What changed in this filing

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Item 1. Financial Statements

2023-05-22 compared with 2022-11-14 · 214 added, 356 removed, 397 unchanged (59% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, 2022

March 31, 2023

December 31, 2022

1 unchanged sentence

Cash and cash equivalents

Restricted cash

Accounts receivable, net of allowance of $ 38,000 and $ 61,000 , respectively

Current portion of notes receivable, net of allowance of nil and $ 43,108 , respectively

Inventories, net

Accounts receivable, net of allowance of $ 42,000 , respectively

Prepaid expenses and other current assets

5 unchanged sentences

Current liabilities

Accounts payable

Accounts payable and accrued expenses

Interest payable

1 unchanged sentence

Operating lease liability, current

Finance lease liability, current

Accrued stock payable

4 unchanged sentences

Operating lease liability, non-current

Notes payable - long-term (net of discount)

Related party long-term notes payable (net of discount)

Finance lease liability, non-current

Notes payable - non-current (net of unamortized discount)

Total liabilities

6 unchanged sentences

200,000,000 shares authorized;

96,192,184 shares and 89,551,993 shares issued and outstanding , respectively

118,664,094 shares issued and outstanding, respectively

Additional paid-in capital

7 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended

Nine months ended

September 30,

Three months ended March 31,

Cultivation sales

12 unchanged sentences

Interest expense

Loss on extinguishment of debt

(Gain) loss on derivative liability

Gain on sale of assets

Total other expenses, net

1 unchanged sentence

( 1,800,798 )

( 1,286,990 )

( 3,499,966 )

( 4,685,782 )

Provision for income taxes

1 unchanged sentence

( 1,886,534 )

( 1,286,990 )

( 3,753,966 )

( 4,685,782 )

Income (loss) from discontinued operations, net of tax

( 2,704,484 )

( 1,327,595 )

( 3,748,488 )

Income from discontinued operations, net of tax

( 1,886,534 )

2 unchanged sentences

( 1,904,234 )

( 1,327,595 )

( 3,819,288 )

( 5,062,916 )

Per share data - basic and diluted

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine months ended September 30,

Three months ended March 31,

Cash flows from operating activities

( 1,886,534 )

( 5,062,916 )

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

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

Amortization of debt discount and equity issuance costs

Depreciation and amortization

Loss on extinguishment of debt

Non-cash lease expense

Bad debt recovery

(Gain) loss on disposal of property and equipment

Loss on warrant derivative liability

Bad debt expense

(Gain) loss on derivative liability

Stock-based compensation

2 unchanged sentences

Prepaid expenses and other assets

Accounts payable and accrued liabilities

Accounts payable, accrued liabilities, and interest payable

Operating lease liabilities

Net cash used in operating activities:

( 2,489,130 )

Net cash (used in) provided by operating activities

Cash flows from investing activities

Purchase of property and equipment

Proceeds for sale of equipment

Acquisition of Station 2 assets

Proceeds on notes receivable

Acquisition of TDM, LLC

( 1,122,015 )

Acquisition of Trees MLK

Net proceeds from sale of Next Big Crop

Net cash used in investing activities

Cash flows from financing activities

Proceeds from exercise of stock options

Proceeds from preferred stock offering

Proceeds from notes payable

Payments on notes payable

Payments on notes payable and finance lease

Net cash used in financing activities

Net decrease in cash and cash equivalents

( 1,123,671 )

Net cash provided by financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

2 unchanged sentences

Cash paid for interest

Cash paid for taxes

Non-cash investing & financing activities

Operating lease right-of-use asset/Operating lease liability

Non-cash debt issuance for acquisition of Station 2 assets

Issuance of accrued stock

12 % Warrants recorded as a debt discount and additional paid-in capital

12 % Warrants recorded as a loss on extinguishment of debt and additional paid-in capital

Accrued dividends on preferred stock

Cashless warrant exercise

Beneficial conversion feature

10 % Warrants recorded as a loss on extinguishment of debt and additional paid-in capital

Issuance of common stock to a consultant

See Notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

IN STOCKHOLDERS’ EQUITY (DEFICIT)

For the three months ended September 30, 2022

IN STOCKHOLDERS’ EQUITY

For the three months ended March 31, 2023

Preferred Stock

Paid-in Capital

January 1, 2023

( 93,384,382 )

Warrants issued with 12 % Notes

Share-based compensation

2 unchanged sentences

( 1,886,534 )

September 30, 2022

( 87,640,103 )

For the three months ended September 30, 2021

Preferred Stock

Paid-in Capital

( 78,686,757 )

Common stock issued upon exercise of stock options

Common stock issued to a consultant

Common stock issued for acquisition of TDM, LLC

Preferred shares issued

Warrants issued with preferred stock

Modification of Warrants

Modification of Options

Stock-based compensation

( 1,327,595 )

September 30, 2021

March 31, 2023

( 95,288,616 )

For the nine months ended September 30, 2022

For the three months ended March 31, 2022

Preferred Stock

2 unchanged sentences

( 83,820,815 )

Common stock issued for acquisition of Trees Waterfront LLC

Common stock issue for acquisition of Trees Waterfront LLC

Common stock issued for acquisition of Trees MLK LLC

Warrants issued with 12 % Notes

Share-based compensation

Dividends on preferred stock

( 3,748,488 )

September 30, 2022

( 87,640,103 )

For the nine months ended September 30, 2021

Preferred Stock

Paid-in Capital

January 1, 2021

( 74,951,436 )

Common stock issued to a consultant

Common stock issued upon exercise of stock options

Common stock issued for acquisition of TDM, LLC

Warrants issued with 10 % Notes

Beneficial conversion feature

Cashless exercise of warrants

Stock-based compensation

Preferred shares issued

Warrants issued with preferred stock

Modification of Warrants

Modification of Options

( 5,062,916 )

September 30, 2021

March 31, 2022

( 84,681,871 )

4 unchanged sentences

Nature of Operations

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

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

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

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

Retail (“Retail Segment”)

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

Cultivation (“Cultivation Segment”)

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

TREES Corporation, a Colorado Corporation (the “Company,” “we,” “us,” or “our,”) is a cannabis retailer and cultivator in the States of Colorado and Oregon.

We presently operate eight (8) cannabis dispensaries as follows:

Englewood, Colorado

Federal Boulevard – Recreational license only

Two (2) in Denver, Colorado

Federal Boulevard – Recreational license only

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

Longmont, Colorado

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

Berthoud, Colorado

2 nd Street (formerly Green Tree/Natural Alternatives for Life) – Medical and Recreational licenses

Three (3) in Oregon

SW Corbett Avenue, Portland, OR – Medical and Recreational licenses

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

7050 NE MLK, Portland, OR – Medical and Recreational licenses

We also operate five (5) cultivation facilities in Colorado as follows:

SevenFive Farm – 3705 N.

75 th Street, Boulder – Retail cultivation license only

Foothills Highway D-300 (formerly Green Tree/Ancient Alternatives) – Medical and Retail cultivation licenses

Foothills Highway C-100 (formerly Green Tree/Mountainside Industries) – Medical and Retail cultivation licenses

Foothills Highway E-100 (formerly Green Tree/Hillside Enterprises) – Retail cultivation license only

2 nd Street (formerly Green Tree/Natural Alternatives for Life) – Medical cultivation license only

Our principal business model is to acquire, integrate and optimize cannabis companies in the retail and cultivation segments utilizing the combined experience of entrepreneurs and synergistic operations of our vertically integrated network.

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

13 unchanged sentences

The condensed consolidated balance sheet for the year ended December 31, 2022, was derived from audited financial statements but does not include all disclosures required by U.S.

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

The information included in this quarterly report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and notes thereto of the Company for the year ended December 31, 2022, which were included in the annual report on Form 10-K filed by the Company on April 17, 2023.

In the opinion of management, these unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and notes thereto of the Company and include all adjustments, consisting only of normal recurring adjustments, considered necessary for the fair presentation of the Company's financial position and operating results.

The results for the three and nine months ended September 30, 2022, are not necessarily indicative of the operating results for the year ending December 31, 2022, or any other interim or future periods.

The results for the three months ended March 31, 2023, are not necessarily indicative of the operating results for the year ending December 31, 2023, or any other interim or future periods.

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

13 unchanged sentences

Customer and Revenue Concentrations

During the three months ended September 30, 2022 and 2021, 79 % and 24 % of SevenFive’s revenue was with one and two customers, respectively.

During the nine months ended September 30, 2022 and 2021, 66 % and 12 % was with one customer, respectively.

The customer in 2022 is a related party dispensary and the revenues associated with this customer is eliminated in consolidation.

Discontinued Operations

On July 16, 2021, we entered into an Asset Purchase Agreement with an individual to sell substantially all of the assets of NBC for a total of $ 150,000 and 10 % of profits generated by the buyer in the states of Michigan, Mississippi, and Massachusetts for a period of twelve months from the closing.

On August 2, 2021, the sale of 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.

On January 1, 2021, we discontinued our investments segment.

As this is not a materially significant segment, we have not shown the effects of the discontinued segment separately in the financial statements.

The cash flows related to discontinued operations have not been segregated and are included in the consolidated statements of cash flows.

During the three months ended March 31, 2023, 88 % of SevenFive’s revenue was with three customers.

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

The customers in both 2023 and 2022 are related party dispensaries and the revenues associated with these customers are eliminated in consolidation.

During the three months ended March 31, 2023, 88 % of Green Tree’s revenue was with three customers.

The customers in 2023 are related party dispensaries and the revenues associated with these customers are eliminated in consolidation.

Going Concern

We incurred net losses of $ 2,704,484 and $ 3,748,488 during the three and nine months ended September 30, 2022, respectively, and $ 1,327,595 and $ 5,062,916 for the three and nine months ended September 30, 2021, respectively, and had an accumulated deficit of $ 87,640,103 as of September 30, 2022.

We had cash and cash equivalents of $ 1,964,660 and $ 2,054,050 as of September 30, 2022, and December 31, 2021, respectively.

We incurred net losses of $ 1,886,534 during the three months ended March 31, 2023, and $ 861,056 for the three months ended March 31, 2022, and had an accumulated deficit of $ 95,288,616 as of March 31, 2023.

We had cash and cash equivalents of $ 1,460,162 and $ 2,583,833 as of March 31, 2023, and December 31, 2022, respectively.

The accompanying unaudited condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets, and the satisfaction of liabilities and commitments in the ordinary course of business.

3 unchanged sentences

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

Our ability to continue as a going concern is dependent upon our ability to raise additional capital to support our planned investing activities.

Our ability to continue as a going concern is dependent upon our ability to raise additional capital to fund operations, support our planned investing activities, and repay our debt obligations as they become due.

If we are unable to obtain additional funding, we would be forced to delay, reduce, or eliminate some or all of our acquisition efforts, which could adversely affect our growth plans.

6 unchanged sentences

The amendments in this ASU are effective for annual and interim periods beginning after December 15, 2023, although early adoption is permitted.

The Company is currently evaluating the impact of the adoption of the standard on the consolidated financial statements.

FASB ASU 2019-12 – “Income Taxes (Topic 740)” – In December 2019, the FASB issued guidance which simplifies certain aspects of accounting for income taxes.

The guidance is effective for interim and annual reporting periods beginning after December 15, 2020, and early adoption is permitted.

We adopted this ASU in the first quarter of 2021.

This ASU did not have a material effect on our condensed consolidated financial statements.

We adopted this ASU in the first quarter of 2022, and the adoption did not have a material effect on our financial statements.

BUSINESS ACQUISITION

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 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.

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

Based on the completed purchase price, there was an adjustment from the tradename to goodwill in the amount of

$ 3,601,000 .

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

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

The accompanying unaudited condensed 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, 2020, are as follows:

Three months ended

Nine months ended

September 30,

Total revenues

Net income (loss) attributable to common stockholders

Net income (loss) per common share

Weighted average number of basic and diluted common shares outstanding

The unaudited pro-forma 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, representing a portion of the overall Trees Transaction, which 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, fair value of 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.

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

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

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

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

The accompanying unaudited condensed consolidated financial statements include the results of Trees Oregon from the date of acquisition for financial reporting purposes, December 30, 2021.

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 assumed certain operating obligations at closing, including certain manufacturing agreements between GT Creations and affiliates of the Green Tree Entities.

Allyson Feiler, a principal owner of the Green Tree Entities, was also elected to our Board of Directors effective the date of acquisition.

We paid cash in the amount of $ 500,000 and stock consideration of 17,977,528 shares of our Common Stock.

The closing price of our Common Stock on December 12, 2022, the date of license transfer, was $ 0.165 per share, as such, fair value of the equity consideration is $ 2,966,292 .

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.

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

We have not completed the allocation of the purchase price for the Green Tree Acquisition.

As of March 31, 2023, 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, 2022, are as follows:

Three months ended

Nine months ended

September 30,

Total revenues

4 unchanged sentences

The unaudited pro-forma results are not intended to present actual results that would have been attained had the acquisition been completed as of January 1, 2022, 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 consideration is $ 1,342,076 .

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

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

We opened the dispensary in the second quarter of 2022.

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

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

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

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

The accompanying unaudited condensed consolidated financial statements include the results of Trees MLK from the date of acquisition for financial reporting purposes, January 5, 2022.

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.

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

We have not completed the allocation of the purchase price for the Green Man Acquisition.

As of March 31, 2023, 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, 2022, are as follows:

Three months ended

Nine months ended

September 30,

Total revenues

4 unchanged sentences

ASSET ACQUISITION

In February 2023, we completed the acquisition of the assets of Station 2, LLC.

The assets consist of a medical and retail cannabis license for a dispensary located in Denver, CO.

We also assumed responsibility of the operating lease for the dispensary and recorded the relating ROU asset which is disclosed separately on the accompanying consolidated balance sheets.

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.

As the dispensary was not in operation and there was no assembled workforce at the time of acquisition, the acquisition was accounted for as an asset acquisition of a license.

As of March 31, 2023, the balance of the license was $ 580,694 , which is recorded within Intangible assets, net in our condensed consolidated balance sheets.

DISCONTINUED OPERATIONS

4 unchanged sentences

Three months ended

Nine months ended

September 30,

Product revenues

6 unchanged sentences

Total costs and expenses

Income (loss) from discontinued operations

The cash flows related to discontinued operations have not been segregated and are included in the consolidated statements of cash flows.

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

Nine months ended

September 30,

Accounts receivables

Prepaid expenses and other current assets

Depreciation and amortization

Capital expenditures

Accounts payable and accrued expenses

Customer deposits

Income from discontinued operations

INVENTORIES, NET

Our inventories consisted of the following:

September 30,

Raw materials

Work-in-progress and finished goods

Inventory reserves

Inventories, net

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

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

We also pay our portion of real estate taxes.

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

No other changes to the lease were made.

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

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

As of September 30, 2022, the balance of the right-of-use asset and lease liability was $ 557,556 and $ 564,624 , respectively.

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

This office space is our corporate office.

The lease expires in November 2022.

Rent is $ 7,150 per month with a 3 % escalation beginning in November 2021.

We also pay our portion of real estate taxes.

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

As of September 30, 2022, the balance of the right-of-use asset and lease liability was $ 14,311 and $ 14,367 , respectively.

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

The lease expires in April 2027.

Rent is $ 5,124 per month with a 5 % annual escalation beginning in May 2022.

The rent includes payment of property taxes.

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

As of September 30, 2022 , the balance of the right-of-use asset and lease liability was $ 205,660 and $ 211,313 , respectively.

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

The lease has an initial term of 5 years and, at our option an additional term of 5 years .

The lease expires in March 2031.

Rent is $ 6,683 per month with a 3 % annual escalation.

The rent includes payment of property taxes.

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

As of September 30, 2022 , the balance of the right-of-use asset and lease liability was $ 361,287 and $ 369,604 , respectively.

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

The lease has an initial term of 3 years and at our option two additional terms of 3 years each.

The lease expires in July 2029.

Rent is $ 3,150 per month with a 5 % annual escalation.

The rent includes payment of property taxes.

We determined the present value of the future lease payments using a discount rate of 20 % over a 10-year term, resulting in a right-of-use asset and lease liability of $ 172,053 .

As of September 30, 2022 , the balance of the right-of-use asset and lease liability was $ 160,267 and $ 165,744 , respectively.

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

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

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

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

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

As of September 30, 2022, the balance of the right-of-use asset and lease liability was $ 1,652,655 and $ 1,681,593 , respectively.

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 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 three months ended March 31, 2023, and March 31, 2022, is as follows:

For the three months ended March 31,

Straight-line operating lease expense

Variable lease cost

Total operating lease expense

The finance lease expense for the three months ended March 31, 2023, and March 31, 2022, was approximately $ 50,000 and nil , respectively.

Related party lease s

As of March 31, 2023, 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, and former, board members, principal shareholders, or employees.

During the three months ended Mach 31, 2022, the related party operating leases consisted of one dispensary and one cultivation facility.

The retail dispensary lease was with a related party through May 2022, when the building was sold to an unaffiliated third-party.

As of March 31, 2023, the ROU asset, operating lease liability, current, and operating lease liability, non-current for the related party leases were $ 1,002,335 , $ 529,299 , and $ 539,267 , respectively.

For the periods ended March 31, 2023 and 2022, the total lease expense for related party leases was $ 127,790 and $ 147,937 , respectively.

Lease Maturities

Future remaining minimum lease payments were as follows:

Year ending December 31,

2022 (remaining three months)

Operating leases

Finance lease

2023 (remaining nine months)

Present value adjustment

( 2,274,659 )

Current portion

Long-term operating lease liability

Lease liability

Lease liability, current

Lease liability, non-current

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.

As of March 31, 2023, the weighted average remaining term of the Company’s operating leases is 4.5 years, and the remaining term on the finance lease is 9.75 years.

None of the Company’s leases contain residual value guarantees or restrictive covenants.

Supplemental cash flow information

For the three months ended March 31,

Supplemental cash flow information

Cash paid for amounts included in operating lease liability

Cash paid for amounts included in finance lease liability

Supplemental lease disclosures of non-cash transactions:

ROU assets obtained in exchange for operating lease liabilities

ACCRUED STOCK PAYABLE

1 unchanged sentence

Balance as of December 31, 2021

Trees Waterfront acquisition stock accrual

Balance as of December 31, 2021

( 1,669,537 )

Balance as of September 30, 2022

Balance as of December 31, 2022

Balance as of March 31, 2023

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

1 unchanged sentence

The stock was issued on January 6, 2022.

The outstanding balance of accrued stock payable as of March 31, 2023 relates to a February 18, 2020 grant of 100,000 fully vested shares for consulting services.

Based on a stock price of $ 0.61 on the date of grant, the consultant will receive $ 60,900 worth of our Common Stock.

As of March 31, 2023, none of the stock has been issued.

NOTES PAYABLE

Our notes payable consisted of the following:

September 30,

March 31, 2023

December 31, 2022

Related-party

2022 12% Notes

2023 12% Notes

Related party note payable

Trees Acquisition Notes

Trees Transaction Notes

Green Tree Acquisition Notes

Green Man Acquisition Notes

Unamortized debt discount

1 unchanged sentence

( 1,758,177 )

( 1,527,346 )

( 1,888,933 )

Current portion

1 unchanged sentence

( 1,879,173 )

( 1,723,517 )

( 1,903,344 )

Long-term portion

Trees Transaction Notes

In January 2022, with the completion of the Trees MLK acquisition, we are obligated to pay the Seller cash equal to $ 384,873 in equal month 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 month installments over a period of 15 months .

The payments begin in September 2023, and the payment is equal to $ 233,333 per month.

The relative fair value of this obligation resulted in a debt discount of $ 512,367 .

We recorded amortization of debt discount expense from this obligation of $ 61,016 and nil for the three months ended March 31, 2023 and March 31, 2022, respectively.

In December 2022, with the completion of the Green Man Acquisition, we are obligated to pay the Seller cash equal to $ 1,500,000 in equal month installments over a period of 18 months .

The payments begin in December 2023 and the payment is equal to $ 83,333 per month.

The relative fair value of this obligation resulted in a debt discount of $ 275,154 .

We recorded amortization of debt discount expense from this obligation of $ 37,250 and nil for the three months ended March 31, 2023 and March 31, 2022, respectively.

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.

Of the $ 10,587,250 , $ 4,037,500 is held in restricted cash.

These amounts are to be used for the acquisitions discussed in Note 13, subsequent events.

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.

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 Common Stock.

5 unchanged sentences

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 from the 12 % Notes of $ 11,931 and nil for the three and nine months ended September 30, 2022 and 2021, respectively.

We recorded amortization of debt discount expense from the 12 % Notes of $ 76,699 and nil for the three months ended March 31, 2023 and 2022, respectively.

We determined there was no beneficial conversion feature on the 12 % Notes issued.

7 unchanged sentences

Expected volatility

In connection with the acquisition of Station 2, LLC in February 2023, we agreed to issue and sell an additional 12 % Note with an aggregate principal amount of $ 385,873 , payable in twenty-four equal monthly payments commencing in May 2023.

The relative fair value of this 12 % Note resulted in a debt discount of $ 50,918 .

We recorded amortization of debt discount expense from this Note of $ 6,712 for the three months ended March 31, 2023.

This 12 % Note is treated as conventional debt.

In December 2020, we entered into a Securities Purchase Agreement (the “Securities Purchase Agreement’) with certain accredited investors (the “ 10 % Investors”), pursuant to which we issued and sold senior convertible promissory notes (the “ 10 % Notes”) with an aggregate principal amount of $ 2,940,000 in exchange for payment to us by certain 10 % Investors of an aggregate amount of $ 1,940,000 in cash, as well as cancellation of outstanding indebtedness of previously issued 15 % notes in the aggregate amount of $ 1,000,000 .

6 unchanged sentences

The relative fair value of the cancellation of the outstanding indebtedness was recorded as an extinguishment of debt and additional paid-in capital of $ 131,000 .

We recorded amortization of debt discount expense from the 10 % Notes of $ 41,352 and $ 21,868 for the three months ended September 30, 2022 and 2021, respectively and $ 84,375 and $ 64,891 during the nine months ended September 30, 2022 and 2021, respectively.

We recorded amortization of debt discount expense from the 10 % Notes of nil and $ 21,393 for the three months ended March 31, 2023 and 2022.

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

18 unchanged sentences

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

We recorded amortization of debt discount expense from the 10 % Notes issued in February 2021 of $ 454,741 and $ 71,150 for the three months ended September 30, 2022 and 2021, respectively and $ 594,721 and $ 180,968 during the nine months ended September 30, 2022 and 2021, respectively.

We recorded amortization of debt discount expense from the February 2021 10 % Notes of nil and $ 69,603 for the three months ended March 31, 2023 and 2022, respectively.

The 10 % Notes are treated as conventional debt.

16 unchanged sentences

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

We recorded amortization of debt discount expense from the 10 % Notes issued in April 2021 of $ 775,638 and $ 126,025 for the three months ended September 30, 2022 and 2021, respectively and $ 1,023,577 and $ 224,446 for the nine months ended September 30, 2022 and 2021, respectively.

We recorded amortization of debt discount expense from the April 2021 10 % Notes of nil and $ 123,285 for the three months ended March 31, 2023 and 2022.

The 10 % Notes are treated as conventional debt.

18 unchanged sentences

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

As of September 30, 2022, there were 322,807 of the 2019 Warrants outstanding.

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

During the three months ended March 31, 2023, and 2022, we recognized a $ 1,307 gain and $ 60,664 loss on the change in fair value of the derivative liability, respectively.

As of March 31, 2023, 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

September 30,

Number of shares underlying the warrants

4 unchanged sentences

The following table sets forth a summary of the changes in the fair value of the warrant derivative liability, our Level 3 financial liabilities that are measured at fair value on a recurring basis:

Three months ended September 30,

Nine months ended September 30,

Beginning balance

Warrant exercise

( 1,523,118 )

Change in fair value of warrants derivative liability

1 unchanged sentence

COMMITMENTS AND CONTINGENCIES

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.

In July 2021, we were served with a Complaint in the District Court, County of Denver, Colorado, by plaintiff 2353 SB, LLC (“Plaintiff”).

6 unchanged sentences

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;

both parties also filed motions for summary judgment.

In October 2022, the court denied our motion to dismiss on the basis that Plaintiff sufficiently pled facts that raise a plausible claim for relief, notwithstanding our possible defenses.

The court did not rule on either motion for summary judgment.

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 the Plaintiff for breach of contract to recover the initial payments made under the lease as well as attorneys’ fees and costs.

In June 2020, our former Executive Chairman resigned, claiming the resignation was for "Good Reason"

under the terms of his employment agreement.

An ultimate determination that such resignation was, in fact, for "Good Reason", rather than a voluntary act absent "Good Reason,"

could enable certain potential claims for benefits under his employment agreement, including for severance, vesting of unvested options and/or for the extension of the term within which options could be exercised in the future.

We do not believe that the resignation was for "Good Reason"

but rather voluntary, and consequently, that any such potential claims, if asserted, would be without substantial merit.

Although the outcome of legal proceedings is subject to uncertainty, the Company will vigorously defend any future claims relating to this matter.

From time to time, we are a party to various litigation matters incidental to the conduct of its business.

We are not presently a party to any legal proceedings that would have a material adverse effect on our business, operating results, financial condition, or cash flows.

The trial is currently scheduled for September 2023.

STOCKHOLDERS’ EQUITY

15 unchanged sentences

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 share, each Preferred Investor will be granted additional Preferred Warrants on a ‘full-ratchet’ basis.

The warrants contain an anti-dilution provision pursuant to which upon a future capital raise at less than $ 1.00 per share, 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.

On September 10, 2022 we recorded an accrued dividend of $ 70,800 .

As of March 31, 2023 we have recorded accrued dividends of $ 106,200 .

Stock-based compensation

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

We recorded $ 24,958 and $ 131,836 in compensation expense for the three months ended September 30, 2022 and 2021, respectively and $ 129,959 and $ 194,120 for the nine months ended September 30, 2022 and 2021, respectively.

We recorded $ 27,396 and $ 76,117 in compensation expense for the three months ended March 31, 2023 and 2022, respectively.

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

1 unchanged sentence

The fair value of these instruments was calculated using the Black-Scholes option pricing method.

On September 3, 2021, we modified two employees stock options in conjunction with revised employment agreements.

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

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

During the year ended December 31, 2022, we granted options to purchase 250,000 common shares to directors.

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

6 unchanged sentences

Forfeited or expired

Outstanding as of September 30, 2022

Exercisable as of September 30, 2022

As of September 30, 2022, there was approximately $ 31,039 of total unrecognized compensation expense related to unvested employee awards, which is expected to be recognized over a weighted-average period of one month .

Outstanding as of March 31, 2023

Exercisable as of March 31, 2023

As of March 31, 2023, there was approximately $ 722 of total unrecognized compensation expense related to unvested employee awards, which is expected to be recognized over a weighted-average period of fourteen months .

On April 1, 2022 we entered into a Restricted Stock Unit Agreement with four participants.

9 unchanged sentences

As these RSU’s do not have a service period, we used the requisite service period derived from the valuation of 10 years .

We recorded $ 13,502 and nil in compensation expense for the three months ended September 30, 2022 and 2021, respectively and $ 27,004 and nil for the nine months ended September 30, 2022 and 2021, respectively.

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

We recorded $ 13,894 and nil in compensation expense for the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, none of the RSU’s have vested.

RELATED PARTY TRANSACTIONS

On June 3, 2020, we entered into a consulting agreement with Adam Hershey, Interim Chief Executive Officer, board member and investor, pursuant to which he would act as a strategic consultant for the Company, including providing assistance with the sourcing and evaluation of merger and acquisition deals, strategic capital, and strategic partnerships or joint ventures.

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

On September 16, 2022, we entered into a new consulting agreement with Adam Hershey, in which Mr.

Hershey will continue to serve as our Interim Chief Executive Officer with compensation equal to $ 200,000 per annum, payable monthly.

The term of the Consulting Agreement is for a period of one year , with automatic six-month renewals.

In addition to the Consulting Agreement, we agreed to extend Mr.

Hershey’s warrants to purchase 7,280,007 shares of Common Stock for an additional two years , with an expiration date of May 29, 2027.

The modification of warrants were recorded as equity and equity issuance costs in the amount of $ 367,445 .

We paid $ 24,999 for the three months ended September 30, 2022 and 2021 and $ 74,997 for the nine months ended September 30, 2022 and 2021.

On September 16, 2022, we entered into a consulting agreement with Ed Myers in which Mr.

Myers will serve as our Chief Operating Officer.

Myers will receive compensation expense equal to $ 200,000 per annum, payable monthly.

Payments are to start October 1, 2022.

We currently have a lease agreement with Dalton Adventures, LLC in which we rent 17,000 square feet of greenhouse space in Boulder, Colorado for $ 29,691 a month, of which $ 27,000 is base rent and $ 2,691 is property taxes.

The owner of Dalton Adventures, LLC is a principal shareholder and board member of the Company.

We have paid approximately $ 89,073 and $ 115,000 in rent for the three months ended September 30, 2022 and 2021, respectively and $ 267,219 and $ 344,000 in rent for the nine months ended September 30, 2022 and 2021, respectively.

We had a lease agreement with Bellewood Holdings, LLC in which we rented retail space for the Trees Englewood retail store in Englewood, Colorado for $ 11,287 per month, of which $ 10,000 is base rent and $ 1,287 is property taxes.

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

Hershey will continue to serve as the Company’s Interim Chief Executive Officer with compensation equal to $ 200,000 per annum, payable by the Company, monthly.

The term of the consulting agreement is for a period of one year , with automatic six-month renewals thereafter unless terminated by either party.

The Company has also agreed to extend warrants to purchase 7,280,007 shares of Common Stock, held by an affiliate of Mr.

Hershey, for an additional two years until, May 29, 2027.

The exercise price and all other terms and conditions of such warrants remain unchanged.

We paid $ 50,000 and $ 24,999 for the three months ended March 31, 2023 and 2022, respectively.

In February 2023, the Company completed the acquisition of Station 2, LLC’s assets.

Station 2, LLC is owned by a board member, who is also a shareholder and executive level employee of the Company.

See Note 3 for additional information regarding the Station 2 asset acquisition.

The Company currently has a lease agreement with Dalton Adventures, LLC in which the Company leases 17,000 square feet of greenhouse space in Boulder, Colorado for $ 29,691 a month, of which $ 27,000 is base rent and $ 2,691 is property taxes.

The base rent increased to $ 27,405 per month starting in January 2023.

The owner of Dalton Adventures, LLC is a principal shareholder and former board member of the Company.

We have incurred $ 75,848 and $ 112,325 in related party lease expense for the three months ended March 31, 2023 and 2022, respectively.

See Note 6 for further discussion of the Company’s obligations associated with related party leases.

The Company currently has a lease agreement with JLA Enterprises, LLC in which the Company leases a retail dispensary in Longmont, Colorado.

A board member and an executive level employee of the Company are owners of

JLA Enterprises, LLC.

The Company also has a lease agreement with ALJ 1090, LLC in which the Company leases 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.

We have incurred $ 51,942 and nil in related party lease expense for the three months ended March 31, 2023 and 2022, respectively.

See Note 6 for further discussion of the Company’s obligations associated with related party leases.

The Company had a lease agreement with Bellewood Holdings, LLC in which the Company leased retail space for the Trees Englewood retail store in Englewood, Colorado for $ 11,287 per month, of which $ 10,000 is base rent and $ 1,287 is property taxes.

The owner of Bellewood Holdings, LLC is a principal shareholder and board member of the Company.

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

We paid approximately nil of rent expense for the three months ended September 30, 2022 and 2021, respectively and $ 52,287 and nil for the nine months ended September 30, 2022 and 2021, respectively.

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

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

On September 15, 2022, all four of our current board members transferred a portion of their 10 % Note amounts and some accrued interest into the 12 % Notes discussed in Note 7.

The total amount rolled was $ 332,204 .

Accrued interest earned and owed to the board members was $ 1,292 as of September 30, 2022.

We incurred nil and $ 35,612 of related party lease expense for the three months ended March 31, 2023 and 2022, respectively.

See Note 6 for further discussion of the Company’s obligations associated with related-party leases.

SEGMENT INFORMATION

5 unchanged sentences

Our financial reporting systems present various data for management to run the business, including internal profit and loss statements prepared on a basis not consistent with GAAP.

The following information is presented net of discontinued operations.

Three months ended September 30,

Three months ended March 31,

Costs and expenses

1 unchanged sentence

( 1,139,573 )

Segment operating income

Corporate expenses

( 4,991,124 )

Net loss from continuing operations before income taxes

( 2,704,679 )

Costs and expenses

( 1,747,568 )

Segment operating income

3 unchanged sentences

( 1,800,798 )

Nine months ended September 30,

Total revenues

Costs and expenses

1 unchanged sentence

( 3,058,302 )

( 8,273,967 )

Operating (loss) income

Corporate expenses

( 5,466,211 )

Net loss from continuing operations before income taxes

( 3,753,966 )

Total revenues

Costs and expenses

( 2,340,913 )

( 3,206,121 )

Operating income

Segment operating income

Corporate expenses

1 unchanged sentence

Net loss from continuing operations before income taxes

( 4,685,782 )

September 30,

Total assets - segments

2 unchanged sentences

SUBSEQUENT EVENTS

On September 13, 2022, we entered into an Asset Purchase Agreement (“APA”) with Ancient Alternatives LLC (“Ancient”), Natural Alternatives For Life, LLC, (“Natural”), Mountainside Industries, LLC (“Mountainside”), Hillside Enterprises, LLC (“Hillside”), and GT Creations, LLC (“GT Creations”), each a Colorado limited liability company (“Green Tree Entities”), pursuant to which we agreed to purchase substantially all of the assets of the Green Tree Entities (“Green Tree Acquisition”).

The purchase price in connection with the Green Tree Acquisition consists of cash equal to $ 500,000 payable at closing;

17,977,528 shares (“Buyer Shares”) of our common stock, par value $ 0.01 per share (“Common Stock”), deliverable at closing;

and an additional $ 3,500,000 in cash in fifteen (15) equal monthly payments commencing on the 9-month anniversary of the closing.

The number of Buyer Shares is subject to adjustment based upon a formula specified in the APA.

The APA provides that we will assume certain liabilities at closing, including certain manufacturing agreements between GT Creations and affiliates of the Green Tree Entities.

The Green Tree Acquisition is subject to certain conditions, including regulatory approval of the Colorado Marijuana Enforcement Division.

As part of the Green Tree Acquisition, we have agreed, upon the closing, to enter into two-year employment agreements with each of Allyson Feiler and Loree Schwartz, equity principals of the Green Tree Entities (“Employment Agreements”).

Feiler will be employed by us as its Chief Marketing Officer at an annual base salary of $ 225,000 , with an agreed one-time bonus equal to $ 383,071.43 , payable within 30 business days following the completion of the cannabis license transfers held by Ancient, Natural, Mountainside and GT Creations.

Schwartz will be employed by us as its Chief Compliance Officer at an annual base salary of $ 150,000 , also with an agreed one-time bonus equal to $ 383,071.43 , payable within 30 business days following the completion of the cannabis license transfers held by Ancient, Natural, Mountainside and GT Creations.

Both Employment Agreements also provide for severance payouts up to the full initial two-year term in the event of a termination without ‘Cause’ or for ‘Good Reason’ (as such terms are defined therein) during the initial term.

In addition, we have agreed, upon the closing, to enter into consulting agreements (“Consulting Agreements”) with each of (i) CMD Consulting Services, Inc., pursuant to which consultant will be paid a one-time consulting fee equal to $ 47,619.05 within 30 days following the closing of each of Ancient, Natural and Hillside;

and (ii) Silverfox LLC pursuant to which consultant will be paid a one-time consulting fee equal to $ 186,238.09 within 30 days following the closing of each of Ancient and Natural.

On October 14, 2022, we entered into an Asset Purchase Agreement with Station 2 LLC (“Station 2”) and Timothy Brown (“Brown”), pursuant to which we agreed to purchase substantially all of the assets of Station 2 (“Station 2 Acquisition”).

The purchase price in connection with the Station 2 Acquisition consists of cash equal to $ 641,454.27 , payable as follows:

Cash at closing of $ 256,581.71 ;

and a cash amount equal to $ 16,036.36 per month for each of the twenty-four (24) months commencing on the first full calendar month following the closing, for an additional total of $ 384,872.56 .

The Station 2 Acquisition was originally disclosed as part of the ‘Trees Acquisition’ in the Company’s Form 8-K filed on April 21, 2021 (“April 2021 Form 8-K”).

The Station 2 Acquisition as disclosed herein constitutes a

material modification to the original terms disclosed in the April 2021 Form 8-K.

The Station 2 Acquisition is subject to certain conditions, including regulatory approval of the Colorado Marijuana Enforcement Division.

On October 28, 2022, we entered into an Asset Purchase Agreement with GMC, LLC (“GMC”) and certain equity holders of GMC party thereto, pursuant to which we agreed to purchase substantially all of the assets of GMC, including two cannabis licenses held by GMC, certain inventory, contracts and other related assets (“GMC Acquisition”).

The purchase price in connection with the GMC Acquisition consists of cash equal to $ 1,200,000 payable at closing;

4,494,382 shares of our common stock, issuable to the GMC members upon closing;

and an amount equal to $ 83,333.33 per month, commencing on the 12-month anniversary of the closing, and continuing each month thereafter for a total of 18 months , for a total additional consideration of $ 1,500,000 .

The GMC Acquisition is subject to certain conditions, including regulatory approval of the Colorado Marijuana Enforcement Division.

The Company evaluated subsequent events through the date that the accompanying financial statements were issued and has determined that subsequent to March 31, 2023, the Company issued 201,250 restricted stock units.

Each restricted stock unit will vest for a period of seven years from the respective grant date and upon vesting will convert into one share of common stock.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements