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, 2024.

 

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    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   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   

 

As of August 9, 2024, there were 108,746,520 issued and outstanding shares of common stock.

 

 

 

 

 

 

TREES CORPORATION

FORM 10-Q

 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION 1 
   
Item 1. Financial Statements 1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures about Market Risk 20
Item 4. Controls and Procedures 20
     
PART II. OTHER INFORMATION 21
   
Item 1. Legal Proceedings 21
Item 1A. Risk Factors 21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Mine Safety Disclosures 21
Item 5. Other Information 21
Item 6. Exhibits 22
  Signatures 23

 

i

 

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

TREES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   June 30, 2024   December 31, 2023 
   (unaudited)    (audited) 
Assets        
Current assets        
Cash and cash equivalents  $383,029   $969,676 
Accounts receivable, net of allowance of $53,098 and $42,000, respectively   191,441    111,863 
Inventories, net   1,020,306    860,918 
Prepaid expenses and other current assets   197,758    411,911 
Total current assets   1,792,534    2,354,368 
           
Right-of-use operating lease asset   1,724,897    1,979,833 
Property and equipment, net   1,277,900    1,395,104 
Intangible assets, net   1,377,440    1,637,491 
Goodwill   15,880,097    15,880,097 
Total assets  $22,052,868   $23,246,893 
           
Liabilities and Stockholders' Equity (Deficit)          
           
Current liabilities          
Accounts payable and accrued expenses  $2,522,589   $2,617,536 
Interest payable   1,961,350    1,570,077 
Income tax payable   1,719,835    392,765 
Operating lease liability, current   843,229    846,201 
Finance lease liability, current   84,746    205,400 
Accrued stock payable   60,900    60,900 
Accrued dividends   123,900    106,200 
Warrant derivative liability   
    4,716 
Accrued legal fees   72,000    102,000 
Notes payable - current   157,763    1,092,382 
Contingent Earnout Liability   
    367,056 
Total current liabilities   7,546,312    7,365,233 
           
Operating lease liability, non-current   996,525    1,218,392 
Finance lease liability, non-current   586,722    501,248 
Notes payable - non-current (net of unamortized discount)   15,037,637    14,013,861 
Total liabilities   24,167,196    23,098,734 
           
Commitments and contingencies (Note 6)   
 
    
 
 
           
Stockholders’ equity (deficit)          
Preferred stock, no par value; 5,000,000 and 5,000,000 shares authorized; 1,180 and 1,180 issued and outstanding, respectively   1,073,446    1,073,446 
Common stock, $0.001 par value; 200,000,000 and 200,000,000 shares authorized; 108,746,520 and 108,746,520 shares issued and outstanding, respectively   108,746    108,746 
Additional paid-in capital   99,729,914    99,450,307 
Accumulated deficit   (103,026,434)   (100,484,340)
Total stockholders’ equity (deficit)   (2,114,328)   148,159 
Total liabilities and stockholders’ equity (deficit)  $22,052,868   $23,246,893 

   

See Notes to unaudited condensed consolidated financial statements.

 

1

 

 

TREES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

   Three months ended   Six months ended 
   June 30,   June 30, 
   2024   2023   2024   2023 
Revenue                
Retail sales  $3,689,122   $5,079,564   $7,375,003   $10,190,183 
Cultivation sales   
    18,430    
    18,430 
Total revenue   3,689,122    5,097,994    7,375,003    10,208,613 
                     
Costs and expenses                    
Cost of sales   1,687,442    3,230,777    3,876,537    6,288,491 
Selling, general and administrative   1,333,836    2,485,751    2,779,088    4,781,991 
Stock-based compensation   
    18,054    14,968    45,450 
Professional fees   237,135    543,566    560,708    1,151,110 
Depreciation and amortization   216,907    290,579    407,248    583,421 
Total costs and expenses   3,475,320    6,568,727    7,638,549    12,850,463 
                     
Operating income (loss)   213,802    (1,470,733)   (263,546)   (2,641,850)
                     
Other income (expenses)                    
Amortization of debt discount   (174,305)   (220,077)   (294,635)   (401,754)
Interest expense   (457,172)   (716,728)   (1,010,915)   (1,166,039)
Gain on derivative liability   3,223    3,912    4,716    5,219 
Gain on contingent earnout   469,907    
    367,056    
 
Loss on sale of assets   
    (2,400)   
    (2,400)
Other income   
    369,871    
    369,871 
Total other income (expenses)   (158,347)   (565,422)   (933,778)   (1,195,103)
                     
Net income (loss) from operations before income taxes   55,455    (2,036,155)   (1,197,324)   (3,836,953)
                     
Provision for income taxes   (1,190,087)   
    (1,327,070)   (85,736)
Loss from operations   (1,134,632)   (2,036,155)   (2,524,394)   (3,922,689)
                     
Accrued preferred stock dividend   
    
    (17,700)   (17,700)
                     
Net loss attributable to common stockholders  $(1,134,632)  $(2,036,155)  $(2,542,094)  $(3,940,389)
                     
                     
Basic and diluted loss per common share                    
                     
Net loss attributable to common stockholders’ per share
  $(0.01)  $(0.02)  $(0.02)  $(0.03)
                     
Basic and diluted weighted average common shares outstanding
   108,746,520    118,664,094    108,746,520    118,664,094 

 

See Notes to unaudited condensed consolidated financial statements.

 

2

 

 

TREES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   Six months ended June 30, 
   2024   2023 
Cash flows from operating activities        
Net loss  $(2,524,394)  $(3,922,689)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:          
Amortization of debt discount and equity issuance costs   294,635    401,754 
Depreciation and amortization   356,232    583,421 
Amortization of right of use lease assets   51,016    
 
Non-cash lease expense   254,936    40,829 
Bad debt expense   12,098    
 
Loss (gain) on disposal of property and equipment   
    2,400 
Loss (gain) on contingent earnout   (367,056)   
 
Loss (gain) on derivative liability   (4,716)   (5,219)
Stock-based compensation   14,968    45,450 
Changes in operating assets and liabilities, net of acquisitions          
Accounts receivable   (91,676)   (72,679)
Prepaid expenses and other assets   214,153    (20,472)
Inventories   (159,388)   (262,574)
Income taxes   1,327,070    85,742 
Accounts payable, accrued liabilities, and interest payable   266,328    2,243,767 
Operating lease liabilities   (224,839)   (3,035)
Net cash used in operating activities   (580,633)   (883,305)
           
Cash flows from investing activities          
Purchase of property and equipment   (29,994)   (10,732)
Acquisition of Station 2 assets   
    (256,582)
Net cash used in investing activities   (29,994)   (267,314)
           
Cash flows from financing activities          
Payments on notes payable   (440,840)   (705,599)
Payments on finance lease   (35,180)   (83,647)
Proceeds from notes payable   500,000    
 
Net cash (used in) provided by financing activities   23,980    (789,246)
           
Net decrease in cash and cash equivalents   (586,647)   (1,939,865)
Cash and cash equivalents, beginning of period   969,676    2,583,833 
Cash and cash equivalents, end of period  $383,029   $643,968 
           
Supplemental schedule of cash flow information          
Cash paid for interest  $615,974   $673,695 
Cash paid for taxes  $6,319   $6 
           
Non-cash investing & financing activities          
Operating lease right-of-use asset obtained in exchange for new operating lease liabilities  $
   $348,825 
Non-cash debt issuance for acquisition of Station 2 assets  $
   $333,953 
Accrued dividends  $17,700   $17,700 
Non-cash extinguishment of debt for Trees MLK Assets  $264,639   $
 

 

See Notes to unaudited condensed consolidated financial statements.

 

3

 

 

TREES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

IN STOCKHOLDERS’ EQUITY

 

   For the three months ended June 30, 2024 
   Preferred Stock   Common Stock   Additional        
   Shares   Amount   Shares   Amount   Paid-in
Capital
   Accumulated
Deficit
   Total 
                                    
April 1, 2024   1,180   $1,073,446    108,746,520   $108,746   $99,465,275   $(101,891,802)  $(1,244,335)
Share-based compensation       
        
    
    
    
 
Capital contribution related to the forgiveness of the Trees MLK Note       
        
    264,639    
    264,639 
Net loss       
        
    
    (1,134,632)   (1,134,632)
June 30, 2024   1,180   $1,073,446    108,746,520   $108,746   $99,729,914   $(103,026,434)  $(2,114,328)

 

   For the three months ended June 30, 2023 
   Preferred Stock   Common Stock   Additional        
   Shares   Amount   Shares   Amount   Paid-in
 Capital
   Accumulated
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 six months ended June 30, 2024 
   Preferred Stock   Common Stock   Additional        
   Shares   Amount   Shares   Amount   Paid-in 
Capital
   Accumulated
Deficit
   Total 
January 1, 2024   1,180   $1,073,446    108,746,520   $108,746   $99,450,307   $(100,484,340)  $148,159 
Share-based compensation       
        
    14,968    
    14,968 
Capital contribution related to the forgiveness of the Trees MLK Note       
        
    264,639    
    264,639 
Dividend on Preferred Stock       
        
    
    (17,700)   (17,700)
Net loss       
        
    
    (2,524,394)   (2,524,394)
June 30, 2024   1,180   $1,073,446    108,746,520   $108,746   $99,729,914   $(103,026,434)  $(2,114,328)

 

   For the six months ended June 30, 2023 
   Preferred Stock   Common Stock   Additional        
   Shares   Amount   Shares   Amount   Paid-in 
Capital
   Accumulated
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 
Dividend 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 

  

See Notes to unaudited condensed consolidated financial statements.

 

4

 

 

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 six (6) cannabis dispensaries as follows:

 

Englewood, Colorado

 

o5005 S Federal Boulevard – Recreational license only

 

Denver, Colorado

 

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

 

Longmont, Colorado

 

o12626 N. 107th Street (formerly Green Tree/Ancient Alternatives) – Medical and Recreational licenses

 

Three (3) in Oregon

 

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

 

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

 

o7050 NE MLK, Portland, OR – Medical and Recreational licenses

 

We also operate two (2) 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

 

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.

 

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, 2023, 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, 2023, which were included in the annual report on Form 10-K filed by the Company on April 10, 2024.

 

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 six months ended June 30, 2024, are not necessarily indicative of the operating results for the year ending December 31, 2024, 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.

 

5

 

 

Reclassifications

 

Certain prior period amounts have been reclassified for consistency with current period 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, 2024 and 2023, 100% of SevenFive’s revenue was with three customers and 81% of SevenFive’s revenue was with two customers, respectively. During the six months ended June 30, 2024 and 2023, 100% of SevenFive’s revenue was with three customers and 77% of SevenFive’s revenue was with two customers, respectively. The customers in 2024 are related party dispensaries and the revenues associated with these customers are eliminated in consolidation.

 

During the three months ended June 30, 2024 and 2023, 100% of Hillside Cultivation’s (formerly noted as Green Tree) revenue was with three customers, and 90% of Hillside Cultivation’s (formerly noted as Green Tree) revenue was with four customers, respectively. During the six months ended June 30, 2024 and 2023, 100% of Hillside Cultivation’s (formerly noted as Green Tree) revenue was with three customers, and 83% of Hillside Cultivation’s (formerly noted as Green Tree) revenue was with three customers, respectively. The customers in 2024 are related party dispensaries and the revenues associated with these customers are eliminated in consolidation.

 

Basic and Diluted Loss Per Share

 

The company presents basic earnings per share (EPS) on the face of the statements of operation. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including convertible debt, stock options, and warrants, using the treasury stock method, and convertible debt instrument, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares as their effect is anti-dilutive.

 

The calculation of basic and diluted net income (loss) per share is as follows:

 

   For the three months ended June 30,   For the six months ended
June 30,
 
   2024   2023   2024   2023 
Loss Per Share:                
Net Loss  $(1,134,632)  $(2,036,155)  $(2,542,094)  $(3,940,389)
Denominator:                    
Weighted-Average common shares outstanding   108,746,520    118,664,094    108,746,520    118,664,094 
Basic net income (loss) per share  $(0.01)  $(0.02)  $(0.02)  $(0.03)

 

Potentially dilutive securities excluded from the basic and diluted net income per share are as follows:

 

   For the three months ended June 30,   For the six months ended
June 30,
 
   2024   2023   2024   2023 
Convertible Debt   33,750,000    24,107,143    33,750,000    24,107,143 
Warrants to purchase common stock   40,518,462    31,804,686    43,363,476    24,013,547 
Options to purchase common stock   4,561,825    4,973,825    4,561,825    4,973,825 
    78,830,287    60,885,654    81,675,301    53,094,515 

 

6

 

  

Going Concern

 

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. The Company has incurred recurring losses and negative cash flows from operations since inception and have primarily funded its operations with proceeds from the issuance of debt and equity. The Company incurred a net loss of $2,524,394 and lost $580,632 in cash from operations during the six months ended June 30, 2024, respectively, and had an accumulated deficit of $103,026,434 as of June 30, 2024. We had cash and cash equivalents of $383,029 as of June 30, 2024. The Company expects our operating losses to continue into the foreseeable future as we continue to execute our acquisition and growth strategy.  As a result, The Company has concluded that there is substantial doubt about its ability to continue as a going concern.  The Company’s unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. 

 

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

 

Summary of Significant Accounting Policies

 

See our Annual Report on Form 10-K for the year ended December 31, 2023, as amended, for discussion of the Company’s significant accounting policies.

 

Recently Issued Accounting Standards

 

The Company does not believe that there are any new accounting pronouncements that have been issued that might have a material impact on its consolidated financial position or results of operations.

 

NOTE 2. INVENTORIES

 

Our inventories consisted of the following:

 

   June 30,   December 31, 
   2024   2023 
Raw materials  $   $351,241 
Work-in-progress and finished goods   1,020,306    509,677 
Inventories  $1,020,306   $860,918 

 

NOTE 3. LEASES

 

The Company’s leases consist primarily of real estate leases for retail and cultivation 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 condensed 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 condensed 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 and six months ended June 30, 2024, and June 30, 2023, is as follows:

 

   For the three months ended June 30,   For the six months ended
June 30,
 
   2024   2023   2024   2023 
Straight-line operating lease expense  $245,554   $338,463   $462,578   $731,728 
Variable lease cost   51,016    255,348    104,626    458,174 
Total operating lease expense  $296,570   $593,811   $567,204   $1,189,902 

  

The finance lease expense for the three months ended June 30, 2024, and June 30, 2023, was approximately $41,824 and $41,823, respectively. The finance lease expense for the six months ended June 30, 2024, and June 30, 2023 was approximately $83,647 and $83,647, respectively.

 

7

 

 

Related party leases

 

As of June 30, 2024, one of the Company’s operating leases, a cultivation facility lease, is a related party lease as the landlord is a principal shareholder and former board member of the Company. As of June 30, 2024, the ROU asset, operating lease liability, current, and operating lease liability, non-current for the related party leases were $94,816, $110,000 and ($10,581), respectively. For the three months ended June 30, 2024 and 2023, the total lease expense for related party leases was $30,000 and $127,790, respectively. For the six months ended June 30, 2024 and 2023, the total lease expense for related party leases was $60,000 and $255,580, respectively.

 

Lease Maturities

 

Future remaining minimum lease payments on our operating leases and finance lease are as follows:

 

Year ending December 31,  Operating leases   Finance lease 
2024 (remaining six months)  $425,189   $102,700 
2025   780,439    171,043 
2026   452,948    136,940 
2027   302,095    143,102 
2028   245,456    149,542 
Thereafter   667,154    668,558 
Total   2,873,281    1,371,885 
Less: Present value adjustment   (1,033,527)   (700,417)
Lease liability   1,839,754    671,468 
Less: Lease liability, current   (843,229)   (84,746)
Lease liability, non-current  $996,525   $586,722 

  

The total remaining lease payments in the table above include $772,051 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.

 

As of June 30, 2024, the weighted average remaining term of the Company’s operating leases is 4.75 years, and the remaining term on the finance lease is 8.5 years.

 

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

 

Supplemental cash flow information

 

For the six months ended June 30,   2024     2023 
Supplemental cash flow information          
Cash paid for amounts included in operating lease liability  $567,204   $701,661 
Cash paid for amounts included in finance lease liability  $83,647   $100,000 
Supplemental lease disclosures of non-cash transactions:          
ROU assets obtained in exchange for operating lease liabilities  $
   $348,825 

 

NOTE 4. ACCRUED STOCK PAYABLE

 

The following tables summarize the changes in accrued common stock payable:

 

       Number of 
   Amount   Shares 
Balance as of December 31, 2022  $60,900    100,000 
Stock issued   
    
 
Balance as of December 31, 2023  $60,900    100,000 
Stock issued   
    
 
Balance as of June 30, 2024  $60,900    100,000 

 

8

 

  

The outstanding balance of accrued stock payable as of June 30, 2024 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 June 30, 2024, none of the stock had been issued.

 

NOTE 5.   NOTES PAYABLE

 

Our notes payable consisted of the following:

 

   June 30, 2024   December 31, 2023 
   Third-party   Related-party   Total   Third-party   Related-party   Total 
2022 12% Notes  $13,167,796    332,204    13,500,000   $13,167,796   $332,204   $13,500,000 
Trees Transaction Notes   
    
    
    
    326,811    326,811 
Green Tree Acquisition Notes   
    468,333    468,333    
    562,000    562,000 
Green Man Acquisition Notes   1,270,000    
    1,270,000    1,555,000    
    1,555,000 
Working Capital Notes   1,000,000    
    1,000,000    500,000    
    500,000 
Unamortized debt discount   (1,023,010)   (19,923)   (1,042,933)   (1,312,427)   (25,141)   (1,337,568)
Total debt   14,414,786    780,614    15,195,400    13,910,369    1,195,874    15,106,243 
Less: Current portion   (96,363)   (61,400)   (157,763)   (605,000)   (487,382)   (1,092,382)
Long-term portion  $14,318,423   $719,214   $15,037,637   $13,305,369   $708,492   $14,013,861 

  

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 monthly installments over a period of 24 months. As of June 30, 2024 and 2023, the debt balance of this note was nil and $224,509, respectively. During the year, the Trees MLK Seller forgave the remaining principal balance $264,639 owed from the Trees MLK acquisition. As the debt holder is also a shareholder of the Company, the effect of this debt forgiveness was accounted for as a capital contribution in paid-in capital.

 

Green Man Acquisition Notes

 

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 monthly 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 $36,656 and $38,379 for the three months ended June 30, 2024 and 2023, respectively, and $67,802 and $75,629 for the six months ended June 30, 2024 and 2023, respectively.

 

12% Notes – 2023 Modification

 

On December 15, 2023, the Company entered into Amended and Restated Senior Secured Convertible Notes with certain accredited investors to modify the original terms of the 12% Notes. We recorded amortization of debt discount expense from the 12% Notes of $117,648 and $77,551 for the three months ended June 30, 2024 and 2023, respectively and $206,832 and $154,250 for the six months ended June 30, 2024 and 2023, respectively.

 

In addition to the Amended Notes, the Lead Investor agreed to provide an additional $250,000 in a separate note (the “2023 Working Capital Note”) which includes a liquidation preference to recover 1.25x the original investment in the event that the Company commences any dissolution, liquidation, or winding up. At our option, the Lead Investor shall provide up to an additional $250,000, and, in such event, the 2023 Working Capital Note shall have a liquidation preference of 1.5x the original investment, applicable to the full $500,000, in the event that the Company commences any dissolution, liquidation, or winding up. The 2023 Working Capital Note bears interest at 12% per annum and is due and payable on September 15, 2026. As of December 31, 2023, the balance of the Working Capital Note was $500,000, as the Company requested and received the additional $250,000 optional amount.

 

On June 15th, 2024 the Lead Investor agreed to provide an additional $250,000 in a separate note (the “2024 Working Capital Note”) which includes a liquidation preference to recover 1.25x the original investment in the event that the Company commences any dissolution, liquidation, or winding up. At our option, the Lead Investor shall provide up to an additional $250,000, and, in such event, the 2024 Working Capital Note shall have a liquidation preference of 1.5x the original investment, applicable to the full $500,000, in the event that the Company commences any dissolution, liquidation, or winding up. The 2024 Working Capital Note bears interest at 12% per annum and is due and payable on September 15, 2026. As of June 30, 2024, the balance of the Working Capital Note was $500,000, as the Company requested and received the additional $250,000 optional amount.

 

9

 

 

NOTE 6.  COMMITMENTS AND CONTINGENCIES

 

Legal

 

From time to time, we may be involved in various claims and legal actions in the ordinary course of business. We are not currently subject to any material legal proceedings outside the ordinary course of our business.

 

NOTE 7.  STOCKHOLDERS’ EQUITY

 

2021 Preferred stock dividends

 

The Company’s Series A Preferred is convertible into 300 shares of common stock per share of Series A Preferred Stock upon the consummation of a capital raise of not less than $5,000,000.   Series A Preferred Stock has no par value per share and has the following rights, restrictions, preferences and privileges summarized as follows:

 

  Authorized Number of Shares – 5,000

 

  Voting Rights – None

 

  Dividends – 6% per annum, ‘paid in kind’ in shares of Series A Preferred

 

  Conversion – Each share of Series A Preferred is mandatorily convertible into 300 shares of Common Stock upon a minimum capital raise of $5,000,000; sale, merger or business combination of the Company; or the Company listing on an exchange

 

  Redemption – No rights of redemption by 2021 Investors, nor mandatory redemption

 

As of June 30, 2024 and December 31, 2023, we have recorded accrued dividends of $123,900 and $106,200, respectively. Dividends were nil for the three months ended June 30, 2024 and 2023 and $17,700 and $17,700 for the six months ended June 30, 2024 and 2023, respectively.

 

Stock-based compensation

 

Stock-based Awards

 

As of June 30, 2024, the Company has two active plans, the 2020 Omnibus Incentive Plan approved by the Board in November 2020 (“2020 Plan”) and the 2014 Equity Incentive Plan approved by the Board in October 2014 (“2014 Plan” and collectively with the 2020 Plan the “Stock Incentive Plans”) that allow the Board of Directors to grant stock-based awards to eligible employees, non-employee directors, and consultants of the Company and its subsidiaries. Under the Stock Incentive Plans, the Board may grant non-statutory and incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units, deferred stock units, performance awards, non-employee director awards, and other stock-based awards. Subject to adjustment, the maximum number of shares of our common stock to be authorized for issuance under the Stock Incentive Plans is 25 million shares. As of June 30, 2024, stock-based awards for approximately 17.5 million shares are available to be issued under the Stock Incentive Plans.

 

10

 

 

Stock Options

 

The following summarizes Employee Awards activity:

 

           Weighted- 
       Weighted-   Average 
       Average   Remaining 
   Number of   Exercise Price   Contractual 
   Shares   per Share   Term (in years) 
Outstanding as of December 31, 2023   4,796,825   $1.05    2.3 
Granted   
    
    
 
Forfeited or expired   (235,000)   1.53    
 
Outstanding as of June 30, 2024   4,561,825   $1.00    1.94 
                
Exercisable as of June 30, 2024   4,561,825   $1.00    1.94 

 

The intrinsic value of the exercisable warrants as of June 30, 2024 was $22,000.

 

As of June 30, 2024, there was no unrecognized compensation expense related to unvested employee awards.

 

We recorded nil in compensation expense for the three months ended June 30, 2024 and 2023, respectively and nil in compensation expense for the six months ended June 30, 2024 and 2023, respectively.

 

Restricted Stock Awards

 

During the three months ended June 30, 2024, the Company did not grant any Restricted Stock Units. During the six months ended June 30, 2024, the Company granted 429,630 Restricted Stock Units with a fair value of $28,656 pursuant to the 2020 Omnibus Incentive Plan to directors and an employee (“2024 RSUs”). The 2024 RSUs vest seven years from the grant date, or earlier upon certain triggering events as defined in the agreement, and upon vesting convert into one share of the Company’s common stock. The fair value of the 2024 RSUs is determined based on the closing price of the Company’s common stock on the grant date.

The Company recorded nil and $18,054 in compensation expense during the three months ended June 30, 2024, and 2023, respectively, and $14,968 and $45,450 in compensation expense during the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, none of the RSU’s have vested.

 

A summary of the Company’s grants of restricted stock units under the 2020 Omnibus Incentive Plan is presented below:

 

      Weighted- 
       Average 
   Number of   Grant 
   Shares   Date Value 
Outstanding as of December 31, 2023   2,240,462   $0.04 
Granted   429,630    0.07 
Forfeited or expired   
    
 
Outstanding as of June 30, 2024   2,670,092   $0.05 

 

Contingent Earnout Liability

 

On December 12, 2022, we completed the Green Tree Acquisition which consisted of the acquisition of substantially all of the assets of Ancient Alternatives LLC, Natural Alternatives For Life, LLC, Mountainside Industries, LLC, Hillside Enterprises, LLC, and GT Creations, LLC, each a Colorado limited liability company (collectively, the “Green Tree Entities”). We paid cash in the amount of $500,000 and stock consideration of 17,977,528 shares of our Common Stock. The closing price of our Common Stock on December 12, 2022, the date of license transfer, was $0.165 per share, as such, fair value of the equity consideration is $2,966,292. Additionally, we had a potential obligation to issue additional stock consideration up to 4,879,615 shares of our Common Stock on the achievement of certain performance indicators on or before June 12, 2024. In November 2023, the Company transferred a majority of the Green Tree Entities back to the original owners. Subsequent to this transfer, the aforementioned debt was modified. This liability is included in Notes payable- current and Notes payable- non-current in the accompanying consolidated balance sheets.

 

The fair value of the contingent earnout liability was $0 and $367,056 at June 30, 2024 and December, 31 2023, respectively. The change in fair value in the three months and six months ended June 30, 2024 resulted in a gain on change in fair value of $469,907 and $367,056, respectively. The contingent earnout liability remained after the Green Tree Acquisition was partially reversed in Q3 2023 and expired in Q2 2024.

 

11

 

 

NOTE 8. RELATED PARTY TRANSACTIONS

 

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. As part of the new consulting agreement, 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 $50,000 for the three months ended June 30, 2024 and 2023, respectively, and $100,000 and $100,000 for the six months ended June 30, 2024 and 2023, 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 of the Company. This acquisition was subsequently reversed in Q3 of 2023.

 

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 decreased to $10,000 per month starting in May 2023. The owner of Dalton Adventures, LLC is a principal shareholder and former board member of the Company.  We have incurred $30,000 and $75,849 in related party lease expense for the three months ended June 30, 2024 and 2023, respectively, and $60,000 and $151,698 in related party lease expense for the six months ended June 30, 2024 and 2023, respectively. See Note 3 for further discussion of the Company’s obligations associated with related party leases.

 

NOTE 9.  SEGMENT INFORMATION

 

Our operations are organized into two segments: Retail and Cultivation. All revenue originates, and all assets are located in the United States. Segment information is presented in accordance with ASC 280, “Segments Reporting.” This standard is based on a management approach that requires segmentation based upon our internal organization and disclosure of revenue and certain expenses based upon internal accounting methods. 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.

 

Three months ended June 30,

 

 

2024  Retail   Cultivation   Eliminations   Total 
Revenues  $3,689,122    344,149    (344,149)   3,689,122 
Costs and expenses   (2,981,932)   (211,796)   344,149    (2,849,552)
Segment operating income  $707,190   $132,353   $
    839,570 
Corporate expenses                  (784,115)
Net loss from continuing operations before income taxes                 $55,455 

 

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2023  Retail   Cultivation   Eliminations   Total 
Revenues  $5,079,564   $944,830   $(926,400)  $5,097,994 
Costs and expenses   (5,347,268)   (1,046,274)   926,400    (5,467,142)
Segment operating income  $(267,704)  $(101,444)  $
    (369,148)
Corporate expenses                  (1,667,007)
Net loss from continuing operations before income taxes                 $(2,036,155)

 

Six months ended June 30,

 

2024  Retail   Cultivation   Eliminations   Total 
Revenues  $7,375,003    592,791    (592,791)   7,375,003 
Costs and expenses   (6,098,192)   (820,082)   592,791    (6,325,483)
Segment operating income  $1,276,811   $(227,291)  $
    1,049,520 
Corporate expenses                  (2,246,844)
Net loss from continuing operations before income taxes                 $(1,197,324)

 

2023  Retail   Cultivation   Eliminations   Total 
Revenues  $10,190,183   $1,628,847   $(1,610,417)  $10,208,613 
Costs and expenses   (9,882,836)   (2,185,847)   1,610,417    (10,458,266)
Segment operating income  $307,347   $(557,000)  $
    (249,653)
Corporate expenses                  (3,587,300)
Net loss from continuing operations before income taxes                 $(3,836,953)

 

   June 30,   December 31, 
Total assets  2024   2023 
Retail  $19,504,130   $20,491,961 
Cultivation   1,987,481    1,736,685 
Corporate   561,257    1,018,247 
Total assets – segments   22,052,868    23,246,893 
Intercompany eliminations   
    
 
Total assets – consolidated  $22,052,868   $23,246,893 

 

13

 

 

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

This Management’s Discussion and Analysis (“MD&A”) is intended to provide an understanding of our financial condition, results of operations and cash flows by focusing on changes in certain key measures from year to year. This discussion should be read in conjunction with the Condensed Consolidated Unaudited Financial Statements contained in this Quarterly Report on Form 10-Q and the Consolidated Financial Statements and related notes and MD&A appearing in our Annual Report on Form 10-K as of and for the year ended December 31, 2023. The results of operations for an interim period may not give a true indication of results for future interim periods or for the year.

 

Cautionary Statement Regarding Forward Looking Statements

 

This Quarterly Report on Form 10-Q, including the financial statements and related notes, contains forward-looking statements that discuss, among other things, future expectations and projections regarding future developments, operations and financial conditions. All forward-looking statements are based on management’s existing beliefs about present and future events outside of management’s control and on assumptions that may prove to be incorrect. If any underlying assumptions prove incorrect, our actual results may vary materially from those anticipated, estimated, projected or intended. We undertake no obligation to publicly update or revise any forward-looking statements to reflect actual results, changes in expectations or events or circumstances after the date of this Quarterly Report on Form 10-Q.

 

When this report uses the words “we,” “us,” or “our,” and the “Company,” they refer to TREES Corporation (formerly, “General Cannabis Corp”).

 

Our Products, Services, and Customers

 

TREES Corporation is a cannabis retailer and cultivator in the States of Colorado and Oregon.

 

We presently operate six (6) cannabis dispensaries as follows:

 

  Englewood, Colorado

 

  o 5005 S. Federal Boulevard – Recreational license only

 

  Denver, Colorado

 

  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

 

  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

 

14

 

 

We also operate two (2) 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
 

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. During the three months ended June 30, 2024 and 2023, 100% of SevenFive’s revenue was with three customers and 81% of SevenFive’s revenue was with two customers, respectively. During the six months ended June 30, 2024 and 2023, 100% of SevenFive’s revenue was with three customers and 77% of SevenFive’s revenue was with two customers, respectively. The customers in 2024 are related party dispensaries and the revenues associated with these customers are eliminated in consolidation.

 

During the three months ended June 30, 2024 and 2023, 100% of Hillside Cultivation’s (formerly noted as Green Tree) revenue was with three customers, and 90% of Hillside Cultivation’s (formerly noted as Green Tree) revenue was with four customers, respectively. During the six months ended June 30, 2024 and 2023, 100% of Hillside Cultivation’s (formerly noted as Green Tree) revenue was with three customers, and 83% of Hillside Cultivation’s (formerly noted as Green Tree) revenue was with three customers, respectively. The customers in 2024 are related party dispensaries and the revenues associated with these customers are eliminated in consolidation.

 

Results of Operations

 

The following tables set forth, for the periods indicated, statements of operations data. The tables and the discussion below should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the notes thereto in this report.

 

   Three months ended June 30,       Percent 
   2024   2023   Change   Change 
Revenues  $3,689,122   $5,097,994   $(1,408,872)   (28)%
Costs and expenses   (3,475,320)   (6,568,727)   3,093,407    (47)%
Other expense   (158,347)   (565,422)   407,075    (72)%
                     
Net Gain (Loss) before income taxes  $55,455   $(2,036,155)  $2,091,610    103%

 

   Six months ended June 30,       Percent 
   2024   2023   Change   Change 
Revenues  $7,375,003   $10,208,613   $(2,833,610)   (28)%
Costs and expenses   (7,638,549)   (12,850,463)   5,211,914    (41)%
Other expense   (933,778)   (1,195,103)   261,325     (22)%
                     
Net Loss before income taxes  $(1,197,324)  $(3,836,953)  $2,639,629    (69)%

 

Revenues

 

The reversal of the acquisition of a portion of the Green Tree assets, which were returned in Q3 2023, contributed to the decrease in revenues and expenses for the three months ended June 30, 2024 compared to June 30, 2023, and for the six months ended June 30, 2024 and June 30, 2023, respectively.

 

Costs and expenses

 

   Three months ended June 30,       Percent 
   2024   2023   Change   Change 
Cost of sales  $1,687,442   $3,230,777   $(1,543,335)   (48)%
Selling, general and administrative   1,333,836    2,485,751    (1,151,915)   (46)%
Stock-based compensation       18,054    (18,054)   (100)%
Professional fees   237,135    543,566    (306,431)   (56)%
Depreciation and amortization   216,907    290,579    (73,672)   (25)%
   $3,475,320   $6,568,727   $(3,093,407)   (47)%

 

15

 



   Six months ended June 30,       Percent 
   2024   2023   Change   Change 
Cost of sales  $3,876,537   $6,288,491   $(2,411,954)   (38)%
Selling, general and administrative   2,779,088    4,781,991    (2,002,903)   (42)%
Stock-based compensation   14,968    45,450    (30,482)   (67)%
Professional fees   560,708    1,151,110    (590,402)   (51)%
Depreciation and amortization   407,248    583,421    (176,173)   (30)%
   $7,638,549   $12,850,463   $(5,211,914)   (41)%

 

Cost of sales decreased for three and six months ended June 30, 2024, as compared to June 30, 2023 due to the reversal of the acquisition of a portion of the Green Tree assets.

 

Selling, general and administrative expense decreased for the three and six months ended June 30, 2024, as compared to June 30, 2023 due to the decreased expenses resulting from the reversal of the acquisition of one dispensary and one cultivation facility in the third quarter of 2023 and one additional dispensary license in the first quarter of 2023, resulting in a decrease in employees and rent expense.

 

Stock-based compensation included the following:

 

   Three months ended June 30,       Percent 
   2024   2023   Change   Change 
Restricted Stock Awards  $   $18,054   $(18,054)   (100)%
   $   $18,054   $(18,054)   (100)%

 

   Six months ended June 30,       Percent 
   2024   2023   Change   Change 
Restricted Stock Awards  $14,968   $45,450   $(30,482)   (67)%
   $14,968   $45,450   $(30,482)   (67)%

 

Employee awards are issued under our 2020 Omnibus Incentive Plan, which was approved by shareholders on November 23, 2020. Expense varies primarily due to the number of stock options and restricted stock awards granted and the share price on the date of grant. The decrease in expense for the three and six months ended June 30, 2024, as compared to June 30, 2023, is due to issuing less restricted stock awards at a higher per unit grant date value in the second quarter of 2024.

 

Professional fees consist primarily of accounting and legal expenses.  Professional fees decreased for the three and six months ended June 30, 2024 as compared to June 30, 2023 due to the lack of unusual accounting activity in the first and second quarters of 2024 as compared to the 2023 periods.

 

Depreciation and amortization decreased due to the reversal of the acquisition of a portion of the Green Tree assets and a revaluation of the Green Tree and Green Man acquisitions as of the three and six months ended June 30, 2024, as compared to June 30, 2023.

 

Other Expense

 

   Three months ended June 30,       Percent 
   2024   2023   Change   Change 
Amortization of debt discount  $174,305   $220,077   $(45,772)   (21)%
Interest expense   457,172    716,728    (259,556)   (36)%
(Gain) loss on derivative liability   (3,223)   (3,912)   689    (18)%
Gain on sale of assets       2,400    (2,400)   (100)%
Other (income)       (369,871)   369,871    (100)%
(Gain) loss on contingent earnout   (469,907)       (469,907)   100%
   $158,347   $565,422   $(407,075)   (72)%

 

16

 

 

Other Expense

 

   Six months ended June 30,       Percent 
   2024   2023   Change   Change 
Amortization of debt discount  $294,635   $401,754   $(107,119)   (27)%
Interest expense   1,010,915    1,166,039    (155,124)   (13)%
(Gain) loss on derivative liability   (4,716)   (5,219)   503    (10)%
Gain on sale of assets       2,400    (2,400)   (100)%
Other income       (369,871)   369,871    (100)%
(Gain) loss on contingent earnout   (367,056)       (367,056)   100%
   $933,778   $1,195,103   $(261,325)   (22)%

 

Amortization of debt discount decreased during the three and six months ended June 30, 2024, as compared to June 30, 2023 due to the change in outstanding debt related to the Green Tree acquisition reversal. Interest expense decreased during the three and six months ended June 30, 2024, as compared to June 30, 2023, due to the modification of the 12% Notes with an interest rate of 12% in Q4 2023 and a delay in Q2 2023 payments. The gain on warrant derivative liability reflects the change in the fair value of the 2019 Warrants which expired in Q2 2024. The loss on contingent earnout reflects the change in the fair value of the Green Tree Contingent Earnout liability which expired in Q2 2024.

 

Retail

 

   Three months ended June 30,       Percent 
   2024   2023   Change   Change 
Revenues  $3,689,122   $5,079,564   $(1,390,442)   (27)%
Costs and expenses   (2,981,932)   (5,347,268)   2,365,336    (44)%
Segment operating income  $707,190   $(267,704)  $974,894    364%

 

   Six months ended June 30,       Percent 
   2024   2023   Change   Change 
Revenues  $7,375,003   $10,190,183   $(2,815,180)   (28)%
Costs and expenses   (6,098,192)   (9,882,836)   3,784,644    (38)%
Segment operating income  $1,276,811   $307,347   $969,464    315%

 

With the partial reversal of the acquisition of Green Tree in Q3 2023, retail revenue decreased for the three and six months ended June 30, 2024, compared to June 30, 2023. Costs and expenses also decreased as a result of the partial acquisition reversal.

 

Cultivation

 

   Three months ended June 30,       Percent 
   2024   2023   Change   Change 
Revenues  $344,149   $944,830   $(600,681)   (64)%
Costs and expenses   (211,796)   (1,046,274)   834,478    (80)%
Segment operating gain (loss)  $132,353   $(101,444)  $233,797    230%

 

   Six months ended June 30,       Percent 
   2024   2023   Change   Change 
Revenues  $592,791   $1,628,847   $(1,036,056)   (64)%
Costs and expenses   (820,082)   (2,185,847)   1,365,765    (62)%
Segment operating loss  $(227,291)  $(557,000)  $329,709    (59)%

 

The decrease in revenues for the three and six months ended June 30, 2024 compared to June 30, 2023, is due to the closure of three cultivations during Q2 2023 and a reduction in grow operations at one of the remaining cultivations facilities in Q1 2023. The decrease in cost and expenses for the three and six months ended June 30, 2024 compared to June 30, 2023 is attributed to the closure of three cultivations during Q2 2023 and a reduction in grow operations at one of the remaining cultivations facilities in Q1 2023.  The costs and expense incurred between our dispensaries and cultivation locations are eliminated in consolidation.

 

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Liquidity

 

Sources of liquidity

 

Our sources of liquidity historically have included the cash exercise of common stock options and warrants, debt, and the issuance of common stock or other equity-based instruments. We anticipate our significant uses of resources will include funding operations.

 

Sources and uses of cash

  

We had cash of $383,029 and $969,676 as of June 30, 2024 and December 31, 2023, respectively. Our cash flows from operating, investing and financing activities were as follows: 

 

   Six months ended June 30, 
   2024   2023 
Net cash used in operating activities  $(580,633)  $(883,305)
Net cash used in investing activities  $(29,994)  $(267,314)
Net cash (used in) provided by financing activities  $23,980   $(789,246)

 

Net cash used in operating activities increased in 2024 due to the expiration and subsequent gain of the Green Tree contingent earnout.

 

Net cash used in investing activities for the six months ended June 30, 2024 from June 30, 2023 decreased as a result of a lack of acquisition activity in 2024.

 

Net cash used in financing activities for the six months ended June 30, 2024 decreased from June 30, 2023 due to the partial reversal of the acquisition of a portion of the Green Tree assets and the issuance of the 2024 Working Capital Note.

 

Capital Resources

 

We had no material commitments for capital expenditures as of June 30, 2024. Part of our growth strategy, however, is to acquire operating businesses. We expect to fund such activity through cash on hand, the issuance of debt, common stock, warrants for our common stock or a combination thereof.

 

Critical Accounting Policies

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the amounts of revenues and expenses. Critical accounting policies are those that require the application of management’s most difficult, subjective, or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. In applying these critical accounting policies, our management uses its judgment to determine the appropriate assumptions to be used in making certain estimates. Actual results may differ from these estimates.

 

We define critical accounting policies as those that are reflective of significant judgments and uncertainties, and which may potentially result in materially different results under different assumptions and conditions. In applying these critical accounting policies, our management uses its judgment to determine the appropriate assumptions to be used in making certain estimates. These estimates are subject to an inherent degree of uncertainty.

 

Business Combinations

 

Amounts paid for acquisitions are allocated to the assets acquired and liabilities assumed based on their estimated fair value at the date of acquisition. The fair value of identifiable intangible assets is based on detailed valuations that use information and assumptions provided by management, including expected future cash flows. We allocate any excess purchase price over the fair value of the net assets and liabilities acquired to goodwill. Identifiable intangible assets with finite lives are amortized over their useful lives. Acquisition-related costs, including advisory, legal, accounting, valuation, and other costs, are expensed in the periods in which the costs are incurred. The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition date.

 

Goodwill and Intangibles

 

Goodwill represents the excess of purchase price over the fair value of identifiable net assets acquired in a business combination. Goodwill and long-lived intangible assets are tested for impairment at least annually in accordance with the provisions of ASC No. 350, Intangibles-Goodwill and Other (“ASC No. 350”). ASC No. 350 requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carry value. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. We test goodwill annually in December, unless an event occurs that would cause us to believe the value is impaired at an interim date. See our Annual Report on Form 10-K for the year ended December 31, 2023, for discussion of the Company’s significant accounting policies.

 

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Intangible assets with finite useful lives are amortized over their respective estimated useful lives and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

 

Impairment of Long-lived Assets

 

We periodically evaluate whether the carrying value of property and equipment has been impaired when circumstances indicate the carrying value of those assets may not be recoverable. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying value is not recoverable, the impairment loss is measured as the excess of the asset’s carrying value over its fair value.

 

Our impairment analyses require management to apply judgment in estimating future cash flows as well as asset fair values, including forecasting useful lives of the assets, assessing the probability of different outcomes, and selecting the discount rate that reflects the risk inherent in future cash flows. If the carrying value is not recoverable, we assess the fair value of long-lived assets using commonly accepted techniques, and may use more than one method, including, but not limited to, recent third-party comparable sales and undiscounted cash flow models. If actual results are not consistent with our assumptions and estimates, or our assumptions and estimates change due to new information, we may be exposed to an impairment charge in the future.

 

Debt with Equity-linked Features

 

We may issue debt that has separate warrants, conversion features, or other equity-linked attributes.

 

Debt with warrants – When we issue debt with warrants, we treat the warrants as a debt discount, record as a contra-liability against the debt, and amortize the balance over the life of the underlying debt as amortization of debt discount expense in the consolidated statements of operations. The offset to the contra-liability is recorded as additional paid in capital in our consolidated balance sheets. If the debt is retired early, the associated debt discount is then recognized immediately as amortization of debt discount expense in the consolidated statement of operations. The debt is treated as conventional debt.

 

We determine the value of the non-complex warrants using the Black-Scholes Option Pricing Model (“Black-Scholes”) using the stock price on the date of issuance, the risk-free interest rate associated with the life of the debt, and the volatility of our stock. For warrants with complex terms, we use the binomial lattice model to estimate their fair value.

 

Convertible Debt - When we issue debt with a conversion feature, we must first assess whether the conversion feature meets the requirements to be treated as a derivative. If the conversion feature within convertible debt meets the requirements to be treated as a derivative, we estimate the fair value of the convertible debt derivative using Black-Scholes upon the date of issuance, using the stock price on the date of issuance, the risk-free interest rate associated with the life of the debt, and the estimated volatility of our stock.

 

Modification of Debt - When we change the terms of existing notes payable, we evaluate the amendments under ASC 470-50, Debt Modification and Extinguishment to determine whether the change should be treated as a modification or as a debt extinguishment. This evaluation includes analyzing whether there are significant and consequential changes to the economic substance of the note. If the change is deemed insignificant then the change is considered a debt modification, whereas if the change is substantial the change is reflected as a debt extinguishment.

 

Equity-based Payments

 

We estimate the fair value of equity-based instruments issued to employees or to third parties for services or goods using Black-Scholes or the Binomial Model, which requires us to estimate the volatility of our stock and forfeiture rate.

 

Revenue Recognition

 

ASC Topic 606, “Revenue from Contracts with Customers” (“ASC 606”) requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASC 606 defines a five-step process to achieve this core principle and, in doing so, judgment and estimates may be required within the revenue recognition process including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.

 

19

 

 

The following five steps are applied to achieve that core principle:

 

Step 1: Identify the contract with the customer;

 

Step 2: Identify the performance obligations in the contract;

 

Step 3: Determine the transaction price;

 

Step 4: Allocate the transaction price to the performance obligations in the contract; and

 

Step 5: Recognize revenue when the company satisfies a performance obligation.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial and Accounting Officer, as appropriate to allow timely decisions regarding required disclosure.

 

We carried out an evaluation under the supervision and with the participation of management, including our Principal Executive Officer and Principal Financial and Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2024, the end of the period covered by this report. Based on that evaluation, our Principal Executive Officer and Principal Financial and Accounting Officer have concluded that our disclosure controls and procedures were effective as of June 30, 2024.

 

Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive officer and principal financial officer and effected by the Board, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

 

  Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

 

  Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures of are being made only in accordance with authorizations of our management and directors; and

 

  Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

 

Because of inherent limitations, our internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal controls over financial reporting during the second quarter of 2024, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, which have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

 

20

 

 

PART II. OTHER INFORMATION

 

ITEM 1.   LEGAL PROCEEDINGS

 

From time to time, we may be involved in various claims and legal actions in the ordinary course of business. We are not currently subject to any material legal proceedings outside the ordinary course of our business.

 

ITEM 1A. RISK FACTORS

 

As of the date of this report, there have been no material changes to the Risk Factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

 

ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

 

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4.   MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5.   OTHER INFORMATION

 

None.

 

21

 

 

ITEM 6. EXHIBITS

 

Exhibits   
10.1  Form of Working Capital Note with issue date of June 15, 2024 (incorporated by reference to Exhibit 10.1 of our Form 8-K filed on June 14, 2024).
10.2  Amended and Restated Working Capital Note dated December 15, 2023 (issue date of June 15, 2024) (incorporated by reference to Exhibit 10.2 of our Form 8-K filed on June 14, 2024).
31.1  Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2  Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1  Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101 INS   Inline XBRL Instance Document.
101.SCH   Inline XBRL Taxonomy Extension Schema Document.
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104   Cover Page Interactive Data File (embedded within the Inline XBRL document). 

 

22

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

TREES CORPORATION
   
Date: August 9, 2024 /s/ Adam Hershey
  Adam Hershey, Interim Chief Executive Officer
  Principal Executive Officer
   
  /s/ Edward Myers
  Edward Myers, Interim Chief Financial Officer
  Principal Financial and Accounting Officer

 

 

23

 

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Exhibit 31.1

 

CERTIFICATIONS

Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002

(Subsections (A) And (B) Of Section 1350, Chapter 63 of Title 18, United States Code)

 

I, Adam Hershey, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of TREES Corporation;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) designed such internal control over financial reporting, or cause such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) any fraud, whether or not material, that involves management or other employees who have significant role in the registrant’s internal control over financial reporting.

 

August 9, 2024  
  /s/ Adam Hershey
  Adam Hershey, Interim Chief Executive Officer,
Principal Executive Officer

 

Exhibit 31.2

 

CERTIFICATIONS

Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002

(Subsections (A) And (B) Of Section 1350, Chapter 63 of Title 18, United States Code)

 

I, Edward Myers, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of TREES Corporation;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) designed such internal control over financial reporting, or cause such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) any fraud, whether or not material, that involves management or other employees who have significant role in the registrant’s internal control over financial reporting.

 

August 9, 2024  
/s/ Edward Myers
  Edward Myers, Interim Chief Financial Officer
Principal Financial and Accounting Officer

Exhibit 32.1

 

In connection with the Quarterly Report of TREES Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2024, as filed with the Securities and Exchange Commission (the “Report”), Adam Hershey, the Company’s Principal Executive Officer, and Edward Meyers, the Company’s Principal Financial and Accounting Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of their knowledge:

 

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of the Company.

 

August 9, 2024 /s/ Adam Hershey
  Adam Hershey, Interim Chief Executive Officer,
Principal Executive Officer

 

August 9, 2024 /s/ Edward Myers
  Edward Myers, Interim Chief Financial Officer
Principal Financial and Accounting Officer

 

v3.24.2.u1
Cover - shares
6 Months Ended
Jun. 30, 2024
Aug. 09, 2024
Document Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Transition Report false  
Entity Interactive Data Current Yes  
Amendment Flag false  
Document Period End Date Jun. 30, 2024  
Document Fiscal Year Focus 2024  
Document Fiscal Period Focus Q2  
Entity Information [Line Items]    
Entity Registrant Name TREES CORPORATION  
Entity Central Index Key 0001477009  
Entity File Number 000-54457  
Entity Tax Identification Number 90-1072649  
Entity Incorporation, State or Country Code CO  
Current Fiscal Year End Date --12-31  
Entity Current Reporting Status Yes  
Entity Shell Company false  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Contact Personnel [Line Items]    
Entity Address, Address Line One 215 Union Boulevard  
Entity Address, Address Line Two Suite 415  
Entity Address, City or Town Lakewood  
Entity Address, State or Province CO  
Entity Address, Postal Zip Code 80228  
Entity Phone Fax Numbers [Line Items]    
City Area Code (303)  
Local Phone Number 759-1300  
Entity Listings [Line Items]    
Title of 12(b) Security N/A  
No Trading Symbol Flag true  
Security Exchange Name NONE  
Entity Common Stock, Shares Outstanding   108,746,520
v3.24.2.u1
Condensed Consolidated Balance Sheets - USD ($)
Jun. 30, 2024
Dec. 31, 2023
Current assets    
Cash and cash equivalents $ 383,029 $ 969,676
Accounts receivable, net of allowance of $53,098 and $42,000, respectively 191,441 111,863
Inventories, net 1,020,306 860,918
Prepaid expenses and other current assets 197,758 411,911
Total current assets 1,792,534 2,354,368
Right-of-use operating lease asset 1,724,897 1,979,833
Property and equipment, net 1,277,900 1,395,104
Intangible assets, net 1,377,440 1,637,491
Goodwill 15,880,097 15,880,097
Total assets 22,052,868 23,246,893
Current liabilities    
Accounts payable and accrued expenses 2,522,589 2,617,536
Interest payable 1,961,350 1,570,077
Income tax payable 1,719,835 392,765
Operating lease liability, current 843,229 846,201
Finance lease liability, current 84,746 205,400
Accrued stock payable 60,900 60,900
Accrued dividends 123,900 106,200
Warrant derivative liability 4,716
Accrued legal fees 72,000 102,000
Notes payable - current 157,763 1,092,382
Contingent Earnout Liability 367,056
Total current liabilities 7,546,312 7,365,233
Operating lease liability, non-current 996,525 1,218,392
Finance lease liability, non-current 586,722 501,248
Notes payable - non-current (net of unamortized discount) 15,037,637 14,013,861
Total liabilities 24,167,196 23,098,734
Commitments and contingencies (Note6)
Stockholders’ equity (deficit)    
Preferred stock, no par value; 5,000,000 and 5,000,000 shares authorized; 1,180 and 1,180 issued and outstanding, respectively 1,073,446 1,073,446
Common stock, $0.001 par value; 200,000,000 and 200,000,000 shares authorized; 108,746,520 and 108,746,520 shares issued and outstanding, respectively 108,746 108,746
Additional paid-in capital 99,729,914 99,450,307
Accumulated deficit (103,026,434) (100,484,340)
Total stockholders’ equity (deficit) (2,114,328) 148,159
Total liabilities and stockholders’ equity (deficit) $ 22,052,868 $ 23,246,893
v3.24.2.u1
Condensed Consolidated Balance Sheets (Parentheticals) - USD ($)
Jun. 30, 2024
Dec. 31, 2023
Statement of Financial Position [Abstract]    
Accounts receivable, net of allowance (in Dollars) $ 53,098 $ 42,000
Preferred stock, par value (in dollars per share) (in Dollars per share)
Preferred stock, shares authorized 5,000,000 5,000,000
Preferred stock, shares issued 1,180 1,180
Preferred stock, shares outstanding 1,180 1,180
Common stock, par value (in dollars per share) (in Dollars per share) $ 0.001 $ 0.001
Common stock, shares authorized 200,000,000 200,000,000
Common stock, shares issued 108,746,520 108,746,520
Common stock, shares outstanding 108,746,520 108,746,520
v3.24.2.u1
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Revenue        
Total revenue $ 3,689,122 $ 5,097,994 $ 7,375,003 $ 10,208,613
Costs and expenses        
Cost of sales 1,687,442 3,230,777 3,876,537 6,288,491
Selling, general and administrative 1,333,836 2,485,751 2,779,088 4,781,991
Stock-based compensation 18,054 14,968 45,450
Professional fees 237,135 543,566 560,708 1,151,110
Depreciation and amortization 216,907 290,579 407,248 583,421
Total costs and expenses 3,475,320 6,568,727 7,638,549 12,850,463
Operating income (loss) 213,802 (1,470,733) (263,546) (2,641,850)
Other income (expenses)        
Amortization of debt discount (174,305) (220,077) (294,635) (401,754)
Interest expense (457,172) (716,728) (1,010,915) (1,166,039)
Gain on derivative liability 3,223 3,912 4,716 5,219
Gain on contingent earnout 469,907 367,056
Loss on sale of assets (2,400)