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BUSINESS ACQUISITION

9 Months Ended

Sep. 30, 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. As of September 30, 2022, we have completed the allocation of the purchase price. Based on the completed purchase price, there was an adjustment from the tradename to goodwill in the amount of

$3,601,000. As of September 30, 2022, the unaudited condensed consolidated balance sheet includes an allocation of cash, fixed assets, inventory, intangible assets and goodwill.

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		1,399,000
Goodwill		11,216,913
	$	13,294,684

The accompanying unaudited 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		2021
Total revenues	$	2,766,183	$	8,847,507
Net income (loss) attributable to common stockholders	$	254,862	$	749,341
Net income (loss) per common share	$	0.00	$	0.01
Weighted average number of basic and diluted common shares outstanding		84,691,204		84,384,904

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. As of September 30, 2022, we have completed the allocation of the purchase price. Based on the purchase price, there was an adjustment from the tradename to goodwill in the amount of $341,000. As of September 30, 2022, the condensed consolidated balance sheet includes an allocation of cash, fixed assets, inventory, intangible assets and goodwill.

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		509,000
Goodwill		1,524,744
	$	2,306,373

The accompanying unaudited condensed 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		Nine months ended
	September 30,		September 30,
	2021		2021
Total revenues	$	450,296	$	1,190,985
Net income (loss) attributable to common stockholders	$	93,796	$	153,612
Net income (loss) per common share	$	0.00	$	0.00
Weighted average number of basic and diluted common shares outstanding		75,545,868		70,805,564

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. When we closed on MLK it was a non-operating dispensary. We opened the dispensary in the second quarter of 2022. As of September 30, 2022, we have completed the allocation of the purchase price. Based on the purchase price, there was an adjustment from the tradename to goodwill in the amount of $912,000. As of September 30, 2022, the unaudited condensed consolidated balance sheet includes an allocation of fixed assets, intangible assets and goodwill.

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


Fixed assets	$	25,150
Tradename		88,000
Goodwill		1,870,381
	$	1,983,531

The accompanying unaudited condensed 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				Nine months ended
	September 30,				September 30,
	2022		2021		2022		2021
Total revenues	$	69,161	$	—	$	91,579	$	—
Net income (loss) attributable to common stockholders	$	(51,105)	$	(29,022)	$	(94,693)	$	(106,691)
Net income (loss) per common share	$	(0.00)	$	(0.00)	$	(0.00)	$	(0.00)
Weighted average number of basic and diluted common shares outstanding		96,192,184		74,092,947		96,155,491		69,352,643

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.