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BUSINESS ACQUISITION

9 Months Ended

Sep. 30, 2021

NOTE 2. BUSINESS ACQUISITION

On May 13, 2020, we received approval of the transaction and transfer of the Dalton Adventures, LLC (“Seller”) license from the Colorado Marijuana Enforcement Division. On May 25, 2020, we finalized the acquisition, pursuant to which we acquired the assets of the Seller that constitute the business of SevenFive Farm, a cultivation facility in Boulder, Colorado, whereby we acquired fixed assets, inventory, a cultivation license and the tradename. The purchase price paid by the Company to the Seller was 8,859,117 shares of common stock. The closing price of General Cannabis Corp’s common stock on May 13, 2020, the date of license transfer, was $0.38 per share, as such, fair value of consideration is $3,808,951. The purchase agreement had a provision whereby the Seller may require us to repurchase in cash 25% of the shares issued to the owner of Dalton Adventures, LLC at a repurchase price equal to the same volume weighted average price used to determine the number of shares issued to the owner of Dalton Adventures, LLC at closing. As a result, we recorded a liability using Black-Scholes in the amount of $442,487 and reduced additional paid-in capital. In December 2020, the Seller waived his right to this provision in the purchase agreement and no longer has the possibility of the buyback of the shares. Therefore, no stock put liability is recorded as of December 31, 2020 and the liability was reversed into equity. We completed the allocation of the purchase price in the first quarter of 2021.

The table below reflects the Company’s estimates of the acquisition date fair values of the assets acquired:


Inventories	$	185,261
Fixed assets		89,490
Tradename		1,050,000
Goodwill		10,100,113
	$	11,424,864

The accompanying condensed consolidated financial statements include the results of SevenFive from the date of acquisition for financial reporting purposes, May 13, 2020. The pro forma effects of the acquisition on the results of operations as if the transaction had been completed on January 1, 2020, are as follows:


	Three months ended		Nine months ended
	September 30,		September 30,
	2020		2020
Total revenues	$	1,585,564	$	4,986,077
Net loss attributable to common stockholders	$	(643,465)	$	(4,548,926)
Net loss per common share:	$	(0.01)	$	(0.09)
Weighted average number of basic and diluted common shares outstanding		58,097,819		52,704,502

The unaudited proforma results of operations are presented for information purposes only. The unaudited pro-forma results are not intended to present actual results that would have been attained had the acquisition been completed as of January 1, 2020, or to project potential operating results as of any future date or for any future periods.

On September 2, 2021, General Cannabis Corp. (the “Company”) completed the acquisition of substantially all of the assets of TREES Englewood, representing a portion of the overall Trees transaction (“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 $1,155,256.09 and stock consideration of 22,380,310 shares of the Company’s Common Stock. Further, cash equal to $1,732,884.14 will be paid to the seller in equal monthly installments over a period of 24 months from the Englewood Closing.

The table below reflects the Company’s estimates of the acquisition date fair values of the assets acquired:


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

The accompanying condensed consolidated financial statements include the results of Trees Englewood from the date of acquisition for financial reporting purposes, September 2, 2021. The pro forma effects of the acquisition on the results of operations as if the transaction had been completed on January 1, 2020, are as follows:


	Three months ended				Nine months ended
	September 30,				September 30,
	2021		2020		2021		2020
Total revenues	$	2,766,183	$	3,757,751	$	8,847,507	$	10,086,668
Net income (loss) attributable to common stockholders	$	254,862	$	(90,229)	$	749,341	$	847,567
Net income (loss) per common share	$	0.00	$	(0.00)	$	0.01	$	0.01
Weighted average number of basic and diluted common shares outstanding		84,691,204		80,478,129		84,384,904		70,331,928