TREES Corp (Colorado) [CANN] Filings

10-Q 1 cann-20220630x10q.htm 10-Q

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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, 2022.

☐ 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.)

1901 S Navajo Street Denver, CO 80223
(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, 2022, there were 96,192,184 issued and outstanding shares of the Company's common stock.

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TREES CORPORATION

FORM 10-Q

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	27
Item 4.	Controls and Procedures	27

PART II. OTHER INFORMATION		28

Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	29
	Signatures	30

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TREES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS



		June 30, 2022	December 31, 2021
		(unaudited)
Assets
Current assets
Cash and cash equivalents	$	1,072,896	$	2,054,050
Accounts receivable, net of allowance of $34,000 and $61,000, respectively		21,061		80,188
Current portion of notes receivable, net of allowance of nil and $43,108, respectively		—		73,000
Inventories, net		1,330,784		1,123,083
Prepaid expenses and other current assets		174,169		149,075
Total current assets		2,598,910		3,479,396

Right-of-use operating lease asset		3,005,480		3,065,152
Property and equipment, net		626,399		680,327
Intangible assets, net		2,147,246		5,999,813
Goodwill		14,612,038		8,799,657
Total assets	$	22,990,073	$	22,024,345

Liabilities and Stockholders' Equity

Current liabilities
Accounts payable	$	1,394,784	$	1,170,708
Interest payable		795,811		621,085
Operating lease liability, current		677,697		721,809
Accrued stock payable		60,900		444,894
Warrant derivative liability		29,723		28,317
Notes payable - current		1,307,558		1,094,398
Total current liabilities		4,266,473		4,081,211

Operating lease liability, non-current		2,357,878		2,427,762
Notes payable - long-term (net of discount)		5,661,392		5,619,570
Related party long-term notes payable (net of discount)		296,190		288,229
Total liabilities		12,581,933		12,416,772
Commitments and contingencies (Note 9)		—		—

Stockholders’ equity
Preferred stock, no par value; 5,000,000 shares authorized; 1,180 issued and outstanding, respectively		1,073,446		1,073,446
Common stock, $0.001 par value; 200,000,000 shares authorized; 96,192,184 shares and 89,551,993 shares issued and outstanding, respectively		96,191		89,550
Additional paid-in capital		94,103,322		92,265,392
Accumulated deficit		(84,864,819)		(83,820,815)
Total stockholders’ equity		10,408,140		9,607,573
Total liabilities and stockholders’ equity	$	22,990,073	$	22,024,345

See Notes to condensed consolidated financial statements.

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TREES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three months ended				Six months ended
	June 30,				June 30,
	2022		2021		2022		2021
Revenue
Retail sales	$	3,158,335	$	—	$	6,455,881	$	—
Cultivation sales		77,392		698,608		353,154		1,347,941
Interest		—		—		—		14,472
Total revenue		3,235,727		698,608		6,809,035		1,362,413

Costs and expenses
Cost of sales		1,745,575		511,426		3,820,463		1,066,631
Selling, general and administrative		1,212,796		582,059		2,538,914		1,180,750
Stock-based compensation		42,386		(41,648)		118,501		62,284
Professional fees		237,461		353,833		518,845		616,148
Depreciation and amortization		(139,991)		72,788		91,855		190,469
Total costs and expenses		3,098,227		1,478,458		7,088,578		3,116,282

Operating income (loss)		137,500		(779,850)		(279,543)		(1,753,869)

Other expenses (income)
Amortization of debt discount and equity issuance costs		216,661		185,460		430,942		253,790
Interest expense		176,045		190,627		350,396		293,683
(Gain) loss on derivative liability		(59,258)		(102,761)		1,406		1,095,983
(Gain) loss on sale of assets		(13,000)		—		(13,000)		1,467
Total other expenses, net		320,448		273,326		769,744		1,644,923

Net loss from continuing operations before income taxes		(182,948)		(1,053,176)		(1,049,287)		(3,398,792)

Provision for income taxes		—		—		—		—
Loss from continuing operations		(182,948)		(1,053,176)		(1,049,287)		(3,398,792)

Income (loss) from discontinued operations, net of tax		—		(323,077)		5,283		(336,529)
Net loss	$	(182,948)	$	(1,376,253)	$	(1,044,004)	$	(3,735,321)



Per share data - basic and diluted
Net loss from continuing operations per share	$	(0.00)	$	(0.02)	$	(0.01)	$	(0.05)
Net loss from discontinued operations per share	$	0.00	$	0.00	$	0.00	$	(0.01)
Net loss attributable to common stockholders per share	$	(0.00)	$	(0.02)	$	(0.01)	$	(0.06)
Weighted average number of common shares outstanding		96,192,184		62,183,748		95,972,067		61,972,553

See Notes to condensed consolidated financial statements.

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TREES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six months ended June 30,
	2022		2021
Cash flows from operating activities
Net loss	$	(1,044,004)	$	(3,735,321)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount and equity issuance costs		430,942		253,790
Depreciation and amortization		91,855		198,988
Non-cash lease expense		447,766		206,900
Bad debt expense		1,156		(21,163)
(Gain) loss on disposal of property and equipment		(13,000)		2,967
Loss on warrant derivative liability		1,406		1,095,983
Stock-based compensation		118,501		62,284
Changes in operating assets and liabilities, net of acquisitions
Accounts receivable		55,972		(175,676)
Prepaid expenses and other assets		(25,094)		529,224
Inventories		(207,701)		(219,184)
Accounts payable and accrued liabilities		398,802		(712,362)
Operating lease liabilities		(502,090)		(185,401)
Net cash used in operating activities:		(245,489)		(2,698,971)

Cash flows from investing activities
Purchase of property and equipment		(14,210)		(327,805)
Proceeds for sale of equipment		13,000		—
Proceeds on notes receivable		75,000		433,393
Acquisition of TREES MLK		(256,582)		—
Proceeds from sale of investment		—		208,761
Net cash provided by (used in) investing activities		(182,792)		314,349

Cash flows from financing activities
Proceeds from exercise of stock options		—		181,709
Proceeds from notes payable		—		3,960,000
Payments on notes payable		(552,873)		(200,000)
Net cash provided by (used in) financing activities		(552,873)		3,941,709

Net increase (decrease) in cash and cash equivalents		(981,154)		1,557,087
Cash and cash equivalents, beginning of period		2,054,050		755,769
Cash and cash equivalents, end of period	$	1,072,896	$	2,312,856

Supplemental schedule of cash flow information
Cash paid for interest	$	175,670	$	14,266

Non-cash investing & financing activities
Operating lease right-of-use asset/Operating lease liability	$	172,053	$	—
Issuance of accrued stock	$	383,994	$	—
Cashless warrant exercise	$	—	$	1,557,078
Beneficial conversion feature	$	—	$	1,110,039
10% Warrants recorded as a loss on extinguishment of debt and additional paid-in capital	$	—	$	1,239,300
Issuance of common stock to a consultant	$	—	$	100,000

See Notes to condensed consolidated financial statements.

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TREES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

IN STOCKHOLDERS’ EQUITY (DEFICIT)


	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 three months ended June 30, 2021
	Preferred Stock			Common Stock			Additional		Accumulated
	Shares	Amount		Shares	Amount		Paid-in Capital		Deficit		Total
April 1, 2021	—	$	—	62,146,515	$	62,144	$	78,632,934	$	(77,310,504)	$	1,384,574
Common stock issued upon exercise of stock options	—		—	119,760		120		46,587		—		46,707
Warrants issued with 10% Notes	—		—	—		—		810,000		—		810,000
Beneficial conversion feature	—		—	—		—		692,500		—		692,500
Stock-based compensation	—		—	—		—		(41,648)		—		(41,648)
Net loss	—		—	—		—		—		(1,376,253)		(1,376,253)
June 30, 2021	—	$	—	62,266,275	$	62,264	$	80,140,373	$	(78,686,757)	$	1,515,880


	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, 2021	1,180	$	1,073,446	89,551,993	$	89,550	$	92,265,392	$	(83,820,815)	$	9,607,573
Common stock issued for acquisition of Trees Waterfront LLC	—		—	1,669,537		1,670		382,324		—		383,994
Common stock issued for acquisition of Trees MLK LLC	—		—	4,970,654		4,971		1,337,105		—		1,342,076
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

	For the six months ended June 30, 2021
	Preferred Stock			Common Stock			Additional		Accumulated
	Shares	Amount		Shares	Amount		Paid-in Capital		Deficit		Total
January 1, 2020	—	$	—	60,813,673	$	60,813	$	75,891,414	$	(74,951,436)	$	1,000,791
Common stock issued to a consultant	—		—	112,359		112		99,888		—		100,000
Common stock issued upon exercise of stock options	—		—	333,620		334		181,375		—		181,709
Warrants issued with 10% Notes	—		—	—		—		1,239,300		—		1,239,300
Beneficial conversion feature	—		—	—		—		1,110,039		—		1,110,039
Cashless exercise of warrants	—		—	1,006,623		1,005		1,556,073		—		1,557,078
Stock-based compensation	—		—	—		—		62,284		—		62,284
Net loss	—		—	—		—		—		(3,735,321)		(3,735,321)
June 30, 2021	—	$	—	62,266,275	$	62,264	$	80,140,373	$	(78,686,757)	$	1,515,880

See Notes to condensed consolidated financial statements.

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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,”) (formerly, General Cannabis Corp), was incorporated on June 3, 2013, and provides services and products to the regulated cannabis industry. On June 8, 2022, our shareholders, upon recommendation of the Board, approved an amendment to our Amended and Restated Articles of Incorporation at our 2022 Annual Meeting of Stockholders. The amendment to our Amended and Restated Articles of Incorporation was filed with the Secretary of State of the State of Colorado on June 8, 2022 and formally changed the name of the Company to TREES Corporation. We currently trade on the OTCQB® Market under the trading symbol CANN. The trading symbol did not change with the name change. As of June 30, 2022, our operations are segregated into the following segments:

Retail (“Retail Segment”)

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

Cultivation (“Cultivation Segment”)

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

During the three months ended June 30, 2022 and 2021, 78% and 11% of SevenFive’s revenue was with one customer, respectively. During the six months ended June 30, 2022 and 2021, 59% and 11% was with one customer, respectively. The customer is a related party dispensary and the revenues associated with this customer is eliminated in consolidation.

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

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 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

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("U.S. GAAP") can be condensed or omitted. The condensed consolidated balance sheet for the year ended December 31, 2021, was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. The information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto of the Company for the year ended December 31, 2021, which were included in the annual report on Form 10-K filed by the Company on March 25, 2022.

In the opinion of management, these condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and notes thereto of the Company and include all adjustments, consisting only of normal recurring adjustments, considered necessary for the fair presentation of the Company's financial position and operating results. The results for the three and six months ended June 30, 2022, are not necessarily indicative of the operating results for the year ending December 31, 2022, or any other interim or future periods. Since the date of the Annual Report, there have been no material changes to the Company’s significant accounting policies.

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 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. In particular, the COVID-19 pandemic has adversely impacted and is likely to further adversely impact the Company's business and markets. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company's business, results of operations, and financial condition, including revenues, expenses, reserves and allowances, fair value measurements and asset impairment charges, will depend on future developments that are highly uncertain and difficult to predict. These developments include, but are not limited to, the duration and spread of the pandemic, its severity in our markets and elsewhere, governmental actions to contain the spread of the pandemic and respond to the reduction in global economic activity, and how quickly and to what extent normal economic and operating conditions can resume.

Discontinued Operations

On July 16, 2021, we entered into an Asset Purchase Agreement with an individual to sell substantially all of the assets of NBC for a total of $150,000 and 10% of profits generated by the buyer in the states of Michigan, Mississippi, and Massachusetts for a period of twelve months from the closing. On August 2, 2021, the sale of NBC was completed. Pursuant to amendment, the buyer paid the additional $75,000 in March 2022, and the 10% profit share described above was eliminated.

On January 1, 2021, we discontinued our investments segment. As this is not a materially significant segment, we have not shown the effects of the discontinued segment in the financial statements.

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

Going Concern

We incurred net losses of $182,948 and $1,044,004 during the three and six months ended June 30, 2022, respectively, and $1,376,253 and $3,735,321 for the three and six months ended June 30, 2021, respectively, and had an accumulated deficit of $84,864,819 as of June 30, 2022. We had cash and cash equivalents of $1,072,896 and $2,054,050 as of June 30, 2022, and December 31, 2021, respectively.

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The accompanying consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets, and the satisfaction of liabilities and commitments in the ordinary course of business. We have incurred recurring losses and negative cash flows from operations since inception and have primarily funded our operations with proceeds from the issuance of convertible debt. We 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 independent registered public accounting firm, in its report on our consolidated financial statements for the year ended December 31, 2021, has also expressed substantial doubt about our ability to continue as a going concern. Our condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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

Summary of Significant Accounting Policies

See our Annual Report on Form 10-K for the year ended December 31, 2021, for discussion of the Company's significant accounting policies.

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, 2021, although early adoption is permitted. We adopted this ASU in the first quarter of 2022. This ASU did not have a material effect on our condensed consolidated financial statements.

FASB ASU 2019-12 – “Income Taxes (Topic 740)” – In December 2019, the FASB issued guidance which simplifies certain aspects of accounting for income taxes. The guidance is effective for interim and annual reporting periods beginning after December 15, 2020, and early adoption is permitted. We adopted this ASU in the first quarter of 2021. This ASU did not have a material effect on our condensed consolidated financial statements.

NOTE 2. BUSINESS ACQUISITION

On September 2, 2021, we completed the acquisition of substantially all of the assets of TREES Englewood, representing a portion of the overall Trees transaction (“Trees Transaction”) previously disclosed pursuant to that certain First Amended and Restated Agreement and Plan of Reorganization and Liquidation dated May 28, 2021, by and among the Company, seller and certain other sellers party thereto, that consists of the assets relating to the Trees dispensary located in Englewood, Colorado (“Englewood Closing”). We paid $1,155,256 in cash in connection with the Englewood Closing and stock consideration of 22,380,310 shares of our Common Stock. The closing price of our common stock on September 2, 2021, the date of license transfer, was $0.47 per share, as such, fair value of consideration is $10,518,746. Further, cash equal to $1,732,884 will be paid to the seller in equal monthly installments over a period of 24 months from the Englewood Closing. As of June 30, 2022, we have completed the preliminary allocation of the purchase price. Based on the preliminary purchase price, there was an adjustment from the tradename to goodwill in the amount of $3,601,000. As of June 30, 2022, the purchase price allocation is being reviewed and is not yet completed. Management anticipates completing the final review of the purchase price allocation as soon as possible. As of June 30, 2022, the condensed consolidated balance sheet includes an allocation of cash, fixed assets, inventory, intangible assets and goodwill.

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


Cash	$	32,941
Fixed assets		59,335
Inventory		586,495
Tradename		1,399,000
Goodwill		11,216,913
	$	13,294,684

The accompanying condensed consolidated financial statements include the results of Trees Englewood from the date of acquisition for financial reporting purposes, September 2, 2021. The pro-forma effects of the acquisition on the results of operations as if the transaction had been completed on January 1, 2020, are as follows:


	Three months ended		Six months ended
	June 30,		June 30,
	2021		2021
Total revenues	$	2,944,108	$	6,079,238
Net income (loss) attributable to common stockholders	$	228,132	$	638,723
Net income (loss) per common share	$	0.00	$	0.01
Weighted average number of basic and diluted common shares outstanding		84,564,058		84,352,863

The unaudited pro-forma results of operations are presented for information purposes only. The unaudited pro-forma results are not intended to present actual results that would have been attained had the acquisition been completed as of January 1, 2020, or to project potential operating results as of any future date or for any future periods.

On December 30, 2021, we completed the acquisition of substantially all the assets of Trees Portland, LLC and Trees Waterfront, LLC, representing a portion of the overall Trees Transaction, which consists of the assets relating to certain Trees dispensaries located in Portland, Oregon ("Oregon Closing”). We paid cash in the amount of $331,581 in connection with the Oregon Closing and stock consideration of 6,423,575 shares of our Common Stock. The closing price of our common stock on December 30, 2021, the date of license transfer, was $0.23 per share, as such, fair value of consideration is $1,477,422. Further, cash equal to $497,371 will be paid to the sellers in equal monthly installments over a period of 24 months from the Oregon Closing. As of June 30, 2022, we have completed the preliminary allocation of the purchase price. Based on the preliminary purchase price, there was an adjustment from the tradename to goodwill in the amount of $341,000. As of June 30, 2022, the purchase price allocation is being reviewed and is not yet completed. Management anticipates completing the final review of the purchase price allocation as soon as possible. As of June 30, 2022, the condensed consolidated balance sheet includes an allocation of cash, fixed assets, inventory, intangible assets and goodwill.

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


Cash	$	14,568
Fixed assets		56,015
Inventory		202,046
Tradename		509,000
Goodwill		1,524,744
	$	2,306,373

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The accompanying consolidated financial statements include the results of Trees Oregon from the date of acquisition for financial reporting purposes, December 30, 2021. The pro-forma effects of the acquisition on the results of operations as if the transaction had been completed on January 1, 2020, are as follows:


	Three months ended		Six months ended
	June 30,		June 30,
	2021		2021
Total revenues	$	1,274,029	$	2,529,124
Net income (loss) attributable to common stockholders	$	15,547	$	66,169
Net income (loss) per common share	$	0.00	$	0.00
Weighted average number of basic and diluted common shares outstanding		68,607,323		68,396,128

On January 5, 2022, we completed the acquisition of substantially all of the assets of Trees MLK Inc. (“MLK”), representing the remaining Oregon dispensary in connection with the overall Trees transaction. We paid cash in the amount of $256,582 and stock consideration of 4,970,654 shares of our Common Stock. The closing price of our common stock on January 5, 2022, the date of license transfer, was $0.27 per share, as such, fair value of consideration is $1,342,076. Further, cash equal to $384,873 will be paid to the sellers in equal monthly installments over a period of 24 months from the MLK closing. When we closed on MLK it was a non-operating dispensary. We opened the dispensary in the second quarter of 2022. As of June 30, 2022, we have completed the preliminary allocation of the purchase price. Based on the preliminary purchase price, there was an adjustment from the tradename to goodwill in the amount of $912,000. As of June 30, 2022, the purchase price allocation is being reviewed and is not yet completed. Management anticipates completing the final review of the purchase price allocation as soon as possible. As of June 30, 2022, the condensed consolidated balance sheet includes an allocation of fixed assets, intangible assets and goodwill.

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


Fixed assets	$	25,150
Tradename		88,000
Goodwill		1,870,381
	$	1,983,531

The accompanying consolidated financial statements include the results of Trees MLK from the date of acquisition for financial reporting purposes, January 5, 2022. The pro-forma effects of the acquisition on the results of operations as if the transaction had been completed on January 1, 2021, are as follows:


	Three months ended				Six months ended
	June 30,				June 30,
	2022		2021		2022		2021
Total revenues	$	22,419	$	—	$	22,419	$	—
Net income (loss) attributable to common stockholders	$	1,999	$	(46,336)	$	(43,588)	$	(77,668)
Net income (loss) per common share	$	0.00	$	(0.00)	$	(0.00)	$	(0.00)
Weighted average number of basic and diluted common shares outstanding		96,192,184		67,154,402		96,136,840		66,943,207

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, 2021, or to project potential operating results as of any future date or for any future periods.

Table of Contents

NOTE 3. DISCONTINUED OPERATIONS

Assets and liabilities of discontinued operations for the Operations Segment included the following:


		June 30,		December 31,
	2022		2021
Accounts receivable, net	$	—	$	—
Prepaid expenses and other current assets		—		—
Current assets discontinued operations		—		—

Property and equipment, net		—		—
Noncurrent assets discontinued operations		—		—

Accounts payable and accrued expenses		—		—
Customer deposits		—		—
Current liabilities discontinued operations	$	—	$	—

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

TREES Corp (Colorado) [CANN] Filings
10-Q	[2022-08-12]
10-Q	[2022-05-13]
10-K	[2022-03-25]
10-Q	[2021-11-12]
10-Q	[2021-08-11]
10-Q	[2021-05-17]
S-1	[2021-05-10]
10-K	[2021-04-01]
10-Q	[2020-11-12]
10-Q	[2020-08-20]
10-Q	[2020-07-07]
10-K	[2020-05-14]
10-Q	[2019-11-08]
10-Q	[2019-08-08]
10-Q	[2019-05-08]
10-K	[2019-03-08]
10-Q	[2018-11-08]
10-Q	[2018-08-08]
10-Q	[2018-05-11]
10-K	[2018-03-12]
S-1	[2017-12-26]
10-Q	[2017-11-07]
10-Q	[2017-08-07]
10-Q	[2017-05-12]
10-K	[2017-03-31]
S-1	[2016-12-05]
10-Q	[2016-11-07]
10-Q	[2016-08-10]
10-Q	[2016-05-09]
10-K	[2016-03-25]
10-Q	[2015-11-13]
10-Q	[2015-08-24]
10-Q	[2015-05-15]
10-K	[2015-04-15]
10-Q	[2014-11-19]
10-Q	[2014-08-19]
10-Q	[2014-05-15]
10-K	[2014-04-15]
S-1	[2014-02-12]
10-Q	[2013-11-19]
10-Q	[2013-07-19]
10-Q	[2013-05-09]
10-K	[2013-04-01]
10-Q	[2012-10-11]
10-Q	[2012-08-20]
10-Q	[2012-05-14]
10-K	[2012-03-30]