blmh20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended March 31, 2024

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From ____________ to ____________

Commission File Number: 000-54258

	BLUM HOLDINGS, INC.
	(Exact Name of Registrant as Specified in its Charter)

Delaware

93-3735199

(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)

(888) 909-5564

(Registrant’s Telephone Number, Including Area Code)

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

None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of May 10, 2024, there were 8,499,105 shares of common stock outstanding, 1,461,997 shares of common stock issuable upon the exercise of all our outstanding warrants, and 369,301 shares of common stock issuable upon the exercise of all vested options.

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BLUM HOLDINGS, INC.

INDEX TO FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED March 31, 2024

	PART I – FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements
	Consolidated Balance Sheets as of March 31, 2024 (Unaudited) and December 31, 2023	4
	Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023 (Unaudited)	5
	Consolidated Statements of Stockholders' Deficit for the Three Months Ended March 31, 2024 and 2023 (Unaudited)	6
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023 (Unaudited)	7
	Notes to Consolidated Financial Statements (Unaudited)	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
	Company Overview	25
	Results of Operations	26
	Liquidity, Capital Resources and Going Concern	31
	Critical Accounting Policies and Estimates	32
	Disclosure About Off-Balance Sheet Arrangements	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	35
Signatures		36

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Cautionary Note Concerning Forward-Looking Statements

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

There are a number of risks, uncertainties, and other important factors, many of which are beyond our control, that could cause actual results to differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. Such risks, uncertainties, and other important factors that could cause actual results to differ include, among others, the risk, uncertainties and factors set forth under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 and in other filings we make from time to time with the U.S. Securities and Exchange Commission (“SEC”).

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

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ITEM 1. FINANCIAL STATEMENTS.

BLUM HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except for shares)

	*March 31,*			*December 31,*
	*2024*			*2023*
	(Unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents	$	1,175		$	862
Accounts Receivable, Net of Allowances of $150 at both March 31, 2024 and December 31, 2023		761			1,004
Inventory		1,663			1,700
Prepaid Expenses & Other Assets		589			470
Notes Receivable		650			645
Assets Related to Discontinued Operations		16			12
Total Current Assets		4,854			4,693

Property, Equipment and Leasehold Improvements, Net		9,690			9,766
Right-of-Use Assets - Operating Leases		8,508			8,965
Intangible Assets, Net		1,350			1,359
Goodwill		3,585			3,585
Other Assets		2,824			1,541
Investments		1,083			2,067
Long-Term Assets Related to Discontinued Operations		69			95
TOTAL ASSETS	$	31,963		$	32,071

LIABILITIES AND STOCKHOLDERS’ DEFICIT
LIABILITIES:
Current Liabilities:
Accounts Payable & Accrued Liabilities	$	26,067		$	23,218
Current Portion of Notes Payable		22,573			22,593
Income Taxes Payable		17,076			16,637
Liabilities Related to Discontinued Operations		—			100
Total Current Liabilities		65,716			62,548

Notes Payable, Net of Discounts		6,472			6,485
Deferred Tax Liabilities		140			112
Operating Lease Liabilities		8,272			8,622
Long-Term Liabilities Related to Discontinued Operations		—			—
TOTAL LIABILITIES		80,600			77,767

COMMITMENTS AND CONTINGENCIES (Note 18)

STOCKHOLDERS’ DEFICIT:
Preferred Stock, Convertible Series V, par value $0.001: 25,000,000 shares authorized; 14,071,431 shares outstanding as of March 31, 2024 and December 31, 2023		1			1
Common Stock, par value $0.001: 990,000,000 shares authorized as of March 31, 2024 and December 31, 2023; 8,499,105 and 8,509,384 shares outstanding as of March 31, 2024 and December 31, 2023, respectively		8			9
Additional Paid-In Capital		408,584			408,473
Accumulated Deficit		(457,230	)		(454,179	)
TOTAL STOCKHOLDERS’ DEFICIT		(48,637	)		(45,696	)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	31,963		$	32,071

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

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BLUM HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

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

	*Three Months Ended*
	*March 31,*
	*2024*			*2023*

Revenue	$	6,782		$	8,617
Cost of Goods Sold		3,174			3,923
Gross Profit		3,608			4,694

Operating Expenses:
Selling, General & Administrative		6,099			5,549
Total Operating Expenses		6,099			5,549

Loss from Operations		(2,491	)		(855	)

Other Income (Expense):
Interest Expense, Net		(1,017	)		(1,024	)
Gain on Extinguishment of Debt		—			3,026
Realized Loss on Investments		—			(61	)
Unrealized Gain on Long-Term Investments		417			—
Other Income		88			—
Total Other Income (Expense)		(512	)		1,941

Income (Loss) from Continuing Operations Before Provision for Income Taxes		(3,003	)		1,086
Provision for Income Tax (Expense) Benefit for Continuing Operations		(52	)		(658	)
Net Income (Loss) from Continuing Operations		(3,055	)		428

Income (Loss) from Discontinued Operations Before Provision for Income Taxes		4			(18	)
Provision for Income Tax for Discontinued Operations		—			—
Net Income (Loss) from Discontinued Operations		4			(18	)

NET INCOME (LOSS)	$	(3,051	)	$	410

Net Income (Loss) from Continuing Operations per Common Share - Basic	$	(0.31	)	$	0.05
Net Income (Loss) from Continuing Operations per Common Share - Diluted	$	(0.31	)	$	0.05
Weighted-Average Shares Outstanding - Basic		9,909,072			8,166,859
Weighted-Average Shares Outstanding - Diluted		9,909,072			8,352,745

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

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BLUM HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (UNAUDITED)

FOR THE THREE MONTHS ENDED March 31, 2024 and 2023

(in thousands, except for shares)

	*Convertible Series V*										*Treasury*		*Additional*
	*Preferred Stock*				*Common Stock*						*Stock*		*Paid-In*		*Accumulated*
	*Shares*		*Amount*		*Shares*			*Amount*			*Amount*		*Capital*		*Deficit*			*Total*
BALANCE AT DECEMBER 31, 2023		14,071,431	$	1		8,509,384		$	9		$	—	$	408,473	$	(454,179	)	$	(45,696	)
Net Loss		—		—		—			—			—		—		(3,051	)		(3,051	)
Cancellation of Shares		—		—		(10,279	)		(1	)		—		1		—			—
Stock Option Expense		—		—		—			—			—		110		—			110
BALANCE AT MARCH 31, 2024		14,071,431	$	1		8,499,105		$	8		$	—	$	408,584	$	(457,230	)	$	(48,637	)

	Convertible Series V								Treasury			Additional
	Preferred Stock				Common Stock				Stock			Paid-In		Accumulated
	Shares		Amount		Shares		Amount		Amount			Capital		Deficit			Total
BALANCE AT DECEMBER 31, 2022		—	$	—		6,795,136	$	701	$	(808	)	$	403,619	$	(440,049	)	$	(36,537	)
Net Income		—		—		—		—		—			—		410			410
Stock Compensation - Services Expense		—		—		161,812		16		—			340		—			356
Stock Issued for Cash		14,071,431		1		—		—		—			1,969		—			1,970
Forfeiture of Common Stock		—		—		—		—		(2	)		2		—			—
Stock Option Expense		—		—		—		—		—			99		—			99
BALANCE AT MARCH 31, 2023		14,071,431	$	1		6,956,948	$	717	$	(810	)	$	406,029	$	(439,639	)	$	(33,702	)

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

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BLUM HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

	*Three Months Ended*
	*March 31,*
	*2024*			*2023*
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)	$	(3,051	)	$	410
Less: Net Income (Loss) from Discontinued Operations		4			(18	)
Net Income (Loss) from Continuing Operations		(3,055	)		428
Adjustments to Reconcile Net Income (Loss) to Net Cash Used in Operating Activities:
Deferred Income Tax Benefit		28			—
Bad Debt Expense (Recoveries)		2			(7	)
Gain from Settlement of Liabilities		—			(1,507	)
Realized Loss on Investments		—			61
Gain on Extinguishment of Debt		—			(3,026	)
Non-Cash Interest (Income) Expense, Net		(5	)		326
Depreciation and Amortization		94			775
Amortization of Operating Lease Right-of-Use Asset		457			491
Stock-Based Compensation		110			455
Unrealized Gain on Investments		(417	)		—
Change in Operating Assets and Liabilities:
Accounts Receivable		241			(349	)
Inventory		37			(634	)
Prepaid Expenses and Other Current Assets		(119	)		183
Other Assets		(1	)		(64	)
Accounts Payable and Accrued Expenses		2,002			832
Operating Lease Liabilities		(350	)		(212	)
Net Cash Used in Operating Activities - Continuing Operations		(976	)		(2,248	)
Net Cash Provided by Operating Activities - Discontinued Operations		27			36
NET CASH USED IN OPERATING ACTIVITIES		(949	)		(2,212	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property and Equipment		(9	)		(153	)
Proceeds from Notes Receivable		—			634
Proceeds from Sale of Investments		1,300			149
Net Cash Provided by Investing Activities - Continuing Operations		1,291			630
Net Cash Provided by Investing Activities - Discontinued Operations		—			—
NET CASH PROVIDED BY INVESTING ACTIVITIES		1,291			630

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of Debt Principal		(29	)		(224	)
Proceeds from Issuance of Preferred Stock		—			1,970
Net Cash Provided by (Used in) Financing Activities - Continuing Operations		(29	)		1,746
Net Cash Used in Financing Activities - Discontinued Operations		—			—
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		(29	)		1,746

NET CHANGE IN CASH		313			164

Cash at Beginning of Period		862			1,200
Cash Reclassed to Discontinued Operations		—			—
CASH AT END OF PERIOD	$	1,175		$	1,364

SUPPLEMENTAL DISCLOSURE FOR OPERATING ACTIVITIES:
Cash Paid for Interest	$	490		$	179

SUPPLEMENTAL DISCLOSURE FOR NON-CASH INVESTING AND FINANCING ACTIVITIES:
Reclass of Accrued Interest to Principal	$	—		$	1,896

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

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BLUM HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 – DESCRIPTION OF BUSINESS

Blum Holdings, Inc. (“Blüm” or the “Company”) is a cannabis company with operations in retail and distribution throughout California, with an emphasis on providing the highest quality of medical and adult use cannabis products. The Company is home to Korova, a brand of high potency products across multiple product categories, currently available in California. The Company operates Blüm OC, a premier cannabis dispensary in 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.

Blum Holdings, Inc. is a holding company with the following subsidiaries:

•	Unrivaled Brands, Inc., a Nevada corporation (“Unrivaled”)
•	Black Oak Gallery, a California corporation (“Black Oak” or “Blüm Oakland”)

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

•	2705 PFC, LLC, a Nevada limited liability company
•	3242 Enterprises, Inc., a California corporation (“The Spot”)

•	3242 Holdings, LLC, a Nevada limited liability company

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

•	People’s First Choice, LLC, a California limited liability company (“Blüm OC”)

•	People’s Costa Mesa, LLC, a California limited liability company

References in this document to the “Company”, “Blüm”, “we”, “us”, or “our” are intended to mean Blum Holdings, Inc., individually, or as the context requires, collectively with its subsidiaries on a consolidated basis.

Corporate Reorganization

On January 12, 2024, Unrivaled Brands, Inc. (“Unrivaled”) completed a corporate reorganization (the “Reorganization”) pursuant to which Blum Holdings, Inc. became the ultimate parent of Unrivaled. As part of the Reorganization, Unrivaled entered into an Agreement and Plan of Merger, dated October 9, 2023 (the “Reorganization Agreement”), with Blüm and Blum Merger Sub, Inc., a Nevada corporation and a wholly-owned subsidiary of Blüm (“Merger Sub”), in which, among other things and subject to its terms and conditions, as described below, that Merger Sub merged with and into Unrivaled, with the separate existence of Merger Sub ceasing and with Unrivaled surviving as a direct, wholly-owned subsidiary of Blüm. After the Reorganization, the Company continues to engage in the business conducted by it prior to the Reorganization and the directors and executive officers of Unrivaled continued to serve in the same capacities for Blüm.

The Reorganization Agreement provides that at the effective time of the Reorganization, on January 12, 2024, all of the issued and outstanding shares of Unrivaled’s common stock, par value $0.001 per share were converted automatically on a one-for-one basis into shares of Blüm’s common stock, par value $0.001 per share, and all of the issued and outstanding shares of Unrivaled’s Series V preferred stock, par value $0.001 per share, were converted on a one-for-one basis into shares of Blüm’s respective classes of preferred stock, par value $0.001 per share. On February 12, 2024, the Company began trading as "BLMH" on the OTCQB.

Additionally, effective January 12, 2024, (x) each outstanding option to purchase shares of Unrivaled's common stock (a “Company Option”) was converted automatically into a stock option to purchase an identical number of shares of Blüm common stock, (y) each outstanding warrant to purchase shares of Unrivaled's common stock (a “Company Warrant”) was converted automatically into a warrant to purchase an identical number of shares of Blüm common stock, and (z) each outstanding promissory note convertible into shares of Unrivaled's common stock (a “Company Note”) was automatically converted into a promissory note convertible into an identical number of shares of Blüm common stock, in each case, on the same terms and conditions as applied to the Company Option, Company Warrant and Company Note, respectively, immediately prior to the effective date and as set forth in the documentation relating to such Company Option, Company Warrant and Company Note.

Effective January 12, 2024, Unrivaled Brands, Inc. completed a reverse stock split of its common stock at a ratio of 1-for-100 (the “Reverse Stock Split”). As a result of the Reorganization, the current stockholders of Unrivaled became stockholders of Blüm with the same number and percentage of shares of Blüm as they held in Unrivaled immediately prior to the Reorganization, subject to any changes from the implementation of the Reverse Stock Split. Accordingly, all share and per share amounts for all periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this Reverse Stock Split and adjustment of the preferred stock conversion ratios.

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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and with the instructions to U.S. Securities and Exchange Commission (“SEC”) Form 10-Q and Article 10 of Regulation S-X of the Securities Act of 1933 and reflect the accounts and operations of the Company and those of its subsidiaries in which the Company has a controlling financial interest. In accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, “Consolidation,” the Company consolidates any variable interest entity (“VIE”) of which it is the primary beneficiary.

The typical condition for a controlling financial interest ownership is holding a majority of the voting interests of an entity; however, a controlling financial interest may also exist in entities, such as VIEs, through arrangements that do not involve controlling voting interests. ASC 810 requires a variable interest holder to consolidate a VIE if that party has the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company does not consolidate a VIE in which it has a majority ownership interest when it is not considered the primary beneficiary. The Company evaluates its relationships with all the VIEs on an ongoing basis to reassess if it continues to be the primary beneficiary.

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 March 31, 2024 and December 31, 2023, and the consolidated results of operations and cash flows for the periods ended March 31, 2024 and 2023 have been included. These interim unaudited consolidated financial statements do not include all disclosures required by GAAP for complete financial statements and, therefore, should be read in conjunction with the more detailed audited consolidated financial statements for the year ended December 31, 2023. The December 31, 2023 balances reported herein are derived from the audited consolidated financial statements for the year ended December 31, 2023. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year.

Going Concern

The Company incurred a pre-tax net loss from continuing operations of $3.0 million for the three months ended March 31, 2024 and pre-tax net income from continuing operations of $1.09 million for the three months ended March 31, 2023. As of March 31, 2024 and December 31, 2023, the Company had an accumulated deficit of $457.23 million and $454.18 million, respectively. At March 31, 2024, the Company had a consolidated cash balance of $1.18 million. Management expects to experience further net losses in 2024 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 the Company will continue as a going concern. In an effort to achieve liquidity that would be sufficient to meet all of its commitments, the Company has undertaken a number of actions, including minimizing capital expenditures and reducing recurring expenses. However, management believes that even after taking these actions, the Company will not have sufficient liquidity to satisfy all of its future financial obligations. The risks and uncertainties surrounding the ability to raise capital, the limited capital resources, and the weak industry conditions impacting the Company’s business raise substantial doubt as to its ability to continue as a going concern.

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Significant Accounting Policies

The significant accounting policies and critical estimates applied by the Company in these interim unaudited consolidated financial statements are the same as those applied in the Company’s audited consolidated financial statements and accompanying notes included in the Company’s 2023 Form 10-K, unless otherwise disclosed in these accompanying notes to the unaudited consolidated financial statements for the interim period ended March 31, 2024.

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, 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.

Income and 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. Included in the Company's denominator for the basic income or loss per share is the number of Series V Preferred Stock on an as-if converted to common stock basis. The Company's operations resulted in net loss and net income for the three months ended March 31, 2024 and 2023, respectively. The denominator of the diluted income per share for the three months ended March 31, 2023 includes 185,886 options to purchase common stock.

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):

	*Three Months Ended*
	*March 31,*
	*2024*		*2023*
Common Stock Warrants		1,461,997		1,011,618
Common Stock Options		369,301		433,316
		1,831,298		1,444,934

Recently Adopted 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 adoption of the standard on January 1, 2024 did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Standards

In July 2023, the FASB issued ASU 2023-03, “Presentation of Financial Statement (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718)”, to amend various SEC paragraphs in the Accounting Standards Codification to reflect the issuance of SEC Staff Accounting Bulletin No. 120, among other things. The ASU does not provide any new guidance so there is no transition or effective date associated with it. The Company is currently evaluating the effect of adopting this ASU.

In October 2023, the FASB issued ASU 2023-06, "Disclosure Improvements," which incorporates certain existing or incremental disclosures and presentation requirements of SEC Regulations S-X and S-K into the FASB Accounting Standards Codification (the “Codification”). ASU 2023-06 is effective for the Company as of the effective date to remove the existing disclosure requirement from Regulations S-X and S-K. Early adoption is not permitted. The Company is currently evaluating the effect of adopting this ASU.

In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures," which requires that a public entity provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by Topic 280 in interim periods, including those that have a single reportable segment. It also requires all public entities, including those with a single reportable segment, to disclose significant segment expenses and other segment items for each reportable segment. In addition, the ASU requires entities to disclose information about the chief operating decision maker ("CODM") and an explanation of how the CODM uses the reported measures. For public business entities, the ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the effect of adopting this ASU.

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures," which requires public business entities to disclose additional information in specified categories with respect to the reconciliation of the effective tax rate to the statutory rate (the rate reconciliation) for federal, state, and foreign income taxes. It also requires greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a specified threshold. In addition, the ASU requires information pertaining to taxes paid (net of refunds received) to be disaggregated for federal, state, and foreign taxes and further disaggregated for specific jurisdictions to the extent the related amounts exceed a quantitative threshold. For public business entities, the ASU is effective for fiscal years beginning after December 15, 2024. The Company is currently evaluating the effect of adopting this ASU.

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NOTE 3 – CONCENTRATIONS OF BUSINESS AND CREDIT RISK

The Company maintains cash balances in several financial institutions that are insured by either the Federal Deposit Insurance Corporation or the National Credit Union Association up to certain federal limitations. At times, the Company’s cash balance exceeds these federal limitations, and it maintains significant cash on hand at certain of its locations. The Company has not historically experienced any material loss from carrying cash on hand. The amount in excess of insured limitations was nil as of March 31, 2024 and December 31, 2023, 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 months ended March 31, 2024 and 2023.

The Company sources cannabis products for retail from various vendors. However, as a result of regulations in the State of California, the Company’s California retail 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 relationships with sufficient members of properly licensed vendors, the Company’s sales may be impacted. During the three ended March 31, 2024 and 2023, the Company did not have any concentration of vendors for inventory purchases. However, this may change depending on the number of vendors who receive appropriate licenses to operate in the State of California.

NOTE 4 – INVENTORY

Raw materials consist of materials and packaging for manufacturing of products owned by the Company. Finished goods consists of cannabis products sold in retail and distribution. Inventory consisted of the following:

	(in thousands)
	*March 31,*		*December 31,*
	*2024*		*2023*
Raw Materials	$	642	$	647
Finished Goods		1,021		1,053
Total Inventory	$	1,663	$	1,700

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NOTE 5 – INVESTMENTS

Mystic Holdings

In September 2023, the Company entered into a settlement agreement to resolve the outstanding litigation with Mystic Holdings, Inc. (“Mystic”) which confirmed the Company's ownership of 8,323,764 shares of common stock in Mystic and 8,332 shares of Series A preferred stock in Mystic. In accordance with ASC 321, the Company recorded the investment in equity securities at fair value based upon the quoted price of the shares in active trading markets (Level 1). As of March 31, 2024, the fair value of the investment was $1.08 million. The Company recorded an unrealized gain on investment of $0.42 million for the three months ended March 31, 2024.

The following tables present the Company’s financial instruments that are measured and recorded at fair value on the Company’s consolidated balance sheets on a recurring basis:

	(in thousands)
	*March 31, 2024*
	*Amount*		*Level 1*		*Level 2*		*Level 3*
Investment in Mystic Holdings, Inc.	$	1,083	$	1,083	$	—	$	—
Total	$	1,083	$	1,083	$	—	$	—

	(in thousands)
	*December 31, 2023*
	*Amount*		*Level 1*		*Level 2*		*Level 3*
Investment in Mystic Holdings, Inc.	$	667	$	667	$	—	$	—
Total	$	667	$	667	$	—	$	—

NOTE 6 – PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Property, equipment, and leasehold improvements consisted of the following:

	(in thousands)
	*March 31,*			*December 31,*
	*2024*			*2023*
Land and Building	$	7,581		$	7,581
Furniture and Equipment		354			354
Computer Hardware		343			343
Leasehold Improvements		5,495			5,487
Vehicles		57			57
Construction in Progress		908			908
Subtotal		14,738			14,730
Less Accumulated Depreciation		(5,048	)		(4,964	)
Property, Equipment and Leasehold Improvements, Net	$	9,690		$	9,766

Depreciation expense related to continuing operations was $0.09 million and $0.12 million for the three months ended March 31, 2024 and 2023, respectively.

All property, equipment and leasehold improvements related to discontinued operations are separately presented from the consolidated balance sheets as of March 31, 2024 and December 31, 2023. Refer to "Note 15 - Discontinued Operations".

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NOTE 7 – INTANGIBLE ASSETS

Intangible assets consisted of the following:

			(in thousands)
			*March 31, 2024*							*December 31, 2023*
	*Estimated Useful Life in Years*		*Gross Carrying Amount*		*Accumulated Amortization*			*Net Carrying Value*		*Gross Carrying Amount*		*Accumulated Amortization*			*Net Carrying Value*
Amortizing Intangible Assets:
Trademarks and Patent		2 to 8	$	4,500	$	(4,500	)	$	—	$	4,500	$	(4,491	)	$	9
Total Amortizing Intangible Assets				4,500		(4,500	)		—		4,500		(4,491	)		9

Non-Amortizing Intangible Assets:
Trade Name	Indefinite			1,350		—			1,350		1,350		—			1,350
Total Non-Amortizing Intangible Assets				1,350		—			1,350		1,350		—			1,350
Total Intangible Assets, Net			$	5,850	$	(4,500	)	$	1,350	$	5,850	$	(4,491	)	$	1,359

Amortization expense related to continuing operations was $0.01 million and $0.56 million for the three months ended March 31, 2024 and 2023, respectively.

NOTE 8 – GOODWILL

Goodwill is assigned to the reporting unit, which is the operating segment level or one level below the operating segment. The Company conducts its annual goodwill impairment assessment on November 1, 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. 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 (“step one”). The balance of goodwill at March 31, 2024 and December 31, 2023 remained unchanged at $3.59 million.

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NOTE 9 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consisted of the following:

	(in thousands)
	*March 31,*		*December 31,*
	*2024*		*2023*
Accounts Payable	$	14,606	$	13,848
Tax Liabilities		2,584		1,445
Accrued Payroll and Benefits		273		494
Current Lease Liabilities		1,963		1,914
Accrued Interest		1,953		1,421
Other Accrued Expenses		4,688		4,096
Total Accounts Payable and Accrued Expenses	$	26,067	$	23,218

NOTE 10 – 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 separately stated while current and long-term lease liabilities are included in accounts payable and accrued liabilities and a separate item, respectively, on the Company’s 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.

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 incremental 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 and other facilities under lease agreements that expire at various dates. In addition, office, production and transportation equipment are leased under agreements that expire at various dates. The Company does not have any significant finance leases. Total operating lease costs were $0.68 million and $0.51 million for the three months ended March 31, 2024 and 2023, respectively. Short-term lease costs during the fiscal quarters ended March 31, 2024 and 2023 were not material.

As of March 31, 2024 and December 31, 2023, the Company has short-term lease liabilities of $1.96 million and $1.91 million, respectively. The table below presents total operating lease right-of-use assets and lease liabilities as of:

	(in thousands)
	*March 31,*		*December 31,*
	*2024*		*2023*
Operating Lease Right-of-Use Assets	$	8,508	$	8,965
Operating Lease Liabilities	$	10,235	$	10,536

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:

	*Three Months Ended*
	*March 31,*			*March 31,*
	*2024*			*2023*
Weighted Average Remaining Lease Term (Years)		8.3			8.6
Weighted Average Discount Rate		11.4	%		11.4	%

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NOTE 11 – NOTES PAYABLE

Notes payable consisted of the following:

	(in thousands)
	*March 31,*			*December 31,*
	*2024*			*2023*
Promissory note dated July 27, 2021, issued to Arthur Chan, which matures July 26, 2024, and bears interest at a rate of 8% 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% and matures on December 28, 2027.		154			154
Promissory note dated October 1, 2021, issued to Matthew Guild as part of the SilverStreak Solutions acquisition. The interest rate on the note was 10.0%. The note matures in March 2028.		261			264
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.		1,044			1,058
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 $3.0 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			22,200
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 annum.		2,794			2,813
Notes Payable - Promissory Notes		28,953			28,989
Vehicle Loans		6			7
Less: Short-Term Debt		(22,573	)		(22,593	)
Plus: Debt Premium, Net		86			82
Net Long-Term Debt	$	6,472		$	6,485

Promissory Note Related to People's California, LLC

On March 6, 2023, the Company entered into a binding settlement term sheet (as amended on May 17, 2023, “Settlement Term Sheet”) to resolve certain litigation matters with People’s California, LLC. On July 10, 2023, the Company received a notice from People's California, LLC in respect of the Settlement Term Sheet wherein People’s California, LLC notified the Company had 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 held by People's California, LLC became callable by the creditor. Accordingly, the Company classified the long-term debt as current notes payable in the consolidated balance sheets as of March 31, 2024 and December 31, 2023. The Company is currently in ongoing discussions with People's California, LLC to renegotiate the debt. As of March 31, 2024, the outstanding balance on the promissory note was $22.2 million and the unamortized debt premium was $0.09 million.

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NOTE 12 – 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. The conversion ratio of each share of Series V Preferred Stock was adjusted to one-tenth (1/10^th) of a share of Common Stock to reflect the Reverse Stock Split effective January 12, 2024 as retroactively presented herein.

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 one-tenth (1/10^th) of a share of common stock for each one share of Series V Preferred Stock or $1.40 per share of common stock and (ii) 703,572 warrants to purchase up to 703,572 of common stock with an exercise price of $2.80 or equivalent to two times the as-converted-to-common stock purchase price of $1.40. 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. The conversion ratio of each share of Series N Preferred Stock was adjusted to one (1) share of Common Stock to reflect the Reverse Stock Split effective January 12, 2024.

Common Stock

The Company authorized 990,000,000 shares of common stock with $0.001 par value per share. As of March 31, 2024 and December 31, 2023, 8,499,105 and 8,509,384 shares of common stock were outstanding, respectively.

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NOTE 13 – STOCK-BASED COMPENSATION

Equity Incentive Plans

As a result of the Reorganization on January 12, 2024, Unrivaled Brands, Inc. assigned to Blüm, and Blüm assumed and agreed to perform all obligations pursuant to (a) the Terra Tech Corp. 2016 Equity Incentive Plan (the “2016 Equity Incentive Plan”), the Terra Tech Corp. Amended and Restated 2018 Equity Incentive Plan (the “2018 Equity Incentive Plan”), and the UMBRLA, Inc. 2019 Equity Incentive Plan (the “2019 Equity Incentive Plan" or the "UMBRLA Plan”), and (b) each award agreement entered into pursuant to the equity incentive plans.

The following table contains information about the Company's equity incentive plans as of March 31, 2024:

	*Awards Reserved for Issuance*		*Awards Exercised*		*Awards Outstanding*		*Awards Available for Grant*
2016 Equity Incentive Plan		2,000,000		—		2,489		1,997,511
2018 Equity Incentive Plan		43,976,425		40,221		245,871		43,690,333
2019 Equity Incentive Plan		55,000,000		349		119,992		54,879,659

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
	March 31, 2024				March 31, 2023
	Number of				Number of
	Shares or		Stock-Based		Shares or		Stock-Based
	Options		Compensation		Options		Compensation
Type of Award	Granted		Expense		Granted		Expense
Stock Options		—	$	110		—	$	99

Stock Grants:
Employees (Common Stock)		—		—		—		—
Directors (Common Stock)		—		—		—		—
Non–Employee Consultants (Common Stock)		—		—		161,812		356
Total Stock–Based Compensation Expense			$	110			$	455

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Stock Options

The following table summarizes the Company’s stock option activity and related information for the three months ended March 31, 2024:

Weighted-

Aggregate

Average

Intrinsic

Weighted-

Remaining

Value of

Number of

Average Exercise

Contractual

In-the-Money

Shares

Price Per Share

Life (in years)

Options

Options Outstanding as of January 1, 2024

369,301

13.00

Options Outstanding as of March 31, 2024

369,301

12.58

8.0 years

—

Options Exercisable as of March 31, 2024

360,333

12.57

8.1 years

—

As of March 31, 2024, total unrecognized stock-based compensation was $0.15 million. Such costs are expected to be recognized over a weighted-average period of approximately 1.00 years. 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.

NOTE 14 – WARRANTS

The following table summarizes the Company's warrant activity for the three months ended March 31, 2024:

				*Weighted-*
				*Average*
				*Exercise*
	*Warrants*			*Price*
Warrants Outstanding as of January 1, 2024		1,463,312		$	6.17
Expired		(1,315	)	$	114.10
Warrants Outstanding as of March 31, 2024		1,461,997		$	6.07

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NOTE 15 – DISCONTINUED OPERATIONS

Cultivation Operations

In October 2023, the Company entered into a management services agreement with a third-party to manage and operate the Company's cultivation facility in Oakland, California. The facility had been non-operational since October 2022. The transaction was not within the scope of deconsolidation guidance under ASC 810 and was accounted for as a sublease in accordance with ASC 842.

On December 15, 2023, the Company entered into a management services agreement with a third-party to manage and operate the Company's cultivation operations in Oakland, California (the "MSA"). The agreement includes an option to purchase the licensed entity at its fair value or a negotiated price. In conjunction with the MSA, the parties entered into a binding letter of intent to sell 100% of the stock and assets of the licensed entity. As a result, the Company no longer had controlling financial interest and all assets and liabilities related to the cultivation operations in Oakland have been fully deconsolidated as of December 31, 2023. On January 28, 2024, the purchase option was exercised and the Company sold the cultivation operations for a purchase price of $1.40 million, of which $0.10 million was received as a deposit as of December 31, 2023, and recognized $0.10 million loss on sale.

The Company concluded that the exit and disposal of its cultivation operations represented a strategic shift that will have a major effect on the Company's operations and financial results and thus all assets and liabilities allocable to the cultivation operations were classified as discontinued operations. The remaining assets associated with the cultivation 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 cultivation 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 all periods presented. The Company has significant continuing involvement in the cultivation facility in Oakland, California as a result of its sublease agreement which expires on July 31, 2027. During the three months ended March 31, 2024, the Company had cash inflows and outflows of $72,000 and $50,000, respectively, from discontinued operations after the disposal transaction.

Operating results for the discontinued operations were comprised of the following:


	(in thousands)
	*Three Months Ended*
	*March 31,*
	*2024*		*2023*
Total Revenues	$	72	$	112
Cost of Goods Sold		—		82
Gross Profit		72		30

Selling, General & Administrative Expenses		68		48
Income (Loss) from Discontinued Operations Before Provision for Income Taxes		4		(18	)

Provision for Income Tax for Discontinued Operations		—		—
Net Income (Loss) from Discontinued Operations	$	4	$	(18	)

Income (Loss) from Discontinued Operations per Common Share Attributable to Blum Holdings, Inc. Common Stockholders - Basic And Diluted	$	0.00	$	(0.00	)

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

		(in thousands)
	*March 31, 2024*		*December 31, 2023*
Cash	$	—	$	—
Prepaid Expenses and Other Assets		16		12
Property, Equipment and Leasehold Improvements, Net		68		95
Other Assets		1		—
Assets Related to Discontinued Operations	$	85	$	107

Accounts Payable and Accrued Expenses		—		100
Liabilities Related to Discontinued Operations	$	—	$	100

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NOTE 16 – SEGMENT INFORMATION

The Company operates in two segments:

(i) Cannabis Retail – Either independently or in conjunction with third parties, the Company operates medical marijuana and adult use cannabis dispensaries in California. All retail dispensaries offer a broad selection of medical and adult use cannabis products including flower, concentrates, and edibles.

(ii) Cannabis Distribution – The Company operates a distribution center in California that distributes its own branded products as well as third party products to its retail dispensaries in California under the Korova brand.

For the periods presented, revenue by reportable segments are as follows:

	(in thousands)
	*Total Revenue*				*% of Total Revenue*
	*Three Months Ended March 31,*
Segment	*2024*		*2023*		*2024*			*2023*
Cannabis Retail	$	6,762	$	8,184		99.7	%		95.0	%
Cannabis Distribution		20		433		0.3	%		5.0	%
Total	$	6,782	$	8,617		100.0	%		100.0	%

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For the periods presented, results of operations by reportable segments are as follows:

	(in thousands)
	*Three Months Ended March 31, 2024*												*Three Months Ended March 31, 2023*
	*Cannabis*			*Cannabis*			*Corporate &*						*Cannabis*			*Cannabis*			*Corporate &*
	*Retail*			*Distribution*			*Other*			*Total*			*Retail*			*Distribution*			*Other*			*Total*
Total Revenues	$	6,762		$	20		$	—		$	6,782		$	8,184		$	433		$	—		$	8,617
Cost of Goods Sold		3,143			31			—			3,174			3,805			118			—			3,923
Gross Profit		3,619			(11	)		—			3,608			4,379			315			—			4,694
Gross Profit %		53.5	%		(55.0	)%								53.5	%		72.7	%

Selling, General & Administrative Expenses		3,439			52			2,608			6,099			2,458			108			2,983			5,549
Income (Loss) from Operations		180			(63	)		(2,608	)		(2,491	)		1,921			207			(2,983	)		(855	)

Other Income (Expense):
Interest Expense		(162	)		—			(855	)		(1,017	)		(48	)		—			(976	)		(1,024	)
Gain on Extinguishment of Debt		—			—			—			—			—			—			3,026			3,026
Realized Loss on Investments		—			—			—			—			—			—			(61	)		(61	)
Unrealized Gain on Investments		—			—			417			417			—			—			—			—
Other Income (Expense)		28			—			60			88			—			—			—			—
Total Other Income (Expense), Net		(134	)		—			(378	)		(512	)		(48	)		—			1,989			1,941

Income (Loss) Before Provision for Income Taxes	$	46		$	(63	)	$	(2,986	)	$	(3,003	)	$	1,873		$	207		$	(994	)	$	1,086

Total Assets	$	13,121		$	894		$	17,948		$	31,963		$	19,882		$	4,290		$	15,294		$	39,466

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.

Refer to “Note 11 – Notes Payable" for related party transactions and balances during the current period.

During the three months ended March 31, 2024, the Company incurred a total of $0.60 million in fees pursuant to the engagement letter with Adnant, LLC ("Adnant") dated August 12, 2022, as subsequently amended, 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 as compensation for Adnant’s continued services during the term of the Engagement. 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 addition to the monthly fee described above, a performance based award of $2.50 million shall be payable to Adnant in shares of common stock 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 Board of Directors with a value equal to or greater than $40.00 million in the aggregate. No shares were issued during the three months ended March 31, 2024 under the Engagement.

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NOTE 18 – COMMITMENTS AND CONTINGENCIES

California Operating Licenses

The Company’s subsidiaries have operated compliantly and have been eligible for applicable licenses and renewals of those licenses.

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 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 were two matters that required an accrual as of March 31, 2024.

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. Mr. Magee amended his complaint to add Unrivaled Brands, Inc. and Buchanan Group, LLC as defendants on January 17, 2024. Trial in this matter is set for January of 2025. 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 as of March 31, 2024.

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 attach order, and 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, Fusion 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 stayed pending final documentation of the settlement agreement. Refer to "Note 11 – Notes Payable" for further details.

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 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. On March 6, 2023, the parties entered into a binding term sheet to settle the litigation. The litigation is stayed pending final documentation of the settlement agreement.

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1149 South LA Street Fashion District, LLC v. 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 complaint claims at least $0.58 million in damages. On April 10, 2023, the Company filed an answer to the complaint. On October 31, 2023, the Court granted the Plaintiff’s Application for Right to Attach Order in the amount of $0.50 million. In doing so, the Court found that the Plaintiffs had demonstrated a probability that they would succeed on the merits of their claims. No additional accrual was required for this matter in the consolidated balance sheet as of March 31, 2024.

Greenlane Holdings, LLC v. Unrivaled Brands, Inc. - On February 6, 2023, Greenlane Holdings, LLC 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. Trial date is scheduled for May 10, 2024. 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.

WGS Group, Inc. v. 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 damages and declaratory relief, breach of security service agreements, breach of the implied covenant of 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 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.

Dominion Capital LLC and M2B Funding Corp. vs Unrivaled Brands, Inc. - On September 28, 2023, Dominion Capital LLC and M2B Funding Corp. filed an action against the Company in the Supreme Court of the State of New York, County of New York, alleging claims for breach of written contract. The complaint claims at least $3.03 million in damages. On November 15, 2023, the parties entered into a binding term sheet to settle the litigation. The litigation is stayed pending final documentation of the settlement agreement.

No Smoking Allowed Except Turn, LLC v. People’s Riverside, LLC and Unrivaled Brands, Inc. - On July 21, 2023, No Smoking Allowed Except Turn, LLC filed an action against the Company in the Superior Court of California, County of Riverside, alleging claims for dam