unrv-20220930

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 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: 000-54258


			UNRIVALED BRANDS, INC.
			(Exact Name of Registrant as Specified in its Charter)


Nevada						26-3062661
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)


3242 S. Halladay Street Santa Ana, California						92705
(Address of Principal Executive Offices)						(Zip Code)

(888) 909-5564

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange
on which registered

Common Stock, par value $0.001

UNRV

OTCQX

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 and 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 such filing requirements for the past 90 days. Yes x No o

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 (section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files). Yes x No o

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. (Check one):


Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	x
Emerging growth company	o

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 provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of November 9, 2022, there were 563,589,795 shares outstanding, 80,881,816 shares of common stock issuable upon the exercise of all our outstanding warrants and 59,518,518 shares of common stock issuable upon the exercise of all vested options.

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UNRIVALED BRANDS, INC.

INDEX TO FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022


	PART I – FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements
	Consolidated Balance Sheets as of September 30, 2022 (Unaudited) and December 31, 2021	3
	Consolidated Statements of Operations for the Three and Nine Months Ended Septe mber 30, 2022 and 2021 (Unaudited)	5
	Consolidated Statements of Stockholders ' Equity for the Three Months Ended September 30, 2022 and 2021 (Unaudited)	6
	Consolidated Statements of Stockholders ' Equity for the Nine Months Ended September 30, 2022 and 2021 (Unaudited)	7
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 (Unaudited)	8
	Notes to Consolidated Financial Statements (Unaudited)	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	35
	Company Overview	35
	Results of Operations	38
	Liquidity and Capital Resources	42
	Disclosure About Off-Balance Sheet Arrangements	43
	Critical Accounting Policies and Estimates	43
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	43

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3.	Defaults Upon Senior Securities	45
Item 4.	Mine Safety Disclosures	46
Item 5.	Other Information	46
Item 6.	Exhibits	47
Signatures		48

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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Cautionary Language Concerning Forward-Looking Statements

In addition to historical information, this Quarterly Report on Form 10-Q may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which provides a “safe harbor” for forward-looking statements made by us. All statements, other than statements of historical facts, including statements concerning our plans, objectives, goals, beliefs, business strategies, future events, business conditions, results of operations, financial position, business outlook, business trends, and other information, may be forward-looking statements. Words such as “might,” “will,” “may,” “should,” “estimates,” “expects,” “continues,” “contemplates,” “anticipates,” “projects,” “plans,” “potential,” “predicts,” “intends,” “believes,” “forecasts,” “future,” and variations of such words or similar expressions are intended to identify forward-looking statements. The forward-looking statements are not historical facts, and are based upon our current expectations, beliefs, estimates and projections, and various assumptions, many of which, by their nature, are inherently uncertain and beyond our control. Our expectations, beliefs, estimates, and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs, estimates, and projections will occur or can be achieved and actual results may vary materially from what is expressed in or indicated by the forward-looking statements.

There are a number of risks, uncertainties, and other important factors, many of which are beyond our control, that could cause actual results to differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. Such risks, uncertainties, and other important factors that could cause actual results to differ include, among others, the risk, uncertainties and factors set forth under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 and in other filings we make from time to time with the U.S. Securities and Exchange Commission (“SEC”).

We caution you that the risks, uncertainties, and other factors set forth in our periodic filings with the SEC may not contain all of the risks, uncertainties, and other factors that are important to you. In addition, we cannot assure you that we will realize the results, benefits, or developments that we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way expected. There can be no assurance that: (i) we have correctly measured or identified all of the factors affecting our business or the extent of these factors’ likely impact, (ii) the available information with respect to these factors on which such analysis is based is complete or accurate, (iii) such analysis is correct, or (iv) our strategy, which is based in part on this analysis, will be successful. All forward-looking statements in this report apply only as of the date of the report or as of the date they were made and, except as required by applicable law, we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments, or otherwise.

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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UNRIVALED BRANDS, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except for shares)


	September 30, 2022		December 31, 2021
	(Unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents	$	1,989	$	6,891
Accounts Receivable	573		4,677
Inventory	2,684		7,179
Prepaid Expenses & Other Assets	1,564		1,272
Notes Receivable	375		750
Assets Held for Sale	23		4,495
Total Current Assets	7,208		25,264

Property, Equipment and Leasehold Improvements, Net	19,576		23,728
Intangible Assets, Net	3,360		129,637
Goodwill	3,585		48,132
Other Assets	16,212		26,915
Investments	721		164
Deferred Tax Asset	608		—
Long-Term Assets Held for Sale	2,579		17,984
TOTAL ASSETS	$	53,849	$	271,824

LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
LIABILITIES:
Current Liabilities:
Accounts Payable & Accrued Liabilities	$	37,037	$	31,904
Current Portion of Notes Payable	26,454		45,749
Income Taxes Payable	9,394		7,969
Liabilities Held for Sale	1,653		2,087
Total Current Liabilities	74,538		87,708

Notes Payable, Net of Discounts	7,964		10,006
Deferred Tax Liabilities	—		6,123
Lease Liabilities	12,101		21,316
Long-Term Liabilities Held for Sale	1,357		184
TOTAL LIABILITIES	95,960		125,337

COMMITMENTS AND CONTINGENCIES (Note 19)	—		—

STOCKHOLDERS’ (DEFICIT) EQUITY:
Common Stock, par value $0.001:
990,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 560,353,549 and 498,546,291 shares outstanding as of September 30, 2022 and December 31, 2021, respectively	584		521
Treasury Stock: 2,308,408 shares of common stock as of September 30, 2022 and December 31, 2021	(808)		(808)
Additional Paid-In Capital	401,729		392,930
Accumulated Deficit	(443,616)		(250,015)
Total Equity Attributable to Stockholders of Unrivaled Brands, Inc.	(42,111)		142,628
Non-Controlling Interest	—		3,859
TOTAL STOCKHOLDERS’ (DEFICIT) EQUITY	(42,111)		146,487

TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY	$	53,849	$	271,824

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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UNRIVALED BRANDS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except for shares and per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021

Revenue	$	10,762	$	20,052	$	49,042	$	24,980
Cost of Goods Sold	10,826		19,724		34,404		21,737
Gross (Loss) Profit	(64)		328		14,638		3,243

Operating Expenses:
Selling, General & Administrative	13,236		12,029		51,074		29,376
Impairment Expense	107,972		—		163,698		—
Loss on Disposal of Assets	1,529		—		1,872		—
Total Operating Expenses	122,737		12,029		216,644		29,376

Loss from Operations	(122,801)		(11,701)		(202,006)		(26,133)

Other Income (Expense):
Interest Expense, Net	(384)		(515)		(2,594)		(627)
Gain (Loss) on Extinguishment of Debt	—		185		542		(5,976)
Gain on Investments	—		—		—		5,337
Unrealized (Loss) Gain on Investments	(493)		—		470		—
Other Income	251		5		1,729		367
Total Other (Expense) Income	(626)		(325)		147		(899)

Loss from Continuing Operations Before Provision for Income Taxes	(123,427)		(12,026)		(201,859)		(27,032)
Provision for Income Tax Benefit for Continuing Operations	3,449		—		5,585		—
Net Loss from Continuing Operations	(119,978)		(12,026)		(196,274)		(27,032)



Net Income from Discontinued Operations	72		6,561		4,051		4,898

NET LOSS	$	(119,906)	$	(5,465)	$	(192,223)	$	(22,134)


Less: Net (Loss) Income from Discontinued Operations Attributable to Non-Controlling Interest	—		(118)		275		(604)
NET LOSS ATTRIBUTABLE TO UNRIVALED BRANDS, INC.	$	(119,906)	$	(5,347)	$	(192,498)	$	(21,530)

Net Loss from Continuing Operations per Common Share Attributable to Unrivaled Brands, Inc. - Basic and Diluted	$	(0.21)	$	(0.03)	$	(0.33)	$	(0.09)
Net Loss per Common Share Attributable to Unrivaled Brands, Inc. - Basic and Diluted	$	(0.21)	$	(0.01)	$	(0.33)	$	(0.07)
Weighted-Average Shares Outstanding - Basic and Diluted	579,942,517		457,745,655		588,887,945		317,491,979

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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UNRIVALED BRANDS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

(in thousands, except for shares)


				Treasury		Additional Paid-In Capital		Accumulated Deficit		Non- Controlling Interest		Total
	Common Stock			Stock
	Shares	Amount		Amount
BALANCE AT JUNE 30, 2022	532,514,791	$	554	$	(808)	$	401,215	$	(323,710)	$	—	$	77,251
Net Loss Attributable to Unrivaled Brands, Inc.	—	—		—		—		(119,906)		—		(119,906)



Stock Compensation - Services Expense	6,472,492	7		—		261		—		—		268



Stock Option Expense	—	—		—		276		—		—		276
Issuance of UMBRLA Holdback Shares	23,424,674	23		—		(23)		—		—		—

BALANCE AT SEPTEMBER 30, 2022	562,411,957	$	584	$	(808)	$	401,729	$	(443,616)	$	—	$	(42,111)

				Treasury		Additional Paid-In Capital		Accumulated Deficit		Non- Controlling Interest		Total
	Common Stock			Stock
	Shares	Amount		Amount
BALANCE AT JUNE 30, 2021	236,545,420	$	258	$	(808)	$	291,026	$	(234,927)	$	3,977	$	59,526
Net Loss Attributable to Unrivaled Brands, Inc.	—	—		—		—		(5,347)		—		(5,347)
Net Loss Attributable to Non-Controlling Interest	—	—		—		—		—		(118)		(118)

Stock Compensation - Directors	124,998	—		—		32		—		—		32
Stock Compensation - Services Expense	3,234,428	3		—		870		—		—		873
Stock Option Exercise	1,434,608	1		—		(1)		—		—		—
Debt Conversion - Common stock	4,548,006	5		—		1,041		—		—		1,046
Stock Issued for UMBRLA Acquisition	191,772,781	193		—		80,130		—		—		80,323
Stock Option Expense	—	—		—		780		—		—		780
Net Assets Attributable to Non-Controlling Interest	—	—		—		—		—		58,749		58,749
BALANCE AT SEPTEMBER 30, 2021	437,660,241	$	460	$	(808)	$	373,878	$	(240,274)	$	62,608	$	195,864

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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UNRIVALED BRANDS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (UNAUDITED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

(in thousands, except for shares)


	Convertible Series A						Treasury		Additional Paid-In Capital		Accumulated Deficit		Non- Controlling Interest		Total
	Preferred Stock			Common Stock			Stock
	Shares	Amount		Shares	Amount		Amount
BALANCE AT DECEMBER 31, 2021	—	$	—	498,546,291	$	521	$	(808)	$	392,930	$	(250,015)	$	3,859	$	146,487
Net Loss Attributable to Unrivaled Brands, Inc.	—	—		—	—		—		—		(192,498)		—		(192,498)
Warrants Exercise	—	—		4,759,708	5		—		(5)		—		—		—
Stock Compensation - Employees	—	—		2,100,000	2		—		350		—		—		352
Stock Compensation - Directors	—	—		943,128	1		—		212		—		—		213
Stock Compensation - Services Expense	—	—		7,197,492	7		—		390		—		—		397
Stock Option Exercise	—	—		146,212	—		—		—		—		—		—
Debt Conversion - Common Stock	—	—		294,452	—		—		75		—		—		75
Stock Issued for Cash	—	—		25,000,000	25		—		4,350		—		—		4,375
Issuance of UMBRLA Holdback Shares	—	—		23,424,674	23		—		(23)		—		—		—
Stock Option Expense	—	—		—	—		—		3,450		—		—		3,450
Disposition of Non-Controlling Interest	—	—		—	—		—		—		(1,103)		(4,134)		(5,237)
Net Income Attributable to Non-Controlling Interest	—	—		—	—		—		—		—		275		275
BALANCE AT SEPTEMBER 30, 2022	—	$	—	562,411,957	$	584	$	(808)	$	401,729	$	(443,616)	$	—	$	(42,111)

	Convertible Series A						Treasury		Additional Paid-In Capital		Accumulated Deficit		Non- Controlling Interest		Total
	Preferred Stock			Common Stock			Stock
	Shares	Amount		Shares	Amount		Amount
BALANCE AT DECEMBER 31, 2020	8	$	—	196,512,879	$	219	$	(808)	$	275,060	$	(219,803)	$	4,463	$	59,131
Net Loss Attributable to Unrivaled Brands, Inc.	—	—		—	—		—		—		(21,530)		—		(21,530)
Adoption of ASU 2020-06	—	—		—	—		—		(1,072)		1,059		—		(13)
Debt Conversion - Common Stock	—	—		24,939,780	25		—		5,031		—		—		5,056
Warrants Issued to Dominion	—	—		—	—		—		5,978		—		—		5,978
Stock Compensation - Employees	—	—		250,000	1		—		67		—		—		68
Stock Compensation - Directors	—	—		1,010,157	—		—		245		—		—		245
Stock Compensation - Services Expense	—	—		3,557,375	4		—		903		—		—		907
Stock Option Exercise	—	—		3,131,555	3		—		(1)		—		—		2
Acquisition of Class A Shares	—	—		16,485,714	16		—		5,873		—		—		5,889
Stock Issued for UMBRLA Acquisition	—	—		191,772,781	192		—		80,130		—		—		80,322
Stock Option Expense	—	—		—	—		—		1,664		—		—		1,664
Net Assets Attributable to Non-Controlling Interest	—	—		—	—		—		—		—		58,749		58,749
Net Loss Attributable to Non-Controlling Interest	—	—		—	—		—		—		—		(604)		(604)
BALANCE AT SEPTEMBER 30, 2021	8	$	—	437,660,241	$	460	$	(808)	$	373,878	$	(240,274)	$	62,608	$	195,864

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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UNRIVALED BRANDS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


	Nine Months Ended September 30,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss	$	(192,223)	$	(22,134)
Less: Net Income from Discontinued Operations	4,051		4,898
Net Loss from Continuing Operations	(196,274)		(27,032)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Deferred Income Tax Benefit	(6,730)		—
Bad Debt Expense	3,050		—
Gain from Debt Forgiveness	—		(86)
Gain on Sale of Investments	—		(5,337)
Loss (Gain) on Extinguishment of Debt	(542)		5,976
Non-Cash Portion of Severance Expense	—		7,990
Non-Cash Interest Expense	1,001		30
Loss on Disposal of Assets	2,208		—

Depreciation and Amortization	9,965		2,653
Amortization of Operating Lease Right-of-Use Asset	1,500		633
Stock-Based Compensation	4,412		2,884
Unrealized Gain on Investments	(470)		—
Impairment Loss	163,698		—
Change in Operating Assets and Liabilities:
Accounts Receivable	1,047		(1,076)
Inventory	4,485		4,018
Prepaid Expenses and Other Current Assets	(852)		(1,334)
Other Assets	50		(263)
Accounts Payable and Accrued Expenses	9,928		(3,771)
Operating Lease Liabilities	(2,566)		262
Net Cash Provided by (Used in) Operating Activities - Continuing Operations	(6,090)		(14,453)
Net Cash Provided by (Used in) Operating Activities - Discontinued Operations	(427)		(2,542)
NET CASH USED IN OPERATING ACTIVITIES	(6,517)		(16,995)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property and Equipment	(2,129)		(6,217)
Proceeds from (Issuance of) Notes Receivable	375		(15,000)

Cash from Acquisitions	—		2,258
Proceeds from Sale of Investments	—		39,382
Proceeds from Sale of Assets	450		72
Net Cash Provided by (Used in) Investing Activities - Continuing Operations	(1,304)		20,495
Net Cash Provided by (Used in) Investing Activities - Discontinued Operations	20,709		8,350
NET CASH PROVIDED BY INVESTING ACTIVITIES	19,405		28,845


CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Notes Payable	—		6,000
Payments of Debt Principal	(21,723)		(3,778)
Cash Paid for Debt Issuance Costs	—		(178)
Proceeds from Issuance of Common Stock	4,375		—



NET CASH PROVIDED BY / (USED IN) FINANCING ACTIVITIES	(17,348)		2,044

NET CHANGE IN CASH	(4,460)		13,894

Cash at Beginning of Period	6,891		217
Cash Reclassed to Discontinued Operations	(442)		—
CASH AT END OF PERIOD	$	1,989	$	14,111

SUPPLEMENTAL DISCLOSURE FOR OPERATING ACTIVITIES:
Cash Paid for Interest	$	1,590	$	705

SUPPLEMENTAL DISCLOSURE FOR NON-CASH INVESTING AND FINANCING ACTIVITIES:
Debt Principal and Accrued Interest Converted into Common Stock	$	75	$	5,056
Promissory Note Issued for Severance	$	—	$	2,100
Net Assets Transferred to Assets Held For Sale	$	851	$	—
Fixed Assets in Accounts Payable	$	—	$	100
Stock Options Exercised on a Net Share Basis	$	—	$	3
Non-Cash Acquisition of UMBRLA Inc.	$	—	$	79,032
Non-Cash Capital Expenditures	$	—	$	2,986
Non-Cash Acquisition of People's	$	—	$	58,749

Issuance of UMBRLA Holdback Shares	$	23	$	—

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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UNRIVALED BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 – DESCRIPTION OF BUSINESS

The Company is a multi-state operator ("MSO") with retail, production, distribution, and cultivation operations, with an emphasis on providing the highest quality of medical and adult use cannabis products. From the acquisition of UMBRLA, the Company has multiple cannabis lifestyle brands. The Company is home to Korova, a brand of high potency products across multiple product categories, currently available in California, Oregon, Arizona, and Oklahoma. Other company brands include Cabana, a boutique cannabis flower brand, and Sticks, a mainstream value-driven cannabis brand, active in California and Oregon. With the acquisition of People’s First Choice, the Company operates a premier cannabis dispensary in Orange County, California. The Company also owns dispensaries in California which operate as The Spot in Santa Ana, Blum in Oakland and SilverStreak in San Leandro. The Company also has licensed distribution facilities in Portland, OR, Los Angeles, CA, and Sonoma County, CA.

Unrivaled is a holding company with the following subsidiaries:

•121 North Fourth Street, LLC, a Nevada limited liability company ("121 North Fourth")

•620 Dyer LLC, a California corporation (“Dyer”)

•1815 Carnegie LLC, a California limited liability company (“Carnegie”)

•Black Oak Gallery, a California corporation (“Black Oak”)

•Blüm San Leandro, a California corporation (“Blüm San Leandro”)

•Halladay Holding, LLC, a California limited liability company (“Halladay”)

•MediFarm, LLC, a Nevada limited liability company (“MediFarm”)

•MediFarm I, LLC, a Nevada limited liability company (“MediFarm I”)

•OneQor Technologies, Inc., a Delaware corporation ("OneQor")

•People's First Choice, LLC, a California limited liability company ("People's")

•SilverStreak Solutions, Inc., a California corporation ("SilverStreak")

•UMBRLA, Inc., a Nevada corporation ("UMBRLA")

Effective July 7, 2021, the Company changed its corporate name from “Terra Tech Corp.” to “Unrivaled Brands, Inc.” in connection with the Company’s acquisition of UMBRLA. References in this document to “the Company”, “Unrivaled”, “we”, “us”, or “our” are intended to mean Unrivaled Brands, Inc., individually, or as the context requires, collectively with its subsidiaries on a consolidated basis.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and with the instructions to U.S. Securities and Exchange Commission (“SEC”) Form 10-Q and Article 10 of Regulation S-X of the Securities Act of 1933 and reflect the accounts and operations of the Company and those of its subsidiaries in which the Company has a controlling financial interest. In accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, “Consolidation,” the Company consolidates any variable interest entity (“VIE”) of which it is the primary beneficiary. The typical condition for a controlling financial interest ownership is holding a majority of the voting interests of an entity; however, a controlling financial interest may also exist in entities, such as VIEs, through arrangements that do not involve controlling voting interests. ASC 810 requires a variable interest holder to consolidate a VIE if that party has the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company does not consolidate a VIE in which it has a majority ownership interest when it is not considered the primary beneficiary. The Company evaluates its relationships with all the VIEs on an ongoing basis to reassess if it continues to be the primary beneficiary.

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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All intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the consolidated financial position of the Company as of September 30, 2022 and December 31, 2021, and the consolidated results of operations and cash flows for the periods ended September 30, 2022 and 2021 have been included. These interim unaudited condensed consolidated financial statements do not include all disclosures required by GAAP for complete financial statements and, therefore, should be read in conjunction with the more detailed audited consolidated financial statements for the year ended December 31, 2021. The December 31, 2021 balances reported herein are derived from the audited consolidated financial statements for the year ended December 31, 2021. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year.

Going Concern

The Company has incurred significant losses in prior periods. For the three and nine months ended September 30, 2022, we incurred a pre-tax net loss from continuing operations of $123.43 million and $201.86 million, respectively, and, as of that date, it had an accumulated deficit of $443.62 million. For the three and nine months ended September 30, 2021, the Company incurred a pre-tax net loss from continuing operations of $12.03 million and $27.03 million, respectively. As of December 31, 2021, the Company had an accumulated deficit of $250.02 million. Management expects to experience further significant net losses in 2022 and in the foreseeable future. At September 30, 2022, the Company had a consolidated cash balance of $1.99 million. The Company has not been able to generate sufficient cash from operating activities to fund its ongoing operations. The Company's future success is dependent upon our ability to achieve profitable operations and generate cash from operating activities. There is no guarantee that the Company will be able to generate enough revenue or raise capital to support its operations.

The Company will be required to raise additional funds through public or private financing, additional collaborative relationships or other arrangements until it is able to raise revenues to a point of positive cash flow. The Company is evaluating various options to further reduce its cash requirements to operate at a reduced rate, as well as options to raise additional funds, including obtaining loans and selling common stock. There is no guarantee that it will be able to generate enough revenue or raise capital to support its operations, or if it is able to raise capital, that it will be available to the Company on acceptable terms, on an acceptable schedule, or at all.

The issuance of additional securities may result in a significant dilution in the equity interests of the Company's current stockholders. Obtaining loans, assuming these loans would be available, will increase the Company's liabilities and future cash commitments. There is no assurance that the Company will be able to obtain further funds required for its continued operations or that additional financing will be available for use when needed or, if available, that it can be obtained on commercially reasonable terms. If the Company is not able to obtain the additional financing on a timely basis, it will not be able to meet its other obligations as they become due and the Company will be forced to scale down or perhaps even cease its operations.

The risks and uncertainties surrounding the Company's ability to continue to raise capital and its limited capital resources raise substantial doubt as to the Company's ability to continue as a going concern for twelve months from the issuance of these financial statements.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. In an effort to achieve liquidity that would be sufficient to meet all of its commitments, the Company has undertaken a number of actions, including minimizing capital expenditures and reducing recurring expenses. However, management believes that even after taking these actions, the Company will not have sufficient liquidity to satisfy all of its future financial obligations. The risks and uncertainties surrounding the ability to raise capital, the limited capital resources, and the weak industry conditions impacting the Company’s business raise substantial doubt as to its ability to continue as a going concern.

Non-Controlling Interest

Non-controlling interest is shown as a component of stockholders’ equity on the consolidated balance sheets and the share of net income (loss) attributable to non-controlling interest is shown as a component of net income (loss) in the consolidated statements of operations.

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of total net revenue and expenses in the reporting periods. The Company regularly evaluates estimates and assumptions related to revenue recognition, allowances for doubtful accounts, sales returns, inventory valuation, stock-based compensation expense, goodwill and purchased intangible asset valuations, derivative liabilities, deferred income tax asset valuation allowances, uncertain tax positions, tax contingencies, litigation and other loss contingencies. These estimates and assumptions are based on current facts, historical experience and various other factors that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenue, costs and expenses that are not readily apparent from other sources. The actual results the Company experiences may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications did not affect net loss, or stockholders’ equity. See “Note 16 – Discontinued Operations" for further discussion regarding discontinued operations.

Trade Receivables

The Company extends non-interest bearing trade credit to its customers in the ordinary course of business which is not collateralized. Accounts receivable are shown on the face of the consolidated balance sheets, net of an allowance for doubtful accounts. The Company analyzes the aging of accounts receivable, historical bad debts, customer creditworthiness and current economic trends, in determining the allowance for doubtful accounts. The Company does not accrue interest receivable on past due accounts receivable. The allowance for doubtful accounts was $1.27 million and $3.68 million as of September 30, 2022 and December 31, 2021, respectively.

Inventory

Inventory is stated at the lower of cost or net realizable value, with cost being determined on the first-in, first-out (“FIFO”) method of accounting. The Company periodically reviews physical inventory for excess, obsolete, and potentially impaired items and reserves. The reserve estimate for excess and obsolete inventory is based on expected future use. The reserve estimates have historically been consistent with actual experience as evidenced by actual sale or disposal of the goods.

Prepaid Expenses and Other Current Assets

Prepaid expenses consist of various payments that the Company has made in advance for goods or services to be received in the future. These prepaid expenses include advertising, insurance, and service or other contracts requiring upfront payments.

Investments

Investments in unconsolidated affiliates are accounted for under the cost or the equity method of accounting, as appropriate. The Company accounts for investments in limited partnerships or limited liability corporations, whereby the Company owns a minimum of 5% of the investee’s outstanding voting stock, under the equity method of accounting. These investments are recorded at the amount of the Company’s investment and adjusted each period for the Company’s share of the investee’s income or loss, and dividends paid. As investments accounted for under the cost method do not have readily determinable fair values, the Company only estimates fair value if there are identified events or changes in circumstances that could have a significant adverse effect on the investment’s fair value.

Publicly held equity securities are recorded at fair value with unrealized gains or losses resulting from changes in fair value reflected as unrealized gains or losses on equity securities in our consolidated statements of operations.

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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Notes Receivable

The Company reviews all outstanding notes receivable for collectability as information becomes available pertaining to the Company’s inability to collect. An allowance for notes receivable is recorded for the likelihood of non-collectability. The Company accrues interest on notes receivable based net realizable value. The allowance for uncollectible notes was nil as of September 30, 2022 and December 31, 2021.

Property, Equipment and Leasehold Improvements

Property, equipment and leasehold improvements are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. The approximate useful lives for depreciation of property, equipment and leasehold improvements are as follows:


Buildings			32 years
Furniture and Equipment			3 to 8 years
Computer and Software			3 to 5 years
Vehicles			5 years
Leasehold Improvements			Shorter of lease term or economic life

Repairs and maintenance expenditures that do not extend the useful lives of related assets are expensed as incurred. Expenditures for major renewals and improvements are capitalized, while minor replacements, maintenance and repairs, which do not extend the asset lives, are charged to operations as incurred. Upon sale or disposition, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. The Company continually monitors events and changes in circumstances that could indicate that the carrying balances of its property, equipment and leasehold improvements may not be recoverable in accordance with the provisions of ASC 360, “Property, Plant, and Equipment” ("ASC 360"). When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. See “Note 7 – Property, Equipment and Leasehold Improvements” for further information.

Intangible Assets

Intangible assets continue to be subject to amortization, and any impairment is determined in accordance with ASC 360. Intangible assets are stated at historical cost and amortized over their estimated useful lives. The Company uses a straight-line method of amortization unless a method that better reflects the pattern in which the economic benefits of the intangible asset are consumed can be reliably determined. The approximate useful lives for amortization of intangible assets are as follows:


Customer Relationships			3 to 5 years
Trademark and Patent			2 to 8 years
Dispensary Licenses			14 years

The Company reviews intangible assets subject to amortization quarterly to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life. Conditions that may indicate impairment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect the value of an asset, a product recall, or an adverse action or assessment by a regulator. If an impairment indicator exists, the Company tests the intangible asset for recoverability. For purposes of the recoverability test, we group our amortizable intangible assets with other assets and liabilities at the lowest level of identifiable cash flows if the intangible asset does not generate cash flows independent of other assets and liabilities. If the carrying value of the asset group exceeds the undiscounted cash flows expected to result from the use and eventual disposition of the asset group, the Company will write the carrying value down to the fair value in the period identified.

Intangible assets that have indefinite useful lives (e.g. trade names) are tested annually for impairment and are tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount of the asset group exceeds its fair value.

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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Goodwill

Goodwill is measured as the excess of consideration transferred and the net of the acquisition date fair value of assets acquired, and liabilities assumed in a business acquisition. In accordance with ASC 350, “Intangibles—Goodwill and Other,” goodwill and other intangible assets with indefinite lives are no longer subject to amortization but are tested for impairment annually or whenever events or changes in circumstances indicate that the asset might be impaired.

The Company reviews the goodwill allocated to each of our reporting units for possible impairment annually as of September 30, and whenever events or changes in circumstances indicate carrying amount may not be recoverable. In the impairment test, the Company measures the recoverability of goodwill by comparing a reporting unit’s carrying amount, including goodwill, to the estimated fair value of the reporting unit. The carrying amount of each reporting unit is determined based upon the assignment of our assets and liabilities, including existing goodwill and other intangible assets, to the identified reporting units. Where an acquisition benefits only one reporting unit, the Company allocates, as of the acquisition date, all goodwill for that acquisition to the reporting unit that will benefit. Where the Company has had an acquisition that benefited more than one reporting unit, the Company has assigned the goodwill to our reporting units as of the acquisition date such that the goodwill assigned to a reporting unit is the excess of the fair value of the acquired business, or portion thereof, to be included in that reporting unit over the fair value of the individual assets acquired and liabilities assumed that are assigned to the reporting unit. If the carrying amount of a reporting unit is in excess of its fair value, the Company recognizes an impairment charge equal to the amount in excess.

Assets Held for Sale

Assets held for sale represent furniture, equipment, and leasehold improvements less accumulated depreciation as well as any other assets that are held for sale in conjunction with the sale of a business. The Company records assets held for sale in accordance with ASC 360 at the lower of carrying value or fair value less costs to sell. Fair value is the amount obtainable from the sale of the asset in an arm’s length transaction. The reclassification takes place when the assets are available for immediate sale and the sale is highly probable. These conditions are usually met from the date on which a letter of intent or agreement to sell is ready for signing.

Discontinued Operations

A component of an entity is identified as operations and cash flows that can be clearly distinguished, operationally and financially, from the rest of the entity. Under ASC Subtopic 205-20, “Presentation of Financial Statements - Discontinued Operations” (“ASC Subtopic 205-20”), a discontinued operation is a component of an entity that either has been disposed of, or is classified as held for sale and represents a strategic shift that has or will have a major effect on the entity’s operations and financial results, or a newly acquired business or nonprofit activity that upon acquisition is classified as held for sale. Discontinued operations are presented separately from continuing operations in the Consolidated Statements of Operations and the Consolidated Statements of Cash Flows. See “Note 16 – Discontinued Operations”. For long-lived assets or disposals groups that are classified as held for sale but do not meet the criteria for discontinued operations, the assets and liabilities are presented separately on the balance sheet of the initial period in which it is classified as held for sale.

Revenue Recognition

Revenue from retail dispensaries is recorded at the time customers take possession of the product and recognized net of discounts, promotional adjustments, and returns. The Company collects taxes on certain revenue transactions to be remitted to governmental authorities, which may include sales, excise and local taxes. These taxes are not included in the transaction price and are, therefore, excluded from revenue. Upon purchase, the Company has no further performance obligations and collection is assured as sales are paid for at time of purchase.

The Company recognizes revenue from cultivation, manufacturing and distribution product sales when its customers obtain control of the products. This determination is based on the customer specific terms of the arrangement and gives consideration to factors including, but not limited to, whether the customer has an unconditional obligation to pay, whether a time period or event is specified in the arrangement and whether the Company can mandate the return or transfer of the products. Revenue is recorded net of taxes collected from customers that are remitted to governmental authorities with collected taxes recorded as current liabilities until remitted to the relevant government authority.

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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Disaggregation of Revenue

The table below includes revenue disaggregated by geographic location for the periods presented:


	(in thousands)
	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
California	$	9,236	$	16,712	$	43,289	$	21,640
Oregon	1,526		3,340		5,753		3,340
Total	$	10,762	$	20,052	$	49,042	$	24,980

Cost of Goods Sold

Cost of goods sold includes the costs directly attributable to product sales and includes amounts paid for finished goods, such as flower, edibles, and concentrates, as well as packaging and delivery costs. It also includes the labor and overhead costs incurred in cultivating and producing cannabis flower and cannabis-derived products. Overhead expenses include allocations of rent, administrative salaries, utilities, and related costs.

Advertising Expenses

The Company expenses advertising costs as incurred in accordance with ASC 720-35, “Other Expenses – Advertising Cost.” Advertising expenses from continuing operations totaled $0.24 million and $1.93 million for the three and nine months ended September 30, 2022, respectively, and $0.08 million and $0.11 million for the three and nine months ended September 30, 2021, respectively.

Stock-Based Compensation

The Company accounts for its stock-based awards in accordance with ASC Subtopic 718-10, “Compensation – Stock Compensation”, which requires fair value measurement on the grant date and recognition of compensation expense for all stock-based payment awards made to employees and directors, including restricted stock awards. For stock options, the Company estimates the fair value using a closed option valuation (Black-Scholes) model. The fair value of restricted stock awards is based upon the quoted market price of the common shares on the date of grant. The fair value is then expensed over the requisite service periods of the awards, net of estimated forfeitures, which is generally the performance period and the related amount is recognized in the consolidated statements of operations.

The Black-Scholes option-pricing model requires the input of certain assumptions that require the Company’s judgment, including the expected term and the expected stock price volatility of the underlying stock. The assumptions used in calculating the fair value of stock-based compensation represent management’s best estimates, but these estimates involve inherent uncertainties and the application of judgment. As a result, if factors change resulting in the use of different assumptions, stock-based compensation expense could be materially different in the future. The Company accounts for forfeitures of stock-based awards as they occur.

Income Taxes

The provision for income taxes is determined in accordance with ASC 740, “Income Taxes”. The Company files a consolidated United States federal income tax return. The Company provides for income taxes based on enacted tax law and statutory tax rates at which items of income and expense are expected to be settled in its income tax return. Certain items of revenue and expense are reported for federal income tax purposes in different periods than for financial reporting purposes, thereby resulting in deferred income taxes. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has incurred net operating losses for financial-reporting and tax-reporting purposes. At September 30, 2021, such net operating losses were offset entirely by a valuation allowance. No valuation allowance remained at September 30, 2022.

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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The Company recognizes uncertain tax positions based on a benefit recognition model. Provided that the tax position is deemed more likely than not of being sustained, the Company recognizes the largest amount of tax benefit that is greater than 50.0% likely of being ultimately realized upon settlement. The tax position is derecognized when it is no longer more likely than not of being sustained. The Company classifies income tax related interest and penalties as interest expense and selling, general and administrative expense, respectively, on the consolidated statements of operations.

Loss Per Common Share

In accordance with the provisions of ASC 260, “Earnings Per Share”, net loss per share is computed by dividing net loss by the weighted-average shares of common stock outstanding during the period. During a loss period, the effect of the potential exercise of stock options, warrants, convertible preferred stock, and convertible debt are not considered in the diluted loss per share calculation since the effect would be anti-dilutive. The results of operations were a net loss for the three and nine months ended September 30, 2022 and 2021. Therefore, the basic and diluted weighted-average shares of common stock outstanding were the same for all periods presented.

Potentially dilutive securities that are not included in the calculation of diluted net loss per share because their effect is anti-dilutive are as follows (in common equivalent shares):


	Nine Months Ended September 30,
	2022	2021

Common Stock Warrants	80,881,817	85,336,515
Common Stock Options	58,843,517	99,504,369
	139,725,334	184,840,884

Recently Adopted Accounting Standards

In May 2021, the FASB issued ASU 2021-04, “Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2021-04”), which amends existing guidance for earnings per share (“EPS”) in accordance with Topic 260. ASU 2021-04 is effective for fiscal years beginning after December 15, 2021 and should be applied prospectively on or after the effective date of the amendments. The adoption of the standard did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Standards

In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Subtopic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (“ASU 2021-08”), which is intended to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022. This update should be applied prospectively on or after the effective date of the amendments. The Company is currently evaluating the effect of adopting this ASU.

In March 2022, the FASB issued ASU 2022-02, “Financial Instruments—Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”), which eliminates the accounting guidance on troubled debt restructurings (TDRs) for creditors and amends the guidance on “vintage disclosures” to require disclosure of current-period gross write-offs by year of origination. The ASU also updates the requirements related to accounting for credit losses under the current guidance and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022. The Company is currently evaluating the effect of adopting this ASU.

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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NOTE 3 – CONCENTRATIONS OF BUSINESS AND CREDIT RISK

The Company maintains cash balances in several financial institutions that are insured by either the Federal Deposit Insurance Corporation or the National Credit Union Association up to certain federal limitations. At times, the Company’s cash balance exceeds these federal limitations, and it maintains significant cash on hand at certain of its locations. The Company has not historically experienced any material loss from carrying cash on hand. The amount in excess of insured limitations was at $0.53 million and $5.42 million as of September 30, 2022 and December 31, 2021, respectively.

The Company provides credit in the normal course of business to customers located throughout the U.S. The Company performs ongoing credit evaluations of its customers and maintains allowances for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends, and other information. There were no customers that comprised more than 10.0% of the Company's revenue for the three and nine months ended September 30, 2022 and 2021.

The Company sources cannabis products for retail, cultivation and production from various vendors. However, as a result of regulations in the State of California, the Company’s California retail, cultivation and production operations must use vendors licensed by the State. As a result, the Company is dependent upon the licensed vendors in California to supply products. If the Company is unable to enter into a relationship with sufficient members of properly licensed vendors, the Company’s sales may be impacted. During the three and nine months ended September 30, 2022 and 2021, the Company did not have any concentration of vendors for inventory purchases. However, this may change depending on the number of vendors who receive appropriate licenses to operate in the State of California.

NOTE 4 – INVENTORY

Raw materials consist of materials and packaging for manufacturing of products owned by the Company. Work-in-progress consists of cultivation materials and live plants grown at Black Oak Gallery and Hegenberger. Finished goods consists of cannabis products sold in retail and distribution. Inventory as of September 30, 2022 and December 31, 2021 consisted of the following:


	(in thousands)
	September 30, 2022		December 31, 2021

Raw Materials	$	235	$	2,258
Work-In-Progress	1,743		1,077
Finished Goods	706		3,844
Total Inventory	$	2,684	$	7,179

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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NOTE 5 – ASSETS HELD FOR SALE

Assets held for sale consist of those classified as discontinued operations and those that do not meet the criteria for discontinued operations under ASC 205. See “Note 16 – Discontinued Operations" for further information. Subsidiaries classified as held for sale that do not qualify as discontinued operations as of September 30, 2022 consist of the following:


	(in thousands)
	September 30, 2022
Cash	$	3
Accounts Receivable, Net	6

Prepaid Expenses and Other Assets	14
Current Assets Held for Sale	23

Property, Equipment and Leasehold Improvements, Net	975
Other Assets	1,604
Assets Held For Sale	2,579

TOTAL ASSETS OF SUBSIDIARIES CLASSIFIED AS HELD FOR SALE	$	2,602

Accounts Payable and Accrued Expenses	$	1,653
Current Liabilities Held For Sale	1,653

Long-Term Lease Liabilities	1,357
Liabilities Held For Sale	1,357

TOTAL LIABILITIES OF SUBSIDIARIES CLASSIFIED AS HELD FOR SALE	$	3,010

During the fiscal second quarter of 2022, the Company decided to divest two operating dispensaries in the state of California. In June 2022, the Company closed Blüm San Leandro and began actively marketing the retail location for sale, which is expected to close within the next year. The assets are classified as held for sale as of September 30, 2022 but do not meet the criteria for discontinued operation under ASC Subtopic 205-20.

On June 18, 2022, the Company entered into a settlement agreement and transferred 100% of the membership interests in the People's dispensary in Los Angeles, CA wherein all operational control and risk of loss was transferred to the original licenseholder and the Company had no further obligations. As consideration received, a promissory note of $1.40 million with the buyer was forgiven. The Company recognized a loss upon sale of assets of $0.38 million for the difference between the aggregate consideration and the book value of the assets as of the disposition date which is recognized in the consolidated statements of operations during the nine months ended September 30, 2022. As of June 18 2022, all assets and liabilities related to the dispensary were deconsolidated from the consolidated balance sheet. All profits or losses subsequent to June 18, 2022 are excluded from the consolidated statements of operations.

During the fiscal third quarter of 2022, the Company terminated its third-party distribution operations in California and is in the process of dissolving the related entities. Accordingly, the Company recognized a loss on disposal of assets of $1.36 million during the three months ended September 30, 2022. The related assets did not meet the held for sale criteria under ASC 360 and are presented as held as used until disposed of other than by sale. All liabilities will continue to remain on the consolidated balance sheets until dissolution of the legal entity. See "Note 20 – Subsequent Events".

During the fiscal third quarter of 2022, the Company terminated its retail and delivery operations at SilverStreak and surrendered the related licenses. As a result, the Company recognized a loss on disposal of assets of $0.33 million during the three months ended September 30, 2022. The related assets did not meet the held for sale criteria under ASC 360 and are presented as held as used until disposed of other than by sale. All liabilities will continue to remain on the consolidated balance sheets until dissolution of the legal entity. See "Note 9 – Goodwill" and "Note 20 – Subsequent Events" for additional information.

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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NOTE 6 – INVESTMENTS

On March 30, 2020, Edible Garden Corp. (“Edible Garden”), a wholly-owned subsidiary of the Company, entered into and closed an Asset Purchase Agreement with Edible Garden Incorporated (the “Purchaser”), pursuant to which Edible Garden sold and the Purchaser acquired substantially all of the assets of Edible Garden (the “Business”). The consideration paid for the Business included two option agreements to purchase up to a 20% interest in the Purchaser for a nominal fee. The first option gives the Company the right to purchase a 10% interest in the Purchaser for one dollar at any time between the one and five-year anniversary of the transaction, or at any time should a change in control event or public offering occur. The second option gives the Company the right to purchase an additional 10% interest in the Purchaser for one dollar at any point prior to the five-year anniversary of the transaction. During the year ended December 31, 2021, the Company exercised its options and acquired 5,000,000 shares of Edible Garden's common stock for a nominal fee. During the fourth quarter of 2021, management concluded that the investment was impaired and recorded an impairment charge of $0.33 million, representing the total amount of the investment.

On May 3, 2022, Edible Garden completed a 1-for-5 reverse stock split of its outstanding common stock. As a result, the Company held 1,000,000 shares in Edible Garden. On May 5, 2022, Edible Garden announced the pricing of its initial public offering of 2,930,000 shares of its common stock and accompanying warrants to purchase up to 2,930,000 shares of common stock for an exercise price of $5.00 per share. Each share of common stock was sold together with one warrant at a combined offering price of $5.00, for gross proceeds of approximately $