of approximately $ 383,000 to each former owner as part of employment agreements to remain with the Company. These payments are included in selling, general, and administrative expenses in the accompanying consolidated statements of operations. NOTE 20. SEGMENT INFORMATION Our operations are organized into two segments: Retail and Cultivation. All revenue originates in, and all assets are located in the United States. Segment information is presented in accordance with ASC 280, Segments Reporting. This standard is based on a management approach that requires segmentation based upon the Company’s internal organization and disclosure of revenue and certain expenses based upon internal accounting methods. The Company’s financial reporting systems present various data for management to run the business, including internal profit and loss statements prepared on a basis not consistent with GAAP. The following information is presented net of discontinued operations. For more information see Note 3. Year ended December 31 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 Retail Cultivation Eliminations ​ Total Revenues ​ $ 12,934,904 ​ $ 1,783,309 ​ $ ( 1,273,671 ) ​ $ 13,444,542 Costs and expenses ​ ​ ( 13,117,039 ) ​ ​ ( 3,346,975 ) ​ ​ 1,273,671 ​ ​ ( 15,190,343 ) Segment operating income ​ $ ( 182,135 ) ​ $ ( 1,563,666 ) ​ $ — ​ ​ ( 1,745,801 ) Corporate expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 7,529,827 ) Net loss from continuing operations before income taxes ​ ​ ​ ​ ​ ​ ​ ​ ​ $ ( 9,275,628 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 Retail Cultivation ​ Eliminations Total Revenues ​ $ 3,515,761 ​ $ 2,722,059 ​ $ ( 325,093 ) ​ $ 5,912,727 Costs and expenses ​ ​ ( 3,112,595 ) ​ ​ ( 6,273,162 ) ​ ​ 325,093 ​ ​ ( 9,060,664 ) Segment operating income ​ $ 403,166 ​ $ ( 3,551,103 ) ​ $ — ​ ​ ( 3,147,937 ) Corporate expenses ​ ​ ​ ​ ​ ​ ​ ( 5,279,214 ) Net loss from continuing operations before income taxes ​ ​ ​ ​ ​ ​ ​ ​ ​ $ ( 8,427,151 ) ​ ​ 69 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, Total assets 2022 2021 Retail ​ $ 25,212,245 ​ $ 16,831,580 Cultivation ​ ​ 4,628,452 ​ ​ 3,634,406 Corporate ​ 1,985,455 ​ 1,709,496 Total assets - segments ​ ​ 31,826,152 ​ ​ 22,175,482 Intercompany eliminations ​ ​ ( 131,439 ) ​ ​ ( 151,137 ) Total assets - consolidated ​ $ 31,694,713 ​ $ 22,024,345 ​ NOTE 21. SUBSEQUENT EVENTS ​ In February 2023, we completed the acquisition of Station 2, LLC, the assets of which consist of a dispensary located in Denver, CO. The consideration paid by the Company consists of cash at closing equal to $ 256,582 plus an additional $ 385,873 in twenty-four (24) equal monthly payments commencing May 2023. Timothy Brown, one of our Board members, was the sole owner of Station 2 and has and will receive all consideration described above. ​ ​ ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.