Exhibit 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 March 31, 2020 and the unaudited pro forma condensed combined statements of operations for each of the three months ended March 31, 2020 and for the year ended December 31, 2019 combine the financial statements of General Cannabis Corp (“General Cannabis”) and Dalton Adventures LLC and Affiliates (dba SevenFive Farm (“Dalton Adventures”) giving effect to the transaction described in the Asset Purchase Agreement, as if they had occurred on January 1, 2019 in respect of the unaudited pro forma condensed combined statements of operations and on March 31, 2020 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, 2019, as contained in the Form 10-K/A filed on July 7, 2020 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 three months ended March 31, 2020, as contained in its Quarterly Report on Form 10-Q filed on July 7, 2020 with the SEC. |
| | · | Dalton Adventures’s audited financial statements as of and for the year ended December 31, 2019, contained elsewhere herein. |
| | · | Dalton Adventures’s unaudited condensed financial statements as of and for the three months ended March 31, 2020 and 2019, 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 Dalton Adventures 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 Dalton Adventures. 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
March 31, 2020
| | | General
Cannabis | | | Dalton
Adventures | | | Pro Forma
Adjustments | | | Pro Forma
Combined | |
| ASSETS | | | | | | | | | | | | | | | | |
| Current Assets | | | | | | | | | | | | | | | | |
| Cash and cash equivalents | | $ | 594,480 | | | $ | 1,028,662 | | | $ | (1,028,662 | )(A) | | $ | 594,480 | |
| Cash held in escrow | | | -- | | | | 74,065 | | | | (74,065 | )(A) | | | -- | |
| Accounts receivable, net | | | 65,930 | | | | 77,340 | | | | (77,340 | )(A) | | | 65,930 | |
| Inventories, net | | | -- | | | | 115,356 | | | | (115,356 | )(A) | | | -- | |
| | | | -- | | | | -- | | | | 185,261 | (B) | | | 185,261 | |
| Notes receivable, net – current portion | | | 470,820 | | | | -- | | | | -- | | | | 470,820 | |
| Prepaid expenses and other current assets | | | 840,922 | | | | 2,120 | | | | (2,120 | )(A) | | | 840,922 | |
| Assets of discontinued operations | | | 231,902 | | | | -- | | | | -- | | | | 231,902 | |
| Total current assets | | | 2,204,054 | | | | 1,297,543 | | | | (1,112,282 | ) | | | 2,389,315 | |
| | | | | | | | | | | | | | | | | |
| Property and equipment, net | | | 204,623 | | | | 860,244 | | | | (860,244 | )(A) | | | 294,113 | |
| | | | -- | | | | -- | | | | 89,490 | (C) | | | -- | |
| Deferred tax asset, net | | | -- | | | | 2,907 | | | | (2,907 | )(A) | | | -- | |
| Investment | | | 250,000 | | | | -- | | | | -- | | | | 250,000 | |
| Right of use asset | | | -- | | | | -- | | | | 1,505,894 | (F) | | | 1,505,894 | |
| Intangibles | | | -- | | | | -- | | | | 25,000 | (E) | | | 25,000 | |
| Goodwill | | | -- | | | | -- | | | | 2,561,744 | (E) | | | 2,561,744 | |
| Total Assets | | $ | 2,658,677 | | | $ | 2,160,694 | | | $ | 2,206,695 | | | $ | 7,026,066 | |
| | | | | | | | | | | | | | | | | |
| LIABILITIES& STOCKHOLDERS’ EQUITY | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Current Liabilities | | | | | | | | | | | | | | | | |
| Accounts payable and accrued expenses | | $ | 1,280,602 | | | $ | 178,279 | | | $ | (178,279 | )(A) | | $ | 1,280,602 | |
| Interest payable | | | 92,340 | | | | -- | | | | -- | | | | 92,340 | |
| Income taxes payable | | | -- | | | | 300,894 | | | | (300,894 | )(A) | | | -- | |
| Customer deposits | | | 893,604 | | | | -- | | | | -- | | | | 893,604 | |
| Accrued stock payable | | | 60,900 | | | | -- | | | | -- | | | | 60,900 | |
| Notes payable (net of discount) | | | 2,640,434 | | | | -- | | | | -- | | | | 2,640,434 | |
| Related party note payable (net of discount) | | | 99,667 | | | | 844,219 | | | | (844,219 | )(A) | | | 99,667 | |
| Warrant derivative liability | | | 3,162,733 | | | | -- | | | | -- | | | | 3,162,733 | |
| Liabilities of discontinued operations | | | 123,217 | | | | -- | | | | -- | | | | 123,217 | |
| Right of use liability – current portion | | | -- | | | | -- | | | | 316,350 | (F) | | | 316,350 | |
| Contingent liabilities | | | -- | | | | -- | | | | 958,114 | (D) | | | 958,114 | |
| Total current liabilities | | | 8,353,497 | | | | 1,323,392 | | | | (48,928 | ) | | | 9,627,961 | |
| | | | | | | | | | | | | | | | | |
| Notes payable, net of loan fees | | | -- | | | | 491,466 | | | | (491,466 | )(A) | | | -- | |
| Right of use liability | | | -- | | | | -- | | | | 1,189,544 | (F) | | | 1,189,544 | |
| Total liabilities | | | 8,353,497 | | | | 1,814,858 | | | | 649,150 | | | | 10,817,505 | |
| | | | | | | | | | | | | | | | | |
| Stockholders’ Equity (Deficit) | | | | | | | | | | | | | | | | |
| Preferred stock, no par value; 5,000,000 shares authorized; no shares issued and outstanding at March 31, 2020 | | | -- | | | | -- | | | | -- | | | | -- | |
| Common Stock, $0.001 par value; 100,000,000 shares authorized; 40,281,881 shares issued and outstanding as of March 31, 2020 | | | 40,282 | | | | -- | | | | 8,859 | (D) | | | 49,141 | |
| Additional paid-in capital | | | 63,550,821 | | | | -- | | | | 1,894,522 | (D) | | | 65,445,343 | |
| Accumulated deficit | | | (69,285,923 | ) | | | 345,836 | | | | (345,836 | )(A) | | | (69,285,923 | ) |
| Total Stockholders’ Deficit | | | (5,694,820 | ) | | | 345,836 | | | | 1,557,545 | (A) | | | (3,791,439 | ) |
| | | | | | | | | | | | | | | | | |
| Total Liabilities& Stockholders’ Equity (Deficit) | | $ | 2,658,677 | | | $ | 2,160,694 | | | $ | 2,206,695 | | | $ | 7,026,066 | |
GENERAL CANNABIS CORP
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Three Months Ended March 31, 2020
| | | General
Cannabis | | | Dalton
Adventures | | | Pro Forma
Adjustments | | | | | Pro Forma
Combined | |
| REVENUES | | | | | | | | | | | | | | | | | | |
| Service | | $ | 308,386 | | | $ | -- | | | $ | -- | | | | | $ | 308,386 | |
| Rent and interest | | | 16,729 | | | | -- | | | | -- | | | | | | 16,729 | |
| Product sales | | | 1,339,073 | | | | -- | | | | -- | | | | | | 1,339,073 | |
| Cultivation sales | | | -- | | | | 648,043 | | | | -- | | | | | | 648,043 | |
| Total revenues | | | 1,664,188 | | | | 648,043 | | | | -- | | | | | | 2,312,231 | |
| | | | | | | | | | | | | | | | | | | |
| COST AND EXPENSES | | | | | | | | | | | | | | | | | | |
| Cost of service revenues | | | 192,567 | | | | -- | | | | -- | | | | | | 192,567 | |
| Cost of goods sold | | | 1,231,413 | | | | 497,079 | | | | 72,946 | | | (A)(E) | | | 1,801,438 | |
| Selling, general and administrative | | | 1,039,934 | | | | 16,236 | | | | 12,123 | | | (E) | | | 1,068,293 | |
| Share-based expense | | | 572,574 | | | | -- | | | | -- | | | | | | 572,574 | |
| Professional fees | | | 597,036 | | | | -- | | | | -- | | | | | | 597,036 | |
| Depreciation and amortization | | | 31,913 | | | | 2,353 | | | | (4,006 | ) | | (A)(D) | | | 30,260 | |
| Total costs and expenses | | | 3,665,437 | | | | 515,668 | | | | 81,063 | | | | | | 4,262,168 | |
| | | | | | | | | | | | | | | | | | | |
| OPERATING INCOME (LOSS) | | | (2,001,249 | ) | | | 132,375 | | | | (81,063 | ) | | | | | (1,949,937 | ) |
| | | | | | | | | | | | | | | | | | | |
| OTHER (INCOME) EXPENSE | | | | | | | | | | | | | | | | | | |
| Amortization of debt discount | | | 66,321 | | | | 1,330 | | | | (1,330 | ) | | (B) | | | 66,321 | |
| Loss on extinguishment of debt | | | 1,137,428 | | | | -- | | | | -- | | | | | | 1,137,428 | |
| Interest expense, net | | | 171,048 | | | | 32,277 | | | | (32,277 | ) | | (C) | | | 171,048 | |
| Gain on warrant derivative liability | | | (1,375,620 | ) | | | -- | | | | -- | | | | | | (1,375,620 | ) |
| Gain on sale of building | | | (139,105 | ) | | | -- | | | | -- | | | | | | (139,105 | ) |
| Total other (income) expense, net | | | (139,928 | ) | | | 33,607 | | | | (33,607 | ) | | | | | (139,928 | ) |
| | | | | | | | | | | | | | | | | | | |
| NET INCOME (LOSS) FROM CONTINUING OPERATIONS | | $ | (1,861,321 | ) | | $ | 98,768 | | | $ | (47,456 | ) | | | | $ | (1,810,009 | ) |
| Loss from discontinued operations | | | (152,858 | ) | | | -- | | | | -- | | | | | | (152,858 | ) |
| | | | | | | | | | | | | | | | | | | |
| NET INCOME (LOSS) | | $ | (2,014,179 | ) | | $ | 98,768 | | | $ | (47,456 | ) | | | | $ | (1,962,867 | ) |
| | | | | | | | | | | | | | | | | | | |
| 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 | | $ | (0.00 | ) | | $ | -- | | | $ | -- | | | | | $ | -- | |
| | | | | | | | | | | | | | | | | | | |
| Net loss per common share | | $ | (0.05 | ) | | $ | -- | | | $ | 0.01 | | | | | $ | (0.04 | ) |
| | | | | | | | | | | | | | | | | | | |
| Weighted average number of common shares outstanding | | | 39,694,890 | | | | -- | | | | 8,859,117 | | | | | | 48,554,007 | |
GENERAL CANNABIS CORP
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2019
| | | General
Cannabis | | | Dalton
Adventures | | | Pro Forma
Adjustments | | | | | Pro Forma
Combined | |
| REVENUES | | | | | | | | | | | | | | | | | | |
| Service | | $ | 1,787,863 | | | $ | -- | | | $ | -- | | | | | $ | 1,787,863 | |
| Rent and interest | | | 95,437 | | | | -- | | | | -- | | | | | | 95,437 | |
| Product sales | | | 1,783,046 | | | | -- | | | | -- | | | | | | 1,783,046 | |
| Cultivation sales | | | -- | | | | 2,796,234 | | | | -- | | | | | | 2,796,234 | |
| Total revenues | | | 3,666,346 | | | | 2,796,234 | | | | -- | | | | | | 6,462,580 | |
| | | | | | | | | | | | | | | | | | | |
| COST AND EXPENSES | | | | | | | | | | | | | | | | | | |
| Cost of service revenues | | | 858,714 | | | | -- | | | | -- | | | | | | 858,714 | |
| Cost of goods sold | | | 1,608,386 | | | | 1,607,768 | | | | 267,201 | | | (A)(C) | | | 3,483,355 | |
| Selling, general and administrative | | | 4,379,800 | | | | 188,315 | | | | 48,492 | | | (C) | | | 4,616,607 | |
| Share-based expense | | | 3,966,621 | | | | -- | | | | -- | | | | | | 3,966,621 | |
| Professional fees | | | 1,598,818 | | | | -- | | | | -- | | | | | | 1,598,818 | |
| Depreciation and amortization | | | 115,696 | | | | 9,206 | | | | 11,000 | | | (D) | | | 135,902 | |
| Loss on disposal of assets | | | -- | | | | 1,197 | | | | -- | | | | | | 1,197 | |
| Total costs and expenses | | | 12,528,035 | | | | 1,806,486 | | | | 326,693 | | | | | | 14,661,214 | |
| | | | | | | | | | | | | | | | | | | |
| OPERATING INCOME (LOSS) | | | (8,861,689 | ) | | | 989,748 | | | | (326,693 | ) | | | | | (8,198,634 | ) |
| OTHER (INCOME) EXPENSE | | | | | | | | | | | | | | | | | | |
| Amortization of debt discount | | | 2,019,726 | | | | -- | | | | -- | | | | | | 2,019,726 | |
| Loss on extinguishment of debt | | | 377,300 | | | | -- | | | | -- | | | | | | 377,300 | |
| Interest expense, net | | | 345,371 | | | | 120,411 | | | | (120,411 | ) | | (B) | | | 345,371 | |
| Gain on warrant derivative liability | | | 2,204,172 | | | | -- | | | | -- | | | | | | 2,204,172 | |
| Total other (income) expense, net | | | 4,946,569 | | | | 120,411 | | | | (120,411 | ) | | | | | 4,946,569 | |
| | | | | | | | | | | | | | | | | | | |
| NET INCOME (LOSS) FROM CONTINUING OPERATIONS | | $ | (13,808,258 | ) | | $ | 869,337 | | | $ | (206,282 | ) | | | | $ | (13,145,203 | ) |
| | | | | | | | | | | | | | | | | | | |
| Loss from discontinued operations | | | (1,675,539 | ) | | | -- | | | | -- | | | | | | (1,675,539 | ) |
| | | | | | | | | | | | | | | | | | | |
| NET INCOME (LOSS) BEFORE INCOME TAXES | | $ | (15,483,797 | ) | | $ | 869,337 | | | $ | (206,282 | ) | | | | $ | (14,820,742 | ) |
| Income tax expense | | | -- | | | | 249,345 | | | | -- | | | | | | 249,345 | |
| | | | | | | | | | | | | | | | | | | |
| NET INCOME (LOSS) | | $ | (15,483,797 | ) | | $ | 619,992 | | | $ | (206,282 | ) | | | | $ | (15,070,087 | ) |
| Deemed dividend | | | (2,341,000 | ) | | | -- | | | | -- | | | | | | (2,341,000 | ) |
| NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS | | $ | (17,824,797 | ) | | $ | 619,992 | | | $ | (206,282 | ) | | | | $ | (17,411,087 | ) |
| PER SHARE DATA – Basic and diluted | | | | | | | | | | | | | | | | | | |
| Net loss from continuing operations per share | | $ | (0.36 | ) | | $ | -- | | | $ | 0.07 | | | | | $ | (0.28 | ) |
| | | | | | | | | | | | | | | | | | | |
| Net loss from discontinued operations per share | | $ | (0.04 | ) | | $ | -- | | | $ | -- | | | | | $ | (0.04 | ) |
| | | | | | | | | | | | | | | | | | | |
| Net loss per common share | | $ | (0.47 | ) | | $ | -- | | | $ | 0.10 | | | | | $ | (0.37 | ) |
| | | | | | | | | | | | | | | | | | | |
| Weighted average number of common shares outstanding | | | 38,106,781 | | | | -- | | | | 8,859,117 | | | | | | 46,965,898 | |
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 Dalton Adventures, LLC and Affiliate (dba SevenFive Farm). The unaudited pro forma condensed combined financial information is presented as if the transaction had been completed on January 1, 2019 with respect to the unaudited pro forma condensed combined statements of operations for each of the three months ended March 31, 2020 and for the year ended December 31, 2019 and on March 31, 2020 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 May 13, 2020, we received approval of the transaction and transfer of the Dalton Adventures, LLC license from the Colorado Marijuana Enforcement Division. On May 25, 2020, we finalized the acquisition of Dalton Adventures, LLC, pursuant to which the we had acquired certain assets of Dalton Adventures, LLC that constitute the business of SevenFive Farm, a cultivation facility in Boulder, Colorado. The purchase price paid by us to the Dalton Adventures, LLC was 8,859,117 shares of common stock. These shares will not be registered; the Seller must hold them for 6-12 months. Accordingly, a downward adjustment of 15% is applied to the fair value of the consideration due to a lack of marketability. The closing price of General Cannabis’ common stock on May 13, 2020 was $0.38 per share, as such, the fair value of the consideration is $2,861,495. Dalton Adventures, LLC may require us to repurchase in cash 25% of the shares issued to Dalton Adventures, LLC at the closing at a repurchase price equal to the same VWAP used to determine the number of shares issued to Dalton Adventures, LLC at closing. In accordance with the agreement, we would be required to repurchase 2,214,779 shares at a price of $0.43 per share. The Company has recorded a contingent liability for the possibility of the buyback of these shares in the amount of $958,114.
NOTE 3. PURCHASE PRICE ALLOCATION
The preliminary allocation for the consideration recorded for the acquisition is as follows:
Dalton Adventures, LLC Purchase Price Allocation
| Inventory | | $ | 185,261 | |
| Fixed Assets | | | 89,490 | |
| Intangibles | | | 25,000 | |
| Goodwill | | | 2,561,744 | |
| Total Purchase Price Consideration | | $ | 2,861,495 | |
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 March 31, 2020
| Note A | To remove Dalton Adventures, LLC assets, liabilities, and equity that were not acquired or assumed |
| Note B | To record certain inventory acquired from Dalton Adventures, LLC |
| Note C | To record certain property, plant, and equipment acquired from Dalton Adventures, LLC |
| Note D | To record additional paid in capital, common stock, and contingent liability as consideration |
| Note E | To record goodwill and intangibles from acquisition |
| Note F | To record right of use asset and liability for operating lease agreement |
Unaudited Pro Forma Condensed Statement of Operations – For The Three Months Ended March 31, 2020
| Note A | To adjust depreciation expense to remove depreciation for assets not acquired |
| Note B | To remove amortization of debt discount |
| Note C | To remove interest expense as the notes payable were not assumed and still held by Dalton Farms, LLC |
| Note D | To record amortization expense for intangibles acquired from Dalton Adventures, LLC |
| Note E | To record lease expense related to the operating lease with Dalton Farms, LLC |
Unaudited Pro Forma Condensed Statement of Operations – For The Year Ended December 31, 2019
| Note A | To adjust depreciation expense to remove depreciation for assets not acquired |
| Note B | To remove interest expense as the notes payable were not assumed and still held by Dalton Farms, LLC |
| Note C | To record lease expense related to the operating lease with Dalton Farms, LLC |
| Note D | To record amortization expense for intangibles acquired from Dalton Adventures, LLC |
