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BUSINESS ACQUISITION

3 Months Ended

Mar. 31, 2022

NOTE 2. BUSINESS ACQUISITION

On September 2, 2021, we 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”). We paid $1,155,256 in cash in connection with the Englewood Closing and stock consideration of 22,380,310 shares of our Common Stock. The closing price of our common stock on September 2, 2021, the date of license transfer, was $0.47 per share, as such, fair value of consideration is $10,518,746. Further, cash equal to $1,732,884 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
	March 31,
	2021
Total revenues	$	3,135,130
Net income (loss) attributable to common stockholders	$	410,591
Net income (loss) per common share	$	0.00
Weighted average number of basic and diluted common shares outstanding		83,943,689

The unaudited pro-forma 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 December 30, 2021, we completed the acquisition of substantially all the assets of Trees Portland, LLC and Trees Waterfront, LLC, representing a portion of the overall Trees Transaction, which consists of the assets relating to certain Trees dispensaries located in Portland, Oregon ("Oregon Closing”). We paid cash in the amount of $331,581 in connection with the Oregon Closing and stock consideration of 6,423,575 shares of our Common Stock. The closing price of our common stock on December 30, 2021, the date of license transfer, was $0.23 per share, as such, fair value of consideration is $1,477,422. Further, cash equal to $497,371 will be paid to the sellers in equal monthly installments over a period of 24 months from the Oregon Closing.

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


Cash	$	14,568
Fixed assets		56,015
Inventory		202,046
Tradename		850,000
Goodwill		1,183,744
	$	2,306,373

The accompanying consolidated financial statements include the results of Trees Oregon from the date of acquisition for financial reporting purposes, December 30, 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
	March 31,
	2021
Total revenues	$	1,255,095
Net income (loss) attributable to common stockholders	$	50,622
Net income (loss) per common share	$	0.00
Weighted average number of basic and diluted common shares outstanding		67,986,954

On January 5, 2022, we completed the acquisition of substantially all of the assets of Trees MLK Inc. (“MLK”), representing the remaining Oregon dispensary in connection with the overall Trees transaction. We paid cash in the amount of $256,582 and stock consideration of 4,970,654 shares of our Common Stock. The closing price of our

common stock on January 5, 2022, the date of license transfer, was $0.27 per share, as such, fair value of consideration is $1,342,076. Further, cash equal to $384,873 will be paid to the sellers in equal monthly installments over a period of 24 months from the MLK closing. The dispensary is a non-operating dispensary. We will be opening the store in the second quarter of 2022.

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


Fixed assets	$	25,150
Tradename		1,000,000
Goodwill		958,381
	$	1,983,531

The accompanying consolidated financial statements include the results of Trees MLK from the date of acquisition for financial reporting purposes, January 5, 2022. The pro-forma effects of the acquisition on the results of operations as if the transaction had been completed on January 1, 2021, are as follows:


	Three months ended
	March 31,
	2022		2021
Total revenues	$	—	$	—
Net income (loss) attributable to common stockholders	$	(45,587)	$	(31,332)
Net income (loss) per common share	$	(0.00)	$	(0.00)
Weighted average number of basic and diluted common shares outstanding		96,080,882		66,534,033

The unaudited pro-forma 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, 2021, or to project potential operating results as of any future date or for any future periods.

We have not completed the allocation of the purchase price for the Trees acquisition. As of March 31, 2022, the consolidated balance sheets include a preliminary allocation of fixed assets, inventory, intangible assets, and goodwill. Management anticipates completing the purchase price allocation as soon as possible, but no later than one year from the acquisition dates.