TREES Corporation (CANN)

[Alan Brochstein]

I no longer am expecting $1.00 but rather $0.90. This is my read of the chart but supported by the terrible financial condition I describe below. Not only are the warrants a problem, but Feinsod is running this into the ground. He should really step aside and bring in someone that knows how to run a business, as these guys clearly don't. They have been at this for years and are still bleeding to death. They really need to get those warrants exercised or find alternative financing soon, or it will be lights out.

Take a look at the year-to-date numbers:

http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=12215653

*Cannabis industry is exploding, and these guys have grown top-line only 11%. Not good enough to excite current or potential investors

*Operating expenses and costs have grown more rapidly than sales - 56%.

*Even stripping out stock comp, operating expenses and costs are up 36%

*Consequently, the operating loss has almost doubled, rising from $1.85mm to $3.5mm.

*Cash used to fund operations has exploded from 434K to $1.64mm in H1

*The balance sheet is a wreck - just $277K in cash at quarter end, ostensibly not enough to make it through this quarter given their cash burn without additional financing

*Current assets of $702K compared to $8.07mm of current liabilities. Stripping out the non-cash derivative warrant liability, the current ratio for this money-burning company is only 1.7X.

*Equity of -$7.8mm, adjusted for the warrants, is only $258K

*Feinsod appears to have put his own interests ahead of the company by doing that dog-crap Dixie deal

*Bring on those warrant exercises - all 5.8mm (which will yield about $3.8mm) and maybe this company lives to see the next year without more capital-raising. The problem is that they will beat the stock down in the process.