TREES Corp (Colorado) 10-Q for FY2021 Q2

TREES Corp (Colorado) (CANN)

10-Q 2021-08-11 For: 2021-06-30

Added on April 06, 2026

About this 10-Q

TREES Corp (Colorado) filed this 10-Q on August 11, 2021, covering the quarter ended June 30, 2021 (FY2021 Q2).

Headline figures

Quarter ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $698.61K; up 26.0% from $554.54K a year earlier
Net loss: $1.38M; compared with a net loss of $1.94M a year earlier

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Colorado		90-1072649
(State of incorporation)		(IRS Employer Identification No.)

6565 East Evans Avenue Denver, CO 80224
(Address of principal executive offices) (Zip Code)

(303) 759-1300
(Registrant’s Telephone Number, Including Area Code)


Title of each class	Name of each exchange on which registered	Ticker symbol
N/A	N/A	N/A


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☑
		Emerging growth company	☐

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	25
Item 4.	Controls and Procedures	25

PART II. OTHER INFORMATION		27

Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	28
	Signatures	29



	June 30, 2021
	(Unaudited)		December 31, 2020
Assets
Current assets
Cash and cash equivalents	$	2,307,604	$	750,218
Accounts receivable, net of allowance of $30,000 and $9,000, respectively		178,784		140,605
Current portion of notes receivable, net of allowance of nil and $125,000, respectively		—		350,000
Inventories, net		590,983		371,799
Prepaid expenses and other current assets		198,176		225,122
Assets of discontinued operations - current portion		284,700		712,010
Total current assets		3,560,247		2,549,754

Right-of-use operating lease asset		1,816,632		1,836,455
Property and equipment, net		642,769		411,525
Investment, held for sale		—		208,761
Intangible assets, net		887,500		984,375
Goodwill		2,484,200		2,484,200
Assets of discontinued operations		35,178		43,697
Total assets	$	9,426,526	$	8,518,767

Liabilities and Stockholders' Equity

Current liabilities
Accounts payable and accrued expenses	$	856,093	$	1,344,269
Interest payable		296,207		16,790
Operating lease liability, current		376,362		370,800
Accrued stock payable		60,900		94,861
Warrant derivative liability		134,234		561,368
Liabilities of discontinued operations		138,461		742,064
Total current liabilities		1,862,257		3,130,152

Operating lease liability, non-current		1,495,394		1,499,280
Long-term notes payable (net of discount)		4,272,858		2,598,965
Related party long-term notes payable (net of discount)		280,137		289,579
Total liabilities		7,910,646		7,517,976
Commitments and contingencies (Note 9)		—		—

Stockholders’ equity
Preferred stock, no par value; 5,000,000 shares authorized; no shares issued and outstanding, respectively		—		—
Common stock, $0.001 par value; 200,000,000 shares authorized; 62,266,275 shares and 60,813,673 shares issued and outstanding, respectively		62,264		60,813
Additional paid-in capital		80,140,373		75,891,414
Accumulated deficit		(78,686,757)		(74,951,436)
Total stockholders’ equity		1,515,880		1,000,791
Total liabilities and stockholders’ equity	$	9,426,526	$	8,518,767


	Three months ended				Six months ended
	June 30,				June 30,
	2021		2020		2021		2020
Revenue
Cultivation sales	$	698,608	$	509,175	$	1,347,941	$	509,175
Interest		—		45,369		14,472		62,098
Total revenue		698,608		554,544		1,362,413		571,273

Costs and expenses
Cost of sales		511,426		281,243		1,066,631		281,243
Selling, general and administrative		582,059		862,029		1,180,750		1,713,265
Stock-based compensation		(41,648)		434,365		62,284		1,006,939
Professional fees		353,833		508,991		616,148		1,106,027
Depreciation and amortization		72,788		21,097		190,469		49,201
Total costs and expenses		1,478,458		2,107,725		3,116,282		4,156,675

Operating loss		(779,850)		(1,553,181)		(1,753,869)		(3,585,402)

Other expenses (income)
Amortization of debt discount and equity issuance costs		185,460		72,516		253,790		138,837
Interest expense		190,627		103,672		293,683		274,720
Loss on extinguishment of debt		—		48,908		—		1,186,336
(Gain) loss on derivative liability		(102,761)		4,541		1,095,983		(1,371,079)
(Gain) loss on sale of assets		—		(82)		1,467		(139,187)
Total other expenses, net		273,326		229,555		1,644,923		89,627

Net loss from continuing operations before income taxes		(1,053,176)		(1,782,736)		(3,398,792)		(3,675,029)

Loss from discontinued operations		(323,077)		(117,636)		(336,529)		(239,522)
Loss from operations before income taxes		(1,376,253)		(1,900,372)		(3,735,321)		(3,914,551)

Provision for income taxes		—		40,535		—		40,535
Net loss		(1,376,253)		(1,940,907)		(3,735,321)		(3,955,086)

Deemed dividend		—		(98,000)		—		(98,000)

Net loss attributable to common stockholders	$	(1,376,253)	$	(2,038,907)	$	(3,735,321)	$	(4,053,086)


Per share data - basic and diluted
Net loss from continuing operations per share	$	(0.02)	$	(0.04)	$	(0.05)	$	(0.09)
Net loss from discontinued operations per share	$	0.00	$	0.00	$	(0.01)	$	0.00
Net loss attributable to common stockholders per share	$	(0.02)	$	(0.04)	$	(0.06)	$	(0.09)
Weighted average number of common shares outstanding		62,183,748		46,013,634		61,972,553		42,841,140


	Six months ended June 30,
	2021		2020
Cash flows from operating activities
Net loss	$	(3,735,321)	$	(3,955,086)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount and equity issuance costs		253,790		138,837
Depreciation and amortization		198,988		65,409
Amortization of loan origination fees		—		(4,973)
Loss on extinguishment of debt		—		1,186,336
Non-cash lease expense		206,900		50,328
Bad debt expense		(21,163)		128,491
Loss on disposal of property and equipment		2,967		5,183
Loss (gain) on warrant derivative liability		1,095,983		(1,371,079)
Stock-based compensation		62,284		1,006,939
Gain on sale of building		—		(139,187)
Changes in operating assets and liabilities, net of acquisitions
Accounts receivable		(175,676)		(344)
Prepaid expenses and other assets		529,224		107,115
Inventories		(219,184)		32,792
Accounts payable and accrued liabilities		(712,362)		(414,877)
Operating lease liabilities		(185,401)		(45,000)
Income taxes		—		40,535
Net cash used in operating activities:		(2,698,972)		(3,168,581)

Cash flows from investing activities
Purchase of property and equipment		(327,805)		(79,427)
Proceeds from sale of investment		208,761		—
Proceeds on notes receivable		433,393		—
Proceeds from sale of building		—		1,421,134
Net cash provided by investing activities		314,349		1,341,707

Cash flows from financing activities
Proceeds from the sale of common stock and warrants - accrued stock payable		—		2,185,000
Proceeds from the exercise of warrants		—		90,000
Proceeds from exercise of stock options		181,709		—
Proceeds from notes payable		3,960,000		1,500,000
Payments on notes payable		(200,000)		(975,000)
Net cash provided by financing activities		3,941,709		2,800,000

Net increase in cash and cash equivalents		1,557,086		973,126
Cash and cash equivalents, beginning of period		755,769		224,994
Cash and cash equivalents, end of period	$	2,312,855	$	1,198,120

Supplemental schedule of cash flow information
Cash paid for interest	$	14,266	$	273,167

Non-cash investing & financing activities
Cashless warrant exercises	$	1,557,078	$	903,779
Beneficial conversion feature	$	1,110,039	$	233,500
10% Warrants recorded as a debt discount and additional paid-in capital	$	1,239,300	$	—
Issuance of common stock to a consultant	$	100,000	$	—
Deemed dividend from 8.5% warrant repricing	$	—	$	98,000
Operating lease right-of-use asset/operating lease liability	$	—	$	2,721,069
15% Warrants recorded as a debt discount and additional paid-in capital	$	—	$	167,163
15% Warrants recorded as a loss on extinguishment of debt and additional paid-in capital	$	—	$	668,336
Debt converted to equity	$	—	$	957,056
Issuance of common stock to an employee	$	—	$	100,000
Stock issued in connection with SevenFive Farm acquisition	$	—	$	2,861,495


	For the three months ended June 30, 2021
	Common Stock			Additional		Accumulated
	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 three months ended June 30, 2020
	Common Stock			Additional		Accumulated
	Shares	Amount		Paid-in Capital		Deficit		Total
April 1, 2020	40,281,881	$	40,282	$	63,550,821	$	(69,285,923)	$	(5,694,820)
Common stock issued for acquisition of SevenFive Farm	8,859,117		8,859		1,894,522		—		1,903,381
Common stock issued upon conversion of debt	1,674,226		1,674		705,382		—		707,056
Stock-based compensation	—		—		434,367		—		434,367
Cashless exercise of warrants	373,340		374		821,164		—		821,538
Net loss	—		—		—		(1,940,907)		(1,940,907)
June 30, 2020	51,188,564	$	51,189	$	67,406,256	$	(71,226,830)	$	(3,769,385)


	For the six months ended June 30, 2021
	Common Stock			Additional		Accumulated
	Shares	Amount		Paid-in Capital		Deficit		Total
January 1, 2021	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

	For the six months ended June 30, 2020
	Common Stock			Additional		Accumulated
	Shares	Amount		Paid-in Capital		Deficit		Total
January 1, 2020	39,497,480	$	39,498	$	61,468,034	$	(67,271,744)	$	(5,764,212)
Sale of common stock, net of issuance costs	42,735		43		99,957		—		100,000
Common stock issued upon conversion of debt	2,215,892		2,215		954,841		—		957,056
Common stock issued for acquisition of SevenFive Farm	8,859,117		8,859		1,894,522		—		1,903,381
Stock-based compensation	—		—		926,698		—		926,698
Beneficial conversion feature	—		—		233,500		—		233,500
Warrants exercised	200,000		200		172,041		—		172,241
Warrants issued with the 15% Notes	—		—		835,499		—		835,499
Cashless exercise of warrants	373,340		374		821,164		—		821,538
Net loss	—		—		—		(3,955,086)		(3,955,086)
June 30, 2020	51,188,564	$	51,189	$	67,406,256	$	(71,226,830)	$	(3,769,385)


Inventories	$	185,261
Fixed assets		89,490
Tradename		1,050,000
Goodwill		2,484,200
	$	3,808,951


	June 30,		December 31,
	2021		2020
Accounts receivable, net	$	262,453	$	187,185
Prepaid expenses and other current assets		16,996		519,274
Current assets discontinued operations		279,449		706,459

Property and equipment, net		35,178		43,697
Noncurrent assets discontinued operations		35,178		43,697

Accounts payable and accrued expenses		34,187		169,492
Customer deposits		51,146		517,931
Current liabilities discontinued operations	$	85,333	$	687,423


Year ending December 31,	Amount
2021 (remaining six months)	$	185,400
2022		381,924
2023		387,653
2024		393,468
2025		399,370
Thereafter		4,048,779
Total		5,796,594
Less: Present value adjustment		(3,924,838)
Operating lease liability	$	1,871,756


			Number of
	Amount		Shares
Balance as of December 31, 2020	$	94,861		359,415
Stock issued		(33,961)		(259,415)
Balance as of June 30, 2021	$	60,900		100,000


Current stock price	$	0.53
Exercise price	$	0.56
Risk-free interest rate		0.38 %
Expected dividend yield		—
Expected term (in years)		5.0
Expected volatility		115%


Current stock price	$	1.12
Exercise price	$	0.56
Risk-free interest rate		0.48 %
Expected dividend yield		—
Expected term (in years)		5.0
Expected volatility		118%


	Three months ended				Six months ended
	June 30,				June 30,
	2021		2020		2021		2020
Product revenues	$	53,865	$	1,127,417	$	614,301	$	2,466,490
Service revenues		96,129		54,364		519,878		362,750
Total revenues		149,994		1,181,781		1,134,179		2,829,240

Cost of sales		286,663		1,030,461		1,127,555		2,454,441
Selling, general and administrative		177,947		264,659		329,833		453,357
Professional fees		4,202		5,670		4,801		5,670
Depreciation and amortization		4,259		3,860		8,519		7,669
Total costs and expenses		473,071		1,304,650		1,470,708		2,921,137
Loss from discontinued operations	$	(323,077)	$	(122,869)	$	(336,529)	$	(91,897)


	May 31,				December 31,		June 30,
	2019				2020		2021
Number of shares underlying the warrants		3,000,000			1,645,807			322,807
Fair market value of stock	$	0.95		$	0.48		$	0.59
Exercise price	$	1.30		$	0.3983		$	0.3983
Volatility		133	%		108	%		105	%
Risk-free interest rate		1.93	%		0.36	%		0.87	%
Warrant life (years)		5.00			3.41			2.92


				Weighted-
		Weighted-		Average
		Average		Remaining
	Number of	Exercise Price		Contractual	Aggregate
	Shares	per Share		Term (in years)	Intrinsic Value
Outstanding as of December 31, 2020	7,266,420	$	1.03	5.5	$	167,000
Granted	983,000		0.91
Exercised	(333,620)		0.54
Forfeited or expired	(1,006,930)		3.95
Outstanding as of June 30, 2021	6,908,870	$	1.07	5.3	$	303,000

Exercisable as of June 30, 2021	5,613,490	$	1.16	5.3	$	153,000


	June 30,		December 31,
Total assets	2021		2020
Cultivation	$	6,720,738	$	6,208,222
Corporate		2,422,760		1,567,021
Discontinued operations		319,878		755,707
Total assets - segments		9,463,376		8,530,950
Intercompany eliminations		(36,850)		(12,183)
Total assets - consolidated	$	9,426,526	$	8,518,767


Current stock price	$	0.83
Exercise price	$	0.56
Risk-free interest rate		1%
Expected dividend yield		—
Expected term (in years)		5.0
Expected volatility		115%


Current stock price	$	0.45 - 0.67
Exercise price	$	0.45
Risk-free interest rate		0.68 - 1.62 %
Expected dividend yield		—
Expected term (in years)		0.83 - 3.06
Expected volatility		112 - 119 %


2021	Cultivation		Eliminations		Total
Revenues	$	698,608	$	—	$	698,608
Costs and expenses		(677,715)		6,094		(671,621)
Segment operating income	$	20,893	$	6,094		26,987
Corporate expenses						(1,080,163)
Net loss from continuing operations before income taxes					$	(1,053,176)


	Three months ended June 30,						Percent
	2021		2020		Change		Change
Revenues	$	698,608	$	554,544	$	144,064	26	%
Costs and expenses		(1,478,458)		(2,107,725)		629,267	(30)	%
Other expense		(273,326)		(229,555)		(43,771)	19	%
Net loss from continuing operations before income taxes		(1,053,176)		(1,782,736)		729,560	(41)	%
Loss from discontinued operations		(323,077)		(117,636)		(205,441)	175	%
Loss from operations before income taxes	$	(1,376,253)	$	(1,900,372)	$	524,119	(28)	%

Exhibits

10.1	Asset Purchase Agreement between General Cannabis Corp, NBC Holdings LLC and Richard Cardinal dated July 16, 2021 (incorporated by reference to Exhibit 10.1 to our Form 8-K filed on July 21, 2021)
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)

	GENERAL CANNABIS CORP

Date: August 11, 2021		/s/ Adam Hershey
		Adam Hershey, Interim Chief Executive Officer
		Principal Executive Officer

		/s/ Diane Jones
		Diane Jones, Chief Financial Officer
		Principal Financial and Accounting Officer