CANN 10-K & 10-Q changes, risk factors and insider trading
TREES Corp (Colorado) · OTC · Retail-Drug Stores And Proprietary Stores · CIK 1477009 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
Largest changes
We have federal and state net operating loss carryforwards that may be limited or expiresee in full comparisonunused. The Company is currently evaluating whether there have been one or more ownership changes pursuant to IRC 382 and 383. If we determine there were one or more ownership changes under these rules, the use of our U.S. federal and state net operating loss carryforwards may be limited and/or otherwise expiredunused. Any such limitation or expiration could materially affect our ability to offset future tax liabilities with net operating losses.
Our business involves the growing of recreational cannabis, an agricultural product. Such business will be subject to the risks inherent in the agricultural business, such as insects, plant diseases and similar agricultural risks. Further, to the extent that our products are grown outside, we are subject to weather and climate conditions. Extended cold streaks, rain or snow, or generally cold weather or climate, could materially adversely affect our cannabis plants. Accordingly, there can be no assurance that natural elements will not have a material adverse effect on any future production of our products. Further, weather events can impact the ability of oursee in full comparisonproducts.retail stores to remain open and the ability of retail customers to visit our retail locations.
Full comparison: every changed paragraph (3)
We operate an agricultural business and retail stores and are subject to weather and climate conditions.
Our business involves the growing of recreational
cannabis, an agricultural product. Such business will be subject to the risks inherent in the agricultural business, such as insects,
plant diseases and similar agricultural risks. Further, to the extent that our products are grown outside, we are subject to weather and
climate conditions. Extended cold streaks, rain or snow, or generally cold weather or climate, could materially adversely affect our cannabis
plants. Accordingly, there can be no assurance that natural elements will not have a material adverse effect on any future production
of our products. Further, weather events can impact the ability of our products.retail stores to remain open and the ability of retail customers
to visit our retail locations.
We have federal and state net operating loss carryforwards that may be
limited or expire unused. The Company is currently evaluating whether there have been one or more ownership changes pursuant to IRC 382 and 383. If we determine there were one or more ownership changes under these rules, the use of our U.S. federal and state net operating loss carryforwards may be limited and/or otherwise expired unused. Any such limitation or expiration could materially affect our ability to offset future tax liabilities with
net operating losses.
Management's Discussion & Analysis (MD&A)
New heading “Costs and expenses”
Largest changes
“Amortization of debt discount decreased during the year ended December 31, 2023 as compared to December 31, 2022 due to the rollover and repayment of the 10% Notes in 2022. Interest expense increased during the year ended December 31, 2023 as compared to December 31, 2022 due to the additional borrowings from the issuance of the 12% Notes held until they were restructured in Q4 2023. The loss on extinguishment of debt during the year ended December 31, 2023 relates to the extinguishment of the 468 debt in October 2023. …”see in full comparison
“Amortization of debt discount increased during the year ended December 31, 2022 as compared to December 31, 2021 due to the senior convertible promissory notes with warrants (“12% Notes”) issued in September 2022 and the rollover and repayment of the 10% Notes. Interest expense increased during the year ended December 31, 2022 as compared to December 31, 2021 due to the additional borrowings from the issuance of the 12% Notes. The gain (loss) on warrant derivative liability reflects the change in the fair value of the 2019 Warrants. …”see in full comparison
“The consolidated financial statements included elsewhere in this Form 10-K, have been prepared on a going concern basis, which assumes we will be able to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future. Our cash of $2,583,833 as of December 31, 2022 is not sufficient to absorb our operating losses and retire our notes payable of $17,802,932 and other obligations as they come due. …”see in full comparison
“The increase in revenue in the year ended December 31, 2022 compared to the year ended December 31, 2021 is due to the full year impact of the Trees retail locations. The increased costs and expenses in 2022 include $2.7 million of non-cash goodwill and intangible asset impairment charges. The Retail Segment is expected to provide consistent positive cash flows which will significantly contribute to our working capital position.”see in full comparison
“This decrease in revenues for the year ended December 31, 2022 as compared to December 31, 2021, is due to significant declines in the wholesale price of marijuana flower. The costs and expenses include non-cash goodwill and intangible asset impairment charges of $0.3 million and $3.0 million for the years ended December 31, 2022 and 2021, respectively.”see in full comparison
“The consolidated financial statements included elsewhere in this Form 10-K, have been prepared on the basis of continuity of operations, realization of assets, and the satisfaction of liabilities and commitments in the ordinary course of business. We have incurred recurring losses and negative cash flows from operations since inception and have primarily funded our operations with proceeds from the issuance of debt and equity. We expect our operating losses to continue into the foreseeable future as we continue to execute our acquisition and growth strategy. …”see in full comparison
Full comparison: every changed paragraph (43)
We incurred net losses of $7,082,258 and $9,475,067 during the years ended December 31, 2023 and 2022, respectively, and had an accumulated deficit of $100,484,340 and $93,384,382 as of December 31, 2023 and December 31, 2022. We had cash and cash equivalents of $969,676 and $2,583,833 as of December 31, 2023, and December 31, 2022, respectively.
The consolidated financial statements included elsewhere in this Form 10-K, have been prepared on the basis of continuity of operations, realization of assets, and the satisfaction of liabilities and commitments in the ordinary course of business. We have incurred recurring losses and negative cash flows from operations since inception and have primarily funded our operations with proceeds from the issuance of debt and equity. 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. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Our ability to continue as a going concern is dependent upon our ability to raise additional capital to fund operations, support our planned investing activities, and repay our debt obligations as they become due. If we are unable to obtain additional funding, we would be forced to delay, reduce, or eliminate some or all of our acquisition efforts, which could adversely affect our growth plans.
The consolidated financial statements included elsewhere in this Form 10-K, have been prepared on a going concern basis, which assumes we will be able to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future. Our cash of $2,583,833 as of December 31, 2022 is not sufficient to absorb our operating losses and retire our notes payable of $17,802,932 and other obligations as they come due. Our ability to continue as a going concern is dependent upon our generating profitable operations in the future and/or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Management believes that (a) we will be successful in obtaining additional capital and (b) actions presently being taken to further implement our business plan to reduce costs and generate additional revenues provide the opportunity for the Company to continue as a going concern. While we believe in the viability of our strategy to generate additional revenues and our ability to raise additional funds, there can be no assurances to that effect. Accordingly, there is substantial doubt about our ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
Revenues
The sales generated by Green Tree and Green Man, which we acquired in Q4 2022, contributed to the increase in revenues for the year ended December 31, 2023 compared to December 31, 2022.
Costs and expenses
Cost of sales increased for the year ended December 31, 2023, as compared to December 31, 2022 due to the additional sales from the Green Tree and Green Man acquisitions.
Selling, general and administrative expense increased for the year ended December 31, 2023, as compared to December 31, 2022, due to the increased expenses resulting from the acquisition of three dispensaries in the fourth quarter of 2022 and one additional dispensary license in the first quarter of 2023. This resulted in an increase in employees and an increase in rent expense.
Professional fees consist primarily of accounting and legal expenses. Professional fees increased for the year ended December 31, 2023 as compared to December 31, 2022 due to the acquisition activity in the first quarter of 2023, as well as the accrued legal expenses for the settlement reached in the second quarter of 2023.
The following discussion of our results of operations relates to our continuing operations. See Note 3 to the consolidated financial statements for information concerning discontinued operations.
The full year impact of the retail operations acquired in the Trees Acquisition acquired at the end of 2021 resulted in the significant increase in revenues for the year ended December 31, 2022. The increase in retail revenue was partially offset by lower revenue in the Cultivation segment due primarily to a significant decline in the wholesale prices of marijuana flower. See Segment discussions below for further details.
Cost of sales and selling, general and administrative expenses both increased year over year primarily due to the full year impact of the retail operations acquired in the Trees Transaction acquired at the end of 2022. See Segment discussions below for further details. One-time bonus payments of $767,000 as part of employment agreements for two former owners of the Green Tree Entities also contributed to the increase in selling, general and administrative costs.
Depreciation and amortization expense increased in 2023 due to amortization related to the intangible assets acquired in the Green Man and Green Tree acquisitions in December 2022, which had useful lives of one year and two years, respectively.
Professional fees consist primarily of accounting, consulting and legal expenses and have remained consistent from 2021 to 2022.
Depreciation and amortization expense increased in 2022 due to an impairment of intangible assets in the Cultivation segment in 2021. As a result of the impairment, the depreciable base of the intangible asset was significantly reduced resulting in the lower amortization.
Amortization of debt discount decreased during the year ended December 31, 2023 as compared to December 31, 2022 due to the rollover and repayment of the 10% Notes in 2022. Interest expense increased during the year ended December 31, 2023 as compared to December 31, 2022 due to the additional borrowings from the issuance of the 12% Notes held until they were restructured in Q4 2023. The loss on extinguishment of debt during the year ended December 31, 2023 relates to the extinguishment of the 468 debt in October 2023. The loss on extinguishment of debt during the year ended December 31, 2022 relates to the rollover and repayment of the 10% Notes. The loss on impairment of assets during the years ended December 31, 2023 and December 31, 2022 is due primarily to goodwill impairments at our Trees Oregon locations included in our Retail segment in 2023 and goodwill and intangible impairments at out Trees Oregon locations included in our Retail segment. The gain on warrant derivative liability reflects the change in the fair value of the 2019 Warrants. The gain on change in the fair value of contingent earnout during the year ended December 31, 2023 is due to changes in the fair value of the contingent earnout liability related to the Green Tree Acquisition. Other income during the year ended December 31, 2023 increased as compared to December 31, 2022 due to the Company applying for employee retention credits through the CARES Act.
Retail
With the acquisition of Green Tree on December 12, 2022, and the acquisition of Green Man on December 19, 2022, as well as the acquisition of the dispensary license for 468 Federal Street, retail revenue increased for the year ended December 31, 2023, compared to December 31, 2022. Costs and expenses also increased as a result of the acquisitions.
Cultivation
The increase in revenues for the year ended December 31, 2023 compared to December 31, 2022 is attributed to the increase in sales made to our dispensaries which are eliminated in consolidation. The increase in cost and expenses for the year ended December 31, 2023 compared to December 31, 2022 is attributed to the acquisitions of Green Tree and Green Man that occurred during December of 2022, as well as the increase in sales made to our dispensaries. The costs and expense incurred between our dispensaries and cultivation locations are eliminated in consolidation.
Amortization of debt discount increased during the year ended December 31, 2022 as compared to December 31, 2021 due to the senior convertible promissory notes with warrants (“12% Notes”) issued in September 2022 and the rollover and repayment of the 10% Notes. Interest expense increased during the year ended December 31, 2022 as compared to December 31, 2021 due to the additional borrowings from the issuance of the 12% Notes. The gain (loss) on warrant derivative liability reflects the change in the fair value of the 2019 Warrants. The loss on extinguishment of debt during 2022 relates to the rollover and repayment of the 10% Notes. The loss on extinguishment of debt for the year ended December 31, 2021 was due to the modification of warrants that occurred on the 15% Warrants during the third quarter of 2021. The loss on impairment of assets in 2022 is due primarily to goodwill and intangible impairments at our Trees Oregon locations included in our Retail Segment. The loss on impairment of assets in 2021 is due to goodwill and intangible impairments in our Cultivation Segment.
With the addition of the Trees Englewood dispensary on September 2, 2021 and the addition of Treees Portland and Trees Waterfront on December 30, 2021, we have established our retail footprint in the Colorado and Oregon markets and have become a vertically integrated company. We continued to expand our retail footprint in Oregon with the addition of the Trees MLK dispensary in January 2022 and in Colorado with the Green Man Acquisition and Green Tree Acquisition in December 2022. The dispensaries acquired in the Green Man Acquisition and Green Tree Acquisition did not have a material impact on the Retail segment results in 2022.
The increase in revenue in the year ended December 31, 2022 compared to the year ended December 31, 2021 is due to the full year impact of the Trees retail locations. The increased costs and expenses in 2022 include $2.7 million of non-cash goodwill and intangible asset impairment charges. The Retail Segment is expected to provide consistent positive cash flows which will significantly contribute to our working capital position.
This decrease in revenues for the year ended December 31, 2022 as compared to December 31, 2021, is due to significant declines in the wholesale price of marijuana flower. The costs and expenses include non-cash goodwill and intangible asset impairment charges of $0.3 million and $3.0 million for the years ended December 31, 2022 and 2021, respectively.
Our primary sources of liquidity includehistorically cashhave proceedsincluded fromthe issuance of
debt, cashcommon generatedstock, fromor operations,other equity-based instruments and the cash exercise of Commoncommon Stockstock options and warrants, and the issuance of Common Stock or other equity-based instruments.warrants. We anticipate our more significant
uses of resources will include funding operations and additional business acquisitions.operations.
In December 2023, we restructured our debt obligations with the Green Tree entities to eliminate these obligations. Subsequent to this restructuring we received $500,000 from the issuance of a working capital loan in full in December 2023.
In September 2022, we received $9,912,250$10,587,250 in cash, net of debt issue costs. We received the cash in a private placement
with certain accredited investors pursuant to the 12% Notes andto wasbe used to repay a portion of the 10% Notes, and to fund thefor acquisition of the Green Tree Entitiesdispensaries and Greenoperating Man, and to fund operations.capital.
In September 2021, we received $1,180,000 in cash by issuing 1,180 shares of our preferred stock and 354,000 warrants to purchase Common Stock.
In February and April 2021, we received $3,960,000 in cash in a private placement with certain accredited investors pursuant to which we issued and sold 10% senior convertible promissory notes.
Net cash used in operating activities decreased in 2023 due to the decreased net loss driven from the expenses described above as well as changes in working capital components, primarily larger reductions in inventory and increases in payables in 2023 compared to 2022.
Net cash used in investing activities decreased in 2023 due to the decreased level of acquisitions compared to 2022.
Net cash used in financing activities increased in 2023 due to an increase in payments on notes payable and finance leases, and less debt raised.
Net cash used in operating activities decreased in 2022 due to due cash generated from the full year operations of the dispensaries acquired in the Trees Transaction. The decrease was partially offset by additional costs associated with the completion of the Green Man Acquisition and Green Tree Acquisition.
Net cash used in investing activities for the year ended December 31, 2022 consisted primarily of $1,971,975 for the purchase Trees MLK, Green Man, and the Green Tree Entities. Net cash used in investing activities for the year ended December 31, 2021 consisted primarily of $1,439,027 for the acquisition of the first three dispensaries of the Trees Transaction. This is offset by the sale of our investment for $208,761, the sale of Next Big Crop in the amount of $150,000 and collection of notes receivables in the amount of $591,717.
Net cash provided by financing activities are primarily related to the issuance of the 12% Notes, partially offset by repayment of a portion of the 10% Notes and payments on the notes payable to the sellers in the Trees Transaction.
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 onone level below
an operating segment) on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than
not reduce the fair value of a reporting unit below its carry value. Application of the goodwill impairment test requires judgement, including
the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units,
and determination of the fair value of each reporting unit. We test goodwill annually in December, unless an event occurs that would cause
us to believe the value is impaired at an interim date. See Notes 1 and 910 to our consolidated financial statements for a description of
our goodwill and intangible asset valuation and impairment policies and associated impacts for the reported periods.
We may issue debt that has separate warrants,
conversion features, or noother equity-linked attributes.
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.
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. If the conversion feature is not treated as a derivative, we assess whether it is a beneficial conversion feature (“BCF”). A BCF exists if the effective conversion price of the convertible debt instrument is less than the stock price on the commitment date. This typically occurs when the effective conversion price is less than the fair value of the stock on the date the instrument was issued. The value of a BCF is equal to the intrinsic value of the feature, the difference between the effective conversion price and the fair value of the Common Stock into which it is convertible.
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.
On January 1, 2018, we adopted ASC Topic 606, “Revenue from Contracts with
Customers” (“ASC 606”). The core principle of 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, it is possible more judgment and estimates may be required within the
revenue recognition process than required under existing U.S. GAAP 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.
What changed in the latest 10-Q
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.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
Largest changes
Amortization of debt discount decreased during the three andsee in full comparisonsixnine months endedJuneSeptember 30, 2024, as compared toJuneSeptember 30, 2023 due to the change in outstanding debt related to the Green Tree acquisition reversal. Interest expensedecreasedincreased during the three andsixnine months endedJuneSeptember 30, 2024, as compared toJuneSeptember 30, 2023, due to themodificationresumption of interest in Q3 2023 of the 12%Notes with an interest rate of 12% in Q4 2023 and a delay in Q2 2023 payments.Notes. 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.
“Hillsides Cultivation’s revenue includes revenue from an external wholesale vendor totaling $5,084 which has been applied to open accounts payable for the retail segment of the Company for the same vendor. Accounts payable and the associated cost of goods sold expense have been increased for the retail segment to account for this adjustment.”see in full comparison
Professional fees consist primarily of accounting and legal expenses. Professional feessee in full comparisondecreasedincreased for the three months ended September 30, 2024 due to increased accounting andsixlegal fees related to our 2023 tax return and the related tax position therein (See Note 6 Income Tax Payable for details). Professional fees decreased for the nine months endedJuneSeptember 30, 2024 as compared toJuneSeptember 30, 2023 due to the lack of unusual accounting activity in the first and second quarters of 2024 as compared to the 2023 periods.
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 endedsee in full comparisonJuneSeptember 30,20242024, SevenFive had zero dollars in revenue and during the three months ended September 30, 2023,100%89% of SevenFive’s revenue was withthree customers and 81% of SevenFive’s revenue was with twofive customers, respectively. During thesixnine months endedJuneSeptember 30, 2024 and 2023, 100% of SevenFive’s revenue was with three customers and77%50% of SevenFive’s revenue was withtwoonecustomers,customer, respectively. The customers in 2024 are related party dispensaries and the revenues associated with these customers are eliminated in consolidation.
During the three months endedsee in full comparisonJuneSeptember 30, 2024 and 2023,100%92% of Hillside Cultivation’s (formerly noted as Green Tree) revenue was with three customers, and90%84% of Hillside Cultivation’s (formerly noted as Green Tree) revenue was with four customers, respectively. During thesixnine months endedJuneSeptember 30, 2024 and 2023,100%98% of Hillside Cultivation’s (formerly noted as Green Tree) revenue was with three customers, and83%78% 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.
Net cash used in operating activities increased in 2024 due to the expiration and subsequent gain of the Green Tree contingentsee in full comparisonearnout.earnout and gain on extinguishment of debt due to the Centri promissory note.
Full comparison: every changed paragraph (18)
We
presently operate sixfive (65) cannabis dispensaries
as follows:
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
September 30, 20242024, SevenFive had zero dollars in revenue
and during the three months ended September 30, 2023, 100%89% of SevenFive’s revenue was with three customers and 81% of SevenFive’s revenue was with twofive customers,
respectively. During
the sixnine months ended JuneSeptember 30, 2024 and 2023, 100% of SevenFive’s revenue was with three customers and 77%
50% of SevenFive’s
revenue was with twoone customers,customer, 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 JuneSeptember 30, 2024
and 2023, 100%92% of Hillside
Cultivation’s (formerly noted as Green Tree) revenue was with three customers, and 90%84% of Hillside Cultivation’s
(formerly
noted as Green Tree) revenue was with four customers, respectively. During the sixnine months ended JuneSeptember 30, 2024 and 2023, 100%
98% of Hillside
Cultivation’s (formerly noted as Green Tree) revenue was with three customers, and 83%78% 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.
Hillsides Cultivation’s revenue includes revenue from an external wholesale vendor totaling $5,084 which has been applied to open accounts payable for the retail segment of the Company for the same vendor. Accounts payable and the associated cost of goods sold expense have been increased for the retail segment to account for this adjustment.
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 JuneSeptember 30, 2024 compared
to JuneSeptember 30, 2023, and for the sixnine months ended JuneSeptember 30, 2024 and June
30, 2023, respectively.
Cost
of sales decreased for three and sixnine months
ended JuneSeptember 30, 2024, as compared to JuneSeptember 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 sixnine months ended JuneSeptember 30, 2024, as compared to JuneSeptember 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.
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 sixnine months ended June
September 30, 2024, as compared to JuneSeptember 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 decreasedincreased for the three months ended September 30, 2024 due to increased accounting and sixlegal
fees related to our 2023 tax return and the related tax position therein (See Note 6 Income Tax Payable for details). Professional fees
decreased for the nine months ended JuneSeptember 30,
2024 as compared to JuneSeptember 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 sixnine months ended JuneSeptember 30, 2024, as compared to JuneSeptember 30, 2023.
Amortization
of debt discount decreased during
the three and sixnine months ended JuneSeptember 30, 2024, as compared to JuneSeptember 30, 2023 due to the change in outstanding
debt related to
the Green Tree acquisition reversal. Interest expense decreasedincreased during the three and sixnine months ended JuneSeptember 30, 2024,
as compared
to JuneSeptember 30, 2023, due to the modificationresumption of interest in Q3 2023 of the 12% Notes with an interest rate of 12% in Q4 2023 and a delay in Q2 2023
payments.Notes. 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.
With
the partial reversal of the acquisition
of Green Tree in Q3 2023, retail revenue decreased for the three and sixnine months ended JuneSeptember 30,
2024, compared to JuneSeptember 30,
2023. Costs and expenses also decreased as a result of the partial acquisition reversal.
The
decrease in revenues for the three and six nine
months ended JuneSeptember 30, 2024 compared to JuneSeptember 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 nine
months ended JuneSeptember 30, 2024 compared to JuneSeptember 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.
We had cash of $383,029$245,367 and $969,676 as of June September
30, 2024 and December 31,
2023, respectively. Our cash flows from operating, investing and financing activities were as follows:
Net
cash used in operating activities increased
in 2024 due to the expiration and subsequent gain of the Green Tree contingent earnout.earnout and gain on extinguishment of debt due to the
Centri promissory note.
Net
cash used in investing activities for the six
nine months ended JuneSeptember 30, 2024 from JuneSeptember 30, 2023 decreased as a result of a lack of acquisition
activity in 2024.
Net
cash used in financing activities for the six
nine months ended JuneSeptember 30, 2024 decreased from JuneSeptember 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.
We had no
material commitments for capital expenditures as of June September
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.
CANN insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding CANN (13F)
None of the 59 investors we track reported a position in their latest 13F.