Business Acquisitions

12 Months Ended

Dec. 31, 2023

Business Acquisitions [Abstract]

BUSINESS ACQUISITIONS

NOTE 2. BUSINESS ACQUISITIONS

Trees

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 the equity consideration is $1,346,076. Further, cash equal to $384,873 will be paid to the sellers in equal monthly installments over a period of 24 months beginning on June 15, 2022. When we closed on MLK it was a non-operating dispensary. We opened the dispensary in the second quarter of 2022.

The table below reflects the Company’s final 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

As the MLK dispensary was not operating until the second quarter of 2022, the were no material results of operations prior to the acquisition date. As such, there would be no material proforma impact on the Company’s operating results.

On December 12, 2022, we completed the Green Tree Acquisition which consisted of the acquisition of substantially all of the assets of Ancient Alternatives LLC, Natural Alternatives For Life, LLC, Mountainside Industries, LLC, Hillside Enterprises, LLC, and GT Creations, LLC, each a Colorado limited liability company (collectively, the “Green Tree Entities”). We paid cash in the amount of $500,000 and stock consideration of 17,977,528 shares of our Common Stock. Additionally, we had a potential obligation to issue additional stock consideration up to 4,879,615 shares of our Common Stock on the achievement of certain performance indicators on or before June 12, 2024. The closing price of our Common Stock on December 12, 2022, the date of license transfer, was $0.165 per share, as such, fair value of the equity consideration is $2,966,292. An additional $3,500,000 in cash was to be paid to the sellers in fifteen (15) equal monthly payments commencing on the 9-month anniversary of the closing, which based on a discount rate of 12%, resulted in the fair value of these additional monthly payments to be approximately $3,017,510. In November 2023, the Company transferred a majority of the Green Tree Entities back to the original owners (see Note 6). Subsequent to this transfer, the aforementioned debt was modified. This liability is included in Notes payable- current and Notes payable- non-current in the accompanying consolidated balance sheets. See Note 14 for additional details.

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

Cash	$	3,928
Inventory		1,588,455
Fixed assets		688,655
Tradename		677,000
Goodwill		4,248,000
	$	7,206,038

Compared to the estimated purchase price allocation reported in our financial statements included in Item 8 of our Form 10-K year ended December 31, 2022 filed with the SEC on April 17, 2023, the final purchase price allocation resulted in a reduction of tradename intangible assets of $273,000 and an increase in goodwill of $995,702. Additionally, as part of the measurement adjustments, the fair value of the installment payments was remeasured using a 16% discount rate, resulting in a decrease of debt of $136,502 for the purchase consideration. Additionally, a contingent earnout liability with a fair value of $859,204 was recognized which increased the purchase consideration and resulting goodwill. The fair value of the contingent earnout liability decreased to $367,056 at December 31, 2023, resulting in a gain on change in fair value of $492,148.

The accompanying consolidated financial statements include the results of the Green Tree Entities from the date of acquisition for financial reporting purposes, December 12, 2022. The pro forma effects of the acquisition on the results of operations as if the transaction had been completed on January 1, 2022, are as follows:

	Year ended December 31,
	2022 (unaudited)
Total revenues	$	22,556,789
Net income (loss) attributable to Common Stockholders	$	(9,558,189	)
Net income (loss) per common share	$	(0.08	)
Weighted average number of basic and diluted common shares outstanding		114,159,065

The unaudited pro-forma results of operations are presented for information purpose 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, 2022, or to project potential operating results as of any future date or for any future periods. In July 2023, the Company entered into an agreement to transfer the Green Tree Entities back to the original owners of these entities (see Note 6).

On December 19, 2022, we completed the Green Man Acquisition, consisting of the acquisition of substantially all of the assets of Green Man. We paid cash in the amount of $1,225,000 and stock consideration of 4,494,382 shares of Common Stock. The closing price of our Common Stock on December 19, 2022, the date of license transfer, was $0.18 per share, as such, fair value of the equity consideration is $808,989. An additional $1,500,000 in cash will be paid to the sellers in eighteen (18) equal monthly payments commencing on the 12-month anniversary of the closing. Based on a discount rate of 12%, the fair value of these additional monthly payments is approximately $1,224,846. This liability is included in Notes payable-current and Notes payable-non-current in the accompanying consolidated balance sheets. See Note 14 for additional details.

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

Cash	$	8,594
Inventory		108,543
Fixed assets		23,500
Tradename		273,000
Goodwill		2,741,000
	$	3,154,637

Compared to the estimated purchase price allocation reported in our financial statements included in Item 8 of our Form 10-K year ended December 31, 2022 filed with the SEC on April 17, 2023, the final purchase price allocation resulted in an increase of tradename intangible assets of $123,000 and a decrease in goodwill of $227,198. Additionally, as part of the measurement adjustments, the fair value of the installment payments was remeasured using a 16% discount rate, resulting in a decrease of debt of $104,198 for the purchase consideration.

The accompanying consolidated financial statements include the results of Green Man from the date of acquisition for financial reporting purposes, December 19, 2022. The pro forma effects of the acquisition on the results of operations as if the transaction had been completed on January 1, 2022, are as follows:

	Year ended December 31,
	2022 (unaudited)
Total revenues	$	19,002,698
Net income (loss) attributable to Common Stockholders	$	(9,641,205	)
Net income (loss) per common share	$	(0.09	)
Weighted average number of basic and diluted common shares outstanding		101,500,915

The unaudited pro-forma results of operations are presented for information purpose 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, 2022, or to project potential operating results as of any future date or for any future periods.