Quarterly report pursuant to Section 13 or 15(d)

ASSETS HELD FOR SALE

v3.22.2.2
ASSETS HELD FOR SALE
 6 Months Ended
Jun. 30, 2022
Discontinued Operations and Disposal Groups [Abstract]  
ASSETS HELD FOR SALE 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 two 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.
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
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
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