TREES Corp (Colorado) 10-Q for FY2022 Q1

TREES Corp (Colorado) (CANN)

10-Q 2022-05-13 For: 2022-03-31

Added on April 06, 2026

About this 10-Q

TREES Corp (Colorado) filed this 10-Q on May 13, 2022, covering the quarter ended March 31, 2022 (FY2022 Q1).

Headline figures

Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $3.57M; up 438.3% from $663.81K a year earlier
Net loss: $861.06K; compared with a net loss of $2.36M a year earlier
Diluted EPS: -$0.01; compared with -$0.04 a year earlier

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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)


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		26

Item 1.	Legal Proceedings	26
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



		March 31, 2022	December 31, 2021
		(unaudited)
Assets
Current assets
Cash and cash equivalents	$	1,651,063	$	2,054,050
Accounts receivable, net of allowance of $43,000 and $61,000, respectively		69,381		80,188
Current portion of notes receivable, net of allowance of nil and $43,108, respectively		—		73,000
Inventories, net		1,182,361		1,123,083
Prepaid expenses and other current assets		166,218		149,075
Total current assets		3,069,023		3,479,396

Right-of-use operating lease asset		3,176,007		3,065,152
Property and equipment, net		662,852		680,327
Intangible assets, net		6,819,163		5,999,813
Goodwill		9,758,038		8,799,657
Total assets	$	23,485,083	$	22,024,345

Liabilities and Stockholders' Equity

Current liabilities
	$	1,368,282	$	1,170,708
Interest payable		793,585		621,085
Operating lease liability, current		745,844		721,809
Accrued stock payable		60,900		444,894
Warrant derivative liability		88,981		28,317
Notes payable - current		1,259,449		1,094,398
Total current liabilities		4,317,041		4,081,211

Operating lease liability, non-current		2,535,492		2,427,762
Notes payable - long-term (net of discount)		5,791,658		5,619,570
Related party long-term notes payable (net of discount)		292,188		288,229
Total liabilities		12,936,379		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		94,060,938		92,265,392
Accumulated deficit		(84,681,871)		(83,820,815)
Total stockholders’ equity		10,548,704		9,607,573
Total liabilities and stockholders’ equity	$	23,485,083	$	22,024,345


	Three months ended
	March 31,
	2022		2021
Revenue
Retail sales	$	3,297,546	$	—
Cultivation sales		275,762		649,333
Interest		—		14,472
Total revenue		3,573,308		663,805

Costs and expenses
Cost of sales		2,074,888		555,205
Selling, general and administrative		1,326,116		598,691
Stock-based compensation		76,117		103,932
Professional fees		281,384		262,315
Depreciation and amortization		231,846		117,681
Total costs and expenses		3,990,351		1,637,824

Operating loss		(417,043)		(974,019)

Other expenses (income)
Amortization of debt discount and equity issuance costs		214,281		68,330
Interest expense		174,351		103,056
Loss on derivative liability		60,664		1,198,744
Other expenses, net		—		1,467
Total other expenses, net		449,296		1,371,597

Net loss from continuing operations before income taxes		(866,339)		(2,345,616)

Provision for income taxes		—		—
Loss from continuing operations		(866,339)		(2,345,616)

Income (loss) from discontinued operations, net of tax		5,283		(13,452)
Net loss	$	(861,056)	$	(2,359,068)



Per share data - basic and diluted
Net loss from continuing operations per share	$	(0.01)	$	(0.04)
Net loss from discontinued operations per share	$	0.00	$	0.00
Net loss attributable to common stockholders per share	$	(0.01)	$	(0.04)
Weighted average number of common shares outstanding		95,749,505		61,563,379


	Three months ended March 31,
	2022		2021
Cash flows from operating activities
Net loss	$	(861,056)	$	(2,359,068)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount and equity issuance costs		214,281		68,330
Depreciation and amortization		231,846		121,941
Non-cash lease expense		298,484		103,450
Bad debt expense		(5,085)		(39,463)
Loss on disposal of property and equipment		—		2,964
Loss on warrant derivative liability		60,664		1,198,744
Stock-based compensation		76,117		103,932
Changes in operating assets and liabilities, net of acquisitions
Accounts receivable		13,892		157,369
Prepaid expenses and other assets		(17,142)		367,486
Inventories		(59,278)		(48,026)
Accounts payable and accrued liabilities		370,074		(1,034,883)
Operating lease liabilities		(277,574)		(92,701)
Net cash provided by (used) in operating activities:		45,223		(1,449,925)

Cash flows from investing activities
Purchase of property and equipment		(8,571)		(264,114)
Proceeds on notes receivable		75,000		—
Acquisition of TREES MLK		(256,582)		—
Proceeds from sale of investment		—		208,761
Net cash used in investing activities		(190,153)		(55,353)

Cash flows from financing activities
Proceeds from exercise of stock options		—		135,002
Proceeds from notes payable		—		1,660,000
Payments on notes payable		(258,057)		(200,000)
Net cash provided by (used in) financing activities		(258,057)		1,595,002

Net increase (decrease) in cash and cash equivalents		(402,987)		89,724
Cash and cash equivalents, beginning of period		2,054,050		755,769
Cash and cash equivalents, end of period	$	1,651,063	$	845,493

Supplemental schedule of cash flow information
Cash paid for interest	$	1,851	$	13,705

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	$	—	$	417,539
10% Warrants recorded as a loss on extinguishment of debt and additional paid-in capital	$	—	$	429,300
Issuance of common stock to a consultant	$	—	$	100,000


	For the three months ended March 31, 2022
	Preferred Stock			Common Stock			Additional		Accumulated
	Shares	Amount		Shares	Amount		Paid-in Capital		Deficit		Total
January 1, 2022	1,180	$	1,073,446	89,551,993	$	89,550	$	92,265,392	$	(83,820,815)	$	9,607,573
Common stock issued for acquisition of Trees Waterfront LLC	—		—	1,669,537		1,670		382,324		—		383,994
Common stock issued for acquisition of Trees MLK LLC	—		—	4,970,654		4,971		1,337,105		—		1,342,076
Share-based compensation	—		—	—		—		76,117		—		76,117
Net loss	—		—	—		—		—		(861,056)		(861,056)
March 31, 2022	1,180	$	1,073,446	96,192,184	$	96,191	$	94,060,938	$	(84,681,871)	$	10,548,704

	For the three months ended March 31, 2021
	Preferred Stock			Common Stock			Additional		Accumulated
	Shares	Amount		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	—		—	213,860		214		134,788		—		135,002
Warrants issued with 10% Notes				—		—		429,300		—		429,300
Beneficial conversion feature				—		—		417,539		—		417,539
Cashless exercise of warrants				1,006,623		1,005		1,556,073		—		1,557,078
Share-based compensation				—		—		103,932		—		103,932
Net loss	—		—	—		—		—		(2,359,068)		(2,359,068)
March 31, 2021	—	$	—	62,146,515	$	62,144	$	78,632,934	$	(77,310,504)	$	1,384,574


Cash	$	32,941
Fixed assets		59,335
Inventory		586,495
Tradename		5,000,000
Goodwill		7,615,913
	$	13,294,684


Cash	$	14,568
Fixed assets		56,015
Inventory		202,046
Tradename		850,000
Goodwill		1,183,744
	$	2,306,373


Fixed assets	$	25,150
Tradename		1,000,000
Goodwill		958,381
	$	1,983,531


		March 31,		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	$	—	$	—


Year ending December 31,	Amount
2022 (remaining nine months)	$	575,503
2023		703,868
2024		721,314
2025		739,303
2026		758,193
Thereafter		5,121,992
Total		8,620,173
Less: Present value adjustment		(5,338,837)
Operating lease liability	$	3,281,336


			Number of
	Amount		Shares
Balance as of December 31, 2020	$	94,861		359,415
Trees Waterfront acquisition stock accrual		383,994		1,669,537
Stock issued		(33,961)		(259,415)
Balance as of December 31, 2021	$	444,894		1,769,537
Stock issued		(383,994)		(1,669,537)
Balance as of March 31, 2022	$	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%


	December 31,			March 31,
	2021			2022
Number of shares underlying the warrants		322,807			322,807
Fair market value of stock	$	0.22		$	0.46
Exercise price	$	0.3983		$	0.3983
Volatility		94	%		103	%
Risk-free interest rate		1.26	%		2.42	%
Warrant life (years)		2.41			2.16


				Weighted-
		Weighted-		Average
		Average		Remaining
	Number of	Exercise Price		Contractual	Aggregate
	Shares	per Share		Term (in years)	Intrinsic Value
Outstanding as of December 31, 2021	4,903,545	$	1.11	5.3	$	22,000
Granted	125,000		0.46
Exercised	—		—
Forfeited or expired	(112,000)		0.63
Outstanding as of March 31, 2022	4,916,545	$	1.11	5.1	$	127,000

Exercisable as of March 31, 2022	4,331,665	$	1.19	5.3	$	71,000


	Three months ended March 31,						Percent
	2022		2021		Change		Change
Revenues	$	3,297,544	$	—	$	3,297,544	100	%
Costs and expenses		(2,593,269)		—		(2,593,269)	100	%
	$	704,275	$	—	$	704,275	100	%


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%


Current stock price	$	0.83
Exercise price	$	0.56
Risk-free interest rate		0.81%
Expected dividend yield		—
Expected term (in years)		5.0
Expected volatility		115%


2022	Retail		Cultivation		Eliminations		Total
Revenues	$	3,297,544	$	518,280	$	(242,516)	$	3,573,308
Costs and expenses		(2,593,269)		(707,549)		242,516		(3,058,301)
Segment operating income	$	704,275	$	(189,269)	$	—		515,006
Corporate expenses								(1,381,345)
Net loss from continuing operations before income taxes							$	(866,339)

Exhibits

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: May 13, 2022		/s/ Adam Hershey
		Adam Hershey, Interim Chief Executive Officer
		Principal Executive Officer

		/s/ Jessica Bast
		Jessica Bast, Chief Financial Officer
		Principal Financial and Accounting Officer


May 13, 2022		/s/ Adam Hershey
		Adam Hershey, Interim Chief Executive Officer,
		Principal Executive Officer


May 13, 2022		/s/ Jessica Bast
		Jessica Bast, Chief Financial Officer, Principal Financial
		and Accounting Officer