As disclosed in Note 1, on June 19, 2025 (the “Date of Disposition”), the Company entered into the SPA to sell of all issued and outstanding equity interests in its cannabis beverage subsidiaries (the “Cannabis Subsidiaries”) pursuant to a share purchase agreement, as amended, with MJ Reg and discontinued the Cannabis-Derived (THC) Beverage. Subsequent to the transaction, the Company’s former VP of Operations was appointed as the CEO of MJ Reg.

As disclosed in Note 1, on June 19, 2025 (the “Date of Disposition”), the Company entered into the SPA with its cannabis beverage subsidiaries (the “Cannabis Subsidiaries”) and the MJ Reg pursuant to which, on the Date of Disposition, the MJ Reg purchased all of the issued and outstanding shares of the Cannabis Subsidiaries from the Company for the Share Purchase Price of $3.0 million promissory notes and inventory for approximately $0.06 million as set forth in the SPA (the “Sale Transaction”). The Share Purchase Price was paid as follows:

The promissory note accrues interest at the lower of 3% per annum and the lowest amount permitted by law; provided, however, if MJ Reg satisfies its obligations under the promissory note, in full, pursuant to the terms thereof, any interest accrued pursuant to the promissory note shall be waived. Notwithstanding the foregoing, upon the occurrence of an Event of Default (as defined in the promissory note), the outstanding principal amount of the promissory note together with any accrued and unpaid interest thereon shall accrue interest at a rate of 10% per annum. The promissory note shall mature upon the earlier of (i) June 19, 2028 and (ii) in the event of prepayment of the promissory note, the date that the principal amount of the promissory note together with the interest accrued thereon is paid in full by MJ Reg.

On June 19, 2025 (the “License Effective Date”), in connection with the SPA, the Company entered into a trademark license agreement (the “License Agreement”) with MJ Holdings pursuant to which the Company granted MJ Holdings an exclusive, freely-usable and non-transferable, fully sublicensable license to use the Licensed IP (as defined in the License Agreement) during the term of such agreement in connection with the manufacture, sale, distribution, advertising, and promotion of all current and future products (the “Licensed Products”) each consisting of a mutually agreed upon composition, formula, recipe, flavor necessary for the Licensed Products and labeling, container size, and packaging, as applicable, to be made available by MJ Holdings for sale on-site at MJ Holdings’ places of business and/or by means of other distributors of MJ Holdings globally, including in any country or jurisdiction where the sale, marketing, and distribution of the Licensed Products is lawful. Pursuant to the License Agreement, MJ Holdings shall retain the exclusive right to any consumable product containing an emulsion derived from the cannabis plant with a THC concentration greater than 0.3% by dry weight and any Licensed IP in connection therewith. Furthermore, MJ Holdings shall own all Licensee Modified Formulas (as defined in the License Agreement) and such Licensee Modified Formulas may be incorporated and/or otherwise used in connection with a Licensed Product during the term of such agreement and at any time thereafter; provided, however, the Company shall be entitled to license the Licensee Modified Formulas on mutually agreeable terms and conditions. Notwithstanding the foregoing, the Company shall maintain exclusive rights to products containing Hemp (as defined in the SPA). Pursuant to the License Agreement, MJ Holdings shall pay the Company $0.15 million on the one year anniversary of the License Effective Date and $0.255 million on each subsequent anniversary of the License Effective Date (the “Licensing Fee”). The Licensing Fee shall be fixed and non-adjustable during the term of the License.

Pursuant to ASC 820, the Company utilized its weighted average cost of capital (WACC) of 11.6% to discount future cash flows and determined the fair values as follows:

Transaction costs incurred in connection with the disposition totaled $0.05 million. The gain on disposal of subsidiaries was calculated as follows:

Schedule Of Assets And Liabilities Operations Of Discontinued Operations 

Following is the breakdown of the gain (loss) from discontinued operations: