Discontinued Operations

9 Months Ended

Sep. 30, 2023

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

DISCONTINUED OPERATIONS

During the fiscal quarter ended September 30, 2023, the Company ceased its cultivation and production operations in the state of California (together, the "California operations") as reported under the TCH Cannabis segment. The Company concluded that the abandonment of its California operations represented a strategic shift and thus all assets and liabilities to the operations within the state of California were classified as discontinued operations. Long-lived assets related to the California operations ceased to be used as of September 30, 2023 and thus considered disposed of other than by sale as of September 30, 2023. The assets associated with the California operations were measured at the lower of their carrying amount or fair value less costs to sell. During the three and nine months ended September 30, 2023, the Company recognized a loss on disposal of $12.7 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 an impairment charge of $12.9 million for the write-off of its intangible assets and goodwill. The Company does not have significant continuing involvement with the California operations outside of the contract liabilities of $2.3 million and the litigation matters disclosed in Note 14.

Revenue and expenses, gains or losses relating to the discontinuation of California 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 operating results of the discontinued operations are summarized as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
REVENUE
Revenue from sale of goods	$	1,566	$	4,032	$	9,033	$	6,791
Real estate income	260		342		411		342
Total revenues	1,826		4,374		9,444		7,133
Cost of goods sold	(6,666)		(6,388)		(21,992)		(10,464)
Gross profit	(4,840)		(2,014)		(12,548)		(3,331)
OPERATING EXPENSES
Selling, general and administrative expenses	1,310		2,167		4,703		6,047
Depreciation and amortization	42		161		189		516
Transaction and restructuring related expenses	942		—		942		1,335
Impairment of goodwill and intangible assets	12,856		—		12,856		—
Total operating expenses	15,150		2,328		18,690		7,898
Loss from operations	(19,990)		(4,342)		(31,238)		(11,229)
Other income (expense)
Interest expense	—		(3)		(32)		(7)
Loss on disposal	(12,747)		—		(12,747)		—
Other	(2,930)		(266)		(1,371)		(213)
Total other income (expense), net	(15,677)		(269)		(14,150)		(220)
Net loss from discontinued operations before income taxes	(35,667)		(4,611)		(45,388)		(11,449)
Income tax expense	(1)		—		(1)		—
Net loss on discontinued operations	$	(35,668)	$	(4,611)	$	(45,389)	$	(11,449)

The carrying amounts of assets and liabilities in the disposal group are summarized as follows:

	September 30, 2023		December 31, 2022
Carrying amount of the assets included in discontinued operations:
Current assets:
Cash	$	122	$	919
Accounts receivable, net	326		1,943
Other receivables	17		(16)
Inventory	372		6,704
Prepaid expenses and other assets	—		192
Total current assets (1)	837		9,742
Property, plant, and equipment, net	1,302		22,492
Intangible assets, net	760		1,687
Goodwill	—		12,148
Right-of-use assets	—		16,522
Deposits	19		619
Total non-current assets (1)	2,081		53,468
TOTAL ASSETS OF THE DISPOSAL GROUP	$	2,918	$	63,210
Carrying amount of the liabilities included in discontinued operations:
Current liabilities:
Accounts payable	3,527		1,600
Accrued expenses and other current liabilities	5,542		5,164
Taxes payable	72		—
Current portion of contract liabilities	328		369
Current portion of lease liability	—		1,712
Total current liabilities (1)	9,469		8,845
Long term notes payable	8		—
Long term accounts payable	330		400
Contract liabilities	2,000		2,000
Deferred tax liability	—		2,181
Lease liability	—		15,513
Total non-current liabilities (1)	2,338		20,094
TOTAL LIABILITIES OF THE DISPOSAL GROUP	$	11,807	$	28,939

(1)    The assets and liabilities of the disposal group are classified as current on the consolidated balance sheets as of September 30, 2023 because it is probable that the sale or disposal other than by sale will occur within one year.