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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended June 30, 2023.

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from ____________ to ____________.

Commission file number:  000-54457

TREES CORPORATION

(Exact name of registrant as specified in its charter)

Colorado

    

90-1072649

(State of incorporation)

(IRS Employer Identification No.)

215 Union Boulevard, Suite 415
Lakewood, CO 80228

(Address of principal executive offices) (Zip Code)

(303) 759-1300

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Name of each exchange on which registered

Ticker symbol

N/A

N/A

N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes þ   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth company” in rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes    No þ

As of August 9, 2023, there were 118,664,094 issued and outstanding shares of the Company's common stock.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TREES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

June 30, 2023

December 31, 2022

(unaudited)

Assets

 

  

 

  

Current assets

 

  

 

  

Cash and cash equivalents

$

643,968

$

2,583,833

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

 

114,052

 

41,373

Inventories, net

2,329,236

2,066,662

Prepaid expenses and other current assets

 

280,070

 

259,598

Total current assets

 

3,367,326

 

4,951,466

Right-of-use operating lease asset

3,108,601

3,866,406

Property and equipment, net

1,809,732

1,947,969

Intangible assets, net

2,697,580

2,543,898

Goodwill

18,384,974

18,384,974

Total assets

$

29,368,213

$

31,694,713

Liabilities and Stockholders' Equity

 

 

Current liabilities

 

 

Accounts payable and accrued expenses

$

3,500,873

$

1,899,450

Interest payable

 

981,157

 

488,813

Income tax payable

290,659

204,917

Operating lease liability, current

1,238,647

1,433,184

Finance lease liability, current

64,455

55,777

Accrued stock payable

 

60,900

 

60,900

Accrued dividends

106,200

88,500

Warrant derivative liability

 

289

 

5,508

Accrued legal fees - current

90,000

Notes payable - current

1,879,173

1,903,344

Total current liabilities

 

8,212,353

 

6,140,393

Operating lease liability, non-current

2,016,117

2,541,590

Finance lease liability, non-current

671,468

706,653

Accrued legal fees, non-current

60,000

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

15,896,725

15,899,588

Total liabilities

26,856,663

25,288,224

Commitments and contingencies (Note 10)

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 issued and outstanding, respectively

118,664

118,664

Additional paid-in capital

 

98,644,211

 

98,598,761

Accumulated deficit

 

(97,324,771)

 

(93,384,382)

Total stockholders’ equity

 

2,511,550

 

6,406,489

Total liabilities and stockholders’ equity

$

29,368,213

$

31,694,713

See Notes to unaudited condensed consolidated financial statements.

3

TREES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three months ended

Six months ended

June 30, 

June 30, 

2023

2022

2023

2022

Revenue

 

Retail sales

$

5,079,564

$

3,158,335

$

10,190,183

$

6,455,881

Cultivation sales

18,430

77,392

18,430

353,154

Total revenue

5,097,994

3,235,727

10,208,613

6,809,035

Costs and expenses

Cost of sales

3,230,777

1,745,575

6,288,491

3,820,463

Selling, general and administrative

2,485,751

1,212,796

4,781,991

2,538,914

Stock-based compensation

18,054

42,386

45,450

118,501

Professional fees

543,566

237,461

1,151,110

518,845

Depreciation and amortization

290,579

(139,991)

583,421

91,855

Total costs and expenses

6,568,727

3,098,227

12,850,463

7,088,578

Operating (loss) income

(1,470,733)

137,500

(2,641,850)

(279,543)

Other expenses (income)

Amortization of debt discount

220,077

216,661

401,754

430,942

Interest expense

716,728

176,045

1,166,039

350,396

(Gain) loss on derivative liability

(3,912)

(59,258)

(5,219)

1,406

Loss (gain) on sale of assets

2,400

(13,000)

2,400

(13,000)

Other (income)

(369,871)

(369,871)

Total other expenses, net

565,422

320,448

1,195,103

769,744

Net loss from continuing operations before income taxes

(2,036,155)

(182,948)

(3,836,953)

(1,049,287)

Provision for income taxes

85,736

Loss from continuing operations

(2,036,155)

(182,948)

(3,922,689)

(1,049,287)

Income from discontinued operations, net of tax

5,283

Net loss

$

(2,036,155)

(182,948)

$

(3,922,689)

$

(1,044,004)

Accrued preferred stock dividend

(17,700)

Net loss attributable to common stockholders

$

(2,036,155)

(182,948)

$

(3,940,389)

$

(1,044,004)

Per share data - basic and diluted

Net loss from continuing operations per share

$

(0.02)

$

(0.00)

$

(0.03)

$

(0.01)

Net loss from discontinued operations per share

$

0.00

$

0.00

$

0.00

$

0.00

Net loss attributable to common stockholders per share

$

(0.02)

$

(0.00)

$

(0.03)

$

(0.01)

Weighted average number of common shares outstanding

118,664,094

96,192,184

118,664,094

95,972,067

See Notes to unaudited condensed consolidated financial statements.

4

TREES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Six months ended June 30, 

2023

2022

Cash flows from operating activities

  

 

  

Net loss

$

(3,922,689)

$

(1,044,004)

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

 

  

 

Amortization of debt discount and equity issuance costs

 

401,754

 

430,942

Depreciation and amortization

 

583,421

 

91,855

Non-cash lease expense

40,829

447,766

Bad debt expense

1,156

Loss (gain) on disposal of property and equipment

2,400

(13,000)

(Gain) loss on derivative liability

 

(5,219)

 

1,406

Stock-based compensation

 

45,450

 

118,501

Changes in operating assets and liabilities, net of acquisitions

 

 

Accounts receivable

 

(72,679)

 

55,972

Prepaid expenses and other assets

 

(20,472)

 

(25,094)

Inventories

 

(262,574)

 

(207,701)

Income taxes

85,742

Accounts payable, accrued liabilities, and interest payable

2,243,767

398,802

Operating lease liabilities

(3,035)

(502,090)

Net cash used in operating activities

 

(883,305)

 

(245,489)

Cash flows from investing activities

 

  

 

  

Purchase of property and equipment

 

(10,732)

 

(14,210)

Acquisition of Station 2 assets

(256,582)

Proceeds for sale of equipment

13,000

Proceeds on notes receivable

75,000

Acquisition of Trees MLK

(256,582)

Net cash used in investing activities

 

(267,314)

 

(182,792)

Cash flows from financing activities

 

  

 

Payments on notes payable and finance lease

(789,246)

(552,873)

Net cash used in financing activities

 

(789,246)

 

(552,873)

Net decrease in cash and cash equivalents

 

(1,939,865)

 

(981,154)

Cash and cash equivalents, beginning of period

 

2,583,833

 

2,054,050

Cash and cash equivalents, end of period

$

643,968

$

1,072,896

Supplemental schedule of cash flow information

 

  

 

  

Cash paid for interest

$

673,695

$

175,670

Cash paid for taxes

$

6

$

Non-cash investing & financing activities

 

  

 

  

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

$

348,825

$

172,053

Non-cash debt issuance for acquisition of Station 2 assets

$

333,953

$

Accrued dividends

$

17,700

$

383,994

See Notes to unaudited condensed consolidated financial statements.

5

TREES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

IN STOCKHOLDERS’ EQUITY

For the three months ended June 30, 2023

Preferred Stock

Common Stock

Additional

Accumulated

    

Shares

    

Amount

    

Shares

    

Amount

    

Paid-in Capital

    

Deficit

    

Total

April 1, 2023

    

1,180

$

1,073,446

118,664,094

    

$

118,664

    

$

98,626,157

    

$

(95,288,616)

    

$

4,529,651

Share-based compensation

18,054

18,054

Net loss

 

 

 

 

(2,036,155)

 

(2,036,155)

June 30, 2023

 

1,180

$

1,073,446

118,664,094

$

118,664

$

98,644,211

$

(97,324,771)

$

2,511,550

For the three months ended June 30, 2022

Preferred Stock

Common Stock

Additional

Accumulated

    

Shares

    

Amount

    

Shares

    

Amount

    

Paid-in Capital

    

Deficit

    

Total

April 1, 2022

1,180

1,073,446

96,192,184

96,191

94,060,936

(84,681,871)

10,548,702

Share-based compensation

42,386

42,386

Net loss

(182,948)

(182,948)

June 30, 2022

1,180

$

1,073,446

96,192,184

$

96,191

$

94,103,322

$

(84,864,819)

$

10,408,140

    

For the six months ended June 30, 2023

Preferred Stock

Common Stock

Additional

Accumulated

    

Shares

    

Amount

    

Shares

    

Amount

    

Paid-in Capital

    

Deficit

    

Total

January 1, 2023

1,180

$

1,073,446

118,664,094

$

118,664

$

98,598,761

$

(93,384,382)

$

6,406,489

Share-based compensation

45,450

45,450

Dividends on preferred stock

(17,700)

(17,700)

Net loss

 

 

 

(3,922,689)

 

(3,922,689)

June 30, 2023

1,180

$

1,073,446

118,664,094

$

118,664

$

98,644,211

$

(97,324,771)

$

2,511,550

For the six months ended June 30, 2022

Preferred Stock

Common Stock

Additional

Accumulated

    

Shares

    

Amount

    

Shares

    

Amount

    

Paid-in Capital

    

Deficit

    

Total

January 1, 2022

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

Share-based compensation

118,501

118,501

Net loss

 

(1,044,004)

 

(1,044,004)

June 30, 2022

1,180

$

1,073,446

96,192,184

$

96,191

$

94,103,322

$

(84,864,819)

$

10,408,140

See Notes to unaudited condensed consolidated financial statements.

6

TREES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1.  NATURE OF OPERATIONS, HISTORY, AND PRESENTATION

Nature of Operations

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

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

Englewood, Colorado

o

5005 S. Federal Boulevard – Recreational license only

Two (2) in Denver, Colorado

o

468 S. Federal Boulevard – Recreational license only

o

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

Longmont, Colorado

o

12626 N. 107th Street (formerly Green Tree/Ancient Alternatives) – Medical and Recreational licenses

Berthoud, Colorado

o

1090 N. 2nd Street (formerly Green Tree/Natural Alternatives for Life) – Medical and Recreational licenses

Three (3) in Oregon

o

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

o

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

o

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

7

We also operate three (3) cultivation facilities in Colorado as follows:

SevenFive Farm – 3705 N. 75th Street, Boulder – Retail cultivation license only

6859 N. Foothills Highway E-100 (formerly Green Tree/Hillside Enterprises) – Retail cultivation license only

1090 N. 2nd 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”)

Through Next Big Crop (“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.  Pursuant to amendment, the buyer paid the additional $75,000 in March 2022, and the 10% profit share described above was eliminated.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include all accounts of the Company and its wholly owned subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation. These unaudited condensed consolidated financial statements have been prepared following the requirements of the Securities and Exchange Commission for interim reporting. As permitted under those rules, certain footnotes and other financial information that are normally required by accounting principles generally accepted in the United States of America ("U.S. GAAP") can be condensed or omitted. 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. GAAP. 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 six months ended June 30, 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.

8

Reclassifications

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.

Use of Estimates

The preparation of our unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. Although these estimates are based on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ from these estimates and assumptions. Furthermore, when testing assets for impairment in future periods, if management uses different assumptions or if different conditions occur, impairment charges may result.

Concentrations of Credit Risk

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

Customer and Revenue Concentrations – Cultivation Segment

During the three months ended June 30, 2023 and 2022, 81% of SevenFive’s revenue was with two customers and 78% was with one customer, respectively. During the six months ended June 30, 2023 and 2022, 77% of SevenFive’s revenue was with two customers and 59% was with one customer, respectively. These customers are related party dispensaries and the revenues associated with these customers are eliminated in consolidation.

During the three months ended June 30, 2023, 90% of Green Tree’s revenue was with four customers. During the six months ended June 30, 2023, 83% 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 $2,036,155 and $3,922,689 during the three and six months ended June 30, 2023, respectively and $182,948 and $1,044,004 for the three and six months ended June 30, 2022, respectively, and had an accumulated deficit of $97,324,771 as of June 30, 2023. We had cash and cash equivalents of $643,968 and $2,583,833 as of June 30, 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. We have incurred recurring losses and negative cash flows from operations since inception and have primarily funded our operations with proceeds from the issuance of debt. We expect our operating losses to continue into the foreseeable future as we continue to execute our acquisition and growth strategy.  As a result, we have concluded that there is substantial doubt about our ability to continue as a going concern.  Our unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Our ability to continue as a going concern is dependent upon our ability to raise additional capital to fund operations, support our planned investing activities, and repay our debt obligations as they become due. If we are unable to obtain additional funding, we would be forced to delay, reduce, or eliminate some or all of our acquisition efforts, which could adversely affect our growth plans.

Summary of Significant Accounting Policies

See our Annual Report on Form 10-K for the year ended December 31, 2022, for discussion of the Company's significant accounting policies.

9

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. Accounting Standards Updates (“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, 2023, 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.

NOTE 2. BUSINESS ACQUISITION

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.

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 June 30, 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.

10

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

    

Six months ended

June 30, 

June 30, 

    

2022

    

2022

Total revenues

$

2,898,973

$

5,302,493

Net income (loss) attributable to Common Stockholders

$

511,727

$

518,524

Net income (loss) per common share

$

0.00

$

0.00

Weighted average number of basic and diluted common shares outstanding

113,727,033

113,727,033

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, 2022, 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.

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

We have not completed the allocation of the purchase price for the Green Man Acquisition. As of June 30, 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

    

Six months ended

June 30, 

June 30, 

    

2022

    

2022

Total revenues

$

1,383,551

$

2,820,461

Net income (loss) attributable to Common Stockholders

$

(545,791)

$

(456,360)

Net income (loss) per common share

$

(0.01)

$

0.00

Weighted average number of basic and diluted common shares outstanding

100,243,887

100,243,887

11

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, 2022, or to project potential operating results as of any future date or for any future periods.

NOTE 3. 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 note equal to $384,873. 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 June 30, 2023, the balance of the license was $565,931, which is recorded within Intangible assets, net in our condensed consolidated balance sheets.

NOTE 4. 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.

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

Three months ended

Six months ended

June 30, 

June 30, 

    

2023

    

2022

    

2023

    

2022

Product revenues

$

$

$

$

3,438

    

Service revenues

Total revenues