NOTE 15 – 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. The Series V Preferred Stock have an aggregate liquidation preference of $1.00 as of December 31, 2024 and 2023.

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 former Chief Operating Officer, and Robert Baca, the Company’s Chief Legal Officer (the "2023 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 2023 Private Placement. The purchasers in the 2023 Private Placement entered into a voting agreement to assign their voting rights to Sabas Carrillo, the Company's Chief Executive Officer.

On December 30, 2024, the Board of Directors amended the Series V Preferred Stock wherein the conversion ratio of each share of Series V Preferred Stock was increased to one-third (1/3rd) of a share of Common Stock and the automatic conversion was extended to the fourth anniversary of the date on which the holder’s shares of Series V Preferred Stock were issued. The amendment of the equity-classified preferred stock was accounted for as an extinguishment in accordance with ASC 260 and included in the calculation of earnings per share for the year ended December 31, 2024. Refer to "Note 19 - Earnings Per Share". The warrants in the 2023 Private Placement were amended on December 30, 2024 and disclosed in "Note 18 - Warrants".

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 and Mezzanine Equity

The Company authorized 990,000,000 shares of Common Stock with $0.001 par value per share. As of December 31, 2024 and 2023, 13,553,473 and 8,509,384 shares of Common Stock were outstanding, respectively.

During the year ended December 31, 2023, the Company issued 25,146 shares of Common Stock related to a cashless exercise of warrants.
 
During the year ended December 31, 2023, the Company issued 961,783 shares of Common Stock to a related party service provider. As a result, the Company recorded $1.91 million of stock-based compensation expense for services during the year ended December 31, 2023. See "Note 25 – Related Party Transactions" for further information.
 
During the year ended December 31, 2023, the Company issued 759,403 shares of Common Stock related to a management fee of $0.57 million for the management services agreement related to Blüm San Leandro. 

On May 1, 2024, the Company issued 749,097 shares of Common Stock to the previous stockholders of SAS and 496,712 shares of Common Stock to the shareholders of Coastal for the transaction described in "Note 10 – Business Combinations", wherein the holders have the option, but not the obligation, to exchange shares of the Company's Common Stock received as part of the purchase price for a promissory note. The Put Option is exercisable 24 months subsequent to the closing date for a period of 90 days thereafter. Refer to "Note 14 – Derivative Liabilities" for further information on the Put Option. The Company determined that the common shares are classified as temporary equity in accordance with ASC 480, "Distinguishing Liabilities from Equity" and has reflected the dollar amount as mezzanine equity in the consolidated balance sheets. The carrying of such shares classified as mezzanine equity was $1.26 million as of December 31, 2024. The redemption value at maturity is $5.05 million. Accretion related to mezzanine equity is recognized using the interest method and included in the calculation of earnings per share for the year ended December 31, 2024. Refer to "Note 19 - Earnings Per Share".

On December 31, 2024, the Company issued 3,808,559 shares of Common Stock to Adnant, LLC at a price per share of $1.62, totaling $6.17 million, as repayment of accounts payable and the performance bonus award. Refer to "Note 25 – Related Party Transactions" for further information.

Treasury Stock

During the year ended December 31, 2023, a member of the Company's Board of Directors forfeited 9,000 shares of the Company's Common Stock to the Company for no cash value. Subsequent to the forfeiture, the Company cancelled 32,084 shares of treasury stock during year ended December 31, 2023. Accordingly, treasury stock outstanding as of December 31, 2024 and 2023 was nil shares of Common Stock.