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

UNRIVALED BRANDS, INC. ~~AND SUBSIDIARIES~~

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except for shares and ~~per-share~~per share data)
Three Months Ended
June 30, Six Months Ended
June 30,
2022 2021 2022 2021
Total revenues $ 17,556 $ 2,872 $ 38,280 $ 4,928
Cost of goods sold 9,286 147 23,578 2,013
Gross profit 8,270 2,725 14,702 2,915
Selling, general and administrative expenses 19,070 4,698 37,837 17,347
Impairment of assets 55,726 — 55,726 —
Loss on sale of assets 542 — 343 —
Loss from operations (67,068) (1,973) (79,204) (14,432)
Other income (expense):
Gain (loss) on extinguishment of debt — — 542 (6,161)
Interest expense, net (443) (39) (2,210) (112)
Unrealized gain on investments 963 — 963 —
Other income 443 17 1,477 362
Gain (loss) on investments — (874) — 5,337
Total other income (expense) 963 (896) 773 (574)
Loss from continuing operations, before provision for income taxes (66,105) (2,869) (78,432) (15,006)
Provision for income tax benefit for continuing operations 449 — 2,136 —
Net loss from continuing operations (65,655) (2,869) (76,295) (15,006)
Income (loss) from discontinued operations, before provision for income taxes 1,843 (2,101) 3,979 (1,663)
Provision for income tax benefit for discontinued operations 95 — — —
Net income (loss) from discontinued operations 1,938 (2,101) 3,979 (1,663)
NET LOSS (63,718) (4,970) (72,317) (16,669)
Less: Loss attributable to non-controlling interest from continuing operations — (868) — (486)
Less: Income attributable to non-controlling interest from discontinued operations — — 275 —
NET LOSS ATTRIBUTABLE TO UNRIVALED BRANDS, INC. $ (63,718) $ (4,102) $ (72,592) $ (16,183)
Loss from continuing operations per common share attributable to Unrivaled Brands, Inc. common stockholders – basic and diluted $ (0.11) $ (0.01) $ (0.13) $ (0.06)
Net Loss per common share attributable to Unrivaled Brands, Inc. common stockholders – basic and diluted $ (0.11) $ (0.02) $ (0.13) $ (0.07)
Weighted-average number of common shares outstanding – basic and diluted 575,973,609 258,897,777 572,176,041 248,066,926
~~The accompanying notes are an integral part of the unaudited consolidated financial statements.~~


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

Revenue	$	8,797	$	15,801	$	18,037	$	34,650
Cost of Goods Sold	4,197		7,714		8,742		20,450
Gross Profit	4,600		8,087		9,295		14,200

Operating Expenses:
Selling, General & Administrative	8,071		18,160		13,668		36,091
Impairment Expense	—		55,726		—		55,726
(Gain) Loss on Disposal of Assets	(1,739)		541		(1,739)		343
Total Operating Expenses	6,332		74,427		11,929		92,160

Loss from Operations	(1,732)		(66,340)		(2,634)		(77,960)

Other Income (Expense):
Interest Expense, Net	(187)		(438)		(1,211)		(2,204)
Gain on Extinguishment of Debt	—		—		3,026		542
Gain on Settlement of Liabilities	110		—		110		—
Realized Loss on Sale of Investments	—		—		(61)		—
Unrealized Gain on Investments	—		963		—		963
Other Income	242		230		271		858
Total Other Income, Net	165		755		2,135		159

Loss from Continuing Operations Before Provision for Income Taxes	(1,567)		(65,585)		(499)		(77,801)
Provision for Income Tax Benefit (Expense) for Continuing Operations	125		448		(533)		2,136
Net Loss from Continuing Operations	(1,442)		(65,137)		(1,032)		(75,665)

Income from Discontinued Operations Before Provision for Income Taxes	—		1,419		—		3,349
Net Income from Discontinued Operations	—		1,419		—		3,349

NET LOSS	$	(1,442)	$	(63,718)	$	(1,032)	$	(72,316)

Less: Net Income from Discontinued Operations Attributable to Non-Controlling Interest	—		—		—		275
NET LOSS ATTRIBUTABLE TO UNRIVALED BRANDS, INC.	$	(1,442)	$	(63,718)	$	(1,032)	$	(72,591)

Net Loss from Continuing Operations per Common Share Attributable to Unrivaled Brands, Inc. - Basic and Diluted	$	—	$	(0.11)	$	—	$	(0.13)
Net Loss per Common Share Attributable to Unrivaled Brands, Inc. - Basic and Diluted	$	—	$	(0.11)	$	—	$	(0.13)
Weighted-Average Shares Outstanding - Basic	835,274,484		575,973,609		851,619,604		572,176,041
Weighted-Average Shares Outstanding - Diluted	835,274,484		575,973,609		851,619,604		572,176,041

~~Table of Contents~~

~~UNRIVALED BRANDS, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(UNAUDITED)~~

~~(in thousands)~~

Six Months Ended
June 30,
2022 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (72,317) $ (16,669)
Less: Net income (loss) from discontinued operations 3,979 (1,663)
Net loss from continuing operations (76,295) (15,006)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for income taxes (2,136) —
Bad debt expense 1,220 —
Depreciation and amortization 6,683 1,035
Gain on sale of assets 343 —
Gain on debt forgiveness — (86)
Gain on sale of investments — (5,337)
Amortization of operating lease right-of-use asset 1,127 385
Gain (loss) on extinguishment of debt (542) 6,161
Non-cash interest expense 676 30
Non-cash portion of severance expense — 7,990
Stock-based compensation 3,868 1,198
Unrealized gain on investments (963) —
Impairment expense 55,726 —
Change in operating assets and liabilities:
Accounts receivable 2,595 (813)
Inventory 1,131 72
Prepaid expenses and other current assets (1,958) (735)
Other assets (2,584) (127)
Accounts payable and accrued expenses 10,156 1,033
Operating lease liabilities 121 (240)
Net cash used in operating activities - continuing operations (833) (4,440)
Net cash used in operating activities - discontinued operations (489) (2,296)
NET CASH USED IN OPERATING ACTIVITIES (1,322) (6,736)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, equipment and leasehold improvements (2,129) (482)
Repayment of notes receivable 375 —
Proceeds from sale of investments — 39,382
Proceeds from sales of assets 450 —
Net cash (used in) / provided by investing activities - continuing operations (1,304) 38,900
Net cash provided by investing activities - discontinued operations 20,709 4,822
NET CASH PROVIDED BY INVESTING ACTIVITIES 19,405 43,722
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable — 3,500
Payments of debt principal (21,645) (1,012)
Cash paid for debt discount — (178)
Proceeds from issuance of common stock 4,375 —
Net cash (used in) / provided by financing activities - continuing operations (17,270) 2,310
NET CASH (USED IN) / PROVIDED BY FINANCING ACTIVITIES (17,270) 2,310
NET CHANGE IN CASH 814 39,296
Cash at beginning of period 6,891 217
Cash reclassified to discontinued operations (442) —
CASH AT END OF PERIOD $ 7,263 $ 39,513
SUPPLEMENTAL DISCLOSURE FOR OPERATING ACTIVITIES:
Cash paid for interest $ 1,558 $ 430
SUPPLEMENTAL DISCLOSURE FOR NON-CASH INVESTING AND FINANCING ACTIVITIES:
Debt principal and accrued interest converted into common stock $ 52 $ 3,596
Net assets transferred to held for sale $ 1,328 $ —
Stock options exercised on a net share basis $ — $ 2
Promissory note issued for severance $ — $ 2,100

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

Table of Contents

UNRIVALED BRANDS, INC. ~~AND SUBSIDIARIES~~

CONSOLIDATED STATEMENTS OF ~~STOCKHOLDERS’~~STOCKHOLDERS' (DEFICIT) EQUITY (UNAUDITED)

FOR THE THREE MONTHS ENDED JUNE 30, ~~2022~~2023 AND ~~2021~~

~~(UNAUDITED)~~2022

(in thousands, except for shares)

Additional
Paid-In Capital Treasury Accumulated
Deficit Non-
Controlling
Interest Total
Common Stock Stock
Shares Amount Amount
Balance at March 31, 2022 530,329,995 $ 552 $ 399,536 $ (808) $ (258,888) $ 4,134 $ 144,526
Stock compensation - employees 1,200,000 1 169 — — — 170
Stock compensation - directors 259,796 0 29 — — — 29
Stock compensation - services expense 725,000 1 128 — — — 129
Stock option expense — — 1,352 — — — 1,352
Disposition of non-controlling interest — — — — (1,103) (4,134) (5,237)
Net loss attributable to Unrivaled Brands, Inc. — — — — (63,718) — (63,718)
Balance at June 30, 2022 532,514,791 $ 554 $ 401,214 $ (808) $ (323,710) $ — $ 77,251
Additional
Paid-In Capital Treasury Accumulated
Deficit Non-
Controlling
Interest Total
Common Stock Stock
Shares Amount Amount
Balance at March 31, 2021 235,491,198 $ 256 $ 290,225 $ (808) $ (230,825) $ 4,845 $ 63,693
Stock compensation - employees 250,000 — 68 — — — 68
Stock compensation - directors 343,493 1 93 — — — 94
Stock option exercises 470,717 1 (1) — — — —
Stock option expense — — 641 — — — 641
Net loss attributable to non-controlling interest — — — — — (868) (868)
Net loss attributable to Unrivaled Brands, Inc. — — — — (4,102) — (4,102)
Balance at June 30, 2021 236,555,408 $ 258 $ 291,026 $ (808) $ (234,927) $ 3,977 $ 59,526


	Convertible Series V Preferred Stock			Common Stock			Treasury Stock		Additional Paid-In Capital		Accumulated Deficit		Non- Controlling Interest
	Shares	Amount		Shares	Amount		Amount								Total
BALANCE AT MARCH 31, 2023	14,071,431	$	1	695,694,794	$	717	$	(810)	$	406,029	$	(439,639)	$	—	$	(33,702)
Net Loss Attributable to Unrivaled Brands, Inc.	—	—		—	—		—		—		(1,442)		—		(1,442)
Stock Compensation - Services Expense	—	—		79,997,091	80		—		1,473		—		—		1,553
Stock Option Expense	—	—		—	—		—		89		—		—		89
Forfeiture and Cancellation of Treasury Stock	—	—		(3,208,420)	—		810		(810)		—		—		—
BALANCE AT JUNE 30, 2023	14,071,431	$	1	772,483,465	$	797	$	—	$	406,781	$	(441,081)	$	—	$	(33,502)


	Convertible Series V Preferred Stock			Common Stock			Treasury Stock		Additional Paid-In Capital		Accumulated Deficit		Non- Controlling Interest
	Shares	Amount		Shares	Amount		Amount								Total
BALANCE AT MARCH 31, 2022	—	$	—	530,329,995	$	552	$	(808)	$	399,536	$	(258,888)	$	4,134	$	144,526
Net Loss Attributable to Unrivaled Brands, Inc.	—	—		—	—		—		—		(63,718)		—		(63,718)
Disposition of Non-Controlling Interest	—	—		—	—		—		—		(1,103)		(4,134)		(5,237)
Stock Compensation - Employees	—	—		1,200,000	1		—		169		—		—		170
Stock Compensation - Directors	—	—		259,796	—		—		29		—		—		29
Stock Compensation - Services Expense	—	—		725,000	1		—		128		—		—		129
Stock Option Expense	—	—		—	—		—		1,352		—		—		1,352
BALANCE AT JUNE 30, 2022	—	$	—	532,514,791	$	554	$	(808)	$	401,214	$	(323,709)	$	—	$	77,251

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

Table of Contents

UNRIVALED BRANDS, INC. ~~AND SUBSIDIARIES~~

CONSOLIDATED STATEMENTS OF ~~STOCKHOLDERS~~STOCKHOLDERS' (DEFICIT) EQUITY (UNAUDITED)

FOR THE SIX MONTHS ENDED JUNE 30, ~~2022~~2023 AND ~~2021~~

~~(UNAUDITED)~~2022

(in thousands, except for shares)

~~Table of Contents~~

Preferred Stock Additional Paid-In Capital Treasury Accumulated Deficit Non-
Controlling
Interest Total
Convertible Series A Common Stock Stock
Shares Amount Shares Amount Amount
Balance at December 31, 2021 — $ — 498,546,291 $ 521 $ 392,930 $ (808) $ (250,015) $ 3,859 $ 146,487
Warrants exercise — — 4,759,708 4 (5) — — — (1)
Stock compensation - employees — — 2,100,000 2 350 — — — 352
Stock compensation - directors — — 943,128 1 212 — — — 213
Stock compensation - services expense — — 725,000 1 128 — — — 129
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
Stock option expense — — — — 3,174 — — — 3,174
Disposition of non-controlling interest — — — — — — (1,103) (4,134) (5,237)
Net income attributable to non-controlling interest — — — — — — — 275 275
Net loss attributable to Unrivaled Brands, Inc. — — — — — — (72,592) — (72,592)
Balance at June 30, 2022 — $ — 532,514,791 $ 554 $ 401,214 $ (808) $ (323,710) $ — $ 77,251
Preferred Stock Additional Paid-In Capital Treasury Accumulated Deficit Non-
Controlling
Interest Total
Convertible Series A Common Stock Stock
Shares Amount Shares Amount Amount
Balance at December 31, 2020 12 $ — 196,512,867 $ 218 $ 275,060 $ (808) $ (219,803) $ 4,463 $ 59,130
Adoption of ASU 2020-06 — — — — (1,071) — 1,059 — (12)
Debt conversion - common stock — — 20,391,774 20 3,990 — — — 4,010
Warrants issued to Dominion — — — — 5,978 — — — 5,978
Stock compensation - employees — — 250,000 — 67 — — — 67
Stock compensation - directors — — 885,159 1.00 213 — — — 214
Stock compensation - services expense — — 332,947 — 32 — — — 32
Stock option exercises — — 1,696,947 2 (2) — — — —
Acquisition of A shares (8) — 16,485,714 17 5,874 — — — 5,891
Elimination of Preferred Stock (4) — — — — — — — —
Stock option expense — — — — 885 — — — 885
Net loss attributable to non-controlling interest — — — — — — — (486) (486)
Net loss attributable to Unrivaled Brands, Inc. — — — — — — (16,183) — (16,183)
Balance at June 30, 2021 — $ — 236,555,408 $ 258 $ 291,026 $ (808) $ (234,927) $ 3,977 $ 59,526


	Convertible Series V						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, 2022	—	$	—	679,513,564	$	701	$	(808)	$	403,619	$	(440,049)	$	—	$	(36,537)
Net Loss Attributable to Unrivaled Brands, Inc.	—	—		—	—		—		—		(1,032)		—		(1,032)
Stock Compensation - Services Expense	—	—		96,178,321	96		—		1,814		—		—		1,910
Stock Option Exercise	—	—		—	—		—		187		—		—		187
Stock Issued for Cash	14,071,431	1		—	—		—		1,969		—		—		1,970
Forfeiture and Cancellation of Treasury Stock	—	—		(3,208,420)	—		808		(808)		—		—		—
BALANCE AT JUNE 30, 2023	14,071,431	$	1	772,483,465	$	797	$	—	$	406,781	$	(441,081)	$	—	$	(33,502)

	Convertible Series V						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.	—	—		—	—		—		—		(72,591)		—		(72,591)
Debt Conversion - Common Stock	—	—		294,452	—		—		75		—		—		75
Warrants Exercise	—	—		4,759,708	4		—		(5)		—		—		(1)
Stock Compensation - Employees	—	—		2,100,000	2		—		350		—		—		352
Stock Compensation - Directors	—	—		943,128	1		—		212		—		—		213
Stock Compensation - Services Expense	—	—		725,000	1		—		128		—		—		129
Stock Option Exercise	—	—		146,212	—		—		—		—		—		—
Stock Issued for Cash	—	—		25,000,000	25		—		4,350		—		—		4,375
Stock Option Expense	—	—		—	—		—		3,174		—		—		3,174
Disposition of Non-Controlling Interest	—	—		—	—		—		—		(1,103)		(4,134)		(5,237)
Net Loss Attributable to Non-Controlling Interest	—	—		—	—		—		—		—		275		275
BALANCE AT JUNE 30, 2022	—	$	—	532,514,791	$	554	$	(808)	$	401,214	$	(323,709)	$	—	$	77,251

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

UNRIVALED BRANDS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


	Six Months Ended June 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss	$	(1,032)	$	(72,316)
Less: Net Income from Discontinued Operations	—		3,349
Net Loss from Continuing Operations	(1,032)		(75,665)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Deferred Income Tax Benefit	—		(2,137)
Bad Debt (Recovery) Expense	(7)		1,220
Gain on Settlement of Liabilities	(110)		—
Realized Loss on Sale of Investments	61		—
Gain on Extinguishment of Debt	(3,026)		(542)
Non-Cash Interest Expense	193		676
(Gain) Loss on Disposal of Assets	(1,739)		343
Depreciation and Amortization	1,558		6,602
Amortization of Operating Lease Right-of-Use Asset	999		1,080
Stock-Based Compensation	2,097		3,868
Unrealized Gain on Investments	—		(963)
Impairment Loss	—		55,726
Change in Operating Assets and Liabilities:
Accounts Receivable	(542)		2,434
Inventory	(1,013)		434
Prepaid Expenses and Other Current Assets	(193)		(1,885)
Other Assets	—		(2,520)
Accounts Payable and Accrued Expenses	1,256		9,776
Operating Lease Liabilities	(647)		200
Net Cash Used in Operating Activities - Continuing Operations	(2,145)		(1,353)
Net Cash Used in Operating Activities - Discontinued Operations	—		(1,150)
NET CASH USED IN OPERATING ACTIVITIES	(2,145)		(2,503)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property and Equipment	(91)		(2,035)
Proceeds from Notes Receivable	634		375
Proceeds from Sale of Investments	149		—
Proceeds from Sale of Assets	—		450
Net Cash Provided by (Used in) Investing Activities - Continuing Operations	692		(1,210)
Net Cash Provided by Investing Activities - Discontinued Operations	—		20,709
NET CASH PROVIDED BY INVESTING ACTIVITIES	692		19,499

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of Debt Principal	(1,129)		(21,634)
Proceeds from Issuance of Common Stock	1,970		4,375
Net Cash Provided by (Used in) Financing Activities - Continuing Operations	841		(17,259)
Net Cash Used in Financing Activities - Discontinued Operations	—		(11)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	841		(17,270)

NET CHANGE IN CASH	(612)		(274)

Cash at Beginning of Period	1,200		6,700
Cash Reclassed to Discontinued Operations	—		(442)
CASH AT END OF PERIOD	$	588	$	5,984

SUPPLEMENTAL DISCLOSURE FOR OPERATING ACTIVITIES:
Cash Paid for Interest	$	182	$	1,552

SUPPLEMENTAL DISCLOSURE FOR NON-CASH INVESTING AND FINANCING ACTIVITIES:
Debt Principal and Accrued Interest Converted into Common Stock	$	—	$	52
Reclass of Accrued Interest to Principal	$	1,896	$	—
Net Assets Transferred to Assets Held For Sale	$	—	$	1,328

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

Table of Contents

UNRIVALED BRANDS, INC. ~~AND SUBSIDIARIES~~

NOTES TO ~~UNAUDITED~~ CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 – DESCRIPTION OF BUSINESS

~~References in this document to “the Company”, “Unrivaled”, “we”, “us”, or “our” are intended to mean~~

Unrivaled Brands, Inc.~~, individually, or as~~ (the “Company”) is a cannabis company with operations in retail, production, distribution, and cultivation throughout California, with an emphasis on providing the ~~context requires, collectively with its subsidiaries on~~highest quality of medical and adult use cannabis products. The Company is home to Korova, a ~~consolidated basis. Effective July 7, 2021,~~brand of high potency products across multiple product categories, currently available in California, Oregon, Arizona, and Oklahoma. With the acquisition of People’s First Choice, the Company ~~changed its corporate name from “Terra Tech Corp.” to “Unrivaled Brands, Inc.”~~operates a premier cannabis dispensary in ~~connection with the Company’s acquisition of UMBRLA, Inc. (“UMBRLA”).~~Orange County, California. The Company also owns dispensaries in California which operate as The Spot in Santa Ana, Blüm in Oakland, and Blüm in San Leandro.

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”)

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

•~~MediFarm I,~~People’s First Choice, LLC, a ~~Nevada~~California limited liability company (“~~MediFarm I”)~~

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

•~~OneQor Technologies, Inc., a Delaware corporation ("OneQor"~~People’s”)

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

•
~~Halladay Holding, LLC,~~

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 ~~California limited liability company (“Halladay”)~~consolidated basis.

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

•~~Silverstreak Solutions, Inc., a California corporation ("Silverstreak")~~

~~The~~During the fiscal second quarter of 2023, the Company ~~is a multi-state operator ("MSO") with retail, production, distribution, and cultivation operations, with an emphasis on providing~~received confirmation for the ~~highest quality of medical and adult use cannabis products. From the acquisition~~legal dissolution of UMBRLA, Inc. As a result, all liabilities and existing obligations of the dissolved entity were extinguished and the Company ~~has multiple cannabis lifestyle brands. The Company is home to Korova,~~recognized a ~~brand~~gain on disposal of ~~high potency products across multiple product categories, currently available in California, Oregon, Arizona,~~assets of $1.74 million during the three 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.six months ended June 30, 2023.

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 ~~our~~its subsidiaries in which ~~we have~~the Company has a controlling financial interest. In accordance with the provisions of ~~FASB or ASC~~Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, “Consolidation,” ~~we consolidate~~the Company consolidates any variable interest entity (“VIE”) of which ~~we are~~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. ~~We do~~The Company does not consolidate a VIE in which ~~we have~~it has a majority ownership interest when ~~we are~~it is not considered the primary beneficiary. ~~We evaluate our~~The Company evaluates its relationships with all the VIEs on an ongoing basis to reassess if ~~we continue~~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 June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, and the consolidated results of operations and cash flows for the ~~quarters~~periods ended June 30, ~~2022~~2023 and ~~2021~~2022 have been included. These interim unaudited condensed consolidated financial statements do not include all disclosures required by GAAP for complete financial

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statements and, therefore, should be read in conjunction with the more detailed audited consolidated financial statements for the year ended December 31, ~~2021.~~2022. The December 31, ~~2021~~2022 balances reported herein are derived from the audited consolidated financial statements for the year ended December 31, ~~2021.~~2022. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation. Specifically, the Company determined the presentation of promotion and marketing program ("PMP") revenue should be included as revenue. Prior period presentation of PMP was included as a component of other income in the consolidated statement of operations. In addition, the Company determined certain amounts pertaining to the gain on settlement of liabilities should be a categorized as a component of selling, general and administrative expenses. These reclassifications did not affect total assets, total liabilities, stockholders' deficit or net loss.

Going Concern

The Company incurred a pre-tax net loss from continuing operations of $1.57 million and $0.50 million for the three and six months ended June 30, 2023, respectively, and $65.59 million and $77.80 million for the three and six months ended June 30, 2022, respectively. As of June 30, 2023 and December 31, 2022, the Company had an accumulated deficit of $441.08 million and $440.05 million, respectively. At June 30, 2023, the Company had a consolidated cash balance of $0.59 million. Management expects to experience further net losses in 2023 and in the foreseeable future. The Company may not be able to generate sufficient cash from operating activities to fund its ongoing operations. The Company's future success is dependent upon its 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 wethe Company will continue as a going concern.In an effort to achieve liquidity that would be sufficient to meet all of ~~our~~its commitments, ~~we have~~the Company has undertaken a number of actions, including minimizing capital expenditures and reducing recurring expenses. However, ~~we believe~~management believes that even after taking these actions, wethe Company will not have sufficient liquidity to satisfy all of ~~our~~its future financial obligations. The risks and uncertainties surrounding ~~our~~the ability to raise capital, ~~our~~the limited capital resources, and the weak industry conditions impacting ~~our~~the Company’s business raise substantial doubt as to ~~our~~its ability to continue as a going concern. ~~See Note 20, "~~

~~Going Concern~~
"

The accompanying notes are an integral part of the ~~Notes to Consolidated Financial Statements for additional information.~~unaudited consolidated financial statements.

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~~Non-Controlling Interest~~

~~Non-controlling interest is shown~~Significant Accounting Policies

The significant accounting policies and critical estimates applied by the Company in these interim unaudited condensed consolidated financial statements are the same 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)~~those applied in the Company’s audited consolidated financial statements ~~of operations.~~and accompanying notes included in the Company’s 2022 Form 10-K, unless otherwise disclosed in these accompanying notes to the unaudited consolidated financial statements for the interim period ended June 30, 2023.

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, revenues or stockholders’ equity. See Note 17, "Discontinued Operations" for further discussion regarding discontinued operations.~~

~~Trade and Other 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 $4.76 million and $3.68 million as of June 30, 2022 and December 31, 2021, respectively.

~~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

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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.

~~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.

~~Property, Equipment and Leasehold Improvements, Net~~

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 our 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.”~~ 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 8, ~~“Property, Equipment and Leasehold Improvements, Net”~~ ~~for further information.~~

~~Intangible Assets~~

~~Intangible assets continue to be subject to amortization, and any impairment is determined in accordance with ASC 360,~~ ~~“Property, Plant, and Equipment,”~~ 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 our intangible assets are as follows:


~~Customer relationships~~			~~3 to 5 years~~
~~Trademark and patent~~			~~2 to 8 years~~
~~Dispensary licenses~~			~~14 years~~

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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, we test 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 intangible asset (asset group) exceeds the undiscounted cash flows expected to result from the use and eventual disposition of the intangible asset (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.

~~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.~~

~~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 June 30, 2022 and December 31, 2021, respectively.

~~Assets Held for Sale and Discontinued Operations~~

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~~, “Property, Plant, and Equipment,”~~ at the lower of carrying value or fair value less costs to sell. Fair value is based on the estimated proceeds from the sale of the facility utilizing recent purchase offers, market comparables and/or data. Our estimate as to fair value is regularly reviewed and subject to changes in the commercial real estate markets and our continuing evaluation as to the facility’s acceptable sale price. 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. The Company follows the guidance within ASC 205, ~~“Reporting Discontinued Operations and Disclosure of Disposals of Components of an Entity”~~ ~~when assets held for sale represent a strategic shift in the Company’s operations and financial results. For long-lived assets or disposals groups that~~

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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 and Performance Obligations~~

Revenue from our retail dispensaries is recorded at the time customers take possession of the product. Revenue from our retail dispensaries is recognized net of discounts, promotional adjustments, and returns. We collect 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 our customers obtain control of our products. Revenue is recorded when the customer is determined to have taken control of the product. 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.

~~Disaggregation of Revenue~~

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

(in thousands)
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
California $ 15,608 $ 2,872 $ 34,053 $ 4,928
Oregon 1,947 — 4,227 —
Total $ 17,556 $ 2,872 $ 38,280 $ 4,928

~~Contract Balances~~

~~Due to the nature of the Company’s revenue from contracts with customers, the Company does not have material contract assets or liabilities that fall under the scope of ASC Topic 606.~~

~~Contract Estimates and Judgments~~

The Company’s revenues accounted for under ASC Topic 606, generally, do not require significant estimates or judgments based on the nature of the Company’s revenue streams. The sales prices are generally fixed at the point of sale and all consideration from contracts is included in the transaction price. The Company’s contracts do not include multiple performance obligations or material variable consideration.

~~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 $0.77 million and $1.69 million for the three and six months ended June 30, 2022, respectively, and $0.08 million and $0.11 million for the three and six months ended June 30, 2021, respectively.

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~~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 our 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 June 30, 2021, such net operating losses were offset entirely by a valuation allowance. No valuation allowance remained at June 30, 2022.

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 income or 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. If the Company is in a net income position, diluted earnings per share includes stock options, warrants, convertible preferred stock, and convertible debt that are determined to be dilutive using the treasury stock method for all equity instruments issuable in equity units and the “if converted” method for the Company’s convertible debt. The ~~results of~~Company's operations ~~were a~~resulted in net loss for the three and six months ended June 30, ~~2022~~2023 and ~~2021.~~2022. Therefore, the basic and diluted weighted-average shares of common stock outstanding were the same for all periods presented.

~~Potentially dilutive~~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):

Six Months Ended
June 30,
2022 2021
Common stock warrants 85,826,872 16,076,556
Common stock options 88,126,615 16,721,567
173,953,487 32,798,123


	Six Months Ended June 30,
	2023	2022

Common Stock Warrants	100,918,457	85,826,872
Common Stock Options	21,125,759	88,126,615
	122,044,216	173,953,487

14The accompanying notes are an integral part of the unaudited consolidated financial statements.

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Recently Adopted 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 adoption of the standard did not have a material impact on the Company’s consolidated financial statements.

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 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 adoption of the standard did not have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments”(“ASU 2016-13”). ASU 2016-13 replaces the “incurred loss” credit losses framework with a new accounting standard that requires management's measurement of the allowance for credit losses to be based on a broader range of reasonable and supportable information for lifetime credit loss estimates. Effective January 1, 2023, the Company adopted the standard. The adoption of this standard do not have a material impact on our financial statements.

Recently Issued Accounting Standards

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurements—Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (Topic 820)”. ASU 2022-03 clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. It also clarifies that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. For public business entities, the ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The Company is currently evaluating the effect of adopting this ASU.

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 $0.89 million~~nil and ~~$5.42 million~~nil as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, 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 six months ended June 30, ~~2022~~2023 and ~~2021.~~2022.

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~~relationships with sufficient members of properly licensed vendors, the Company’s sales may be impacted. During the three and six months ended June 30, 2023 and 2022, ~~and 2021, we~~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 – VARIABLE INTEREST ENTITIES~~

On October 26, 2017, the Company entered into operating agreements with NuLeaf, Inc. and formed NuLeaf Sparks Cultivation, LLC and NuLeaf Reno Production, LLC (collectively, “NuLeaf”) to build and operate cultivation and production facilities for our IVXX brand of cannabis products in Nevada.

The ~~agreements were subject to approval by the State of Nevada, the City of Sparks and the City of Reno in Nevada. Under the terms~~accompanying notes are an integral part of the agreements, the Company remitted to NuLeaf an upfront investment of $4.50 million in the form of convertible loans bearing an interest rate of 6% per annum. On June 28, 2018, the Company received approval from the State of Nevada. The remaining required approvals from local authorities were received in July 2018. As a result, the notes receivable balance was converted into a 50% ownership interest in NuLeaf. The investment in NuLeaf was initially recorded at cost and accounted for using the equity method.

In February 2019, we amended and restated the NuLeaf agreements and obtained control of the operations of NuLeaf. The Company has determined these entities are variable interest entities in which the Company is the primary beneficiary by reference to the power and benefits criterion under ASC 810, ~~“Consolidation.”~~ The provisions within the amended agreement granted the Company the power to manage and make decisions that affect the operation of these entities. As the primary beneficiary of NuLeaf Sparks Cultivation, LLC and NuLeaf Reno Production, LLC, the Company began consolidating the accounts and operations of these entities on March 1, 2019. All intercompany transactions are eliminated in theunaudited consolidated financial statements. ~~Effective March 1, 2019, we remeasured our equity method investment in NuLeaf to fair value and consolidated the results of NuLeaf within our consolidated financial statements.~~

In November 2021, Nuleaf entered a definitive agreement with Jushi Holdings Inc. to acquire NuLeaf, Inc., together with its subsidiaries and affiliated companies and the Company classified the Nuleaf operations as classified as held for sale as of December 31, 2021. The transaction closed in April 2022 and the Nuleaf operations are classified as discontinued operations for all periods presented. See Note 17, "~~Discontinued Operations" for further information.~~

During the three and six months ended June 30, 2022, revenue attributed to NuLeaf was $— million and $2.81 million, respectively, and net loss attributed to NuLeaf was $8.12 million and $8.19 million, respectively. During the three and six months ended June 30, 2021, revenue attributed to NuLeaf was $3.39 million and $6.45 million, respectively, and net loss attributed to NuLeaf was $1.73 million and $0.97 million, respectively. The aggregate carrying values of Sparks

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~~Cultivation, LLC~~NOTE 4 – INVENTORY

Raw materials consist of materials and ~~NuLeaf Reno Production, LLC assets~~packaging for manufacturing of products owned by the Company. Work-in-progress consists of cultivation materials and ~~liabilities, after elimination~~live plants. Finished goods consists of ~~any intercompany transactions~~cannabis products sold in retail and ~~balances, in the consolidated balance sheets were as follows:~~


	~~(in thousands)~~
	December 31, 2021
~~Current assets:~~
~~Cash~~	$	~~1,544~~
~~Accounts receivable, net~~	~~1,553~~
distribution. Inventory	~~1,359~~
~~Prepaid expenses and other current assets~~	39
~~Total current assets~~	~~4,495~~

~~Property, equipment and leasehold improvements, net~~	~~5,099~~
~~Other assets~~	~~295~~
~~TOTAL ASSETS~~	$	~~9,889~~

~~Liabilities:~~
~~Total current liabilities~~	$	~~350~~
~~Total long-term liabilities~~	~~184~~
~~TOTAL LIABILITIES~~	$	~~534~~

~~During the six months ended June 30, 2022, the Company sold its interest in NuLeaf and no assets and liabilities remained~~ as of June 30, ~~2022. See Note 17,~~ ~~"Discontinued Operations"~~ ~~for further discussions.~~2023 and December 31, 2022 consisted of the following:


	(in thousands)
	June 30, 2023		December 31, 2022

Raw Materials	$	674	$	524
Work-In-Progress	649		284
Finished Goods	1,629		1,131
Total Inventory	$	2,952	$	1,939

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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 17, "Discontinued Operations" for further information. Subsidiaries classified as held for sale that do not qualify as discontinued operations as of June 30, 2022 consist of the following:~~


	~~(in thousands)~~
	June 30, 2022
~~Cash~~	$	~~439~~
~~Accounts receivable, net~~	6
~~Inventory~~	7
~~Prepaid expenses and other assets~~	~~130~~
~~Total current assets held for sale~~	~~582~~

~~Property, equipment and leasehold improvements, net~~	~~1,132~~
~~Other assets~~	~~1,659~~
~~Total long-term assets held for sale~~	~~2,791~~

~~TOTAL ASSETS OF SUBSIDIARIES CLASSIFIED AS HELD FOR SALE~~	$	~~3,373~~

~~Accounts payable and accrued expenses~~	$	~~1,851~~
~~Total current liabilities held for sale~~	~~1,851~~

~~Long-term lease liabilities~~	~~1,465~~
~~Total long-term liabilities held for sale~~	~~1,465~~

~~TOTAL LIABILITIES OF SUBSIDIARIES CLASSIFIED AS HELD FOR SALE~~	$	~~3,316~~

During the fiscal second quarter of 2022, the Company decided to divest 2 operating dispensaries in the state of California. In June 2022, the Company permanently closed Blüm San Leandro and is actively marketing the retail location for sale. The transaction is expected to close within the next year. The assets are classified as held for sale as of June 30, 2022 but do not meet the criteria for discontinued operation.

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 Buyer and the Company had no further obligations except for the operating lease payments. As consideration received, a promissory note of $1.4 million with the Buyer was forgiven. The Company recognized a loss upon sale of assets of $0.54 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 three months ended June 30, 2022. All assets and liabilities related to the dispensary are excluded from the consolidated balance sheet as of June 30, 2022, except for the lease related assets and liabilities. All profits or losses subsequent to June 18, 2022 are excluded from the consolidated statements of operations.

~~NOTE 6 –~~ INVESTMENTS ~~IN UNCONSOLIDATED AFFILIATES~~

On March 30, 2020, Edible Garden Corp. (“Edible Garden”), a wholly-owned subsidiary of Terra Tech Corp. (the “Company”), entered into and closed an Asset Purchase Agreement (the “Purchase Agreement”) with Edible Garden Incorporated (the “Purchaser”), pursuant to which Edible Garden Corp. sold and the Purchaser purchased 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 1 dollar at any time between the ~~one~~ ~~and five-year anniversary of the transaction, or at~~

~~Table of Contents~~

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 1 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 Corp. ("Edible Garden"), an entity in which the Company had an investment of common stock, 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 ~~is being~~was sold together with one warrant at a combined offering price of $5.00, for gross proceeds of approximately $14.70 million. ~~The Company holds a 20% interest in Edible Garden.~~ As a result of the initial public offering, the Company reassessed its write down on the investment and recorded a write up to its fair value, which is categorized within the fair value hierarchy as Level 2. In November 2022, the lock-up restriction on the Company's shares in Edible Garden expired and accordingly, the Company's investment transferred from Level 2 to Level 1 fair value measurement. During the fiscal first quarter ended March 31, 2023, the Company sold all its shares in Edible Garden and received $0.15 million. As a result, the Company recorded a ~~gain~~realized loss on ~~investment~~the sale of ~~$0.96~~investments of $0.06 million ~~for~~during the ~~three and~~ six months ended June 30, ~~2022.~~2023. During the six months ended June 30, 2022, the Company recorded nil in realized or unrealized losses related to its investment in Edible Garden.

NOTE ~~7 – INVENTORY~~

Raw materials consist of materials and packaging for manufacturing of products owned by Unrivaled Brands. 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 June 30, 2022 and December 31, 2021 consisted of the following:

(in thousands)
June 30,
2022 December 31,
2021
Raw materials $ 1,848 $ 2,258
Work-in-progress 1,686 1,077
Finished goods 2,504 3,844
Total inventory $ 6,038 $ 7,179

~~NOTE 8~~6 – PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS ~~NET~~

Property, equipment, and leasehold improvements as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 consisted of the following:

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

Land and building $ 7,581 $ 7,787
Furniture and equipment 3,970 3,873
Computer hardware 341 348
Leasehold improvements 11,454 14,409
Vehicles 1,143 1,142
Construction in progress 2,436 1,832
Subtotal 26,925 29,391
Less accumulated depreciation (5,509) (5,663)
Property, equipment and leasehold improvements, net $ 21,416 $ 23,728


	(in thousands)
	June 30, 2023		December 31, 2022

Land and Building	$	7,581	$	7,581
Furniture and Equipment	1,314		1,336
Computer Hardware	334		299
Leasehold Improvements	7,901		8,009
Vehicles	57		103
Construction in Progress	2,565		2,565
Subtotal	19,752		19,893
Less Accumulated Depreciation	(7,175)		(6,893)
Property, Equipment and Leasehold Improvements, Net	$	12,577	$	13,000

Depreciation expense related to ~~property, equipment~~continuing operations was $0.22 million and ~~leasehold improvements~~$0.93 million for the three months ended June 30, 2023 and 2022, respectively, and ~~June 30, 2021 was $0.97~~$0.43 million and ~~$0.32~~$1.84 million ~~respectively, and~~ for the six months ended June 30, 2023 and 2022, ~~and June 30, 2021 was $1.92 million and $0.66 million, respectively~~respectively.

18The accompanying notes are an integral part of the unaudited consolidated financial statements.

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~~On January 21, 2022, the Company sold its land in Spanish Springs, Nevada for $0.45 million to an unrelated third party.~~

NOTE 97 – INTANGIBLE ASSETS ~~AND GOODWILL~~

~~Intangible Assets, Net~~

Intangible assets ~~net consisted of the following~~ as of June 30, ~~2022~~2023 and December 31, ~~2021:~~2022 consisted of the following:


			(in thousands)														(in thousands)
			June 30, 2022						December 31, 2021								June 30, 2023						December 31, 2022
		Estimated Useful Life in Years	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		Gross Carrying Amount		Accumulated Amortization		Net Carrying Value			Estimated Useful Life in Years	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		Gross Carrying Amount		Accumulated Amortization		Net Carrying Value

Amortizing Intangible Assets:	Amortizing Intangible Assets:														Amortizing Intangible Assets:
Customer Relationships	Customer Relationships	3 to 5	$	7,400	$	(7,400)	$	—	$	7,400	$	(7,400)	$	—	Customer Relationships	3 to 5	$	7,400	$	(7,400)	$	—	$	7,400	$	(7,400)	$	—
Trademarks and Patent	Trademarks and Patent	2 to 8	4,500		(1,876)		2,624		4,500		(750)		3,750		Trademarks and Patent	2 to 8	4,500		(4,116)		384		4,500		(2,991)		1,509
Operating Licenses	Operating Licenses	14	100,701		(10,503)		90,198		100,701		(6,864)		93,837		Operating Licenses	14	12,239		(12,239)		—		12,239		(12,239)		—
Total Amortizing Intangible Assets	Total Amortizing Intangible Assets		112,601		(19,779)		92,822		112,601		(15,014)		97,587		Total Amortizing Intangible Assets		24,139		(23,755)		384		24,139		(22,630)		1,509

Non-Amortizing Intangible Assets:	Non-Amortizing Intangible Assets:														Non-Amortizing Intangible Assets:
Trade Name	Trade Name	Indefinite	9,950		—		9,950		32,050		—		32,050		Trade Name	Indefinite	1,350		—		1,350		1,350		—		1,350
Total Non-Amortizing Intangible Assets	Total Non-Amortizing Intangible Assets		9,950		—		9,950		32,050		—		32,050		Total Non-Amortizing Intangible Assets		1,350		—		1,350		1,350		—		1,350
Total Intangible Assets, Net	Total Intangible Assets, Net		$	122,551	$	(19,779)	$	102,772	$	144,651	$	(15,014)	$	129,637	Total Intangible Assets, Net		$	25,489	$	(23,755)	$	1,734	$	25,489	$	(22,630)	$	2,859

Amortization expense related to continuing operations was $0.56 million and $2.42 million for the three months ended June 30, 2023 and 2022, respectively, and ~~2021 was $2.42~~$1.13 million and ~~$0.18~~$4.77 million ~~respectively, and~~ for the six months ended June 30, ~~2022~~2023 and ~~2021 was $4.77 million and $0.38 million,~~2022, respectively.

~~During the second quarter~~

NOTE 8 – GOODWILL

As of ~~2022, management noted indicators of impairment of its indefinite-lived assets of certain asset groups. Specifically,~~June 30, 2023, changes in circumstances resulted in significant differences in actual revenue compared to projections. The Company used a discount rate under current market conditions to determine a preliminary estimate, noting an impairmentthe carrying amount of ~~$22.10 million~~ ~~which is included~~ goodwill during the period presented were as ~~a component of impairment expense for the three and six months ended June 30, 2022. The Company will conduct its annual impairment assessment on September 30 that may result in additional impairment.~~follows:

~~Goodwill~~

Goodwill arises from the purchase price for acquired businesses exceeding the fair value of tangible and intangible assets acquired less assumed liabilities. Goodwill is assigned to the reporting unit, which is the operating segment level or one level below the operating segment.


	(in thousands)

Balance as of December 31, 2022	$	3,585
Balance as of June 30, 2023	$	3,585

The Company conducts its annual goodwill impairment assessment on September 30, and between annual tests if the Company becomes aware of an event or a change in circumstances that would indicate the carrying value may be impaired.

~~Table~~ Management did not identify any impairment triggers during the three and six months ended June 30, 2023 and concluded there was no impairment of ~~Contents~~

goodwill.

For the purpose of the goodwill impairment assessment, the Company has the option to perform a qualitative assessment (commonly referred to as “step zero”) to determine whether further quantitative analysis for impairment of goodwill or indefinite-lived intangible assets is necessary or a quantitative assessment (“step one”) where the Company estimates the fair value of each reporting unit using a discounted cash flow method (income approach).

~~During~~ Goodwill is assigned to the ~~second quarter of 2022,~~reporting unit, which is the ~~Company identified changes in circumstances that would indicate~~operating segment level or one level below the ~~carrying value of certain reporting units~~ ~~may be impaired.~~ ~~Management performed a preliminary quantitative assessment using a comparison of actual revenues to projections and applied a current discount rate,~~ ~~which resulted in a goodwill impairment loss of $33.63 million for the three and six months ended June 30, 2022.~~ ~~The Company will conduct its annual impairment assessment on September 30 that may result in additional impairment.~~operating segment. The balance of goodwill at June 30, ~~2022~~2023 and December 31, ~~2021 was$14.51 million~~2022 remained unchanged at $3.59 million.

The accompanying notes are an~~d $48.13 million, respectively.~~

~~NOTE 10 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES~~

~~Accounts payable and accrued expenses consisted~~ integral part of the ~~following:~~unaudited consolidated financial statements.

(in thousands)
June 30,
2022 December 31,
2021
Accounts Payable $ 19,898 $ 16,804
Tax Liabilities 7,244 5,147
Accrued Payroll and Benefits 948 1,409
Current Lease Liabilities 1,940 3,120
Other Accrued Expenses 7,118 5,424
Total Accounts Payable and Accrued Expenses $ 37,148 $ 31,904

2014

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NOTE 119 – ~~NOTES PAYABLE~~ACCRUED LIABILITIES

~~Notes payable as of June 30, 2022 and December 31, 2021~~Accrued liabilities consisted of the following:

(in thousands)
June 30,
2022 December 31,
2021
Promissory note dated January 18, 2018, issued for the purchase of real property. The promissory note was collateralized by the land and building purchased and matured January 18, 2022. The promissory note bears interest at 12.0% for year one and escalates 0.5% per year thereafter. The full principal balance and accrued interest are due at maturity. In the event of default, the note is convertible at the holder's option. $ — $ 6,500
Promissory note dated May 4, 2020, issued to Harvest Small Business Finance, LLC, an unaffiliated third party. Loan was part of the Paycheck Protection Program ("PPP Loan") offered by the U.S. Small Business Administration. The interest rate on the note was 1.0%. The note required interest and principal payments seven months from July 2020. The note matures in February 2025. 15 562
Unsecured promissory note dated January 22, 2021, issued to Michael Nahass (a related party), which matured January 25, 2022, and bore interest at a rate of 3% per annum. — 1,050
Convertible promissory note dated January 25, 2021, issued to accredited investors, which matured July 22, 2022 and bears interest at a rate of 8% per annum. The conversion price is $0.175 per share. 3,450 3,500
Promissory note dated July 27, 2021, issued to Arthur Chan which matures July 26, 2024, and bears interest at a rate of 12% per annum. 2,500 2,500
Senior Secured Promissory Note dated November 22, 2021 issued to Dominion Capital LLC, which matured on February 22, 2022 and bore interest at a rate of 12% per annum. — 2,500
Unsecured promissory note without interest from a related party. The loan is paid in 20 equal installments and matured on August 1, 2022. 60 90
Promissory note dated June 1, 2020, issued as part of the Paycheck Protection Program ("PPP Loan") offered by the U.S. Small Business Administration. The interest rate on the note is 1.0%. The note matured on June 1, 2022. 297 297
Line of credit agreement entered on March 31, 2021, which matured on March 31, 2022 and bore interest of 2.9% per 30 days. — 4,500
Promissory note dated October 1, 2021, issued to Sterling Harlan as part of the SilverStreak Solutions acquisition. The interest rate on the note was 3.0%. The note matured on April 1, 2022. 2,000 2,000
Promissory note dated October 1, 2021, issued to Sterling Harlan as part of the SilverStreak Solutions acquisition. The interest rate on the note is 3.0%. The note matures on October 1, 2022. 2,500 2,500
Secured promissory note dated November 22, 2021 issued to People's California, LLC, which matures on November 22, 2023 and bears interest at a rate of 8.0% per annum. Payments due include $2.00 million plus accrued interest for the first twelve months followed by payments of $1.00 million plus accrued interest until maturity. 21,569 28,569
Promissory note dated May 1, 2019, assumed by the Company on July 1, 2021 in connection with the purchase of real property, from a related party. The note matures on May 15, 2039 and bears interest at a rate of 9.89% per year. 2,922 2,954
Notes payable - promissory notes $ 35,313 $ 57,522
Vehicle loans 177 204
Less: Short-term debt (26,532) (45,749)
Less: Debt discount (1,320) (1,971)
Net Long-Term Debt $ 7,638 $ 10,006

~~Table of Contents~~

~~During the six months ended June 30, 2022, the Company converted debt and accrued interest into 294,452 shares of the Company’s common stock. See Note 13, "Stockholders' Equity" for further information.~~

~~Series A Preferred Stock Purchase Agreement~~

On January 22, 2021, the Company entered into an unsecured promissory note in the amount of $1.05 million in connection with the Series A Preferred Stock Purchase Agreement with Michael A. Nahass. The promissory note bears interest at the rate of 3% and matured on or about January 25, 2022. On February 8, 2022, the Company paid the outstanding principal and interest on the $1.05 million promissory note held by Mr. Nahass. This payment satisfied the obligation and retired the note.

~~Debt Related to Dyer Property~~

On January 18, 2018, the Company entered into a $6.50 million promissory note for the purchase of land and building in Santa Ana, CA (the "Dyer Property"). On November 22, 2021, the Company issued a senior secured promissory note to Dominion Capital LLC in the amount of $2.50 million, which matured on February 22, 2022 and bore interest at a rate of 12% per annum. As a result of the sale of the Dyer Property on February 10, 2022, the Company retired a total of $9.00 million in outstanding debt related to the Dyer Property. See Note 17, "~~Discontinued Operations" for further information.~~

~~Forgiveness of PPP Note~~

On May 4, 2020, OneQor Technologies, Inc entered into a promissory note (the “PPP Note”) with Harvest Small Business Finance, LLC (the “Lender”), pursuant to which the Lender agreed to make a loan to the Company under the Paycheck Protection Program (“PPP”) offered by the U.S. Small Business Administration in a principal amount of $0.56 million. The PPP Note incurs interest at a fixed rate of 1% per annum and matured on May 4, 2022. On February 16, 2022, the Company received notice of forgiveness of approximately $0.54 million of the PPP Note. The remainder is to be paid off over the next three years.

~~Debt Assumed in the UMBRLA Acquisition~~

On July 1, 2021, upon the closing of the UMBRLA acquisition, the Company assumed a line of credit agreement with Bespoke Financial, Inc. for the lesser of a maximum draw amount of $4.50 million and a borrowing base consisting of eligible accounts receivable inventory and cash that serves as collateral. The line of credit accrues interest at a rate of 2.9% every 30 days and expires on March 31, 2022. On March 9, 2022, the Company paid the outstanding principal and interest due on the line of credit facility. The payment satisfied the obligation and retired the debt.

~~Amendment of People's Secured Promissory Note~~

On April 8, 2022, the Company and People's California, LLC agreed to amend a portion of the November 22, 2021 Closing Documents (Primary Membership Interest Purchase Agreement, Secondary Membership Interest Purchase Agreement, Secured Promissory Note, and other ancillary agreements). On April 11, 2022, the Company paid $3.00 million upon execution of the amendment and was to pay $5.00 million by June 1, 2022, or June 30, 2022 if the Company obtained debt financing approved by People’s, to satisfy all financial obligations that would be owing as of June 30, 2022. People’s declined to approve the debt financing obtained by the Company, and the Company did not make the $5.00 million payment. Management is renegotiating terms of the promissory note as of the date of these consolidated financial statements.


	(in thousands)
	June 30, 2023		December 31, 2022

Tax Liabilities	$	2,663	$	1,018
Accrued Payroll and Benefits	602		628
Accrued Interest	1,053		2,113
Other Accrued Expenses	1,290		665
Total Accrued Liabilities	$	5,608	$	4,424

NOTE 1210 – LEASES

A lease provides the lessee the right to control the use of an identified asset for a period of time in exchange for consideration. Operating lease right-of-use assets are included in other assets while lease liabilities are a line item on the Company’s ~~Consolidated Balance Sheets.~~consolidated balance sheets. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The Company determines if an arrangement is a lease at inception. Right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Most operating leases contain renewal options that provide for rent increases based on prevailing market conditions. The terms used to calculate the right-of-use assets for certain properties include the renewal options that the Company is reasonably certain to exercise.

~~Table of Contents~~

The discount rate used to determine the commencement date present value of lease payments is the interest rate implicit in the lease, or when that is not readily determinable, the Company utilizes its secured borrowing rate. Right-of-use assets include any lease payments required to be made prior to commencement and exclude lease incentives. Both right-of-use assets and lease liabilities exclude variable payments not based on an index or rate, which are treated as period costs. The Company’s lease agreements do not contain significant residual value guarantees, restrictions or covenants.

The Company occupies office facilities under lease agreements that expire at various dates. In addition, office, production and transportation equipment is leased under agreements that expire at various dates. The Company does not have any significant finance leases. Total operating lease costs were $0.86 million and $1.37 million for the three months ended June 30, 2023 and 2022, respectively, and ~~June 30, 2021 were~~ $1.50 million and ~~$0.34~~$2.47 million ~~respectively, and~~ for the six months ended June 30, 2023 and 2022, ~~and June 30, 2021 were $2.71 million and $0.75 million, respectively.~~respectively. Short-term lease costs during the ~~2022 and 2021~~ fiscal quarters ended June 30, 2023 and 2022 were not material.

As of June 30, ~~2022~~2023 and December 31, ~~2021, short term~~2022, the Company has short-term lease liabilities of ~~$1.94~~$2.13 million and ~~$3.12~~$2.00 million, ~~are included in “Accounts Payable and Accrued Expenses” on the consolidated balance sheets,~~ respectively. The table below presents total operating lease right-of-use assets and lease liabilities as of June 30, ~~2022~~2023 and December 31, ~~2021:~~

(in thousands)
June 30,
2022 December 31,
2021
Operating lease right-of-use assets $ 16,111 $ 24,448
Operating lease liabilities $ 16,411 $ 24,436

~~The table below presents the maturities of operating lease liabilities as of June 30,~~ 2022:

(in thousands)
Operating
Leases
2022 (remaining) $ 1,627
2023 3,308
2024 3,373
2025 2,927
2026 2,299
Thereafter 11,400
Total lease payments 24,934
Less: discount (8,523)
Total operating lease liabilities $ 16,411


	(in thousands)
	June 30, 2023		December 31, 2022
Operating Lease Right-of-Use Assets	$	12,946	$	13,946
Operating Lease Liabilities	$	14,437	$	15,084

The table below presents the weighted average remaining lease term for operating leases and weighted average discount rate used in calculating operating lease right-of-use assets:

Six Months Ended
June 30,
2022 June 30,
2021
Weighted average remaining lease term (years) 5.7 79.0
Weighted average discount rate 11.4 % 11.6 %


	Six Months Ended
	June 30, 2023		June 30, 2022
Weighted Average Remaining Lease Term (Years)	8.0		5.7
Weighted Average Discount Rate	11.7	%	11.4	%

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

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NOTE 11 – NOTES PAYABLE

Notes payable as of June 30, 2023 and December 31, 2022 consisted of the following:


	(in thousands)
	June 30, 2023		December 31, 2022
Promissory note dated May 4, 2020, issued to Harvest Small Business Finance, LLC, an unaffiliated third party. Loan was part of the Paycheck Protection Program ("PPP Loan") offered by the U.S. Small Business Administration. The interest rate on the note was 1.0%. The note required interest and principal payments seven months from July 2020. The note matures in February 2025.	$	14	$	14
Convertible promissory note dated January 25, 2021, issued to accredited investors, which matured July 22, 2022 and bears interest at a rate of 8.0% per annum. The conversion price is $0.175 per share.	3,253		3,450
Promissory note dated July 27, 2021, issued to Arthur Chan which matures July 26, 2024, and bears interest at a rate of 8.0% per annum.	2,500		2,500
Unsecured promissory note dated December 28, 2022 due to a related party. The interest rate on the note is 1.0% and matures on December 28, 2027.	94		154
Promissory note dated October 1, 2021, issued to Sterling Harlan as part of the SilverStreak Solutions acquisition. The interest rate on the note was 10.0%. The note matures in March 2028.	308		2,000
Promissory note dated October 1, 2021, issued to Sterling Harlan as part of the SilverStreak Solutions acquisition. The interest rate on the note was 10.0%. The note matures in March 2028.	1,230		2,500
Secured promissory notes dated March 6, 2023 issued to People's California, LLC, which matures in March 2028 and bears interest at a rate of 10.0% per annum on the first $3.00 million due in December 2023, and 5.0% per annum on the remaining balance through September 2023 and 10.0% per annum thereafter. Payment of the remaining balance is due in March 2028.	22,200		21,569
Promissory note dated May 1, 2019, assumed by the Company on July 1, 2021 in connection with the purchase of real property, from a related party. The note matures on May 15, 2039 and bears interest at a rate of 9.9% per year.	2,876		2,882
Notes Payable - Promissory Notes	$	32,475	$	35,069
Vehicle Loans	57		76
Less: Short-Term Debt	(25,879)		(29,662)
Less: Debt Discount, Net	(11)		(669)
Net Long-Term Debt	$	6,642	$	4,814

Amendments of Promissory Note Related to People's California, LLC

On March 6, 2023, the Company entered into a binding settlement term sheet ("Settlement Term Sheet") to resolve pending litigation matters with People’s California, LLC, whereby the parties agreed to amend the terms of that certain secured promissory note ("Original Note"), issued by the Company to People's California, LLC on November 22, 2021. The Original Note was amended and restated into two secured promissory notes: a $3.00 million note ("$3M Note") and a $20.00 million note ("Settlement Note"). The $3M Note accrues simple interest at 10.0% annually, interest payable monthly in cash, and principal is due 180 days after effective date of the Settlement Term Sheet.

The Settlement Note accrues interest at 5.0% for the first 180 days, and 10.0% thereafter, interest is paid in cash (or the Company’s common stock based on the 10-day volume-weighted average price ("VWAP") at the date of issuance) starting 180 days after the effective date of the Settlement Term Sheet and on the first of the month thereafter. The amount of $5.00 million of principal is due in cash within 90 days of the effective date of the Settlement Term Sheet with the balance due on the fifth anniversary of the effective date of the Settlement Term Sheet, which is March 6, 2028. When the $5.00 million principal payment for the Settlement Note and the $3.00 million payment under the $3M Note are paid (“Up-front Settlement”) in accordance with the Settlement Term Sheet, People's California, LLC will be obligated to transfer the Riverside and Costa Mesa licenses and stores to the Company as described in that certain membership interest purchase agreement, dated as of November 22, 2021, with People's California, LLC for no additional consideration.

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

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On the earlier of the date of the Up-front Settlement payment or 180 days after the effective date of the Settlement Term Sheet, People's California, LLC will have the option to convert a portion or all of the principal balance of the Settlement Note into the Company's common stock subject to certain requirements in the Settlement Term Sheet. The conversion price is the lower of $0.20 or the 10-day VWAP of the Company's common stock. Upon payment of the Up-front Settlement, the Company has the option to convert the unpaid principal balance of either notes into the Company's common stock at a conversion price of $0.20 per share as long as the at the time of the conversion the Company's common stock has a 10-day VWAP of $0.20 per share or greater.

After the first $5.00 million principal payment on the Settlement Note, principal payments made in cash prior to the first anniversary of the Settlement Term Sheet reduce the principal balance by twice the amount of the cash payment. The modification to the Company's promissory note under the Settlement Term Sheet was classified as troubled debt restructuring pursuant to ASC 470-60, "Troubled Debt Restructurings by Debtors" ("ASC 470-60") and the Company recorded a premium of $0.47 million. See "Note 18 – Commitments and Contingencies" for details on the related litigation matters.

On May 17, 2023, the Company amended the Settlement Term Sheet wherein the maturity date of the $3M Note was extended to December 6, 2023 and payments of the $5.00 million portion of the Up-front Settlement was extended through September 6, 2023, with $0.80 million being due and paid in cash on May 18, 2023. In addition, the Company shall make an additional $2.20 million principal repayment on or before July 6, 2023. Monthly interest payments were amended to provide the Company with the option to pay 50% of interest in the form of registered shares of common stock. Further, upon payment of the $0.80 million on May 18, 2023, People's California, LLC shall transfer the Riverside and Costa Mesa licenses and stores to the Company for no additional consideration. Such assets have not been transferred to the Company as of June 30, 2023 and the Company has not recorded a debt premium for the contingent free assets. The amendment to the Settlement Term Sheet was classified as a troubled debt restructuring pursuant to ASC 470-60.

On July 10, 2023, the Company received a notice of breach and demand to cure from People's California, LLC in respect of the Settlement Term Sheet, as amended on May 17, 2023, wherein People’s California, LLC stated that the Company failed to make the principal repayment of $2.20 million on July 6, 2023 and a monthly interest payment of $25,000 for the month of June 2023. As a result, the promissory notes became callable by the creditor subsequent to the balance sheet date but before these consolidated financial statements are issued. Accordingly, the Company classified the long-term debt as current notes payable in the consolidated balance sheet as of June 30, 2023. The Company is currently in ongoing discussions with People's California, LLC to renegotiate the debt.

Amendment of Promissory Notes Related to SilverStreak Acquisition

On March 23, 2023, the Company entered into a binding term sheet to modify the terms of the $2.00 million and $2.50 million unsecured promissory notes originally issued on October 1, 2021 in connection with that certain stock purchase agreement dated June 9, 2021 and amended on July 13, 2021, which reduced the principal to an aggregate of $1.25 million, with required monthly aggregate payments of approximately $0.03 million, interest of 10% per annum, and maturing on March 15, 2028 ("Notes Modification"). The parties also agreed that the Company shall be responsible for certain tax liabilities of approximately $0.53 million. The Notes Modification was classified as a troubled debt restructuring pursuant to ASC 470-60, "Troubled Debt Restructurings by Debtors," and the Company recorded a gain on extinguishment of debt of $3.03 million and reduced the carrying value of the promissory notes to total future cash payments of $1.59 million.

On April 30, 2023, the Company entered into a Settlement Agreement and Release (the “Settlement Agreement”) as definitive documentation of the binding term sheet dated March 23, 2023 related to the unsecured promissory notes issued on October 1, 2021 in connection with the acquisition of SilverStreak Solutions, Inc.

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

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NOTE 1312 – ~~EQUITY~~STOCKHOLDERS' DEFICIT

Series V Preferred Stock

In December 2022, the Company filed a Certificate of Designation of Rights, Privileges, Preferences, and Restrictions with the Secretary of State of the State of Nevada to establish a new class of preferred shares, the Series V Preferred Stock, $0.001 par value. The number of authorized shares of Series V Preferred Stock is 25,000,000 shares. Each share of Series V Preferred Stock is convertible into ten shares of Common Stock at any time from and after the first anniversary of the issuance date. Each share of Series V Preferred Stock will automatically be converted into ten fully paid and non-assessable shares of Common Stock on the second anniversary of the date on which the holder’s shares of Series V Preferred Stock were issued. The Series V Class of Preferred Stock have a one-year lock-up and have a two times voting right which automatically expires in two years.

In January 2023, the Company entered into Securities Purchase Agreements with certain investors, including Sabas Carrillo, the Company’s Chief Executive Officer, Patty Chan, the Company’s Chief Financial Officer, James Miller, the Company's Chief Operating Officer, and Robert Baca, the Company’s Chief Legal Officer (the "Private Placement"). Pursuant to the SPA, the Company issued (i) 14,071,431 shares of Series V Preferred Stock at $0.14 per share which is equal to the closing share price of the Company’s common stock on December 30, 2022 on an as-converted-to-common stock-basis of ten shares of common stock for each one share of Series V Preferred Stock or $0.014 per share of common stock and (ii) 70,357,155 warrants to purchase up to 70,357,155 of common stock with an exercise price of $0.028 or equivalent to two times the as-converted-to-common stock purchase price of $0.014. The Company received total gross proceeds of $1.97 million from the Private Placement. The purchasers in the Private Placement entered into a voting agreement to assign their voting rights to Sabas Carrillo, the Company's Chief Executive Officer.

Series N Preferred Stock

In February 2023, the Company filed a Certificate of Designation of Rights, Privileges, Preferences, and Restrictions with the Secretary of State of the State of Nevada to establish a new class of preferred shares, the Series N Preferred Stock, $0.001 par value. The number of authorized shares of Series N Preferred Stock is 2,500,000 shares. Each share of Series N Preferred Stock is convertible into 100 shares of the Company's common stock at any time from and before the first anniversary of the issuance date. Each share of Series N Preferred Stock will automatically be converted into 100 fully paid and non-assessable shares of the Company's common stock on the first anniversary of the issuance date.

Common Stock

The Company authorized 990,000,000 shares of common stock with $0.001 par value per share. As of June 30, ~~2022~~2023 and December 31, ~~2021, 532,514,791~~2022, 772,483,465 and ~~498,546,291~~679,513,554 shares of common stock were outstanding, respectively.

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~~On February 1, 2022~~During the six months endedJune 30, 2023, the Company ~~granted 294,452~~issued 96,178,321 shares ~~Common Stock~~of common stock to ~~Apollo Management Group, Inc. in exchange for the $0.05 million Convertible Promissory Note that Apollo Management Group, Inc. held~~ ~~and the~~a related ~~accrued interest. The fair value of the shares was $0.08 million.~~

~~On February 28, 2022,~~party service provider. As a result, the Company ~~sold 25,000,000 shares~~recorded $1.91 million of stock-based compensation expense for ~~an aggregate sales price of $4.35 million to Arthur Chan, an unrelated party. The shares were restricted.~~services during the six months endedJune 30, 2023. See "Note 17 – Related Party Transactions" for further information.

During the six months ended June 30, ~~2022~~ 2023, a member of the Company's board of directors forfeited 900,000 shares of the Company's common stock to the Company ~~issued 4,759,708 and 146,212 common~~for no cash value. Subsequent to the forfeiture, the Company cancelled 3,208,420 shares ~~for the cashless exercise~~ of ~~warrants and options, respectively.~~

~~During~~treasury stock during the six months ended June 30, ~~2022~~2023,. Accordingly, treasury stock outstanding as of June 30, 2023 and December 31, 2022 was nil and 2,308,420 shares of common stock, respectively.

The accompanying notes are an integral part of the ~~Company issued 2,100,000 and 943,128 common shares to employees and directors, respectively. As a result, the Company recorded stock compensation~~unaudited consolidated financial statements.

Table of ~~$0.35 million and $0.21 million, respectively.~~Contents

~~During the three and~~ ~~six months endedJune 30, 2022, the Company issued 725,000 common shares to third party service providers. As a result, the Company recorded stock compensation of $0.13 million.~~

NOTE 1413 – STOCK-BASED COMPENSATION

Equity Incentive Plans

In the first quarter of 2016, the Company adopted the 2016 Equity Incentive Plan. In the fourth quarter of 2018, the Company adopted the 2018 Equity Incentive Plan. In July 2021, the Company assumed the 2019 Equity Incentive Plan as part of the acquisition of UMBRLA. The following table contains information about the Company's equity incentive plans as of June 30, ~~2022:~~2023:


		Awards Reserved for Issuance	Awards Exercised	Awards Outstanding	Awards Available for Grant		Awards Reserved for Issuance	Awards Exercised	Awards Outstanding	Awards Available for Grant

2016 Equity Incentive Plan	2016 Equity Incentive Plan	999,906	—	499,953	499,953	2016 Equity Incentive Plan	497,776	—	248,888	248,888
2018 Equity Incentive Plan	2018 Equity Incentive Plan	30,988,982	4,022,133	14,009,842	12,957,007	2018 Equity Incentive Plan	17,364,171	4,022,133	6,754,353	6,587,685
2019 Equity Incentive Plan	2019 Equity Incentive Plan	109,990,468	34,884	73,014,714	36,940,870	2019 Equity Incentive Plan	24,062,129	34,884	14,027,519	9,999,726

Stock-Based Compensation Expense

The following table sets forth the total stock-based compensation expense resulting from stock options and restricted grants of common stock to employees, directors and non-employee consultants in the consolidated statement of operations which are included in selling, general and administrative expenses:


	(in thousands, except for shares / options)
	For the Three Months Ended
	June 30, 2023			June 30, 2022
Type of Award	Number of Shares or Options Granted	Stock-Based Compensation Expense		Number of Shares or Options Granted	Stock-Based Compensation Expense

Stock Options	—	$	89	400,000	$	1,352

Stock Grants:
Employees (Common Stock)	—	—		1,200,000	170
Directors (Common Stock)	—	—		259,796	29
Non–Employee Consultants (Common Stock)	79,997,091	1,553		725,000	129

Total Stock–Based Compensation Expense		$	1,642		$	1,680


	(in thousands, except for shares / options)
	For the Six Months Ended
	June 30, 2023			June 30, 2022
Type of Award	Number of Shares or Options Granted	Stock-Based Compensation Expense		Number of Shares or Options Granted	Stock-Based Compensation Expense

Stock Options	—	$	187	400,000	$	3,174

Stock Grants:
Employees (Common Stock)	—	—		2,100,000	352
Directors (Common Stock)	—	—		943,128	213
Non–Employee Consultants (Common Stock)	96,178,321	1,910		725,000	129

Total Stock–Based Compensation Expense		$	2,097		$	3,868

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

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Stock Options

The following table summarizes the Company’s stock option activity and related information for the six months ended June 30, ~~2022:~~2023:

Number of
Shares
Weighted-
Average Exercise
Price Per Share Weighted-
Average
Remaining
Contractual
Life Aggregate
Intrinsic
Value of
In-the-Money
Options

Options outstanding as of January 1, 2022 88,251,380 $ 0.20
Granted 400,000 —
Exercised (146,212) $ 0.08
Forfeited (223,791) $ 0.15
Expired (154,762) $ 0.34
Options outstanding as of June 30, 2022 88,126,615 $ 0.20 8.3 years $ 33
Options exercisable as of June 30, 2022 50,718,424 $ 0.24 7.4 years $ 50


	Number of Shares	Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value of In-the-Money Options

Options Outstanding as of January 1, 2023	52,821,099	$	0.23
Forfeited	(31,695,340)	$	0.23
Options Outstanding as of June 30, 2023	21,125,759	$	0.23	7.1 years	$	—
Options Exercisable as of June 30, 2023	15,931,299	$	0.28	7.5 years	$	—

As of June 30, ~~2022, there was $5.44 million~~2023, total unrecognized stock-based ~~compensation.~~compensation was $0.21 million. Such costs are expected to be recognized over a weighted-average period of approximately ~~1.6~~1.01 years.

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The Company recognizes compensation expense for stock option awards on a straight-line basis over the applicable service period of the award. The service period is generally the vesting period.

The Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. Hence, the Company uses the “simplified method” described in Staff Accounting Bulletin 107 to estimate the expected term of share option grants.

The expected stock price volatility assumption was determined by examining the historical volatilities for the Company’s common stock. The Company will continue to analyze the historical stock price volatility and expected term assumptions as more historical data for the Company’s common stock becomes available.

The risk-free interest rate assumption is based on the U.S. treasury instruments whose term was consistent with the expected term of the Company’s stock options.

The expected dividend assumption is based on the Company’s history and expectation of dividend payouts. The Company has never paid dividends on its common stock and does not anticipate paying dividends on its common stock in the foreseeable future. Accordingly, the Company has assumed no dividend yield for purposes of estimating the fair value of the Company stock-based compensation.

~~Stock-Based Compensation Expense~~

(in thousands except for shares / options)
For the Three Months Ended
June 30, 2022 June 30, 2021
Type of Award Number of
Shares or
Options
Granted Stock-Based
Compensation
Expense Number of
Shares or
Options
Granted Stock-Based
Compensation
Expense

Stock options 400,000 $ 1,352 5,409,716 $ 641
Stock grants:
Employees (common stock) 1,200,000 $ 170 250,000 68
Directors (common stock) 259,796 $ 29 343,493 94
Non–employee consultants (common stock) 725,000 $ 129 — —
Total stock–based compensation expense $ 1,680 $ 803

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(in thousands except for shares / options)
For the Six Months Ended
June 30, 2022 June 30, 2021
Type of Award Number of
Shares or
Options
Granted Stock-Based
Compensation
Expense Number of
Shares or
Options
Granted Stock-Based
Compensation
Expense

Stock options 400,000 $ 3,174 5,909,716 $ 885
Stock grants:
Employees (common stock) 2,100,000 $ 352 250,000 67
Directors (common stock) 943,128 $ 213 885,159 214
Non–employee consultants (common stock) 725,000 $ 129 332,947 32
Total stock–based compensation expense $ 3,868 $ 1,198

On March 10, 2022, the Company terminated the employment of Oren Schauble, the Company’s President. On March 13, 2022, the Company terminated the employment of Francis Knuettel II, the Company’s Chief Executive Officer. The Company entered into separation agreements with each of Mr. Knuettel and Mr. Schauble regarding the compensation to be granted to each of them regarding their separation from the Company. In addition, on March 17, 2022 the Company entered into a consulting agreement with Mr. Schauble pursuant to which he will continue to provide certain services to the Company through a future agreed upon date. The Company granted Mr. Schauble 910,623 restricted shares of the Company's Common Stock in 4 monthly installments.

On April 12, 2022, the Company and Francis Knuettel, formerly the Company's Chief Executive Officer, agreed to terms on a separation agreement. The Company agreed to pay Mr. Knuettel 50% of his annual base salary and continue his medical benefits for a period of six months. Mr. Knuettel's unvested shares and options vested immediately. As part of this separation agreement Mr. Knuettel resigned as a director of the Company.

On April 14, 2022, the Company and Dallas Imbimbo, an advisor to the Company and a director of the Company, agreed to terms on a separation agreement. The Company agreed to vest 100% of Mr. Imbimbo's restricted common stock granted pursuant to the advisor agreement with Mr. Imbimbo. The Company agreed to vest 100% of the options to purchase shares of the Company's common stock granted as part Mr. Imbimbo's Independent Director Agreement. The Company will pay Mr. Imbimbo $0.08 million in cash compensation. As part of this separation agreement, Mr. Imbimbo resigned as a director of the Company and as an Advisor to the Company.

NOTE 1514 – WARRANTS

The following table summarizes the Company's warrant activity for the six months ended June 30, ~~2022:~~2023:

Warrants Weighted-Average
Exercise
Price
Warrants outstanding as of January 1, 2022 85,826,872 $ 0.22
Issued — $ —
Exercised (4,759,708) $ —
Warrants outstanding as of June 30, 2022 81,067,164 $ 0.14


	Warrants	Weighted-Average Exercise Price

Warrants Outstanding as of January 1, 2023	80,881,817	$	0.11

Issued	70,357,155	$	0.03
Expired	(560,211)	$	2.43
Warrants Outstanding as of June 30, 2023	150,678,761	$	0.06

26The accompanying notes are an integral part of the unaudited consolidated financial statements.

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NOTE 1615 – ~~COMMITMENTS AND CONTINGENCIES~~DISCONTINUED OPERATIONS

~~California Operating Licenses~~Oregon Operations

On December 28, 2022, the Company entered into a Stock Purchase and Sale Agreement pursuant to which the Company sold all of its equity interests in LTRMN, Inc., which conducts cannabis distribution and wholesale activities in Oregon, for an aggregate purchase price of $0.25 million. The purchase price was paid in the form of a secured promissory note at a rate of 8.0% per annum due and payable on the third anniversary of the date of issuance. However, upon a final and binding settlement of certain ongoing litigation that is approved by UMBRLA, the purchase price shall be automatically revised to be nil and the promissory note shall be deemed paid and satisfied in-full.

On December 28, 2022, the Company entered into a Membership Interest Purchase and Sale Agreement pursuant to which the Company sold its 50.0% equity interests in Psychonaut Oregon, LLC (“Psychonaut”) to Joseph Gerlach for an aggregate purchase price of $1.00. Mr. Gerlach owns the other 50.0% of the equity interests in Psychonaut and is also the Company’s Chief Cultivation Officer. In connection with the sale of Psychonaut, the Company entered into an unsecured promissory note dated December 28, 2022 (the “Psychonaut Note”) pursuant to which the Company consolidated all current liabilities due to Mr. Gerlach totaling $0.15 million. The Psychonaut Note accrues interest at a rate of 1.0% per annum and is due and payable on the fifth anniversary of the date of issuance.

The Company concluded that the sale of LTRMN, Inc. and Psychonaut (together, the "Oregon operations") represented a strategic shift that will have a major effect on the Company’s ~~subsidiaries have operated compliantly~~operations and ~~have been eligible~~financial results and thus all assets and liabilities allocable to the operations within the state of Oregon were classified as discontinued operations. The assets associated with the Oregon operations were measured at the lower of their carrying amount or fair value less costs to sell ("FVLCTS"). Revenue and expenses, gains or losses relating to the discontinuation of Oregon operations were eliminated from profit or loss from the Company’s continuing operations and are shown as a single line item in the consolidated statements of operations for ~~applicable licenses and renewals of those licenses.~~all periods presented.

~~Litigation and Claims~~

The Company is the subject of lawsuits and claims arising in the ordinary course of business from time to time. The Company reviews any such legal proceedings and claims on an ongoing basis and follows appropriate accounting guidance when making accrual and disclosure decisions. The Company establishes accruals for those contingencies where the incurrence ofrecognized a loss ~~is probable and can be reasonably estimated, and it discloses the amount accrued and the amount of a reasonably possible loss in excess~~upon sale of the amount accrued if such disclosure is necessary for the Company’s financial statements to not be misleading. To estimate whether a loss contingency should be accrued by a charge to income, the Company evaluates, among other factors, the degreeOregon operations of ~~probability of an unfavorable outcome and the ability to make a reasonable estima~~te of the amount of the loss. The Company does not record liabilities when the likelihood that the liability has been incurred is probable, but the amount cannot be reasonably estimated. Based upon present information, the Company determined that there was one matter that required an accrual as of June 30, 2022. We have accrued $0.50 million for the net carrying value of the assets as of the disposition date which was determined as the book value less direct costs to sell and is recognized as a component of loss on disposal of assets and other expense in the Consolidated Statements of Operations for Discontinued Operations during the year ended December 31, 2022. As of December 31, 2022, the Oregon operations have been fully deconsolidated by the Company and the Company does not have any continuing involvement with the former subsidiary outside of the Magee litigation ~~detailed below.~~disclosed in “Note 18 – Commitments and Contingencies”.

NuLeaf

On November 17, 2021, Medifarm III, LLC (“Medifarm III”), a wholly-owned subsidiary of the Company, entered into a Membership Interest Purchase Agreement (the “NuLeaf Purchase Agreement”) with NuLeaf, Inc., a Nevada corporation (“NuLeaf”). Upon the terms and subject to the satisfaction of the conditions described in the NuLeaf Purchase Agreement, Medifarm III agreed to sell its 50.0% of the outstanding membership interests of each of NuLeaf Reno Production, LLC (“NuLeaf Reno”) and NuLeaf Sparks Cultivation, LLC (“NuLeaf Sparks”) to NuLeaf, which owned the remaining 50.0% of the membership interests of NuLeaf Reno and NuLeaf Sparks, for aggregate consideration of $6.50 million in cash. The transaction closed in April 2022.

OneQor

During fiscal year 2020, management suspended the operations of OneQor due to (i) a lack of proper growth in customer acquisition and revenue for this CBD operation during the COVID-19 pandemic and (ii) the overall financial health of the Company as a result of COVID-19 and social unrest. The Company plans to focus its attention and resources on growing its THC business. In November 2022, the Company received confirmation for the legal dissolution of OneQor. Accordingly, all liabilities and existing obligations related to OneQor were extinguished as of December 31, 2022.

The completed sales of our NuLeaf and Oregon operations during the periods presented represented a strategic shift that had a major effect on the Company’s operations and financial results. As a result, management determined the results of these components qualified for discontinued operations presentation in accordance with ASC 205, “Reporting Discontinued Operations and Disclosure of Disposals of Components of an Entity".

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

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~~Magee v. UMBRLA, Inc. et al.~~-~~The company is currently involved in a breach of contract action brought by former LTRMN, Inc. (“LTRMN”) employee, Kurtis Magee, which was filed by Mr. Magee in~~Operating results for the ~~Superior Court~~discontinued operations were comprised of the ~~State~~following:


	(in thousands)
	Three Months Ended June 30,		Six Months Ended June 30,
	2022		2022
Total Revenues	$	1,948	$	6,833
Cost of Goods Sold	1,549		3,648
Gross Profit	399		3,185

Selling, General & Administrative Expenses	1,137		3,608
Gain on Sale of Assets	(2,047)		(3,728)
Income from Operations	1,309		3,305

Interest Expense	(6)		(6)
Other Income	21		50
Income from Discontinued Operations Before Provision for Income Taxes	1,324		3,349

Income Tax Expense	95		—
Income from Discontinued Operations	$	1,419	$	3,349

Income from Discontinued Operations per Common Share Attributable to Unrivaled Brands, Inc. Common Stockholders - Basic And Diluted	$	—	$	0.01

As of ~~California, County of Orange, on July 21, 2020. Mr. Magee alleges breach of contract in connection with Mr. Magee’s separation agreement with LTRMN. Trial in this matter is set for~~June 30, 2023 and December ~~5, 2022.~~

~~Terra Tech Corp. v. National Fire & Marine Ins. Co., et al.~~ - ~~On or about December 6, 2021,~~31, 2022, the ~~Company initiated an action in California Superior Court, County of Alameda, against National Fire & marine Insurance Company (“National Fire”), Woodruff-Sawyer & Co.,~~assets and ~~R-T Specialty, LLC in connection with the denial of an insurance claim by National Fire following the vandalism~~liabilities related to discontinued operations were deconsolidated and looting of the Company’s Bay Area dispensaries in May 2020. The Company alleges that coverage levels for the Company were changed after the policy was bound, in a manner inconsistent with the binder, which prevented the Company from fully recovering its losses in connection with the incidents. Trial in this matter has not yet been set.

~~Unrivaled Brands, Inc. et al v. Mystic Holdings, Inc., et al.~~ - On May 11, 2022, Unrivaled and its wholly-owned subsidiary, Medifarm I, LLC (“Plaintiffs”) initiated an action in the Second Judicial District of the State of Nevada, County of Washoe, against Mystic Holdings, Inc. (“Mystic”) and Picksy Reno LLC (collectively with Mystic, “Defendants”) in connection with Defendants’ failure to honor Plaintiffs’ exercise of a put option entitling Plaintiffs to the repurchase of approximately 8,332,096 shares of Mystic at a price of $1.00 per share. No proceedings have yet been held in this matter and a trial date has not been scheduled.

~~Fusion LLF, LLC v. Unrivaled Brands, Inc.~~- On June 27, 2022, Fusion LLF, LLC filed an action against the Company, Fusion LLF, LLC v. Unrivaled Brands, Inc., Superior Court for the State of California, County of Orange Case No. 30-2022-01266856-CU-BC-CJC alleging claims for breach of contract, account stated, and right to attach order and writ of attachment. The Complaint claims at least ~~$4.55 million~~ ~~in damages. Company has not yet responded to the Complaint and is evaluating the claims.~~

no balance remained.

NOTE ~~17 – DISCONTINUED OPERATIONS~~

~~NuLeaf~~

On November 17, 2021, Medifarm III, LLC (“Medifarm”), a wholly-owned subsidiary of the Company, entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with NuLeaf, Inc., a Nevada corporation (“NuLeaf”). Upon the terms and subject to the satisfaction of the conditions described in the Purchase Agreement, Medifarm will sell its fifty percent (50%) of the outstanding membership interests of each of NuLeaf Reno Production, LLC (“NuLeaf Reno”) and NuLeaf Sparks Cultivation, LLC (“NuLeaf Sparks”) to NuLeaf, which currently owns the remaining fifty percent (50%) of the membership interests of NuLeaf Reno and NuLeaf Sparks, for aggregate consideration

~~Table of Contents~~

of $6.50 million in cash. The transaction closed in April 2022 and the Company recognized a gain of $2.05 million for the difference between the aggregate consideration and the book value of the assets as of the disposition date, less direct costs to sell, for the three and six months ended June 30, 2022.

~~Nevada Dispensaries~~

During fiscal year 2019 and 2020, the Company entered into Asset Purchase Agreements with unrelated third parties to sell substantially all of the assets of the Company related to the Company's dispensaries located at:

•~~1130 East Desert Inn Road, Las Vegas, NV 89109~~

•~~1085 S. Virginia St., Suite A, Reno, NV 89502~~

•~~3650 S. Decatur Blvd., Las Vegas, NV~~

The dispensaries are collectively referred to as the "Nevada dispensaries". The transactions for the sale of the Nevada dispensaries closed upon receiving all required government approvals during the fiscal fourth quarter ended December 31, 2021.

~~Real Estate~~

On December 7, 2021, 620 Dyer LLC, a wholly-owned subsidiary of the Company, entered into a Standard Offer, Agreement and Escrow Instructions for Purchase of Real Estate (the “PSA”) with FRO III/SMA Acquisitions, LLC (the “Buyer”) to sell the real property located at 620 East Dyer Road, Santa Ana, CA (the “Dyer Property”) for $13.40 million in cash. On February 10, 2022, the Company announced the closing of the sale of the Dyer Property, resulting in the Company retiring $9.00 million of outstanding debt on the Dyer Property as disclosed in Note 11, "~~Notes Payable~~". The Company is continuing to evaluate its options with respect to the license originally connected to the Dyer property, including consideration of the retail density in the area. If the city of Santa Ana grants approval to relocate licenses elsewhere in the city, the Company may consider using the dispensary license to open a dispensary in an underserved part of Santa Ana.

During fiscal year 2020, the Company classified real property in Las Vegas, NV and Santa Ana, CA as available-for-sale as it met the criteria of ASC 360-10-45-0. In August 2021, the Company sold the properties.

~~OneQor~~

During fiscal year 2020, management suspended the operations of OneQor Technologies due to (i) a lack of proper growth in customer acquisition and revenue for this CBD operation during the COVID-19 pandemic and (ii) the overall financial health of the Company as a result of COVID-19 and social unrest. The Company plans to focus its attention and resources on growing its THC business.

~~Edible Garden~~

On March 30, 2020, the Company entered into and closed an Asset Purchase Agreement with Edible Garden AG Inc. (the "Purchaser") pursuant to which the Company sold substantially all of the assets of Edible Garden Corp. As part of the consideration received, the Company entered into two option agreements to purchase up to a 20% interest in the Purchaser. During the year ended December 31, 2021, the Company exercised both options and acquired 5,000,000 common shares of the Purchaser for a nominal fee.

The completed sales of our NuLeaf operations and Nevada dispensaries, completed sales of real estate assets, and assets divested during the periods presented represent a strategic shift that will have a major effect on the Company’s operations and financial results. As a result, management determined the results of these components qualified for discontinued

~~Table of Contents~~

~~operations presentation in accordance with ASC 205, “Reporting Discontinued Operations and Disclosure of Disposals of Components of an Entity". Operating results for the discontinued operations were comprised of the following:~~

(in thousands)
Three Months Ended
June 30, Six Months Ended
June 30,
2022 2021 2022 2021
Total revenues $ — $ 3,391 $ 2,605 $ 6,446
Cost of goods sold (23) 3,776 520 4,591
Gross profit 23 (385) 2,085 1,855
Selling, general and administrative expenses 228 1,561 1,862 3,036
Impairment of assets — — — —
(Gain) loss on sale of assets (2,048) 5 (3,729) 6
Income (loss) from operations $ 1,843 $ (1,951) $ 3,952 $ (1,187)
Interest expense — (150) — (476)
Other income — — 27 —
Income tax benefit 95 — — —
Net income (loss) from discontinued operations $ 1,938 $ (2,101) $ 3,979 $ (1,663)
Loss from discontinued operations per common share attributable to Unrivaled Brands, Inc. common stockholders - basic and diluted $ (0.01) $ (0.01) $ — $ (0.01)

~~The carrying amounts of the major classes of assets and liabilities for the discontinued operations are as follows:~~


	~~(in thousands)~~
	December 31, 2021
~~Cash~~	$	~~1,544~~
~~Accounts receivable, net~~	~~1,553~~
~~Inventory~~	~~1,359~~
~~Prepaid expenses and other assets~~	39
~~Property, equipment and leasehold improvements, net~~	~~17,661~~


~~Other assets~~	~~323~~
~~Assets of discontinued operations~~	$	~~22,479~~

~~Accounts payable and accrued expenses~~	$	~~1,170~~


~~Income taxes payable~~	~~917~~
~~Long-term lease liabilities~~	~~184~~
~~Liabilities of discontinued operations~~	$	~~2,271~~

~~NOTE 18~~16 – SEGMENT INFORMATION

The Company operates in 2two segments:

(i) ~~cannabis retail and (ii) cannabis cultivation and distribution. Our reportable segments are as follows:~~

~~Table of Contents~~

(in thousands) (in thousands)
Total Revenue % of Total Revenue Total Revenue % of Total Revenue
Three Months Ended June 30, Six Months Ended June 30,
Segment 2022 2021 2022 2021 2022 2021 2022 2021
Cannabis Retail $ 10,947 $ 2,318 62.4 % 80.7 % $ 23,056 $ 4,017 60.2 % 81.5 %
Cannabis Cultivation & Distribution 6,609 554 37.6 % 19.3 % 15,224 911 39.8 % 18.5 %
Total $ 17,556 $ 2,872 100.0 % 100.0 % $ 38,280 $ 4,928 100.0 % 100.0 %

Cannabis Retail

– Either independently or in conjunction with third parties, ~~we operate~~the Company operates medical marijuana and adult use cannabis dispensaries in California. All ~~our~~ retail dispensaries offer a broad selection of medical and adult use cannabis products including flower, concentrates, and ~~edibles.~~edibles.

(ii) Cannabis Cultivation and Distribution

~~We operate distribution centers~~ – The Company operates a cultivation facility in Oakland, California and distributes flower grown from the facility to other manufacturers or to its own retail cannabis dispensaries in California ~~and Oregon that distribute our own branded products~~under the Korova brand.

For the periods presented, revenue by reportable segments are as ~~well as third party products to our own dispensaries and to other non-affiliated medical marijuana and/or adult use cannabis dispensaries.~~follows:


	(in thousands)								(in thousands)
	Total Revenue				% of Total Revenue				Total Revenue				% of Total Revenue
	Three Months Ended June 30,								Six Months Ended June 30,
Segment	2023		2022		2023		2022		2023		2022		2023		2022
Cannabis Retail	$	8,415	$	11,140	95.7	%	70.5	%	$	16,885	$	23,653	93.6	%	68.3	%
Cannabis Cultivation & Distribution	382		4,661		4.3	%	29.5	%	1,152		10,997		6.4	%	31.7	%

Total	$	8,797	$	15,801	100.0	%	100.0	%	$	18,037	$	34,650	100.0	%	100.0	%

30The accompanying notes are an integral part of the unaudited consolidated financial statements.

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(in thousands) (in thousands)
Six Months Ended June 30, 2022 Six Months Ended June 30, 2021
Cannabis Retail Cannabis Cultivation & Distribution Corporate & Other Total Cannabis Retail Cannabis Cultivation & Distribution Corporate & Other Total
Total revenues $ 23,056 $ 15,224 $ — $ 38,280 $ 4,017 $ 911 $ — $ 4,928
Cost of goods sold 12,311 11,267 — 23,578 2,110 (97) — 2,013
Gross profit 10,745 3,957 — 14,702 1,907 1,008 — 2,915
Selling, general and administrative expenses 11,452 8,486 17,899 37,837 2,664 874 13,809 17,347
Impairment of assets — — 55,726 55,726 — — — —
Loss (gain) on sale of assets 542 — (199) 343 — — — —
Income (loss) from operations (1,249) (4,529) (73,426) (79,204) (757) 134 (13,809) (14,432)
Other income (expense):
Interest expense — (176) (2,034) (2,210) — — (112) (112)
Gain (loss) on extinguishment of debt — — 542 542 — — (6,161) (6,161)
Realized and unrealized gain on investments — — 963 963 — — 5,337 5,337
Other income 200 527 750 1,477 80 — 282 362
Total other income (loss) 200 351 222 773 80 — (654) (574)
Income (loss) before provision for income taxes $ (1,049) $ (4,178) $ (73,204) $ (78,432) $ (677) $ 134 $ (14,463) $ (15,006)
Total assets $ 51,164 $ (73) $ 133,018 $ 180,255 $ 18,950 $ (3,522) $ 91,373 $ 106,801
For the periods presented, results of operations by reportable segments are as follows:


	(in thousands)
	Three Months Ended June 30, 2023										Three Months Ended June 30, 2022
	Cannabis Retail			Cannabis Cultivation & Distribution			Corporate & Other		Total		Cannabis Retail			Cannabis Cultivation & Distribution			Corporate & Other		Total
Total Revenues	$	8,415		$	382		$	—	$	8,797	$	11,140		$	4,661		$	—	$	15,801
Cost of Goods Sold	3,963			234			—		4,197		5,430			2,284			—		7,714
Gross Profit	4,452			148			—		4,600		5,710			2,377			—		8,087
Gross Profit %	52.9		%	38.7		%					51.3		%	51.0		%

Selling, General & Administrative Expenses	2,852			312			4,907		8,071		6,427			3,886			7,847		18,160
Impairment Expense	—			—			—		—		—			—			55,726		55,726
(Gain) Loss on Disposal of Assets	—			—			(1,739)		(1,739)		542			—			(1)		541
Income (Loss) from Operations	1,600			(164)			(3,168)		(1,732)		(1,259)			(1,509)			(63,572)		(66,340)

Other Income (Expense):
Interest Income (Expense)	48			—			(235)		(187)		—			(11)			(427)		(438)
Gain on Settlement of Liabilities	110			—			—		110		—			—			—		—
Unrealized Gain on Investments	—			—			—		—		—			—			963		963
Other Income (Expense)	(31)			9			264		242		(71)			112			189		230
Total Other Income (Expense), Net	127			9			29		165		(71)			101			725		755

Income (Loss) Before Provision for Income Taxes	$	1,727		$	(155)		$	(3,139)	$	(1,567)	$	(1,330)		$	(1,408)		$	(62,847)	$	(65,585)

Total Assets (Liabilities)	$	18,231		$	4,456		$	15,573	$	38,260	$	51,162		$	(73)		$	129,166	$	180,255

31The accompanying notes are an integral part of the unaudited consolidated financial statements.

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(in thousands) (in thousands)
Three Months Ended June 30, 2022 Three Months Ended June 30, 2021
Cannabis Retail Cannabis Cultivation & Distribution Corporate & Other Total Cannabis Retail Cannabis Cultivation & Distribution Corporate & Other Total
Total revenues $ 10,947 $ 6,609 $ — $ 17,556 $ 2,318 $ 554 $ — $ 2,872
Cost of goods sold 5,430 3,856 — 9,286 1,154 (1,007) — 147
Gross profit 5,517 2,753 — 8,270 1,164 1,561 — 2,725
Selling, general and administrative expenses 6,427 3,886 8,757 19,070 1,416 512 2,770 4,698
Impairment of assets — — 55,726 55,726 — — — —
Loss on sale of assets 542 — — 542 — — — —
Income (loss) from operations (1,452) (1,133) (64,483) (67,068) (252) 1,049 (2,770) (1,973)
Other income (expense):
Interest expense — (11) (432) (443) — — (39) (39)
Realized and unrealized gain (loss) on investments — — 963 963 — — (874) (874)
Other income (loss) 122 112 209 443 80 — (63) 17
Total other income (loss) 122 101 740 963 80 — (976) (896)
Income (loss) before provision for income taxes $ (1,330) $ (1,032) $ (63,743) $ (66,105) $ (172) $ 1,049 $ (3,746) $ (2,869)
Total assets $ 51,164 $ (73) $ 133,018 $ 180,255 $ 18,950 $ (3,522) $ 91,373 $ 106,801


	(in thousands)
	Six Months Ended June 30, 2023										Six Months Ended June 30, 2022
	Cannabis Retail			Cannabis Cultivation & Distribution			Corporate & Other		Total		Cannabis Retail			Cannabis Cultivation & Distribution			Corporate & Other		Total
Total Revenues	$	16,885		$	1,152		$	—	$	18,037	$	23,653		$	10,997		$	—	$	34,650
Cost of Goods Sold	7,768			974			—		8,742		12,311			8,139			—		20,450
Gross Profit	9,117			178			—		9,295		11,342			2,858			—		14,200
Gross Profit %	54.0		%	15.5		%					48.0		%	26.0		%

Selling, General & Administrative Expenses	5,310			467			7,891		13,668		11,452			8,486			16,153		36,091
Impairment Expense	—			—			—		—		—			—			55,726		55,726
(Gain) Loss on Disposal of Assets	—			—			(1,739)		(1,739)		542			—			(199)		343
Income (Loss) from Operations	3,807			(289)			(6,152)		(2,634)		(652)			(5,628)			(71,680)		(77,960)

Other Income (Expense):
Interest Expense	—			—			(1,211)		(1,211)		—			(176)			(2,028)		(2,204)
Gain on Extinguishment of Debt	—			—			3,026		3,026		—			—			542		542
Gain on Settlement of Liabilities	110			—			—		110		—			—			—		—
Realized Loss on Investments	—			—			(61)		(61)		—			—			—		—
Unrealized Gain on Investments	—			—			—		—		—			—			963		963
Other Income (Expense)	(317)			324			264		271		(397)			527			728		858
Total Other Income (Expense), Net	(207)			324			2,018		2,135		(397)			351			205		159

Income (Loss) Before Provision for Income Taxes	$	3,600		$	35		$	(4,134)	$	(499)	$	(1,049)		$	(5,277)		$	(71,475)	$	(77,801)

Total Assets (Liabilities)	$	18,231		$	4,456		$	15,573	$	38,260	$	51,162		$	(73)		$	129,166	$	180,255

NOTE 17 – RELATED PARTY TRANSACTIONS

All related party transactions are monitored quarterly by the Company and approved by the Audit Committee of the Company's board of directors.

During the three and six months ended June 30, 2023, the Company incurred a total of $0.60 million and $1.05 million in fees pursuant to the engagement letter with Adnant, LLC ("Adnant") dated August 12, 2022, as amended on June 30, 2023, for executive level consulting and related business support services (the "Engagement"). Effective April 1, 2023, Adnant is entitled to receive monthly fees of $0.20 million through September 30, 2023 as compensation for Adnant’s continued services. The Engagement, as amended, provides Adnant with the option to convert accrued and unpaid service fees into shares of common stock of the Company. In accordance with the Engagement, the Company issued 79,997,091 and 96,178,321 shares of the Company's common stock under the performance bonus award valued at $1.55 million and $1.91 million for the three and six months ended June 30, 2023, respectively.

During the six months endedJune 30, 2023, a member of the Company's board of directors forfeited 900,000 shares of the Company's common stock to the Company for no cash value. Refer to "Note 12 - Stockholders' Deficit" for further information.

During the six months endedJune 30, 2023, the Company's CEO advanced the Company $0.20 million for working capital needs. The advance is non-interest bearing and due on demand. The related party advance is presented as a component of accounts payable and accrued expenses in the consolidated balance sheet as of June 30, 2023.

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

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NOTE 1918 – ~~RELATED PARTY TRANSACTIONS~~COMMITMENTS AND CONTINGENCIES

~~Refer to Note 11, "Notes Payable~~"California Operating Licenses

The Company’s subsidiaries have operated compliantly and have been eligible for ~~related party transactions~~applicable licenses and ~~balances during the current period.~~renewals of those licenses.

~~All related party transactions are monitored quarterly by the Company~~Litigation and ~~approved by the Audit Committee of the Board of Directors.~~

~~NOTE 20 – GOING CONCERN~~

We have incurred significant losses in prior periods. For the three and six months ended June 30, 2022, we incurred a pre-tax net loss from continuing operations of $66.10 million and $78.43 million, respectively, and, as of that date, we had an accumulated deficit of $323.71 million. For the three and six months ended June 30, 2021, we incurred a net loss from continuing operations of $2.87 million and $15.01 million, respectively. As of December 31, 2021, we had an accumulated deficit of $250.02 million. We expect to experience further significant net losses in 2022 and the foreseeable future. At June 30, 2022, we had a consolidated cash balance of approximately $7.26 million. We have not been able to generate sufficient cash from operating activities to fund our ongoing operations. Our future success is dependent upon our ability to achieve profitable operations and generate cash from operating activities. There is no guarantee that we will be able to generate enough revenue and/or raise capital to support our operations.Claims

~~We will~~The Company is the subject of lawsuits and claims arising in the ordinary course of business from time to time. The Company reviews any such legal proceedings and claims on an ongoing basis and follows appropriate accounting guidance when making accrual and disclosure decisions. The Company establishes accruals for those contingencies where the incurrence of a loss is probable and can be reasonably estimated, and it discloses the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued if such disclosure is necessary for the Company’s financial statements to not be misleading. To estimate whether a loss contingency should be accrued by a charge to income, the Company evaluates, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of the loss. The Company does not record liabilities when the likelihood that the liability has been incurred is probable, but the amount cannot be reasonably estimated. Based upon present information, the Company determined that there was one matter that required an accrual as of June 30, 2023.

Magee v. UMBRLA, Inc. et al. - The Company is currently involved in a breach of contract action brought by former LTRMN, Inc. (“LTRMN”) employee, Kurtis Magee, which was filed by Mr. Magee in the Superior Court of the State of California, County of Orange, on July 21, 2020. Mr. Magee alleges breach of contract in connection with Mr. Magee’s separation agreement with LTRMN. Trial in this matter is set for April 29, 2024. The Company believes the likelihood of a loss contingency is probable. Accordingly, the Company has accrued $0.50 million for this matter in the consolidated balance sheet.

Terra Tech Corp. v. National Fire & Marine Ins. Co., et al. - On or about December 6, 2021, the Company initiated an action in California Superior Court, County of Alameda, against National Fire & marine Insurance Company (“National Fire”), Woodruff-Sawyer & Co., and R-T Specialty, LLC in connection with the denial of an insurance claim by National Fire following the vandalism and looting of the Company’s Bay Area dispensaries in May 2020. The Company alleges that coverage levels for the Company were changed after the policy was bound, in a manner inconsistent with the binder, which prevented the Company from fully recovering its losses in connection with the incidents. Trial in this matter has not been set. No amount has been recognized in the consolidated balance sheets as of June 30, 2023 and December 31, 2022 for the gain contingency.

Unrivaled Brands, Inc. et al v. Mystic Holdings, Inc., et al. - On May 11, 2022, Unrivaled and its wholly-owned subsidiary, Medifarm I, LLC (“Plaintiffs”) initiated an action in the Second Judicial District of the State of Nevada, County of Washoe, against Mystic Holdings, Inc. (“Mystic”) and Picksy Reno LLC (collectively with Mystic, “Defendants”) in connection with Defendants’ failure to ~~raise additional funds through public or private financing, additional collaborative relationships or other arrangements until we are able~~honor Plaintiffs’ exercise of a put option entitling Plaintiffs to ~~raise revenues to a point~~the repurchase of ~~positive cash flow. We are evaluating various options to further reduce our cash requirements to operate~~approximately 8,332,096 shares of Mystic at a ~~reduced rate,~~price of $1.00 per share. A trial date has not yet been set. No amount has been recognized in the consolidated balance sheets as ~~well as options~~of June 30, 2023 and December 31, 2022 for the gain contingency.

Fusion LLF, LLC v. Unrivaled Brands, Inc.- On June 27, 2022, Fusion LLF, LLC filed an action against the Company, in the Superior Court for the State of California, County of Orange, alleging claims for breach of contract, account stated, and right to ~~raise additional funds, including obtaining loans~~attach order and ~~selling common stock. There~~writ of attachment. The complaint claims at least $4.55 million in damages. On August 11, 2022, the Company filed an answer to the complaint. On August 5, 2022, Fushion LLF, LLC filed an application for a right to attach order and writ of attachment, which was denied on December 8, 2022.

People's California, LLC v. Unrivaled Brands, Inc. - On July 19, 2022, People’s California, LLC, the sellers of People's First Choice, filed an action against the Company in the Superior Court for the State of California, County of Orange, bringing claims for breach of contract and breach of the covenant of good faith and fair dealing stemming from the Company’s alleged breach of certain agreements with People’s California, LLC. The complaint claims at least $23.00 million in damages.

On September 20, 2022, the Company filed a cross-complaint in the matter in November 2021. The Company was seeking a minimum of $5.40 million in damages.

On March 6, 2023, the parties entered into a binding term sheet to settle the litigation. The litigation is ~~no guarantee that we will~~stayed pending final documentation of the settlement agreement. The litigation is expected to be ~~able~~dismissed in the next 180 days. Refer to ~~generate enough revenue and/or~~"Note 11 – Notes Payable" for further details.

32The accompanying notes are an integral part of the unaudited consolidated financial statements.

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~~raise capital to support our operations, or if we are able to raise capital, that it will be available to us~~People's California, LLC v. Kovacevich, et al - On August 1, 2022, People’s California, LLC filed an action against certain current and former officers and directors of the Company in the Superior Court for the State of California, County of Orange, derivatively on ~~acceptable terms,~~behalf of the Company and listing the Company as a nominal defendant alleging claims for breach of fiduciary duty, abuse of control, self-dealing, corporate waste, and unjust enrichment based on ~~an acceptable schedule, or at all.~~a series of corporate transactions and management decisions. The Complaint does not state a specific claim for damages.

On March 6, 2023, the parties entered into a binding term sheet to settle the litigation. The ~~issuance~~litigation is stayed pending final documentation of ~~additional securities may result in a significant dilution~~the settlement agreement. The litigation is expected to be dismissed in the equity interests of our current stockholders. Obtaining loans, assuming these loans would be available, will increase our liabilities and future cash commitments. There is no assurance that we will be able to obtain further funds required for our 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 we are not able to obtain the additional financing on a timely basis, we will not be able to meet our other obligations as they become due and we will be forced to scale down or perhaps even cease our operations.next 180 days.

1149 South LA Street Fashion District, LLC vs Unrivaled Brands, Inc. - On January 30, 2023, 1149 South LA Street Fashion District, LLC and 1135 South LA Street Fashion District LLC filed an action against the Company and other defendants in the Superior Court of the State of California, County of Los Angeles, alleging claims for breach of written contract, breach of written guaranty, breach of implied covenant of good faith and fair dealing, waste, and declaratory relief. The ~~risks and uncertainties surrounding our ability~~complaint claims at least $0.58 million in damages. On April 10, 2023, the Company filed an answer to ~~continue to raise capital and our limited capital resources raise substantial doubt~~the complaint. Because no conclusion has been formed as to ~~our ability~~whether an unfavorable outcome is either probable or remote, no opinion is expressed as to ~~continue~~the likelihood of an unfavorable outcome or the amount or range of any possible loss to the Company.

Greenlane Holdings, LLC v. Unrivaled Brands, Inc. - On February 6, 2023, Greenlane Holdings, LLC, a related party, filed an action against the Company in the Superior Court of the State of California, County of Los Angeles, alleging claims for breach of contract, account stated, and unjust enrichment. The complaint alleges damages of $0.40 million. On April 10, 2023, the Company filed an answer to the complaint. Because no conclusion has been formed as ~~a going concern~~to whether an unfavorable outcome is either probable or remote, no opinion is expressed as to the likelihood of an unfavorable outcome or the amount or range of any possible loss to the Company.

WGS Group, Inc. vs Unrivaled Brands, Inc. - On July 17, 2023 WGS Group, Inc. filed an action against the Company in the Superior Court of California, County of Orange Central Justice Center, alleging claims for ~~twelve months from~~damages and declaratory relief, breach of security service agreements, breach of the ~~issuance~~implied covenant of ~~these~~good faith and fair dealing, quantum meruit, violations of business and professional code sections 17200 Et SEQ., declaratory relief regarding successor-in-interest liability, and declaratory relief regarding ultra vires actions imposing personal liability on chief financial ~~statements.~~officer. Because no conclusion has been formed as to whether an unfavorable outcome is either probable or remote, no opinion is expressed as to the likelihood of an unfavorable outcome or the amount or range of any possible loss to the Company.

NOTE 2119 – SUBSEQUENT EVENTS

On July 19, 2022, People’s California, LLC, the sellers of Peoples First Choice, filed an action against Unrivaled Brands, Inc. (the “Company”), styled, People’s California, LLC v. Unrivaled Brands, Inc., in the Superior Court for the State of California, County of Orange Case No. 30-2022-01270747-CU-BC-CJC, bringing claims for breach of contract and breach of the covenant of good faith and fair dealing stemming from the Company’s alleged breach of certain agreements with People’s California, LLC. The Complaint claims at least
~~$23.00 million~~ ~~in damages.~~

The Company has ~~not yet responded~~evaluated subsequent events through August 14, 2023, which is the date these consolidated financial statements were issued, and has concluded no subsequent events have occurred that would require recognition in the consolidated financial statements or disclosure in the notes to the ~~Complaint and is evaluating the claims.~~

On August 1, 2022, People’s California, LLC filed an action against certain current and former officers and directors of the Company, styled People’s California, LLC v. Nicholas Kovacevich, et al, in the Superior Court for the State of California, County of Orange Case No. 30-2022-01272843-CU-MC-CJC, derivatively on behalf of the Company and listing the Company as a nominal defendant alleging claims for breach of fiduciary duty, abuse of control, self-dealing, corporate waste, and unjust enrichment based on a series of corporate transactions and management decisions. The Complaint does not state a specific claim for damages. The Company and the individual defendants have not yet responded to the Complaint and the Company is evaluating the claims.

~~On July 21, 2022, Tiffany Davis resigned as Interim Chief Executive Officer and as a member of the Company’s Board of Directors effective immediately.~~

On August 12, 2022, the Board of Directors appointed Sabas Carrillo as Interim Chief Executive Officer. Mr. Carrillo is the Founder and CEO of Adnant, LLC, an accounting and consulting firm advising cannabis companies on technical and operational accounting, strategic transactions, and the public offering process.

On August 12, 2022, the Company entered into an engagement letter with Adnant, LLC (“Adnant”). Pursuant to the engagement letter, Adnant will provide executive level consulting and related business support and services related to the Company’s present and future challenges and opportunities. Specifically, Adnant will provide a team of restructuring focused executives that may include, but not be limited to, CEO support, chief restructuring officer, executive vice president of finance, Financial Planning and Analysis (“FP&A”) professional, and/or legal consulting. Adnant is expected to work closely with the Company and its internal teams, existing management, existing consultants and advisors, lenders, attorneys, and other relevant parties in connection with the implementation of the strategies most appropriate to achieve the Company's objectives and as directed and authorized by the Company’s Board of Directors (the “Board”).

Adnant’s fees for the services will be a flat fee of $0.15 million monthly. The payment of the monthly fee shall be subject to the Company having available a cash balance greater than or equal to $1.2 million (the “Cash Threshold”) following the payment of the monthly fee. Should cash not be sufficient when the fee becomes due and payable, the Company shall accrue such fee(s) until such time as the Cash Threshold is achieved or, at the election of Adnant, and as mutually agreed by the Company, such fees may be paid in an equivalent value of shares of the Company’s common stock.

In addition to the monthly fee described above, a Performance Bonus Award in the aggregate amount of $2,000,000 shall be payable to Adnant in shares of the Company’s common stock (“Performance Bonus Award Shares”) based upon the achievement of the Performance Bonus Award Objectives set forth in the Engagement Letter and the continued performance of Adnant towards obtaining such Performance Bonus Award Objectives.consolidated financial statements.

33The accompanying notes are an integral part of the unaudited consolidated financial statements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

~~FORWARD-LOOKING STATEMENTS~~

~~In addition to historical information,~~This management’s discussion and analysis (“MD&A”) of the financial condition and results of operations of Unrivaled Brands, Inc. (“Unrivaled Brands”, “Unrivaled”, or the “Company”) is for the three and six months ended June 30, 2023. The following discussion should be read in conjunction with, and is qualified in its entirety by, the consolidated financial statements and the accompanying notes presented in Item 1 of this Quarterly Report on Form 10-Q ~~may contain “forward-looking statements” within the meaning of Section 27A~~(this "Form 10-Q") and those discussed in Item 8 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 can 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 ourCompany’s 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”~~(the “Form 10-K”).

~~We caution you that the risks, uncertainties, and other factors set forth in our periodic filings~~ filed with the SEC ~~may not contain all of~~on April 10, 2023. Except for historical information, the discussion in this section contains forward-looking statements that involve risks and uncertainties. Future results could differ materially from those discussed below for many reasons, including the risks ~~uncertainties,~~described in “Cautionary Language Concerning Forward-Looking Statements,” “Item 1A—Risk Factors” 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 statementselsewhere 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.Form 10-Q.

~~Company Overview~~COMPANY OVERVIEW

Our corporate headquarters is located at 3242 S. Halladay St, Santa Ana, California 92705 and our telephone number is (888) 909-5564. Our website addresses are as follows: www.unrivaledbrands.com. No information available on or through our websites shall be deemed to be incorporated into this Quarterly Report on Form 10-Q. Our common stock, par value $0.001 (the “Common Stock”), is quoted on the OTC Markets Group, Inc’s OTCQX tier under the symbol “UNRV.”

Our Business

The Company is a ~~multi-state operator ("MSO")~~cannabis company with retail, production, distribution, and cultivation operations throughout California, 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 ~~Santa Ana, California.~~Orange County, California, regularly servicing upwards of 1,000 customers each day. The Company also owns dispensaries in California which operate as The Spot in Santa Ana, ~~Blum~~Blüm in Oakland, and ~~Silverstreak~~Blüm in San Leandro. ~~The~~As of June 30, 2023, the Company ~~also has licensed distribution facilities in Portland, OR, Los Angeles, CA and Sonoma County, CA.~~had 145 employees.

We are organized into two reportable segments:

~~Table of Contents~~

•Cannabis Retail – Includes cannabis-focused retail, both physical stores and non-store front delivery

•Cannabis Cultivation and Distribution – Includes cannabis cultivation, ~~production,~~manufacturing, and distribution operations

Either independently or in conjunction with third parties, we operate medical marijuana retail and adult use dispensaries and cultivation and production facilities in ~~California and Oregon.~~California.

Our corporate headquarters are located at 3242 S. Halladay St, Santa Ana, California 92705 and our telephone number is (888) 909-5564. Our website address is www.unrivaledbrands.com. No information available on or through our websites shall be deemed to be incorporated into this Form 10-Q. Our common stock, par value $0.001 (the “Common Stock”), is quoted on the OTC Markets Group, Inc’s OTCQB tier under the symbol “UNRV.”

Fiscal Second Quarter 2023 Highlights

Amendments of Promissory Note Related to People's California, LLC

On May 17, 2023, the Company amended the binding settlement term sheet ("Settlement Term Sheet") with People’s California, LLC to extend the maturity date of certain principal repayments as originally agreed upon in the Settlement Term Sheet dated March 6, 2023. In addition, the Company shall make an additional $2.20 million principal repayment on or before September 6, 2023. Monthly interest payments were amended to provide the Company with the option to pay 50% of interest in the form of registered shares of common stock. Refer to Note 11 of the Consolidated Financial Statements for additional details.

Management Changes

On June 5, 2023, the Company announced the resignation of two of its board members, Nicholas Kovacevich and Eric Baum, effective July 1, 2023.

On June 12, 2023, the Company appointed Patty Chan as its Chief Financial Officer. Ms. Chan previously served as the Company’s Interim Chief Financial Officer since September 2022. Effective June 26, 2023, Chris Rivera was appointed as Interim Chief Financial Officer during Ms. Chan’s parental leave through November 2023.

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On June 30, ~~2022,~~2023, the Company’s board of directors (the “Board”) appointed Sabas Carrillo, the Chief Executive Officer, as Chairman of the Board and James Miller, the Chief Operating Officer, as a director on the Board, effective July 1, 2023. Mr. Carrillo has served as a member of the Board since December 2022.

On June 30, 2023, the Company amended and restated its engagement letter (“A&R Engagement Letter”) with Adnant, LLC (“Adnant”) dated August 12, 2022 pursuant to which Adnant will continue to provide certain executive level consulting and related business support and services through September 30, 2023. Effective April 1, 2023, as compensation for such services, Adnant is entitled to receive a monthly flat fee of $0.20 million. Adnant has the option to convert accrued and unpaid service fees into shares of common stock of the Company.

In addition to the monthly fee described above, a Performance Bonus Award of $2.50 million shall be payable to Adnant in shares of the Company’s common stock (“Performance Bonus Award Shares”) based upon the achievement of the Performance Bonus Award Objectives set forth in the A&R Engagement Letter and the continued performance of Adnant towards obtaining such Performance Bonus Award Objectives. A transaction bonus award of $1.25 million is also available to Adnant subject to a change of control event approved by the Company’s Board of Directors with a value equal to or greater than $40.00 million in the aggregate.

~~had 238~~

Outlook

~~employees. Our employees~~

The Company will continue to focus on its performing assets, particularly California retail assets. In particular, the Company intends to emphasize retail business fundamentals including a robust and diverse product offering, improving inventory and vendor management, effective marketing, and reinvigorating its Korova brand. The Company will continue to focus on reducing and streamlining its corporate overhead and rightsizing the Company. This outlook is based on several management assumptions that are largely outside the ~~heart~~control of ~~our~~the Company. InWith a ~~rapidly evolving~~disciplined approach to retail performance, a management team with extensive cannabis industry, itcapital markets experience, deep relationships in the industry, and a commitment to investing in its team and, specifically, its company culture, the Company is ~~imperative~~encouraged that ~~we attract, develop,~~Unrivaled will emerge from its current restructuring efforts as an effective cannabis company. We will continue to seek further opportunities to expand profitability and ~~retain top talent on an ongoing basis. To do this, we seek to make Unrivaled Brands an inclusive, diverse, and safe workplace, with meaningful compensation and opportunities~~maximize returns for ~~career~~ its shareholders.

~~growth.~~Table of Contents

RESULTS OF OPERATIONS

The below table outlines our consolidated statements of operations for the ~~impact~~three and six months ended June 30, 2023 and 2022:


	(unaudited)
	Three Months Ended June 30,											Six Months Ended June 30,
($ in thousands)	2023			2022			$ Change			% Change		2023			2022			$ Change			% Change
Revenue	$	8,797		$	15,801		$	(7,004)		(44.0)	%	$	18,037		$	34,650		$	(16,613)		(48.0)	%
Cost of Goods Sold	4,197			7,714			(3,517)			(46.0)	%	8,742			20,450			(11,708)			(57.0)	%
Gross Profit	4,600			8,087			(3,487)			(43.0)	%	9,295			14,200			(4,905)			(35.0)	%
Gross Profit %	52.3		%	51.2		%	1.1		%			51.5		%	41.0		%	10.6		%

Operating Expenses:
Selling, General & Administrative Expenses	8,071			18,160			(10,089)			(55.6)	%	13,668			36,091			(22,423)			(62.1)	%
Impairment Expense	—			55,726			(55,726)			(100.0)	%	—			55,726			(55,726)			(100.0)	%
(Gain) Loss on Disposal of Assets	(1,739)			541			(2,280)			(421.4)	%	(1,739)			343			(2,082)			(607.0)	%
Total Operating Expense, Net	6,332			74,427			(68,095)			(91.5)	%	11,929			92,160			(80,231)			(87.1)	%

Loss from Operations	(1,732)			(66,340)			64,608			(97.4)	%	(2,634)			(77,960)			75,326			(96.6)	%
Other Income, Net	165			755			(590)			(78.1)	%	2,135			159			1,976			1,242.8	%

Loss from Continuing Operations Before Provisions for Income Taxes	(1,567)			(65,585)			64,018			(97.6)	%	(499)			(77,801)			77,302			(99.4)	%
Provision for Income Tax Benefit (Expense) for Continuing Operations	125			448			(323)			(72.1)	%	(533)			2,136			(2,669)			(125.0)	%

Net Loss from Continuing Operations	(1,442)			(65,137)			63,695			(97.8)	%	(1,032)			(75,665)			74,633			(98.6)	%
Net Income from Discontinued Operations	—			1,419			(1,419)			(100.0)	%	—			3,349			(3,349)			(100.0)	%

Net Loss	(1,442)			(63,718)			62,276			(97.7)	%	(1,032)			(72,316)			71,284			(98.6)	%

Net Income from Discontinued Operations Attributable to Non-Controlling Interest	—			—			—			—	%	—			275			(275)			(100.0)	%

Net Loss Attributable to Unrivaled Brands, Inc.	$	(1,442)		$	(63,718)		$	62,276		(97.7)	%	$	(1,032)		$	(72,591)		$	71,559		(98.6)	%

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Revenue

Overall revenue for the three months ended June 30, 2023 was $8.80 million compared to $15.80 million for the same period in 2022, a decrease of ~~reclassifying~~$7.00 million or 44.0%. During the three months ended June 30, 2023, the Company generated revenue from continuing operations of $8.80 million composed of retail revenue of $8.42 million and cultivation/distribution revenue of $0.38 million. This compared to revenue from continuing operations of $15.80 million for the quarter ended June 30, 2022, which included retail revenue of $11.14 million and cultivation/distribution revenue of $4.66 million.

Retail revenue for the three months ended June 30, 2023 decreased compared to the same period in the prior year by $2.73 million or 24.5% due to the closure of our non-storefront delivery in Sacramento, California, the divestiture of the Downtown Los Angeles retail operations during the second quarter of 2022, and a general decline in the cannabis market during the last half of 2022. While we operated the non-storefront Sacramento retail operation and the Los Angeles retail operations during the first quarter of 2022, there were no operations of the ~~NuLeaf~~same non-storefront Sacramento retail and Los Angeles retail operations ~~Nevada Dispensaries, OneQor, and Edible Garden to discontinued operations:~~

(in thousands) (in thousands)
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 $ Change % Change 2022 2021 $ Change % Change
Revenue
Continuing Operations $ 17,555 $ 2,871 $ 14,684 511.0 % $ 38,280 $ 4,928 $ 33,352 677.0 %
Discontinued Operations — 3,391 (3,047) (100.0) % 2,605 6,446 (3,841) (60.0) %
Total Revenue $ 17,555 $ 6,262 $ 11,637 180.0 % $ 40,885 $ 11,374 $ 29,511 259.0 %
Cost of Goods Sold
Continuing Operations $ 9,286 $ 147 $ 9,139 6,217.0 % $ 23,578 $ 2,013 $ 21,565 1,071.0 %
Discontinued Operations (23) 3,776 (3,799) (101.0) % 520 4,591 (4,071) (89.0) %
Total Cost of Goods Sold $ 9,263 $ 3,923 $ 5,340 136.0 % $ 24,098 $ 6,604 $ 17,494 265.0 %
Gross Profit $
Continuing Operations $ 8,269 $ 2,724 $ 5,545 204.0 % $ 14,702 $ 2,915 $ 11,787 404.0 %
Discontinued Operations 23 (385) 408 (106.0) % 2,085 1,855 230 12.0 %
Total Gross Profit $ $ 8,292 $ 2,339 $ 5,953 255.0 % $ 16,787 $ 4,770 $ 12,017 252.0 %
Gross Profit %
Continuing Operations 47.1 % 94.9 % (47.8) % 38.4 % 59.2 % (20.7) %
Discontinued Operations n.d. (11.4) % 11.4 % 80.0 % 28.8 % 51.3 %
Total Gross Profit % 47.2 % 37.4 % 9.9 % 41.1 % 41.9 % (0.9) %

~~Outlook~~during the quarter ended June 30, 2023, which contributed $0.91 million in revenues in the prior year.

~~Unrivaled Brands, Inc. has made substantial progress on its integration efforts since successfully closing the merger with UMBRLA on July 1~~st, 2021. Management believes that this strategic acquisition and corporate rebranding will provide a sustainable platform to capture synergies across organization verticals by leveraging Unrivaled’s existing brand portfolio and scaling its multi-state distribution operations. Furthermore, on September 1st, 2021, the Company entered into a Management Agreement with People’s First Choice; granting Unrivaled Brands, Inc. operational management and control of the Santa Ana, CA dispensary which provided an immediate lift to revenues as well as the opportunity to expand the retail footprint of our in-house product lines including, but not limited to, Korova, Sticks and Cabana. However, if these

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~~acquisitions do not perform as expected, an earlier than expected impairment analysis of these acquired intangible assets~~Cultivation and ~~goodwill may result in impairments of our long-lived assets.~~

Besides integrating and expanding the Company’s platform, management is focused on fostering strategic partnerships with keystone brands in the west coast that complement our brand portfolio and corporate mission. As such, on August 18th ~~2021, Unrivaled entered into an exclusive~~ distribution agreement with G-Eazy’s FlowerShop, a lifestyle and wellness brand that can be found in over 400 retail stores across California at time of writing. To this end, the Company’s efforts to create a robust and scalable platform in tandem to brand-conscious partnerships both position the Company to create sustainable shareholder value as “The West Coast MSO”.

~~Comparison of the Three Months Ended June 30, 2022 and 2021~~

~~Revenues~~

~~During~~revenue for the three months ended June 30, ~~2022, the Company generated total revenue of $17.56~~2023 decreased by $4.28 million ~~composed of retail revenue of $10.95 million and cultivation/distribution revenue of $6.61 million. This~~or 91.8% compared to ~~total revenue of $2.87 million for~~ the ~~quarter ended June 30, 2021, which included retail revenue of $2.32 million and cultivation/distribution revenue of $0.55 million. This was an increase of 511.0%~~same period in ~~total revenue.~~

~~Retail revenue for the quarter dramatically outpaced the second quarter of~~ the prior year due to the ~~retail assets acquired~~closure of all operations except for one growing facility in Northern California that was implemented as part of the Company's turnaround plan in 2022. In addition, we eliminated third-party distribution operations in California which contributed $4.66 million of revenue in the ~~Company's 2021 acquisitions~~same period in the prior year. We also ceased growing operations at a facility in Northern California which provided no revenue in 2023 and began slowing down cultivation operations at our remaining facility in Northern California which provided $0.34 million of ~~UMBRLA, People's First Choice and SilverStreak Solutions. We are operating five retail stores and~~revenue in the current year. Combined revenues from both facilities provided $1.11 million in the prior year.

Gross Profit

Cost of goods sold for the three months ended June 30, 2023 was $4.20 million, a ~~non-storefront delivery service in 2022~~decrease of $3.52 million, or 46.0%, compared to ~~prior year when the Company was operating two retail stores. On a comparable store basis, we saw a 23.3% increase over first quarter 2021~~$7.71 million for the ~~two comparable stores.~~three months ended June 30, 2022. The decrease in cost of goods sold was directly impacted by the decrease in revenues for the current reporting period as compared to the prior year.

~~Cultivation and distribution revenues were dramatically increased as~~

Gross profit from continuing operations for the three months ended June 30, 2023 was $4.60 million compared to a ~~result~~gross profit of ~~the Company’s merger with UMBRLA, with a wholesale/distribution operation throughout California and Oregon. The additive wholesale/distribution assets provided a net benefit of $9.47~~$8.09 million for the three months ended June 30, 2022, as a ~~direct result~~decrease of ~~integrating UMBRLA’s platform - an increase of 2,863%~~$3.49 million or 43.0%. The decrease in gross profit was directly impacted by the decrease in revenues for the current reporting period as compared to the prior year. However, the Company's gross margin improved for the three months ~~ended~~ June 30, ~~2021.~~

2023 to 52.3% as compared to 51.2% for the same period in the prior year as the Company focused on its core assets and divested non-performing assets related to its distribution operations. Gross ~~Profit~~

~~The Company’s gross~~ profit for on-going retail operations improved to 52.9% for the three months ended June 30, ~~2022 was $8.27 million,~~2023 compared to ~~a gross profit of $2.72 million~~51.3% for the ~~three months ended June 30, 2021, an increase of $5.55 million or 204.0%.~~same period in the prior year.

Selling, General ~~and~~& Administrative Expenses ~~and Other Operating Expenses~~

~~The merger with UMBRLA and the acquisitions of People's First Choice and SilverStreak Solutions in 2021 led to more operations with additional facilities, employees, and costs to support them.~~

Selling, ~~general~~general and administrative expenses for the three months ended June 30, ~~2022~~2023 were ~~$19.07~~$8.07 million, compared to ~~$4.70~~$18.16 million for the three months ended June 30, ~~2021, an increase~~2022, a decrease of ~~$14.37~~$10.09 million or ~~305.9%~~55.6%. ~~For~~ As a result of the Company's restructuring plan implemented during the third fiscal quarter of 2022, the Company saw significant reductions in expenses during the three months ended June 30, ~~2022,~~2023 as compared to the same period in the prior year. Specifically, the Company saw a decrease of $2.57 million in depreciation and amortization ~~and depreciation expenses increased by $2.56~~expense, a decrease of $1.40 million ~~over the three months ended June 30, 2021, facilities~~in facility related expenses, such as rent, utilities, repairs and maintenance, security, and insurance, ~~increased by $2.89~~a decrease of $3.00 million ~~over second quarter~~in salaries and benefits, and a decrease of ~~2021. Taxes, licensing~~$0.04 million in stock-based compensation. Management expects to continue focusing on efficiencies within its core assets and ~~permitting increased by $1.17 million. Advertising increased by $0.73 million. Employee related expenses increased by $3.93 million or 382%.~~reducing non-core assets and expenditures.

Operating Loss

The Company realized an operating loss from continuing operations of ~~$67.07~~$1.73 million for the three months ended June 30, 2023 compared to $66.34 million for the three months ended June 30, 2022, ~~compared~~a decrease of $64.61 million or 97.4%. This improvement from the same period in the prior year was primarily attributable to the results of the Company's restructuring objectives noted above and an ~~operating loss~~impairment charge of ~~$1.97~~$55.73 million ~~for~~recognized in the three months ended June 30, ~~2021, an increase of $65.09 million or 3,298.5%. This increase~~2022, where no impairment charge was ~~attributed primarily to a~~ ~~$55.73 million~~ ~~charge for impairment of intangible assets and goodwill related to~~recognized during the ~~UMBRLA and People's acquisitions.~~current period.

Other Income ~~(Expense)~~

Other income for the three months ended June 30, ~~2022, were $0.96~~2023 of $0.17 million was generally consistent compared to ~~other expense of $0.90 million recognized in the three months ended June 30, 2021, an improvement of $1.86 million.~~ This increase in other income was attributed to the mark-to-market adjustment for the Company's investment in Edible Garden which resulted in a $4.82 million unrealized gain during the fiscal second quarter.

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~~Discontinued Operations~~

~~We realized a net income of $1.94~~$0.76 million for the three months ended June 30, 2022. ~~This was an increase of $4.04 million over~~During the three months ended June 30, ~~2021,~~ ~~resulting from~~2023, the ~~disposal~~Company recognized a gain on settlement of liabilities of $0.11 million versus none in the ~~Dyer property and profit from our NuLeaf operations.~~comparative prior period. This was offset by an unrealized gain on investments of $0.96 million during the three months ended June 30, 2022 compared to none in the current period.

Discontinued Operations

Net ~~Loss Attributable to Unrivaled Brands, Inc.~~

~~We incurred a net loss of $63.72 million, or $(0.11) per share,~~income from discontinued operations was nil for the three months ended June 30, ~~2022, an increase of $(0.09) per share~~2023 compared to $1.42 million for the comparative prior period. All discontinued operations were fully divested as of December 31, 2022, and as a ~~net~~result, the Company had no income or loss ~~of $4.10 million, or $(0.02) per share,~~from discontinued operations for the three months ended June 30, ~~2021.~~2023.

~~The increase in net loss per share was attributable~~ ~~to the~~ ~~$55.73 million~~ ~~impairment on intangible assets and goodwill related to the UMBRLA and People’s acquisitions.~~

~~Comparison~~

Table of ~~the~~Contents

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Revenue

Overall revenue was $18.04 million for the six months ended June 30, 2023 compared to $34.65 million for the same period in 2022, a decrease of $16.61 million or 48.0%. Revenue from continuing operations was $18.04 million for the six months ended June 30, 2023 which was composed of retail revenue of $16.89 million and ~~2021~~

~~Revenues~~

~~During~~cultivation/distribution revenue of $1.15 million. This compared to revenue from continuing operations of $34.65 million for the six months ended June 30, 2022, ~~the Company generated total revenue of $38.28 million composed of~~which included retail revenue of ~~$23.06~~$23.65 million and cultivation/distribution revenue of ~~$15.22~~$11.00 million. ~~This compared to total revenue of $4.93 million~~ ~~for the six months ended June 30, 2021 which included retail revenue of $4.02 million and cultivation/distribution revenue of $0.91 million.~~ ~~This was an increase of 677.0% in total revenue.~~

Retail revenue for the six months ended June 30, 2023 decreased compared to the same period in the prior year by $6.77 million or 28.6% due to the closure of our non-storefront delivery in Sacramento, California, the divestiture of the Downtown Los Angeles retail operations during the second quarter of 2022, ~~dramatically outpaced~~and a general decline in the cannabis market during the last half of 2022. While we operated the non-storefront Sacramento retail operation and the Los Angeles retail operations during the first two quarters of 2022, there were no operations of the same non-storefront Sacramento retail and Los Angeles retail operations during the first two quarters of 2023, which contributed $2.29 million in revenues in the prior year.

Cultivation and distribution revenue for the six months ofended June 30, 2023 decreased by $9.85 million or 89.5% compared to the same period in the prior year due to the ~~retail assets acquired~~closure of all operations except one growing facility in Northern California that was implemented as part of the Company's turnaround plan. In addition, we eliminated third-party distribution operations in California which contributed $11.87 million of revenue in the ~~Company's 2021 acquisitions~~same period in the prior year. We also ceased growing operations at a facility in Northern California which provided no revenue in 2023 and began slowing down cultivation operations at our remaining facility in Northern California which provided $0.99 million of ~~UMBRLA, People's First Choice and SilverStreak Solutions. We operated five retail stores and a non-storefront delivery service~~revenue in ~~2022~~the current year compared to $2.21 million in the prior ~~year when~~year.

Gross Profit

Cost of goods sold for the ~~Company~~six months ended June 30, 2023 was ~~operating two retail stores.~~

~~Cultivation and distribution revenues were dramatically increased as~~$8.74 million, a ~~result~~decrease of ~~the Company’s merger with UMBRLA, with its distribution network in California and Oregon. The additive distribution assets provided a net benefit of $14.31~~$11.71 million or 57.0% compared to $20.45 million for the six months ended June 30, 2022. The decrease in cost of goods sold was directly impacted by the decrease in revenues for the current reporting period as compared to the prior year.

Gross ~~Profit~~

~~The Company’s~~profit from continuing operations for the six months ended June 30, 2023 was $9.30 million compared to a gross profit of $14.20 million for the six months ended June 30, 2022, a decrease of $4.91 million or 35.0%. The decrease in gross profit was ~~$14.70 million,~~directly impacted by the decrease in revenues for the current reporting period as compared to athe prior year. However, the Company's overall gross margin improved for the six months June 30, 2023 to 51.5% as compared to 41.0% for the same period in the prior year as the Company focused on its core assets and divested non-performing assets related to its distribution operations. Gross profit ~~of $2.92 million~~for on-going retail operations improved to 54.0% for the six months ended June 30, ~~2021, an increase of $11.79 million .~~2023 compared to 48.0% for the same period in the prior year.

Selling, General ~~and~~& Administrative Expenses ~~and Other Operating Expenses~~

~~The merger with UMBRLA and the acquisitions of People's First Choice and SilverStreak Solutions in 2021 led to more operations with additional facilities, employees, and costs to support them.~~

Selling, general and administrative expenses for the six months ended June 30, ~~2022,~~2023 were ~~$37.84~~$13.67 million, compared to ~~$17.35~~$36.09 million for the six months ended June 30, ~~2021, an increase~~2022, a decrease of ~~$20.49~~$22.42 million or ~~118.1%~~62.1%. ~~For~~As a result of the Company's restructuring plan implemented during the third fiscal quarter of 2022, the Company saw significant reductions in expenses during the six months ended June 30, ~~2022,~~2023 as compared to the same period in the prior year. Specifically, the Company saw a decrease of $5.04 million in depreciation and amortization ~~and depreciation expenses increased by $4.71~~expense, a decrease of $3.03 million ~~over the six months ended June 30, 2021, facilities~~in facility related expenses, such as rent, utilities, repairs and maintenance, security, and insurance, ~~increased by $5.04~~a decrease of $5.93 million ~~over the first half~~in salaries and benefits, and a decrease of ~~2021. Option expense~~$1.77 million in stock-based compensation. Management expects to continue focusing on efficiencies within its core assets and ~~director’s compensation increased by $1.92 million with the two more board members in much~~reducing non-core assets and expenditures.

Table of 2022 compared with 2021. Taxes, licensing and permitting increased by $2.40 million. Advertising increased by $1.63 million. These increases were partially offset by employee related expenses decreasing by $1.48 million and several other smaller expense decreases.Contents

Operating Loss

The Company realized an operating loss from continuing operations of ~~$79.20~~$2.63 million for the six months ended June 30, 2023 compared to $77.96 million for the six months ended June 30, 2022, ~~compared~~a decrease of $75.33 million or 96.6%. This improvement from the same period in the prior year was primarily attributable to the results of the Company's restructuring objectives noted above and an ~~operating loss~~impairment charge of ~~$14.43~~$55.73 million ~~for~~recognized in the six months ended June 30, ~~2021. This was primarily driven by a $55.73 million intangible asset and goodwill~~2022, where no impairment charge ~~related to~~was recognized for the ~~UMBRLA and People's acquisitions.~~

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three months ended June 30, 2023.

Other Income ~~(Expense)~~

Other income for the six months ended June 30, ~~2022, were $0.77~~2023 was $2.14 million compared to ~~the $(0.57)~~$0.16 million expense recognized in the six months ended June 30, 2021, an increase of $1.35 million. This increase in other income was attributed to the mark-to-market adjustment for the Company's investment in Edible Garden which resulted in a $4.82 million unrealized gain.

~~Discontinued Operations~~

We realized a net income of $3.98 million for the six months ended June 30, 2022. This was an increase of $5.55 million over the six months ended June 30, 2021 resulting from the disposal of the Dyer property and profit from our NuLeaf operations.

~~Net Loss Attributable to Unrivaled Brands, Inc.~~

~~We incurred a net loss attributable to Unrivaled Brands, Inc. of $72.32 million, or $(0.13) per share,~~ for the six months ended June 30, 2022, an increase of ~~$0.05 per share~~$1.98 million. The change from the prior year was primarily attributable to an increase in gain on extinguishment of debt due to the $3.03 million recognized during the current period, offset by a decrease in other income of $0.59 million compared to ~~a net loss of $16.18 million, or $(0.07) per share,~~the same period in the prior year.

Discontinued Operations

Net income from discontinued operations was nil for the six months ended June 30, ~~2021.~~2023 compared to $3.35 million for the comparative prior period. All discontinued operations were fully divested as of December 31, 2022, and as a result, the Company had no income or loss from discontinued operations for the six months ended June 30, 2023.

Three Months Ended June 30, 2023 Compared to Three Months Ended March 31, 2023

The ~~dramatic increase in net loss was attributable to an impairment charge~~below table outlines our consolidated statements of ~~$55.73 million on intangible assets and goodwill relating to the UMBRLA and People’s acquisitions during~~operations for the fiscal second quarter of 2023 compared to the fiscal first quarter of 2023:


	(unaudited)
	Three Months Ended
	June 30,			March 31,
($ in thousands)	2023			2023			$ Change			% Change
Revenue	$	8,797		$	9,240		$	(443)		(5.0)	%
Cost of Goods Sold	4,197			4,545			(348)			(8.0)	%
Gross Profit	4,600			4,695			(95)			(2.0)	%
Gross Profit %	52.3		%	50.8		%	1.5		%

Operating Expenses:
Selling, General & Administrative Expenses	8,071			5,597			2,474			44.2	%
Gain on Disposal of Assets	(1,739)			—			(1,739)			100.0	%
Total Operating Expenses	6,332			5,597			735			13.1	%

Loss from Operations	(1,732)			(902)			(830)			92.0	%
Other Income, Net	165			1,970			(1,805)			(91.6)	%

(Loss) Income Before Provisions for Income Taxes	(1,567)			1,068			(2,635)			(246.7)	%
Provision for Income Tax Benefit (Expense)	125			(658)			783			(119.0)	%

Net (Loss) Income	$	(1,442)		$	410		$	(1,852)		(451.7)	%

Revenue

Revenues for the three months ended June 30, 2023 were generally consistent with the preceding quarter ended March 31, 2023. The decrease in consolidated revenue of $0.44 million was primarily due to a $0.39 million decrease in cultivation/distribution revenue quarter over quarter due to the Company's focus on its retail operations during the current period. Retail revenue was generally consistent with the prior quarter.

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Gross Profit

Cost of goods sold for the three months ended June 30, 2023 was $4.20 million, a decrease of $0.35 million or 8.0%, compared to $4.55 million for the three months ended March 31, 2023. The decrease in cost of goods sold was primarily due to the improvement in efficiency and focus on cost-cutting measures at the Company's cultivation facility and its operations.

Gross profit from continuing operations for the three months ended June 30, 2023 was $4.60 million compared to $4.70 million for the three months ended March 31, 2023, an decrease of $0.10 million or 2.0%. The decrease in gross profit was directly impacted by the decrease in promotion and marketing program ("PMP") revenue compared to the immediate prior quarter. The Company's overall gross profit improved for the three months June 30, 2023 to 52.3% as compared to 50.8% for the immediate prior quarter. Gross profit for on-going retail operations declined to 52.9% for the three months ended June 30, 2023 compared to 55.1% for the preceding quarter as a result of a decline in PMP revenue during the three months ended June 30, 2023. Gross profit for on-going retail operations remained consistent from product sales.

Selling, General & Administrative Expenses

Selling, general and administrative expenses for the three months ended June 30, 2023 were $8.07 million, compared to $5.60 million for the three months ended March 31, 2023. The quarter-over-quarter increase of $2.47 million or 44.2%.was primarily related to an increase in stock-based compensation of $1.19 million for shares issued pursuant to a related party for executive-level consulting and related business support services and an increase in professional fee expenses of $0.47 million due to professional fees related to legal services.

Operating Loss

The Company realized an operating loss from continuing operations of $1.73 million for the three months ended June 30, 2023 compared to $0.90 million for the three months ended March 31, 2023, an increase of $0.83 million or 92.0%. The increase in operating loss from the immediate prior quarter was primarily due to the $2.47 million increase in selling, general and administrative expenses as described above, offset by a gain on disposal of assets of $1.74 million for the dissolution of UMBRLA, Inc.

Other Income

Other income for the three months ended June 30, 2023 was $0.17 million compared to $1.97 million for the three months ended March 31, 2023, a decrease of $1.81 million. This change from was primarily attributable to the gain on extinguishment of debt of $3.03 million during the first quarter of 2023, versus none in the current quarter.

~~DISCLOSURE ABOUT OFF-BALANCE SHEET ARRANGEMENTS~~Non-GAAP Reconciliations

Non-GAAP earnings is a supplemental measure of our performance that is neither required by, nor presented in accordance with, U.S. generally accepted accounting principles (“US GAAP”). Non-GAAP earnings is not a measurement of the Company's financial performance under US GAAP and should not be considered as alternative to net income, operating income, or any other performance measures derived in accordance with US GAAP, or as alternative to cash flows from operating activities as a measure of the Company's liquidity. In addition, in evaluating non-GAAP earnings, you should be aware that in the future the Company will incur expenses or charges such as those added back to calculate non-GAAP earnings. The Company's presentation of non-GAAP earnings should not be construed as an inference that its future results will be unaffected by unusual or nonrecurring items.

Non-GAAP earnings has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of the Company's results as reported under US GAAP. Some of these limitations are (i) it does not reflect the Company's cash expenditures, or future requirements for capital expenditures or contractual commitments, (ii) it does not reflect changes in, or cash requirements for, the Company's working capital needs, (iii) it does not reflect interest expense, or the cash requirements necessary to service interest or principal payments, on the Company's debt, (iv) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and non-GAAP earnings does not reflect any cash requirements for such replacements, (v) it does not adjust for all non-cash income or expense items that are reflected in the Company's statements of cash flows, and (vi) other companies in our industry may calculate this measure differently than we do, limiting its usefulness as comparative measures.

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The Company compensates for these limitations by providing specific information regarding the US GAAP amounts excluded from such non-GAAP financial measures. The Company further compensates for the limitations in our use of non-GAAP financial measures by presenting comparable US GAAP measures more prominently.

The Company believes that non-GAAP earnings facilitates operating performance comparisons from period to period by isolating the effects of some items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies.

These potential differences may be caused by variations in capital structures (affecting interest expense) and the age and book depreciation of facilities and equipment (affecting relative depreciation expense). The Company also presents non-GAAP earnings because (i) it believes that this measure is frequently used by securities analysts, investors and other interested parties to evaluate companies in the Company's industry, (ii) the Company believes that investors will find these measures useful in assessing the Company's ability to service or incur indebtedness, and (iii) the Company uses non-GAAP earnings internally as benchmark to compare its performance to that of its competitors.

In the presentation of the financial results below, the Company reconciles non-GAAP Adjusted EBITDA Income (Loss) with net income (loss) attributable to continuing operations, the most directly comparable GAAP measure. Management believes that this presentation may be more meaningful in analyzing our income generation.

On a non-GAAP basis, the Company recorded non-GAAP Adjusted EBITDA Loss of $0.80 million for the three months ended June 30, 2023 compared to $4.61 million for the three months ended June 30, 2022. For the six months ended June 30, 2023, the Company recorded non-GAAP Adjusted EBITDA Loss of $0.45 million compared to $9.69 million for the six months ended June 30, 2022. The details of those expenses and non-GAAP reconciliation of these non-cash items are set forth below:


	(in thousands)
	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net Loss	$	(1,442)	$	(63,718)	$	(1,032)	$	(72,316)
Less: Net Income from Discontinued Operations, Net	—		(1,419)		—		(3,349)
Add (Deduct) Impact of:
Interest Expense	187		438		1,211		2,204
Provision for Income Tax (Benefit) Expense	(125)		(448)		533		(2,136)
Depreciation Expense	221		930		433		1,837
Amortization of Intangible Assets	562		2,422		1,125		4,765
EBITDA Income (Loss) from Continuing Operations (Non-GAAP)	$	(597)	$	(61,795)	$	2,270	$	(68,995)

Non-GAAP Adjustments:
Stock-based Compensation Expense	1,642		1,680		2,097		3,868
Impairment of Assets	—		55,726		—		55,726
Severance Expense for Series A Share Repurchases	—		201		—		871
Realized Loss on Sale of Investments	—		—		61		—
Unrealized Gain on Investments	—		(963)		—		(963)
(Gain) Loss on Disposal of Assets	(1,739)		541		(1,739)		343
Gain on Settlement of Liabilities	(110)		—		(110)		—
Gain on Extinguishment of Debt	—		—		(3,026)		(542)
Adjusted EBITDA Loss from Continuing Operations (Non-GAAP)	$	(804)	$	(4,610)	$	(447)	$	(9,692)

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LIQUIDITY, CAPITAL RESOURCES AND GOING CONCERN

We incurred net losses for the three and six months ended June 30, 2023 and 2022, respectively and have an accumulated deficit of $441.08 million and $440.05 million at June 30, 2023 and December 31, 2022, respectively. As of June 30, 2023, we had a working capital deficit of $47.10 million, including $0.59 million of cash compared to a working capital deficit of $54.57 million, including $1.20 million of cash, as of December 31, 2022. Current assets were approximately 0.11 times current liabilities as of June 30, 2023, compared to approximately 0.08 times current liabilities as of December 31, 2022.

We dohave not been able to generate sufficient cash from operating activities to fund our ongoing operations. Since our inception, we have ~~any transactions, agreements~~raised capital through private sales of common stock, preferred stock and debt securities. Our future success is dependent upon our ability to achieve profitable operations and generate cash from operating activities. There is no guarantee that we will be able to generate enough revenue and/or raise capital to support our operations.

We will be required to raise additional funds through public or private financing, additional collaborative relationships or other ~~contractual~~ arrangements until we are able to raise revenues to a point of positive cash flow. We believe our existing and available capital resources will be sufficient to satisfy our funding requirements through the end of 2023. However, we continue to evaluate various options to further reduce our 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 ~~constitute off-balance sheet arrangements.~~we will be able to generate enough revenue and/or raise capital to support our operations, or if we are able to raise capital, that such capital will be available to us on acceptable terms, on an acceptable schedule, or at all.

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 consolidated financial statements have been prepared in accordance with US GAAP, which contemplate our continuation as a going concern.

Operating Activities

Cash used in operating activities for the six months ended June 30, 2023 was $2.15 million, compared to $2.50 million for the six months ended June 30, 2022, a decrease of $0.36 million, or 14.3%. The decrease in cash used in operating activities was primarily due to a slowdown in cash payments of payables and accrued expenses, partly due to the lack of capital during the current period as compared to the same period in the prior year and our increased efforts to scale back on non-accretive expenditures. For the latter half of fiscal year 2022, management focused on its turnaround plan to stabilize operations to put the Company on a path to profitability. Management took decisive action to preserve operating cash flow by reducing cash burn, prioritizing payments, renegotiating vendor agreements and closing underperforming business units. Management expects to see improvements in cash flow from operating activities as the Company continues to execute its strategic restructuring.

Investing Activities

Cash provided by investing activities for the six months ended June 30, 2023 was $0.69 million, compared to $19.50 million for the six months ended June 30, 2022, a decrease of $18.81 million, or 96.5%. The decrease in cash provided by investing activities was primarily due to the cash received upon disposing some of the Company's subsidiaries, which the Company had no such transactions in the current year.

Financing Activities

Cash provided by financing activities for the six months ended June 30, 2023 was $0.84 million, compared to cash used in financing activities of $17.27 million for the six months ended June 30, 2022, an improvement of $18.11 million, or 104.9%. The decrease in cash used in financing activities as compared to the prior year was primarily due to the significant debt payments made on the Company's debt in the prior year, while the Company has minimal debt payments in the current year.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section discusses our unaudited consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources. These accounting policies are described in “Note 2 ~~“Summary~~ – Summary of Significant Accounting Policies” of the notes to unaudited ~~condensed~~ consolidated financial statements included in this ~~report.~~Form 10-Q.

~~LIQUIDITY AND CAPITAL RESOURCES~~

We incurred net losses for the three and six months ended June 30, 2022 and 2021 and have an accumulated deficit of approximately $323.71 million and $250.02 million at June 30, 2022 and December 31, 2021, respectively.DISCLOSURE ABOUT OFF-BALANCE SHEET ARRANGEMENTS

As of June 30, 2022, we had working capital deficit of $57.25 million, including $7.26 million of cash compared to working capital deficit of $62.44 million, including $6.89 million of cash, as of December 31, 2021. Current assets were approximately 0.24 times current liabilities as of June 30, 2022, compared to approximately 0.29 times current liabilities as of December 31, 2021.

We2023, the Company does not have not been able to generate sufficient cash from operating activities to fund our ongoing operations. Since our inception, we have raised capital through private sales of common stock and debt securities. Our future success is dependent upon our ability to achieve profitable operations and generate cash from operating activities. There is no

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guarantee that we will be able to generate enough revenue and/or raise capital to support our operations. In addition to this, if certain of our previous acquisitions do not operationally improve, we may be required to do an earlier than expected impairment analysis of our intangible assets and goodwill may result in impairments of our long-lived assets.

~~We will be required to raise additional funds through public or private financing, additional collaborative relationships~~any transactions, agreements or other contractual arrangements until we are able to raise revenues to a point of positive cash flow. We believe our existing and available capital resources will be sufficient to satisfy our funding requirements through the end of 2022. However, we continue to evaluate various options to further reduce our 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 we will be able to generate enough revenue and/or raise capital to support our operations, or if we are able to raise capital, that it will be available to us on acceptable terms, on an acceptable schedule, or at all.

~~Operating Activities~~

Cash used in operating activities for the six months ended June 30, 2022 was $1.32 million, compared to $6.74 million for the three months ended June 30, 2021, an increase of $5.41 million, or 80.4%. The increase in cash used in operating activities was due to primarily to increase in cash used for prepaid expenses and other assets.

~~Investing Activities~~

Cash provided by investing activities for the six months ended June 30, 2022 was $19.41 million, compared to cash provided by investing activities of $43.72 million for the six months ended June 30, 2021, a decrease of $24.32 million, or 55.6%. ~~The decrease in cash provided by investing activities was primarily due to the $39.38 million gain on sale of the Company's Hydrofarm investment in 2021 and no comparable sale in 2022.~~

~~Financing Activities~~

Cash used in financing activities for the six months ended June 30, 2022 was $17.27 million, compared to $2.31 million provided by financing activities for the six months ended June 30, 2021, a decrease of $19.58 million, or 847.6%. ~~The decrease in cash provided by financing activities for the six months ended June 30, 2022 was primarily due to $21.64 million of principal repayments of debt made in the first half of the year.~~

~~Non-GAAP Reconciliations~~

Non-GAAP earnings is a supplemental measure of our performance that is neither required by, nor presented in accordance with, U.S. generally accepted accounting principles (“US GAAP”). Non-GAAP earnings is not a measurement of our financial performance under US GAAP and should not be considered as alternative to net income, operating income, or any other performance measures derived in accordance with US GAAP, or as alternative to cash flows from operating activities as a measure of our liquidity. In addition, in evaluating non-GAAP earnings, you should be aware that in the future we will incur expenses or charges such as those added back to calculate non-GAAP earnings. Our presentation of non-GAAP earnings should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.

Non-GAAP earnings has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under US GAAP. Some of these limitations are (i) it does not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments, (ii) it does not reflect changes in, or cash requirements for, our working capital needs, (iii) it does not reflect interest expense, or the cash requirements necessary to service interest or principal payments, on our debt, (iv) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and non-GAAP earnings does not reflect any cash requirements for such replacements, (v) it does not adjust for all non-cash income or expense items that are reflected in our statements of cash flows, and (vi) other companies in our industry may calculate this measure differently than we do, limiting its usefulness as comparative measures.

We compensate for these limitations by providing specific information regarding the US GAAP amounts excluded from such non-GAAP financial measures. We further compensate for the limitations in our use of non-GAAP financial measures by presenting comparable US GAAP measures more prominently.

We believe that non-GAAP earnings facilitates operating performance comparisons from period to period by isolating the effects of some items that vary from period to period without any correlation to core operating performance or that vary

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widely among similar companies. These potential differences may be caused by variations in capital structures (affecting interest expense) and the age and book depreciation of facilities and equipment (affecting relative depreciation expense). We also present non-GAAP earnings because (i) we believe that this measure is frequently used by securities analysts, investors and other interested parties to evaluate companies in our industry, (ii) we believe that investors will find these measures useful in assessing our ability to service or incur indebtedness, and (iii) we use non-GAAP earnings internally as benchmark to compare our performance to that of our competitors.

In the presentation of the financial results below, the Company reconciles non-GAAP earnings (loss) with net loss attributable to continuing operations, the most directly comparable GAAP measure, and reports non-GAAP earnings (loss) per share, which is calculated by dividing non-GAAP net income (loss) divided by weighted average common shares. Management believes that this presentation may be more meaningful in analyzing our income generation.

On a non-GAAP basis, the Company recorded a non-GAAP loss of $2.82 million for the three months ended June 30, 2022 compared to $1.88 million for the three months ended June 30, 2021. For the six months ended June 30, 2022, the Company recorded a $4.40 million loss compared to a $4.11 million loss for the six months ended June 30, 2021. The details of those expenses and non-GAAP reconciliation of these non-cash items are set forth below:

(in thousands)
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Net loss attributable to Unrivaled Brand, Inc. $ (63,718) $ (4,102) $ (72,592) $ (16,183)
Non-GAAP adjustments:
Amortization of intangible assets 2,422 184 4,765 376
Depreciation expense 972 323 1,918 660
Stock-based compensation expense 1,553 803 3,868 1,198
Impairment of assets 55,726 — 55,726 —
Interest expense 443 39 2,210 112
Severance expense 201 — 871 8,990
Loss (gain) on sale of investments — 874 — (5,337)
Unrealized gain on investments (963) — (963) —
Loss on sale of assets 542 — 343 —
Gain for debt forgiveness — — — (86)
Loss (gain) on extinguishment of debt — — (542) 6,161
Non-GAAP net loss attributable to Unrivaled Brands, Inc. $ (2,822) $ (1,879) $ (4,396) $ (4,109)

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~~The following table sets forth the computation of basic and diluted loss per share on a non-GAAP basis:~~

(in thousands, except for shares)
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Non-GAAP net loss $ (2,822) $ (1,879) $ (4,396) $ (4,109)
Denominator:
Weighted average common shares - Basic 575,973,609 258,897,777 572,176,041 248,066,926
Weighted average common shares - Diluted 575,973,609 258,897,777 572,176,041 248,066,926
Non-GAAP loss per common share:
Non-GAAP loss - Basic $ — $ (0.01) $ (0.01) $ (0.02)
Non-GAAP loss - Diluted $ — $ (0.01) $ (0.01) $ (0.02)
constitute off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

This item is omitted as it is not required for a smaller reporting company.

ITEM 4. CONTROLS AND PROCEDURES.

Under the supervision and with the participation of our management, our principal executive officer and our principal financial officer are responsible for conducting an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of June 30, ~~2022.~~2023. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were not effective to a reasonable level as of June 30, ~~2022.~~2023.

Based on the results of its assessment, our management concluded that our internal control over financial reporting was not effective as of ~~December 31, 2021~~June 30, 2023 based on such criteria due to material weaknesses in internal control over financial reporting described below:

Material Weaknesses in Internal Control over Financial Reporting

•The Company’s primary user access controls (i.e., provisioning, de-provisioning, and quarterly user access review) to ensure appropriate segregation of duties that would adequately restrict user and privileged access to the financially relevant systems and data to appropriate Company personnel were not operating effectively. Automated process-level controls and manual controls that are dependent upon the information derived from such financially relevant systems were also determined to be ineffective as a result of such deficiency.

•The Company did not maintain adequate and timely review transactions and account reconciliations resulting in material audit adjustments.

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Remediation Plan

We plan to enhance our internal control over financial reporting in an effort to remediate the material weaknesses described above. We are committed to ensuring that our internal control over financial reporting is designed and operating effectively. Our remediation process will include:

•Investing in IT systems to enhance our operational and financial reporting and internal controls.

•Enhancing the organizational structure to support financial reporting processes and internal controls.

•Providing guidance, education and training to employees relating to our accounting policies and procedures.

•Further developing and documenting detailed policies and procedures regarding business processes for significant accounts, critical accounting policies and critical accounting estimates.

•Establishing effective general controls over IT systems to ensure that information produced can be relied upon by process level controls is relevant and reliable.

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We expect to remediate these material weaknesses during ~~2022.~~fiscal year 2023. However, we may discover additional material weaknesses that may require additional time and resources to ~~remediate.~~remediate.

Changes in Internal Control Over Financial Reporting

We regularly assess the adequacy of our internal controls over financial reporting and enhance our controls in response to internal control assessments and external audit and regulatory recommendations. No changes in internal control over financial reporting have been identified in connection with the evaluation of disclosure controls and procedures during the quarter ended June 30, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

The Company is the subject of lawsuits and claims arising in the ordinary course of business from time to time. See “Note ~~16,~~ ~~“Commitments~~18 – Commitments and Contingencies” ~~and Note 21,~~ ~~"Subsequent Events"~~for further information about ~~legal activity.~~litigation and claims.

ITEM 1A. RISK FACTORS.

There have been no material changes to the risk factors disclosed in Part I, Item 1A, “Risk Factors”, of our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, except for the risk factors noted below. Please refer to that section for disclosures regarding the risk and uncertainties relating to our business.

We have entered into binding term sheets with third parties and cannot assure you that any anticipated arrangements under such term sheets will lead to definitive agreements. If we are unable to complete these arrangements in a timely manner and on terms favorable to us, our business may be adversely affected.

We have engaged in negotiations with a number of third parties and have agreed to terms regarding settlement of litigation in which the Company is involved and restructuring of certain debt. We may be unable to negotiate final terms in a timely manner, or at all, and there is no guarantee that the terms of any final, definitive, binding agreement will be the same or similar to those currently contemplated in the term sheets. Final terms may be less favorable to us than those set forth in the term sheets. Delays in negotiating final, definitive, binding agreements could slow the Company’s development, divert management’s attention from other matters, result in wasted resources, and cause the Company to consume capital significantly faster than it currently anticipates.

The effects of war, acts of terrorism, threat of terrorism, or other types of violence, could adversely affect our business.

Some of our stores are located in areas with a high amount of foot traffic. Any threat of terrorist attacks or actual terrorist events, or other types of violence, such as shootings or riots, could lead to lower consumer traffic and a decline in sales. Decreased sales could have a material adverse effect on our business, financial condition and results of operations.

~~Our common stock may be categorized as “penny stock,” which may make it more difficult for investors to sell their shares of common stock due to suitability requirements.~~

Our common stock may be categorized as “penny stock.” The Commission has adopted Rule 15g-9 under the Exchange Act, which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. The price of our common stock is significantly less than $5.00 per share and, unless we qualify for an exception, may be considered “penny stock.” This designation imposes additional sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors. The penny stock rules, if applicable to us, would require a broker-dealer buying our securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities given the increased risks generally inherent in penny stocks. These rules may restrict the ability and/or willingness of brokers or dealers to buy or sell our common stock, either directly or on behalf of their clients, may discourage potential stockholders from purchasing our common stock, or may adversely affect the ability of stockholders to sell their shares.

If our acquired intangible assets become impaired in the future, we may incur significant impairment charges.

At least annually, or whenever events or circumstances arise indicating impairment may exist, we review goodwill for impairment as required by generally accepted accounting principles in the United States. Long-lived assets other than goodwill and indefinite-lived intangible assets, held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. ~~During the fiscal second quarter ended June 30, 2022, we recorded an impairment charge of~~ ~~$22.10 million~~ ~~for intangible assets and~~ ~~$33.63 million~~ for goodwill related to acquisitions during the 2021 fiscal year. As of June 30, 2022, we had remaining goodwill of $14.51 million and intangible assets of $102.77 million. The Company will perform its annual impairment assessment on September 30 that may result in additional impairment.

In the future, we may need to further reduce the carrying amount of goodwill and incur additional non-cash charges to our results of operations. Such charges could have the effect of reducing goodwill with a corresponding impairment expense and may have a material effect upon our reported results. The additional expense may reduce our reported profitability or increase our reported losses in future periods and could negatively affect the value of our securities, our ability to obtain other sources of capital, and may generally have a negative effect on our future operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

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ITEM 4. MINE SAFETY DISCLOSURES.

None.

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ITEM 5. OTHER INFORMATION.

None.

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ITEM 6. EXHIBITS.


Exhibit						Description

2.1						Agreement and Plan of Merger, dated March 2, 2021
2.2						Name Change Agreement and Plan of Merger, dated as of June 30, 2021, by and between ~~the Company~~Terra Tech Corp. and Unrivaled Brands, Inc.
2.3						Membership Interest Purchase Agreement, dated as of July 1, 2021, by and among the Company and Nicholas Kovacevich and Dallas Imbimbo.
2.4						Membership Interest Purchase Agreement, dated August 15, 2021.
2.5						Membership Interest Purchase Agreement, dated as of November 17, 2021.
2.6						Membership Interest Purchase Agreement, dated November 22, 2021.
~~2.7~~3.1						Certificate of Withdrawal of Certificate of Designation of Series A Preferred Stock
~~2.8~~3.2						Certificate of Withdrawal of Certificate of Designation of Series B Preferred Stock
~~2.9~~3.3						Articles of Merger, filed with the Nevada Secretary of State on July 1, 2021.
~~2.10~~3.4						Name Change Articles of Merger, filed with the Nevada Secretary of State on July 1, 2021.
~~2.11~~3.5						Articles of Incorporation.
~~2.12~~3.6						Certificate of ~~Amendment~~Amendment.
~~2.13~~3.7						Certificate of ~~Change~~Change.
~~2.14~~3.8						Certificate of ~~Amendment~~Amendment.
~~2.12~~3.9						Second Amended and Restated Bylaws.
~~3.1~~3.10						Certificate of Designation of Series V Preferred Stock.
3.11						Amended and Restated Certificate of Designation of Series V Preferred Stock.
3.12						Second Amended and Restated Certificate of Designation of Series V Preferred Stock.
3.13						Certificate of Designation of Series N Preferred Stock.
4.1						Form of Amendment No. 1 to 7.5% Senior Convertible Promissory Note.
~~3.2~~4.2						Form of Amendment No. 2 to 7.5% Senior Convertible Promissory Note, dated January 11, 2021.
~~3.3~~4.3						Form of Amendment No. 3 to 7.5% Senior Convertible Promissory Note.
~~3.4~~4.4						Form of Common Stock Purchase Warrant
~~3.5~~4.5						Form of 3.0% Senior Convertible Promissory Note.
~~3.6~~4.6						Form of Common Stock Purchase Warrant (“A Warrant”).
~~3.7~~4.7						Form of Common Stock Purchase Warrant (“B Warrant”).
~~3.8~~4.8						Form of Straight Promissory Note (“6-Month Note”).
~~3.9~~4.9						Form of Straight Promissory Note (“12-Month Note”).
~~3.10~~4.10						Common Stock Purchase Warrant
~~3.11~~4.11						Form of Senior Secured Promissory Note.
~~3.12~~4.12						Secured Promissory Note, dated November 22, 2021.
~~3.13~~10.1						~~2016 Equity Incentive Plan~~Settlement Agreement and Release, dated April 30, 2023, by and between Unrivaled Brands, Inc. and Matthew Guild and Sterling Harlan.†
~~3.14~~10.2						~~Form of Terra Tech Corp.~~ Amended and Restated ~~2018 Equity Incentive Plan.~~†
~~3.15~~						~~Amendment to Terra Tech Corp. Amended and Restated 2018 Equity Incentive Plan, dated as of February 14, 2020~~.†
~~3.16~~						~~2019 Equity Incentive Plan of UMBRLA, Inc.†~~
~~3.17~~						~~Amendment to 2019 Equity Incentive Plan of UMBRLA, Inc., dated March 1, 2020.†~~
~~3.18~~						~~Amendment to 2019 Equity Inventive Plan of UMBRLA, Inc., dated October 22, 2020.†~~
~~4.1~~						~~Sublease, dated March 29, 2016, by and between Black Oak Gallery and CCIG Properties, LLC .~~
~~4.2~~						~~Employment Agreement between Terra Tech Corp. and Jeffrey Batliner,~~Engagement Letter, dated June ~~7, 2021.~~
~~4.3~~						~~Loan Agreement Amendment, dated January 7, 2021.~~
~~4.4~~						~~Indemnification Agreement (Jeffrey Batliner), dated January 7, 2021.†~~
~~4.5~~						~~Indemnification Agreement (Steven J. Ross), dated January 7, 2021.†~~
~~4.6~~						~~Form of Registration Rights Agreement.~~
~~4.7~~						~~Independent Director Agreement~~30, 2023, between ~~Terra Tech Corp.~~Unrivaled Brands, Inc. and ~~Nicholas Kovacevich, dated February 1, 2021.†~~

~~Table of Contents~~


~~4.8~~						~~Independent Director Agreement between Terra Tech Corp. and Ira Ritter, dated February 1, 2021.†~~
~~4.9~~						~~Registration Rights Agreement.~~
~~4.10~~						~~Independent Director Agreement between Terra Tech Corp. and Tiffany Davis, dated April 6, 2021.†~~
~~4.11~~						~~Director Indemnification Agreement between Terra Tech Corp. and Tiffany Davis, dated April 6, 2021.†~~
~~4.12~~						~~Stock Option Agreement between Terra Tech Corp. and Tiffany Davis, dated April 6, 2021.~~Adnant, LLC
31.1						Certification of Sabas ~~Carril~~lo ,Carrillo, Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
31.2						Certification of ~~Jeffrey Batliner,~~Chris Rivera, Interim Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
32.1						Certification of Sabas Carrillo,, Chief Executive Officer, pursuant to Sections 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. **
32.2						Certification of ~~Jeffrey Batliner,~~Chris Rivera, Interim Chief Financial Officer, pursuant to Sections 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. **
101						The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2022,~~March 31, 2023, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Cash Flow, (iv) Consolidated Statements of Stockholders Equity, and (v) Notes to Unaudited Consolidated Financial Statements.*
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).*

___________________

*Filed herewith

** Furnished herewith

Table of Contents

*** Certain schedules and exhibits to this agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the Securities and Exchange Commission upon request.

♦ Indicates a management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	UNRIVALED BRANDS, INC.

Date: August ~~18, 2022~~14, 2023	By:	/s/ ~~Jeffrey Batliner~~Chris Rivera
		~~Jeffrey Batliner~~Chris Rivera
		Interim Chief Financial Officer (Principal Accounting Officer and Principal Financial Officer)

4641


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


3242 S. Halladay Street, Suite 202 Santa Ana, California						92705
(Address of Principal Executive Offices)						(Zip Code)


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


	PART I – FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements
	Consolidated Balance Sheets as of June 30, ~~2022~~2023 (Unaudited) and December 31, ~~2021~~2022	34
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, ~~2022~~2023 and ~~2021~~2022 (Unaudited)	5
	Consolidated Statements of Stockholders' (Deficit) Equity for the Three Months Ended June 30, 2023 and 2022 (Unaudited)	6
	Consolidated Statements of Stockholders' (Deficit) Equity for the Six Months Ended June 30, 2023 and 2022 (Unaudited)	7
	Consolidated Statements of Cash Flows for the Six Months Ended June 30 ~~2022~~, 2023 and ~~2021~~2022 (Unaudited)	6
	~~Consolidated Statements of Stockholders Equity for the Three Months Ended June 30, 2022 and 2021 (Unaudited)~~	7
	~~Consolidated Statements of Stockholders Equity for the Six Months Ended June 30, 2022 and 2021 (Unaudited)~~	78
	Notes to ~~Unaudited~~ Consolidated Financial Statements (Unaudited)	9

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3427
	Company Overview	3427
	Results of Operations	3529
	Liquidity, Capital Resources and Going Concern	35
	Critical Accounting Policies and Estimates	36
	Disclosure About Off-Balance Sheet Arrangements	3836
	~~Critical Accounting Policies and Estimates~~	38
	~~Liquidity and Capital Resources~~	38

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4136

Item 4.	Controls and Procedures	4136

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	4338

Item 1A.	Risk Factors	4338

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4338

Item 3.	Defaults Upon Senior Securities	4338

Item 4.	Mine Safety Disclosures	4438

Item 5.	Other Information	4439

Item 6.	Exhibits	4540

Signatures		4641


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


	Six Months Ended June 30,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(72,317)	$	(16,669)
Less: Net income (loss) from discontinued operations	3,979		(1,663)
Net loss from continuing operations	(76,295)		(15,006)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for income taxes	(2,136)		—
Bad debt expense	1,220		—
Depreciation and amortization	6,683		1,035

Gain on sale of assets	343		—

Gain on debt forgiveness	—		(86)
Gain on sale of investments	—		(5,337)
Amortization of operating lease right-of-use asset	1,127		385
Gain (loss) on extinguishment of debt	(542)		6,161
Non-cash interest expense	676		30
Non-cash portion of severance expense	—		7,990
Stock-based compensation	3,868		1,198
Unrealized gain on investments	(963)		—
Impairment expense	55,726		—
Change in operating assets and liabilities:
Accounts receivable	2,595		(813)
Inventory	1,131		72
Prepaid expenses and other current assets	(1,958)		(735)
Other assets	(2,584)		(127)
Accounts payable and accrued expenses	10,156		1,033
Operating lease liabilities	121		(240)
Net cash used in operating activities - continuing operations	(833)		(4,440)
Net cash used in operating activities - discontinued operations	(489)		(2,296)
NET CASH USED IN OPERATING ACTIVITIES	(1,322)		(6,736)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, equipment and leasehold improvements	(2,129)		(482)
Repayment of notes receivable	375		—




Proceeds from sale of investments	—		39,382
Proceeds from sales of assets	450		—
Net cash (used in) / provided by investing activities - continuing operations	(1,304)		38,900
Net cash provided by investing activities - discontinued operations	20,709		4,822
NET CASH PROVIDED BY INVESTING ACTIVITIES	19,405		43,722




CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable	—		3,500
Payments of debt principal	(21,645)		(1,012)
Cash paid for debt discount	—		(178)
Proceeds from issuance of common stock	4,375		—




Net cash (used in) / provided by financing activities - continuing operations	(17,270)		2,310

NET CASH (USED IN) / PROVIDED BY FINANCING ACTIVITIES	(17,270)		2,310

NET CHANGE IN CASH	814		39,296

Cash at beginning of period	6,891		217

Cash reclassified to discontinued operations	(442)		—
CASH AT END OF PERIOD	$	7,263	$	39,513

SUPPLEMENTAL DISCLOSURE FOR OPERATING ACTIVITIES:
Cash paid for interest	$	1,558	$	430

SUPPLEMENTAL DISCLOSURE FOR NON-CASH INVESTING AND FINANCING ACTIVITIES:
Debt principal and accrued interest converted into common stock	$	52	$	3,596
Net assets transferred to held for sale	$	1,328	$	—
Stock options exercised on a net share basis	$	—	$	2


Promissory note issued for severance	$	—	$	2,100


	(in thousands)
	Operating Leases
2022 (remaining)	$	1,627
2023	3,308
2024	3,373
2025	2,927
2026	2,299
Thereafter	11,400
Total lease payments	24,934
Less: discount	(8,523)
Total operating lease liabilities	$	16,411


	Six Months Ended
	June 30, 2022		June 30, 2021
Weighted average remaining lease term (years)	5.7		79.0
Weighted average discount rate	11.4	%	11.6	%