8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 18, 2021 (September 2, 2021)

GENERAL CANNABIS CORP

(Exact Name of Registrant as Specified in Charter)

Colorado	000-54457	90-1072649
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification Number)

6565 E. Evans Avenue Denver, Colorado	80224
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (303) 759-1300

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Explanatory Note

This Current Report on Form 8-K/A (this “Amendment”) amends the Current Report on Form 8-K (the “Original 8-K”) filed by General Cannabis Corp (the “Company”) dated September 2, 2021, and filed with the Securities and Exchange Commission on September 8, 2021. This Amendment is solely for the purpose of providing the financial statements and information required by Item 9.01(a) of Form 8-K and the pro forma financial information required by Item 9.01(b) of Form 8-K in connection with the Company’s previously reported acquisition of TDM, LLC.

This Amendment No. 1 on Form 8-K/A amends and supplements the Original 8-K to include the historical audited and unaudited financial statements of TDM, LLC and the pro forma combined financial information required by Item 9.01 of Form 8-K that were not included in the Original 8-K in reliance on the instructions to such item. Except as set forth herein, no modifications have been made to information contained in the Original 8-K, and the Company has not updated any information contained therein to reflect events that have occurred since the date of the Original 8-K.

Item 9.01Financial Statements and Exhibits.

(a)     Financial statements of business acquired.

The audited financial statements of TDM, LLC as of and for the year ended December 31, 2020 and 2019, with the accompanying notes, are filed herewith as Exhibit 99.1 to this Form 8-K/A.

(b)     Pro forma financial information.

The unaudited pro forma financial statements of TDM, LLC for the year ended December 31, 2020 and for the six months ended June 30, 2021 and 2020, with the accompanying notes, are filed herewith as Exhibit 99.3 to this Form 8-K/A.

(d)     The exhibits listed in the following Exhibit Index are filed as part of this Current Report on Form 8-K.

Exhibit No.	Description
23.1	Consent of Independent Auditors
99.1	Audited financial statements of TDM, LLC as of and for the years ended December 30, 2020 and 2019.
99.2	Unaudited interim condensed consolidated financial statements of TDM, LLC
99.3	Unaudited pro forma condensed combined consolidated financial statements as of and for the six months ended June 30, 2021 and for the year ended December 31, 2020.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: October 18, 2021

GENERAL CANNABIS CORP
By:	/s/ Adam Hershey
Name:	Adam Hershey
Title:	Interim Chief Executive Officer

EX-23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation in this Form 8-K-A of our report dated October 18, 2021, relating to the financial statements of TDM, LLC as of December 31, 2020.  

Certified Public Accountants

Lakewood, CO

October 18, 2021

EX-99.1

Exhibit 99.1

TDM, LLC

Financial Statements

For the years ended December 31, 2020 and 2019

TDM, LLC

Contents

Independent Auditor’s Report	1
Balance Sheets	3
Statements of Income and Member’s Equity (Deficit)	4
Statements of Cash Flows	5
Notes to Financial Statements	6

TDM, LLC

Independent Auditor’s Report

October 18, 2021

To the Members

TDM, LLC

Englewood, Colorado

Report on the Financial Statements

We have audited the accompanying financial statements of TDM, LLC, which comprise the statements of financial position as of December 31, 2020, and the related statements of activities and cash flows for the years then ended and the related notes to the financial statements.

Going Concern Uncertainty

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company is dependent on financing that is not guaranteed, which raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

1

TDM, LLC

Independent Auditor’s Report

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of TDM, LLC as of December 31, 2020, and the results of its operations and its cash flows.

Emphasis of a Matter

TDM, LLC has significant transactions and relationships with related party affiliates, including entities controlled by the Members, which are described in Note 7 to the financial statements. Transactions involving related parties cannot be presumed to be carried out on an arm’s length basis, as the requisite conditions of competitive, free market dealings may not exist. Our opinion is not modified with respect to this matter.

Certified Public Accountants

Lakewood, CO

2

TDM, LLC

Balance Sheets

As of December 31,	2020		2019
ASSETS
Current Assets
Cash and cash equivalents	$	264,798	$	200,972
Inventory		334,214		400,289
Prepaid expenses and other current assets		4,358		5,076
Total current assets		603,370		606,337
Non-current assets
Property and equipment, net		18,805		7,212
Operating lease right-of-use asset		466,142		595,944
Other non-current assets		7,500		7,500
Total non-current assets		492,447		610,656
Total Assets		1,095,817		1,216,993
LIABILITIES AND MEMBER'S EQUITY
Current liabilities
Accounts payable		327,607		257,182
Accrued expenses and other current liabilities		351,638		480,446
Current portion of lease obligation		129,875		122,089
Total current liabilities		809,120		859,717
Long-term liabilities
Lease obligation, net of current portion		331,186		477,805
Total liabilites		1,140,306		1,337,522
Commitments and contingencies (see note 6)		-		-
Member's equity (deficit)		(44,489)		(120,529)
Total liabilities and member's equity	$	1,095,817	$	1,216,993

See accompanying independent auditor’s report and notes to the financial statements

3

TDM, LLC

Statement of Income and Member’s Equity (Deficit)

For the year ended December 31,	2020		2019
Product sales, net	$	13,500,618	$	10,708,913
Cost of goods sold		9,785,330		6,900,349
Gross margin		3,715,288		3,808,564
Operating expenses
Labor and benefits		1,391,432		1,271,328
Occupancy costs		213,843		182,699
Professional services		383,825		421,965
Office supplies and equipment		111,923		106,383
Advertising and promotion		41,064		147,521
Depreciation		2,807		1,912
Other operating expense		288,206		336,657
Total operating expenses		2,433,100		2,468,465
Operating income		1,282,188		1,340,099
Other Income		9,120		4,158
Net Income	$	1,291,308	$	1,344,257
Member's equity, beginning of the year		(120,529)		222,909
Contributions from member		59,000		-
Distributions to member		(1,274,268)		(1,687,695)
Member's equity (deficit), end of the year	$	(44,489)	$	(120,529)

See accompanying independent auditor’s report and notes to the financial statements

4

TDM, LLC

Statements of Cash Flows

For the year ended December 31,	2020		2019
Cash flows from operating activities
Net income	$	1,291,308	$	1,344,257
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		2,807		1,912
Lease payments (greater than) less than lease expense		(9,031)		9,450
Changes in operating assets and liabilities:
Inventories		66,075		(59,081)
Prepaid expenses and other current assets		718		4,578
Accounts payable		70,425		21,104
Accrued expenses and other current liabilities		(128,808)		209,264
Net cash provided by operating activities		1,293,494		1,531,484
Cash flows from investing activities
Purchase of property and equipment		(14,400)		(4,800)
Net cash used for investing activities		(14,400)		(4,800)
Cash flows from financing activities
Contributions from member		59,000		-
Distributions to member		(1,274,268)		(1,687,695)
Net cash used for financing activities		(1,215,268)		(1,687,695)
Net increase (decrease) in cash and cash equivalents		63,826		(161,012)
Cash and cash equivalents at the beginning of the year		200,972		361,984
Cash and cash equivalents at the end of the year	$	264,798	$	200,972

Supplemental cash flow Information
Cash paid during the year for:		2020		2019
Amounts included in the measurement of lease liabilities	$	201,569	$	89,380

Supplemental non-cash financing activity	2020		2019
ROU assets obtained in exchange for new lease liabilities	-	$	671,197

See accompanying independent auditor’s report and notes to the financial statements

5

TDM, LLC

Notes to Financial Statements

1. ORGANIZATION AND NATURE OF BUSINESS

TDM, LLC (“TDM” or the “Company”) is a single member limited liability company which was formed in October 2014 under the laws of Colorado. Under the terms of the operating agreement, TDM will continue in existence until the member makes a determination to dissolve the entity. The Company’s principal business is retail sales of recreational and medicinal cannabis products. The licensed retail store is located in Englewood, Colorado and the Company’s business office is located in Denver, Colorado.

The Company’s business is subject to legal risk. Even though the State of Colorado has granted licenses to the Company for retail distribution of marijuana products, these activities remain illegal under federal law. This causes difficulty in obtaining traditional banking and financing relationships. If the federal government elects to enforce the laws as currently written or changes the laws with respect to cannabis, it could have an adverse effect on the Company’s operations, including potential prosecution under the laws and liquidation of the Company. The Company is also subject to a variety of state laws, regulations, and local ordinances.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates, and such results could be material.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. FDIC insured cash balances held in a bank are approximately $147,000 and $23,000 as of December 31, 2020 and 2019, respectively. The Company has not experienced any losses on this account, and management believes that the Company’s risk of loss is remote. The remainder of the Company’s recorded cash balances consist of cash on hand.

Inventories

Inventories consist of finished goods ready for sale to retail customers and are stated at the lower of cost or net realizable value. Net realizable value is determined as the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale. The Company periodically reviews physical inventory to specifically identify and adjust the value of excess, obsolete, and otherwise unsaleable items. Based on the low level of historical write-offs and frequent inventory turnover, management believes that obsolete inventory as of the fiscal year end is immaterial, and therefore no reserve for obsolete inventory is recorded as of December 31, 2020 or 2019.

6

TDM, LLC

Notes to Financial Statements

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. When property and equipment is sold or retired, the cost and accumulated depreciation are eliminated from the accounts and gains or losses are recorded in the statements of income. Expenditures for maintenance and repairs are expensed as incurred.

Depreciation is determined using the straight-line method over the following estimated useful lives:

Leasehold Improvements	3-5 years
Equipment	5 years

Impairment of Long-Lived Assets

GAAP requires that long-lived assets, such as property and equipment, be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the asset is measured by comparison of its carrying amount to undiscounted future net cash flows the asset is expected to generate. Specifically, management projects undiscounted cash flows expected over the period to be benefited. If such assets are considered to be impaired, the impairment recognized is measured as the amount by which the carrying amount of the asset exceeds its fair value. Estimates of expected future cash flows represent management’s best estimate based on currently available information and reasonable, supportable assumptions. Any impairment recognized is permanent and may not be restored. As of December 31, 2020, and 2019, the Company believes no indicators of impairment exist.

Revenue Recognition

The Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers and all the related amendments (the “revenue standard” or “ASC 606”).

The Company generates revenue from the sale of cannabis to individual retail customers. It recognizes this revenue at a point in time when control of the goods has been transferred to the customer at an amount which reflects the consideration the Company receives in exchange for those goods. The Company’s sales consist of a single performance obligation for which the transaction price for a given product sold is equivalent to the price quoted for the product, net of any discounts or allowances applicable at a point in time.

The Company has elected to exclude from measurement of the transaction price all taxes (e.g., sales, use, value added and certain excise taxes) that are assessed by a governmental authority in connection with a specific revenue-producing transaction and collected by the Company from the customer. Accordingly, the Company recognizes revenue net of taxes.

The Company generally does not have contract assets or contract liabilities.

Cost of Goods Sold

Cost of goods sold includes the costs of inventory sold including the product packaging as well as any inventory shrink due to theft or waste.

7

TDM, LLC

Notes to Financial Statements

Advertising and Marketing costs

Advertising and marketing costs are expensed as incurred.

Income Taxes

The Company has elected to be taxed as an S-Corporation under the provisions of the United States Internal Revenue Code. Accordingly, taxable income and losses of the Company are reported on the income tax returns of the Company’s member and no provision for income taxes has been reflected in these financial statements.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASC 842” or the “new lease standard”). The Company adopted ASC 842 as of January 1, 2019, using the effective date method.

ASC 842 requires companies leasing assets to recognize on their balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset. The Company elected to apply the short-term lease exemption for all leases with an original term of less than 12 months, for purposes of applying the recognition and measurement requirements in the new lease standard. See Note 4 for further discussion of the Company’s leases.

Other accounting standards have been issued or proposed by the FASB that do not require adoption until a future date and are not expected to have a material impact on the financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

3. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

As of December 31,	2020		2019
Leasehold Improvements	$	16,170	$	1,770
Equipment		8,300		8,300
Total property and equipment		24,470		10,070
Less: Acummulated depreciation		(5,665)		(2,858)
Property and equipment, net	$	18,805	$	7,212

4. LEASES

The Company has operating leases for office space (“office lease”) and for its retail building (“store lease”).

From January 2019 through October 2019, the store lease was with a third-party lessor. As the remaining term on this lease was less than 12 months upon adoption of ASC 842, the Company elected not to apply the recognition and measurement provisions of the new lease standard to this lease.

When the third-party store lease expired, the building was acquired by Bellewood Holdings, LLC (“Bellewood”), a related party company under common ownership. The Company entered a new 5- year lease with Bellwood. The Company’s office lease is a 4-year lease that commenced in December 2018. Both of the Company’s leases include

8

TDM, LLC

Notes to Financial Statements

options to extend the lease term, however these options are not reasonably certain to be exercised and therefore are not included in the determination of the lease obligation or ROU asset. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The weighted average remaining term of the Company’s leases is 3.1 years as of December 31, 2020.

In addition to the monthly base rent payments, the Company pays additional amounts to cover the cost of insurance, property taxes, and other operating expenses. These additional payments are variable and, in accordance with ASC 842, are excluded from the recognition and measurement of the lease obligation.

The Company’s operating lease liabilities and ROU assets are presented separately on the accompanying Balance Sheet. The leases do not have a stated interest rate, and therefore management used a discount rate of 10% to determine the present value of the lease obligation.

Lease expense is recognized on a straight-line bases over the term of the lease, with incremental variable lease payments are expensed as incurred. Lease expense is included in Occupancy costs in the accompanying Statement of Income and Member’s Equity. The components of lease expense are as follows:

For the year ended December 31,	2020		2019
Operating lease cost	$	184,726	$	160,188
Variable lease cost		29,117		22,511
Total lease cost	$	213,843	$	182,699

Maturity of Lease Obligation as of December 31, 2020
2021	$	171,056
2022		186,680
2023		102,000
2024		85,000
Total lease payments		544,736
Less: Interest		(83,675)
Present value of lease obligation	$	461,061

5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Details of the Company’s accrued expenses and other current liabilities are as follows:

As of December 31,	2020		2019
Sales tax accruals	$	309,119	$	439,662
Payroll accruals		41,389		40,090
Other expense accruals		1,131		694
Total accrued liabilities and other current assets	$	351,638	$	480,446

6. COMMITMENTS AND CONTINGENCIES

The Company’s operations are subject to a variety of local and state regulation. Failure to comply with one or more of those regulations could result in fines, restrictions on its operations, or losses of permits that could result in the Company ceasing operations. While management of the Company believes that the Company followed applicable local and state regulation for the years ended December 31, 2020 and 2019, and through the date of the financial

9

TDM, LLC

Notes to Financial Statements

statements, cannabis regulations continue to evolve and are subject to differing interpretations. As a result, the Company may be subject to regulatory fines, penalties or restrictions in the future.

7. RELATED PARTY TRANSACTIONS

As discussed above in Note 4, the Company’s current store lease is with a Bellwood, a related party. The initial term of the lease is five years and includes an option for two successive terms of three years each. The total lease payments to Bellwood were $102,000 and $8,500 for the years ended December 31, 2020 and 2019, respectively. The portion of the Company’s lease obligation and associated ROU asset attributable to the related party lease are as follows:

As of December 31,	2020		2019
Lease obligation attributable to related party lease	$	315,177	$	389,680
ROU asset attributable to related party lease	$	317,161	$	381,464

The Company also compensates its owner for his role in managing the business. The Company paid the owner approximately $280,000 in both 2020 and 2019. These costs are included in Labor and benefits in the accompanying Statement of Income and Member’s Equity.

8. SIGNIFICANT CONCENTRATIONS

The Company’s operations consistent of a single retail store. Any events or circumstances that occur to prevent the store from operating for a significant period of time, or that affect the demand for its products or costs of operation in its geographic location, could have a material adverse impact on the Company’s results of operations.

9. SUBSEQUENT EVENTS

The Company has evaluated events through October 18, 2021, which is the date the consolidated financial statements were available to be issued. There were no material subsequent events that require recognition or disclosure in these consolidated financial statements other than those described below.

Acquisition

The Company, along with two affiliated entities, Trees Portland, LLC and Trees Waterfront, LLC, (all together “Trees”) entered into an Asset Purchase Agreement with General Cannabis Corporation, a Colorado Corporation (“the Acquirer”), pursuant to which the Acquirer purchased certain assets of Trees with the intent to assume its cannabis retail sales operations. Trees agreed to receive a portion of the Acquirer’s shares of common stock and $5 million of cash as consideration. The sale will became effective upon approval by the Colorado Marijuana Enforcement Division.

10

EX-99.2

TDM, LLC

UNAUDITED CONDENSED FINANCIAL STATEMENTS

AS OF JUNE 30, 2021

TDM, LLC

TABLE OF CONTENTS

	page
Balance Sheets	1
Statements of Income and Member's (Deficit) Equity	2
Statements of Cash Flows	3
Notes to Financial Statements	4

BALANCE SHEETS

	June 30,	December 31,
	2021	2020
	(unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$ 502,988	$ 264,798
Inventory	417,277	334,214
Prepaid expenses and other current assets	11,086	4,358
Total current assets	931,351	603,370
Non-current assets
Property and equipment, net	16,017	18,805
Operating lease right-of-use asset	396,194	466,142
Other non-current assets	7,500	7,500
Total non-current assets	419,711	492,447
Total Assets	1,351,062	1,095,817
LIABILITIES AND MEMBER'S DEFICIT
Current liabilities
Accounts payable	401,799	327,607
Accrued expenses and other current liabilities	628,710	351,638
Current portion of lease obligation	138,420	129,875
Total current liabilities	1,168,929	809,120
Long-term liabilities
Lease obligation, net of current portion	250,909	331,186
Total liabilities	1,419,838	1,140,306
Commitments and contingencies (see note 5)	-	-
Member's deficit	(68,776)	(44,489)
Total liabilities and member's deficit	$ 1,351,062	$ 1,095,817

See accompanying notes to the financial statements

STATEMENT OF INCOME AND MEMBER’S (DEFICIT) EQUITY

(Unaudited)

	Three months ended June 30,		Six months ended June 30,
	2021	2020	2021	2020
Product sales, net	$ 2,944,108	$ 3,223,167	$ 6,079,238	$ 6,328,917
Cost of goods sold	2,045,407	2,208,751	4,081,005	4,197,631
Gross margin	898,701	1,014,416	1,998,233	2,131,286
Operating expenses
Labor and benefits	405,975	331,602	704,135	660,209
Occupancy costs	53,526	53,291	107,052	107,014
Professional services	101,973	82,070	266,815	188,058
Office supplies and equipment	29,313	36,397	50,809	62,054
Advertising and promotion	1,170	10,088	2,172	25,355
Depreciation	1,394	530	2,788	1,060
Other operating expense	78,407	44,730	228,240	151,944
Total operating expenses	671,758	558,708	1,362,011	1,195,694
Operating income	226,943	455,708	636,222	935,592
Other Income	1,189	1,282	2,501	2,204
Net Income	$ 228,132	$ 456,990	$ 638,723	$ 937,796
Member's (deficit) equity, beginning of the period	(76,053)	212,629	(44,489)	(120,529)
Contributions from member	200,000	-	200,000	-
Distributions to member	(420,855)	(320,663)	(863,010)	(468,311)
Member's (deficit) equity, end of the period	$ (68,776)	$ 348,956	$ (68,776)	$ 348,956

See accompanying notes to the financial statements

STATEMENTS OF CASH FLOWS

(unaudited)

For the six months ended June 30,	2021	2020
Cash flows from operating activities
Net income	$ 638,723	$ 937,796
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	2,788	1,060
Lease payments greater than lease expense	(1,784)	(8,982)
Changes in operating assets and liabilities:
Inventories	(83,063)	39,634
Prepaid expenses and other current assets	(6,728)	(6,859)
Accounts payable	74,192	23,698
Accrued expenses and other current liabilities	277,072	(131,573)
Net cash provided by operating activities	901,200	854,774
Cash flows from financing activities
Contributions from member	200,000	-
Distributions to member	(863,010)	(468,311)
Net cash used for financing activities	(663,010)	(468,311)
Net increase in cash and cash equivalents	238,190	386,463
Cash and cash equivalents at the beginning of the year	264,798	200,972
Cash and cash equivalents at the end of the year	$ 502,988	$ 587,435
Supplemental cash flow Information
Cash paid during the six months ended:	2021	2020
Amounts included in the measurement of lease liabilities	$ 94,148	$ 101,344

See accompanying notes to the financial statements

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND Nature of Business

TDM, LLC (“TDM” or the “Company”) is a single member limited liability company which was formed in October 2014 under the laws of Colorado. Under the terms of the operating agreement, TDM will continue in existence until the member makes a determination to dissolve the entity. The Company’s principal business is retail sales of recreational and medicinal cannabis products. The licensed retail store is located in Englewood, Colorado and the Company’s business office is located in Denver, Colorado.

The Company’s business is subject to legal risk. Even though the State of Colorado has granted licenses to the Company for retail distribution of marijuana products, these activities remain illegal under federal law. This causes difficulty in obtaining traditional banking and financing relationships. If the federal government elects to enforce the laws as currently written or changes the laws with respect to cannabis, it could have an adverse effect on the Company’s operations, including potential prosecution under the laws and liquidation of the Company. The Company is also subject to a variety of state laws, regulations, and local ordinances.

2. Summary of Significant Accounting Policies

Basis of Accounting

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to state fairly the financial position, results of operations, and cash flows of the Company at the dates and for the periods indicated. Interim results are not necessarily indicative of results for the full fiscal year. The comparative balance sheet as of December 31, 2020 was derived from the audited financial statements but does not include all disclosures required by GAAP.

These unaudited consolidated financial statements should be read in conjunction with the Company’s annual audited consolidated financial statements for the year ended December 31, 2020 and the notes thereto.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates, and such results could be material.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. FDIC insured cash balances held in a bank were approximately $436,000 and $147,000 as of June 30, 2021 and December 31, 2020, respectively. The Company has not experienced any losses on this account, and management believes that the Company’s risk of loss is remote. The remainder of the Company’s recorded cash balances consist of cash on hand.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases(Topic 842) (“ASC 842” or the “new lease standard”). The Company adopted ASC 842 as of January 1, 2019, using the effective date method.

ASC 842 requires companies leasing assets to recognize on their balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset. The Company elected to apply the short-term lease exemption for all leases with an original term of less than 12 months, for purposes of applying the

recognition and measurement requirements in the new lease standard. See Note 3 for further discussion of the Company’s leases.

Other accounting standards have been issued or proposed by the FASB that do not require adoption until a future date and are not expected to have a material impact on the financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

3. LEASES

The Company has operating leases for office space (“office lease”) and for its retail building (“store lease”).

In addition to the monthly base rent payments, the Company pays additional amounts to cover the cost of insurance, property taxes, and other operating expenses. These additional payments are variable and, in accordance with ASC 842, are excluded from the recognition and measurement of the lease obligation.

The Company’s operating lease liabilities and ROU assets are presented separately on the accompanying Balance Sheet. The leases do not have a stated interest rate, and therefore management used a discount rate of 10% to determine the present value of the lease obligation.

Lease expense is recognized on a straight-line bases over the term of the lease, with incremental variable lease payments are expensed as incurred. Lease expense is included in Occupancy costs in the accompanying Statement of Income and Member’s Equity. The components of lease expense are as follows:

	For the three months ended June 30,		For the six months ended June 30,
	2021	2020	2021	2020
Operating lease cost	$ 46,181	$ 46,181	$ 92,363	$ 92,363
Variable lease cost	7,345	7,110	14,689	14,651
Total lease cost	$ 53,526	$ 53,291	$ 107,052	$ 107,014

The following table summarizes the maturity of the Company’s lease obligations as of June 30, 2021:

2021 (remaining 6 months)	$ 76,908
2022	186,680
2023	102,000
2024	85,000
Total lease payments	450,588
Less: Interest	(61,259)
Present value of lease obligation	$ 389,329

4. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Details of the Company’s accrued expenses and other current liabilities are as follows:

	June 30,	December 31,
As of	2021	2020
Sales tax accruals	$ 555,562	$ 309,119
Payroll accruals	35,597	41,389
Other expense accruals	37,550	1,131
Total accrued liabilities	$ 628,710	$ 351,638

5. COMMITMENTS AND CONTINGENCIES

The Company’s operations are subject to a variety of local and state regulation. Failure to comply with one or more of those regulations could result in fines, restrictions on its operations, or losses of permits that could result in the Company ceasing operations. While management of the Company believes that the Company followed applicable local and state regulation for the for the year ended December 31, 2020 and the six months ended June 30, 2021, and through the date of the financial statements, cannabis regulations continue to evolve and are subject to differing interpretations. As a result, the Company may be subject to regulatory fines, penalties or restrictions in the future.

6. related party transactions

The Company’s current store lease is with a Bellewood, a related party. The initial term of the lease is five years and includes an option for two successive terms of three years each. The total lease payments to Bellewood were $51,000 for both the six months ended June 30, 2021 and June 30, 2020. The portion of the Company’s lease obligation and associated ROU asset attributable to the related party lease are as follows:

	June 30,	December 31,
As of	2021	2020
Lease obligation attributable to related party lease	$ 279,627	$ 315,177
ROU asset attributable to related party lease	$ 282,461	$ 317,161

7.

8. SIGNIFICANT CONCENTRATIONS

The Company’s operations consistent of a single retail store. Any events or circumstances that occur to prevent the store from operating for a significant period of time, or that affect the demand for its products or costs of operation in its geographic location, could have a material adverse impact on the Company’s results of operations.

9. SUBSEQUENT EVENTS

The Company has evaluated events through August 6, 2021, which is the date the consolidated financial statements were available to be issued. There were no material subsequent events that require recognition or disclosure in these consolidated financial statements.

EX-99.3

GENERAL CANNABIS CORP

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Unaudited Pro Forma Condensed Combined Financial Information

The unaudited pro forma condensed combined balance sheet as of June 30, 2021 and the unaudited pro forma condensed combined statements of operations for each of the six months ended June 30, 2021 and for the year ended December 31, 2020 combine the financial statements of General Cannabis Corp (“General Cannabis”) and TDM, LLC (dba TREES Englewood (“TREES Colorado”) giving effect to the transaction described in the Asset Purchase Agreement, as if they had occurred on January 1, 2020 in respect of the unaudited pro forma condensed combined statements of operations and on June 30, 2021 in respect of the unaudited pro forma condensed combined balance sheet.

The unaudited pro forma condensed combined financial information should be read in conjunction with:

General Cannabis’s audited consolidated financial statements and accompanying notes as of and for the year ended December 31, 2020, as contained in the Form 10-K filed on April 1, 2021 with the United States Securities and Exchange Commission (the “SEC”)

● General Cannabis’s unaudited condensed consolidated financial statements and accompanying notes as of and for the six months ended June 30, 2021

● TREES Colorado audited financial statements as of and for the year ended December 31, 2020, contained elsewhere herein.

● TREES Colorado unaudited condensed financial statements as of and for the six months ended June 30, 2021 and 2020, contained elsewhere herein.

● The other information contained in or incorporated by reference into this filing.

The final purchase consideration and the allocation of the purchase consideration may materially differ from that reflected in the unaudited pro forma condensed combined financial information after final valuation procedures are performed and amounts are finalized following the completion of the acquisition.

The unaudited pro forma adjustments give effect to events that are directly attributable to the transaction and are based on available data and certain assumptions that management believes are factually supportable. In addition, with respect to the unaudited condensed combined statements of operations, the unaudited pro forma adjustments are expected to have a continuing impact on the combined results.

The unaudited pro forma condensed combined financial information is presented for informational purposes only and to aid you in your analysis of the financial aspects of the acquisition. The unaudited pro forma condensed combined financial information described above has been derived from the historical financial statements of General Cannabis and TREES Colorado and the related notes included elsewhere in this Form 8-K. The unaudited pro forma condensed combined financial information is based on General Cannabis’s accounting policies. Further review may identify additional differences between the accounting policies of General Cannabis and TREES Colorado. The unaudited pro forma adjustments and the pro forma condensed combined financial information don’t reflect the impact of synergies or post-transaction management actions and are not necessarily indicative of the financial position or results of operations that may have actually occurred had the transaction taken place on the dates noted, or of General Cannabis’s future financial position or operating results.

GENERAL CANNABIS CORP

Unaudited Pro Forma Condensed Combined Balance Sheet

June 30, 2021

	General		TREES		Pro Forma			Pro Forma
	Cannabis		Colorado		Adjustments			Combined
Assets
Current assets
Cash and cash equivalents	$	2,307,604	$	502,988	$	(470,047)	(A)	$	2,340,545
		—		—		(1,155,256)	(B)		(1,155,256)
Accounts receivable, net		178,784		—		—			178,784
Inventories, net		590,983		417,277		(417,277)	(A)		590,983
						586,495	(C)		586,495
Prepaid expenses and other current assets		198,176		11,086		(11,086)	(A)		198,176
Assets of discontinued operations - current portion		284,700		—		—			284,700
Total current assets		3,560,247		931,351		(1,467,171)			3,024,427
Right-of-use operating lease asset		1,816,632		396,194		—			2,212,826
Property and equipment, net		642,769		16,017		(16,017)	(A)		642,769
						59,335	(D)		59,335
Intangible assets, net		887,500		—		5,000,000	(E)		5,887,500
Goodwill		2,484,200		—		7,615,913	(E)		10,100,113
Assets of discontinued operations		35,178		—		—			35,178
Other non-current assets		—		7,500		(7,500)	(A)		—
Total assets	$	9,426,526	$	1,351,062	$	11,184,560		$	21,962,148
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses	$	856,093	$	1,030,509	$	(1,030,509)	(A)	$	856,093
Interest payable		296,207		—		—			296,207
Operating lease liability, current		376,362		138,420		—			514,782
Accrued stock payable		60,900		—		—			60,900
Warrant derivative liability		134,234		—		—			134,234
Liabilities of discontinued operations		138,461		—		—			138,461
Total current liabilities		1,862,257		1,168,929		(1,030,509)			2,000,677
Operating lease liability, non-current		1,495,394		250,909		—			1,746,303
Long-term notes payable (net of discount)		4,272,858		—		1,732,884	(B)		6,005,742
Related party long-term notes payable (net of discount)		280,137		—		—			280,137
Total Liabilities		7,910,646		1,419,838		702,375			10,032,859
Commitments and contingencies		—		—		—			—
Stockholders’ Equity (Deficit)
Preferred stock, no par value; 5,000,000 shares authorized; no shares issued and outstanding, respectively		—		—		—			—
Common stock, $0.001 par value; 200,000,000 shares authorized; 62,266,275 shares issued and outstanding		62,264		—		—			62,264
Additional paid-in capital		80,140,373		—		10,406,844	(B)		90,547,217
Accumulated deficit		(78,686,757)		(68,776)		75,341	(A)		(78,680,192)
Total Stockholders’ Equity		1,515,880		(68,776)		10,482,185			11,929,289
Total Liabilities and Stockholders’ Equity (Deficit)	$	9,426,526	$	1,351,062	$	11,184,560		$	21,962,148

GENERAL CANNABIS CORP

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Six Months Ended June 30, 2021

	General		TREES		Pro Forma			Pro Forma
	Cannabis		Colorado		Adjustments			Combined
Revenue
Cultivation sales		1,347,941		—		—			1,347,941
Retail sales		—		6,079,238		—			6,079,238
Interest		14,472		—		—			14,472
Total revenue		1,362,413		6,079,238		—			7,441,651
Costs and expenses
Cost of sales		1,066,631		4,081,005		—			5,147,636
Selling, general and administrative		1,180,750		1,092,408		—			2,273,158
Stock-based compensation expense		62,284		—		—			62,284
Professional fees		616,148		266,815		—			882,963
Depreciation and amortization		190,469		2,788		253,146	(A)(B)		446,403
Total costs and expenses		3,116,282		5,443,016		253,146			8,812,444
Operating (loss) income		(1,753,869)		636,222		(253,146)			(1,370,793)
Other expenses (income)
Amortization of debt discount and equity issuance costs		253,790		—		—			253,790
Interest expense		293,683		—		—			293,683
Loss on derivative liability		1,095,983		—		—			1,095,983
Loss on sale of assets		1,467		—		—			1,467
Other (income), net		—		(2,501)		—			(2,501)
Total other expenses (income), net		1,644,923		(2,501)		—			1,642,422
Net (loss) income from continuing operations before income taxes	$	(3,398,792)	$	638,723	$	(253,146)		$	(3,013,215)
Loss from discontinued operations		(336,529)		—		—			(336,529)
(Loss) income from operations before income taxes	$	(3,735,321)	$	638,723	$	(253,146)		$	(3,349,744)
Provision for income taxes		—		—		—			—
Net (loss) income	$	(3,735,321)	$	638,723	$	(253,146)		$	(3,349,744)
Deemed dividend		—		—		—			—
Net (loss) income attributable to common stockholders	$	(3,735,321)	$	638,723	$	(253,146)		$	(3,349,744)
Per share data - Basic and diluted
Net loss from continuing operations per share	$	(0.05)		—	$	(0.01)		$	(0.04)
Net loss from discontinued operations per share	$	(0.01)		—	$	0.00		$	(0.00)
Net loss attributable to common stockholders per share	$	(0.06)		—	$	(0.01)		$	(0.04)
Weighted average number of common shares outstanding		62,183,748		—		22,380,310			84,564,058

GENERAL CANNABIS CORP

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Year Ended December 31, 2020

	General		TREES		Pro Forma			Pro Forma
	Cannabis		Colorado		Adjustments			Combined
Revenue
Cultivation sales	$	2,279,867	$	—	$	—		$	2,279,867
Retail sales		—		13,500,618		—			13,500,618
Interest		103,837		—		—			103,837
Total revenue		2,383,704		13,500,618		—			15,884,322
Costs and expenses
Cost of sales		1,388,626		9,785,330		—			11,173,956
Selling, general and administrative		2,901,931		2,046,468		—			4,948,399
Stock-based compensation expense		1,504,389		—		—			1,504,389
Professional fees		2,263,717		383,825		—			2,647,542
Depreciation and amortization		199,683		2,807		509,060	(A)(B)		711,550
Total costs and expenses		8,258,346		12,218,430		509,060			20,985,836
Operating (loss) income		(5,874,642)		1,282,188		(509,060)			(5,101,514)
Other expenses (income)
Amortization of debt discount and equity issuance costs		295,256		—		—			295,256
Interest expense		453,522		—		—			453,522
Loss on extinguishment of debt		1,638,009		—		—			1,638,009
(Gain) on derivative liability		(735,796)		—		—			(735,796)
Other (income), net		(97,948)		(9,120)		—			(107,068)
Total other expenses (income), net		1,553,043		(9,120)		—			1,543,923
Net (loss) income from continuing operations before income taxes	$	(7,427,685)	$	1,291,308	$	(509,060)		$	(6,645,437)
Loss from discontinued operations		(252,007)		—		—			(252,007)
(Loss) income from operations before income taxes	$	(7,679,692)	$	1,291,308	$	(509,060)		$	(6,897,444)
Provision for income taxes		—		—		—			—
Net (loss) income	$	(7,679,692)	$	1,291,308	$	(509,060)		$	(6,897,444)
Deemed dividend		(830,494)		—		—			(830,494)
Net (loss) income attributable to common stockholders	$	(8,510,186)	$	1,291,308	$	(509,060)		$	(7,727,938)
Per share data - Basic and diluted
Net loss from continuing operations per share	$	(0.15)		—	$	(0.02)		$	(0.09)
Net loss from discontinued operations per share	$	(0.00)		—	$	0.00		$	(0.00)
Net loss attributable to common stockholders per share	$	(0.17)		—	$	(0.02)		$	(0.11)
Weighted average number of common shares outstanding		50,895,301		—		22,380,310			73,275,611

GENERAL CANNABIS CORP

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

NOTE 1.BASIS OF PRESENTATION

The unaudited pro forma condensed combined financial information set forth herein is based upon the consolidated financial statements of General Cannabis Corp and TREES Colorado. The unaudited pro forma condensed combined financial information is presented as if the transaction had been completed on January 1, 2020 with respect to the unaudited pro forma condensed combined statements of operations for each of the six months ended June 30, 2021 and for the year ended December 31, 2020 and on June 30, 2021 in respect of the unaudited pro forma condensed combined balance sheet.

The unaudited pro forma condensed combined financial information is presented for informational purposes only and is not necessarily indicative of the combined financial position or results of operations had the transaction occurred as of the dates indicated, nor is it meant to be indicative of any anticipated combined financial position or future results of operations that the combined company will experience after the completion of the transactions.

We have accounted for the acquisition in this unaudited pro forma condensed combined financial information using the acquisition method of accounting, in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 805 “Business Combinations” (“ASC 805”). In accordance with ASC 805, we use our best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. Goodwill as of the acquisition date is measured as the excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired.

Pro forma adjustments reflected in the unaudited pro forma condensed combined balance sheet are based on items that are factually supportable and directly attributable to the transaction. Pro forma adjustments reflected in the pro forma condensed combined statements of operations are based on items that are factually supportable, directly attributable to the transaction and expected to have a continuing impact on the combined results. The unaudited pro forma condensed combined financial information does not reflect the cost of any integration activities or benefits from the transaction, including potential synergies that may be generated in future periods.

NOTE 2. DESCRIPTION OF THE TRANSACTION

On September 2, 2021, General Cannabis completed the acquisition of substantially all of the assets of TREES Colorado, representing a portion of the overall Trees transaction previously disclosed pursuant to that certain First Amended and Restated Agreement and Plan of Reorganization and Liquidation dated May 28, 2021 by and among the Company, Seller and certain other sellers party thereto, that consists of the assets relating to the Trees dispensary located in Englewood, Colorado (“Englewood Closing”). The cash paid by the Company in connection with the Englewood Closing consisted of $1,154,956.09 and the stock consideration shall be 22,380,310 shares of the Company’s Common Stock. Further, cash equal to $1,732,884.14 will be paid to Seller in equal monthly installments over a period of 24 months from the Englewood Closing.

NOTE 3.PURCHASE PRICE ALLOCATION

The preliminary allocation for the consideration recorded for the acquisition is as follows:

Cash	$	32,941
Fixed assets		59,335
Inventory		586,495
Tradename		5,000,000
Goodwill		7,615,913
Total Purchase Price Consideration	$	13,294,684

The purchase price allocation is preliminary. The purchase price allocation will continue to be preliminary until a valuation is finalized and the fair value and useful life of the assets acquired is determined. The amounts from the final valuation may significantly differ from the preliminary allocation.

NOTE 4.PRO FORMA ADJUSTMENTS

The following pro forma adjustments give effect to the transaction:

Unaudited Pro Forma Condensed Combined Balance Sheet – As of June 30, 2021

Note ATo remove TREES Colorado assets, liabilities, and equity that were not acquired or assumed

Note BTo record cash, additional paid in capital, common stock, and promissory note as consideration

Note CTo record certain inventory from TREES Colorado

Note DTo record certain property, plant, and equipment acquired from TREES Colorado

Note ETo record goodwill and intangibles from acquisition

Unaudited Pro Forma Condensed Statement of Operations – For The Six Months Ended June 30, 2021

Note ATo adjust depreciation expense to remove depreciation for assets not acquired

Note BTo record amortization of intangibles acquired from TREES Colorado

Unaudited Pro Forma Condensed Statement of Operations – For The Year Ended December 31, 2020

Note ATo adjust depreciation expense to remove depreciation for assets not acquired

Note BTo record amortization of intangibles acquired from TREES Colorado

XML

Document and Entity Information	Sep. 02, 2021
Document and Entity Information [Abstract]
Document Type	8-K/A
Document Period End Date	Sep. 02, 2021
Entity File Number	000-54457
Entity Registrant Name	GENERAL CANNABIS CORP
Entity Incorporation, State or Country Code	CO
Entity Tax Identification Number	90-1072649
Entity Address, Address Line One	6565 E. Evans Avenue
Entity Address, City or Town	Denver
Entity Address, State or Province	CO
Entity Address, Postal Zip Code	80224
City Area Code	303
Local Phone Number	759-1300
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Entity Central Index Key	0001477009
Amendment Flag	false