Discontinued Operations |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Discontinued Operations and Disposal Groups [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Discontinued Operations |
On June 19, 2025 (the “Date of Disposition”), the Company completed the sale of all issued and outstanding equity interests in its cannabis beverage subsidiaries (the “Cannabis Subsidiaries”) to MJ Reg pursuant to a share purchase agreement (“SPA”). As part of the transaction, the Company discontinued its Cannabis-Derived (THC) Beverage operations. The disposal group met the criteria for discontinued operations under ASC 205-20.
Under the SPA, MJ Reg purchased the Cannabis Subsidiaries for (i) a $3.0 million promissory note and (ii) inventory valued at approximately $0.06 million. The promissory note is payable in scheduled installments through June 19, 2028, bears interest at the lower of 3% per annum or the minimum rate permitted by law, and provides for a 10% default rate. Interest is waived if MJ Reg fully satisfies all obligations under the note.
In connection with the SPA, the Company entered into a trademark license agreement with MJ Holdings granting exclusive rights to use certain licensed intellectual property in connection with THC-based consumable products. The Company retains exclusive rights to Hemp-based products. Under the agreement, the Company is entitled to receive a fixed annual licensing fee of $0.15 million on the first anniversary of the License Effective Date and $0.255 million on each subsequent anniversary.
At the Date of Disposition, the Company measured the consideration at fair value using a weighted average cost of capital of 11.6%, resulting in the following valuations:
Transaction costs incurred totaled $0.05 million. The Company recognized a gain on disposal of $3.9 million in 2025.
The Cannabis Subsidiaries’ operating results for the periods presented are classified as discontinued operations. No activity occurred during the six months ended June 30, 2026, other than the ongoing assessment of collectability of the promissory note and licensing receivable. The Company continues to evaluate the carrying value of the related receivables each reporting period.
A summary of results from discontinued operations for the three months and six months ended June 30, 2025 is presented below:
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