GENERAL CANNABIS CORP (Form: 10-K, Received: 05/14/2020 17:16:12)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2019

[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number: 000-54457

GENERAL CANNABIS CORP

(Exact name of registrant as specified in its charter)


COLORADO		90-1072649
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

6565 E. Evans Avenue

Denver, Colorado 80224

(Address of principal executive offices)

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

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐	Non-accelerated filer	þ
Smaller reporting company	þ	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. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act): Yes o No þ

The aggregate market value of the voting stock held by non-affiliates of the registrant, based upon the closing sale price of the registrant’s common stock on June 30, 2019, was $31,638,715.

As of May 5, 2020, the Registrant had 40,281,881 issued and outstanding shares of common stock.

TABLE OF CONTENTS


PART I

Item 1.	Business	4
Item 1A.	Risk Factors	11
Item 1B.	Unresolved Staff Comments	20
Item 2.	Properties	20
Item 3.	Legal Proceedings	20
Item 4.	Mine Safety Disclosures	20

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	21
Item 6.	Selected Financial Data	22
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	28
Item 8.	Financial Statements and Supplementary Data	28
Item 9.	Changes In and Disagreements With Accountants On Accounting and Financial Disclosure	59
Item 9A.	Controls and Procedures	59
Item 9B.	Other Information	59

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	60
Item 11.	Executive Compensation	64
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	66
Item 13.	Certain Relationships and Related Transactions and Director Independence	66
Item 14.	Principal Accounting Fees and Services	67

PART IV

Item 15.	Exhibits, Financial Statement Schedules	67
	Signatures	69

EXPLANATORY NOTE

As previously reported on Form 8-K filed on March 30, 2020, the Company was unable to file its Annual Report on Form 10-K for the fiscal year ended December 31, 2019 by the original deadline of March 30, 2020, due to circumstances related to COVID-19 pandemic. The Company’s operations and business have been disrupted due to the unprecedented conditions and travel restrictions surrounding the COVID-19 pandemic spreading throughout the United States. These disruptions have resulted in limited access to the Company’s facilities and have interfered with management’s ability to work with its independent accountants, professional advisors and support staff in order to complete the Company’s financial statements and related disclosures that will be included in the Company’s Form 10-K.

PART I

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

This Annual Report on Form 10-K (this “Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.

We cannot predict all risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements will occur or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management, any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.

Some factors that might cause such differences are described in the section entitled “Risk Factors” in this Report and in other documents that we file from time to time with the Securities and Exchange Commission (“SEC”), which factors include, without limitation, the following:

Competition from other similar companies;

Regulatory limitations on the products we can offer and markets we can serve;

Other changes in the regulation of medical and recreational cannabis use;

Changes in underlying consumer behavior, which may affect the business of our customers;

Our ability to access adequate financing on reasonable terms and our ability to raise additional capital in order to fund our operations;

Our ability to identify and successfully integrate acquisitions, and the ability of acquired businesses to perform as expected;

Challenges with new products, services and markets; and

Fluctuations in the credit markets and demand for credit.

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

The following description of the business of General Cannabis Corp should be read in conjunction with the information included elsewhere in this Report. Unless the context indicates otherwise, references to the words “we,” “us,” “our,” “GCC,” and the “Company” in this Report refer to General Cannabis Corp.

ITEM 1. BUSINESS.

Recent Strategic Changes

The cannabis industry is dynamic and becoming more mature. As markets like Colorado mature, we believe that an opportunity exists for operationally excellent companies to build scale by acquiring and operating licensed cannabis facilities. Accordingly, we are focused on delivering on the promise of cannabis, by: (1) investing for long-term and sustainable value creation, (2) focused execution that allows us to continue to generate cash and meet our financial commitments, (3) using data and analysis to guide decisions, and (4) moving with an urgency that reflects our conviction and confidence in our ability to own the customers’ loyalty and advocacy. To that end, during the year ended 2019, we announced the following significant actions in support of our continued growth:

On December 26, 2019, the board of directors and management made the strategic move to cease operations of Chiefton, our apparel line.

On December 26, 2019, the board of directors committed to a plan to cease operations of STOA Wellness, our retail store. We transferred all assets of STOA Wellness to an individual on January 10, 2020, in exchange for the release on the outstanding lease.

We determined that the sale and disposal of our security and consumer goods segments represented a strategic shift that will have a major effect on our results of operations and, as a result, we have presented the disposal as held for sale and discontinued operations in our financial statements. Unless noted otherwise, discussion in this Annual Report on Form 10-K pertains to our continuing operations.

History and Corporate Structure

General Cannabis Corp, a Colorado corporation, was incorporated on June 3, 2013. We operate through our ten wholly-owned subsidiaries: (a) 6565 E. Evans Owner LLC, a Colorado limited liability company formed in 2014; (b) General Cannabis Capital Corporation, a Colorado corporation formed in 2015; (c) GC Security LLC (“GCS”), a Colorado limited liability company formed in 2015; (d) GC-NY Health, LLC, a New York limited liability company formed in 2019; (e) Standard Cann, Inc., a Colorado corporation formed in 2019; (f) Cannassuer, LLC, a Colorado limited liability company formed in 2019; (g) Cannasseur Dispensary, LLC, a limited liability company formed in 2019; (h) Cannasseur Cultivation, LLC, a limited liability company formed in 2019; (i) Cannassuer Extraction, LLC, a limited liability company formed in 2019 (j) SevenFive Farms, LLC, a limited liability company formed in 2020, (k) SevenFive Farms Cultivation, LLC, a limited liability company formed in 2020 and (l) GC Corp., a Colorado corporation, originally formed in 2013 under the name ACS Corp. In 2015, the name was changed to GC Corp.

Our Products, Services and Customers

Through our reporting segments (Security, Operations, Consumer Goods, and Investments), we provide products, services and capital to the regulated cannabis industry and non-cannabis customers, which include the following:

Operations Consulting and Products (“Operations Segment”)

Through Next Big Crop (“NBC”), we deliver comprehensive consulting services to the cannabis industry that include obtaining licenses, compliance, cultivation, retail operations, logistical support, facility design and construction, and expansion of existing operations. During 2019 and 2018, 59% and 60% of NBC’s revenue was with three customers and one customer, respectively.

NBC oversees our wholesale equipment and supply business, operated under the name “GC Supply,” which provides turnkey sourcing and stocking services to cultivation, retail and infused products manufacturing facilities. Our products include building materials, equipment, consumables and compliance packaging. There are generally multiple suppliers for the products we sell; however, there are a limited number of manufacturers of certain high tech cultivation equipment.

NBC provides a competitive advantage as we plan to evaluate and operate licensed cultivation facilities.

Capital Investments and Real Estate (“Investments Segment”)

As a publicly traded company, we have access to capital that may not be available to businesses operating in the cannabis industry. Accordingly, we may provide debt or equity capital through (a) loans or revolving lines of credit, (b) leasing real estate we own, or (c) investing in businesses using cash or shares of our common stock.

Recent Significant Transactions

On April 7, 2020, we entered into an Asset Purchase Agreement with The Organic Seed, LLC, doing business under the name Cannasseur (the “Seller”), pursuant to which we agreed to acquire the assets of the Seller which includes a recreational retail dispensary, a 12,000 square foot light deprivation greenhouse, and a manufacturing facility based in Pueblo West, Colorado. The agreement provides the purchase price to acquire Cannasseur is $2,350,000 (the “Purchase Price”). The purchase price will be paid by issuing to the Seller shares of our common stock equal to the purchase price divided by the volume weighted average per share price of our shares for 30 consecutive trading days ending on the second trading day prior to the closing (the “VWAP”); provided that if the VWAP exceeds $0.55 per share, then the VWAP will equal $0.55 per share for purposes of the foregoing calculation; and if the VWAP is less than $0.45 per share, then the VWAP will be adjusted to equal $0.45 for the purposes of the foregoing calculation. The closing is subject to approval of the transaction by the Colorado Marijuana Enforcement Division, as well as other customary closing conditions.

On March 20, 2020 we sold our office building located in Denver, Colorado, to certain individuals for a sale price of $1,499,000 and net proceeds, after repaying the mortgage on the property, was approximately $600,000.

In February and March 2020, we issued and sold unsecured promissory notes (the “Unsecured Notes”) with an aggregate principal amount of $2,031,000 to certain investors in exchange for $525,000 of new funding and the cancellation of outstanding indebtedness of $1,506,000 represented by prior promissory notes issued by us in September 2019. The Unsecured Notes have an annual interest rate of 15% and mature on January 31, 2021 and March 1, 2021. Interest is due on a quarterly basis. In connection with the issuance of the Unsecured notes, each holder of Unsecured Notes received three warrants (i.e., a 2020 A Warrant, a 2020 B Warrant and a 2020 C Warrant) to acquire shares of Common Stock at an exercise price equal to $0.45 per share.

On January 24, 2020, we entered into an asset purchase agreement with Dalton Adventures, LLC (the “Seller”), pursuant to which we agreed to acquire the assets of the Seller and which constitutes the business of SevenFive Farm, a cultivation facility in Boulder, Colorado. The purchase price to be paid for the assets is equal to 1.4 times the Seller’s gross revenue for the 12-month period prior to the closing; provided that the purchase price will not be lower than $3,000,000. The purchase price will be paid by issuing to the Seller shares of our common stock equal to the purchase price divided by the volume weighted average per share price of our shares for 30 consecutive trading days ending on the second trading day prior to the closing (the “VWAP”); provided that if the VWAP exceeds $0.85 per share, then the VWAP will equal $0.85 per share for purposes of the forgoing calculation. The Seller may require us to repurchase in cash 25% of the shares issued to the Seller at the closing at a repurchase price equal to the same VWAP used to determine the number of shares issued to the Seller at closing. The closing is subject to approval of the transaction by the Colorado Marijuana Enforcement Division, which was received on May 13, 2020, as well as other customary closing conditions.

In September 2019, we completed a $1,506,000 private placement with certain accredited investors pursuant to (a) a senior unsecured promissory note, bearing interest at 12% payable quarterly, with principal due October 31, 2020, with an option for us to extend the due date to October 31, 2021 (“2019 12% Notes”) and (b) warrants with an exercise price of $1.30 per share and a life of 1.1 years; however, if we prepay at any time the life extends to October 31, 2022 (“2019 12% Warrants”) (combined the “2019 12% Agreements”). We may prepay the 2019 12% Notes at any time, but in any event must pay at least one year of interest. As described above, the 2019% Notes were cancelled in connection with the issuance of the 2020 Notes.

In July 2019, we completed a $855,000 private placement pursuant to a promissory note (“SBI Note”) with a certain accredited investor, bearing interest at 10% with principal due on October 18, 2019. On November 15, 2019, SBI agreed to an extension of debt to November 29, 2019 with an increase in principal amount of the note from $855,000 to $905,000. On December 30, 2019 SBI agreed to extend the maturity date of the note to January 31, 2020, upon the payment of $195,911 of

the note. On February 18, 2020, we entered into a promissory note exchange agreement (the “Exchange Agreement”) with the investor pursuant to which the SBI Note was exchanged for a new convertible promissory note (the “SBI Convertible Note”). The SBI Convertible Note has a principal amount of $934,000, an interest rate of 10% per annum and a maturity date of February 18, 2021. The SBI Convertible Note may be converted at the option of the investor into shares of our common stock at a conversion price equal to 80% of the Market Price (as defined in the SBI Convertible Note); provided that the conversion price shall in no event be less than $0.45 per share (unless adjusted as provided in the SBI Convertible Note).

Competitive Strengths

We believe we possess certain competitive strengths and advantages in the industries in which we operate:

Cultivation Expertise. NBC has designed and operated over 100 cultivation facilities across the country. As we execute on our rollup strategy, this expertise enables us to evaluate, acquire and operate these facilities efficiently.

Range of Services. We are able to leverage our breadth of services and resources to deliver comprehensive, integrated solutions to companies in the cannabis industry—from operational and compliance, to products and services.

Strategic Alliances. We are dedicated to growing through strategic acquisitions, partnerships and agreements that will enable us to enter and expand into new markets. Our strategy is to pursue alliances with potential targets that have the ability to generate positive cash flow, effectively meet customer needs and supply desirable products, services or technologies, among other considerations. We anticipate that strategic alliances will play a significant role as more states pass legislation permitting the cultivation and sale of hemp and cannabis.

Regulatory Compliance. The state and local laws regulating the cannabis industry change at a rapid pace. We have resources committed to ensure our operations are in compliance with all state and local laws, policies, guidance and regulations to which we are subject. We apply this compliance knowledge to our customers in order to ensure that they, too, are in full compliance.

Industry Knowledge. We continue to create, share and leverage information and experiences with the purpose of creating awareness and identifying opportunities to increase shareholder value. Our management team has business expertise, extensive knowledge of the cannabis industry and closely monitors changes in legislation. We work with partners who enhance the breadth of our industry knowledge.

Market Conditions

Our target markets are the locations in the U.S. and its territories that have legalized cannabis:


Location	Medical	Recreational	Year*
California**	X	X	1996 / 2016
Washington	X	X	1998 / 2012
Alaska	X	X	1998 / 2014
Oregon**	X	X	1998 / 2014
Maine	X	X	1999 / 2016
Hawaii**	X		2000
Colorado**	X	X	2000 / 2012
Nevada**	X	X	2000 / 2016
Montana	X		2004
Vermont	X	X	2004 / 2018


Location	Medical	Recreational	Year*
Rhode Island	X		2006
New Mexico	X		2007
Michigan	X	X	2008 / 2018
District of Columbia	X	X	2009 / 2014
Arizona**	X		2010
New Jersey**	X		2010
Delaware	X		2011
Connecticut	X		2012
Massachusetts	X	X	2012 / 2016
Illinois**	X	X	2013/2019
New Hampshire	X		2013
Guam	X		2014
Maryland**	X		2014
Minnesota	X		2014
New York**	X		2014
Louisiana	X		2015
Puerto Rico	X		2015
Arkansas**	X		2016
Location	Medical	Recreational	Year*
Florida	X		2016
North Dakota	X		2016
Ohio**	X		2016
Pennsylvania**	X		2016
West Virginia	X		2017
Missouri	X		2018
Northern Mariana Islands	X	X	2018
Oklahoma**	X		2018
Utah	X		2018

* When two dates are listed the first date refers to medical legalization. ** Indicates locations in which we provide or have provided services.

Our best opportunities are in locations with large populations or legal recreational cannabis use. Continued development of the regulated cannabis industry depends on additional legalization, which is significantly influenced by state and local legislation.

Competition

Overall, we believe we have a competitive advantage by providing a range of goods and services to the cannabis industry. This allows us to provide integrated solutions to our customers, as well as sell additional goods and services to customers of a single segment. There is no aspect of our business, however, that is protected by patents or copyrights. As a result, our competitors could duplicate our business model with little effort.

Operations Consulting and Products. There are a limited number of competitors that provide the full range of services that NBC delivers. However, each individual service we provide has competition from experts in individual, specific fields. For example, attorneys may assist with license procurement and compliance. There are numerous firms that specialize in traditional greenhouse and cultivation consulting, as well as companies that provide operations services. As the cannabis industry grows, these competitors may develop further expertise and expand their focus on the cannabis industry.

Capital Investments and Real Estate. Many banks and traditional financial institutions refuse to provide financial services to cannabis-related business. With the growth of the cannabis industry, however, there has been growth in alternative financing and banking resources. Many of these alternative sources have more capital and resources than we have.

Government and Industry Regulation

Cannabis is currently a Schedule I controlled substance under the Controlled Substances Act (“CSA”) and is, therefore, illegal under federal law. Even in those states in which the use of cannabis has been legalized pursuant to state law, its use, possession and/or cultivation remains a violation of federal law. A Schedule I controlled substance is defined as one that has no currently accepted medical use in the United States, a lack of safety for use under medical supervision and a high potential for abuse. The U.S. Department of Justice (the “DOJ”) describes Schedule I controlled substances as “the most dangerous drugs of all the drug schedules with potentially severe psychological or physical dependence.” If the federal government decides to enforce the CSA in Colorado with respect to state-regulated cannabis activities in Colorado and other states, persons that are charged with distributing, possessing with intent to distribute or growing cannabis could be subject to fines and/or terms of imprisonment, the maximum being life imprisonment and a $50 million fine.

In light of the conflict between federal laws and state laws regarding cannabis, the previous administration under President Obama had effectively stated that it was not an efficient use of resources to direct federal law enforcement agencies to prosecute those lawfully abiding by state-designated laws allowing the use and distribution of medical cannabis. For example, the prior DOJ Deputy Attorney General of the Obama administration, James M. Cole, issued a memorandum (the “Cole Memo”) to all United States Attorneys providing updated guidance to federal prosecutors concerning cannabis enforcement under the CSA. In addition, the Financial Crimes Enforcement Network (“FinCEN”) provided guidelines (the “FinCEN Guidelines”) on February 14, 2014, regarding how financial institutions can provide services to cannabis-related businesses consistent with their Bank Secrecy Act (“BSA”) obligations (see “– FinCEN”).

Congress previously enacted an omnibus spending bill that included a provision (the “Rohrabacher-Blumenauer Amendment”) prohibiting the DOJ from using funds to prevent states with medical cannabis laws from implementing such laws. This provision, however, has only been extended through September 30, 2020, and must be renewed annually by Congress. In August 2016, a Ninth Circuit federal appeals court ruled in United States v. McIntosh that the Rohrabacher-Blumenauer Amendment bars the DOJ from spending funds on the prosecution of conduct that is allowed by state medical cannabis laws, provided that such conduct is in strict compliance with applicable state law. In March 2015, bipartisan legislation titled the Compassionate Access, Research Expansion, and Respect States Act (the “CARERS Act”) was introduced, proposing to allow states to regulate the medical use of cannabis by changing applicable federal law, including by reclassifying cannabis under the Controlled Substances Act to a Schedule II controlled substance and thereby changing the plant from a federally-criminalized substance to one that has recognized medical uses. More recently, the Respect State Marijuana Laws Act of 2017 has been introduced in the U.S. House of Representatives, which proposes to exclude persons who produce, possess, distribute, dispense, administer or deliver marijuana in compliance with state laws from the regulatory controls and administrative, civil and criminal penalties of the CSA.

These developments previously were met with a certain amount of optimism in the cannabis industry, but (i) neither the CARERS Act nor the Respect State Marijuana Laws Act of 2017 have yet been adopted, (ii) the Rohrabacher-Blumenauer Amendment, being an amendment to an appropriations bill that must be renewed annually, has not currently been renewed beyond September 30, 2020, and (iii) the ruling in United States v. McIntosh is only applicable precedent in the Ninth Circuit, which does not include Colorado, the state where we currently primarily operate.

Furthermore, on January 4, 2018, the former U.S. Attorney General, Jeff Sessions, issued a memorandum for all U.S. Attorneys (the “Sessions Memo”) stating that the Cole Memo was rescinded effectively immediately. In particular, Mr. Sessions stated that “prosecutors should follow the well-established principles that govern all federal prosecutions,” which require “federal prosecutors deciding which cases to prosecute to weigh all relevant considerations, including federal law enforcement priorities set by the Attorney General, the seriousness of the crime, the deterrent effect of criminal prosecution, and the cumulative impact of particular crimes on the community.” The Sessions Memo went on to state that given the DOJ’s well-established general principles, “previous nationwide guidance specific to marijuana is unnecessary and is rescinded, effective immediately.”

In response to the Sessions Memo, U.S. Attorney Bob Troy for the District of Colorado, the state in which our principal business operations are presently located, issued a statement on January 4, 2018, stating that the United States Attorney’s Office in Colorado is already guided by the well-established principles referenced in the Sessions Memo, “focusing in particular on identifying and prosecuting those who create the greatest safety threats to our communities around the state. We will, consistent with the Attorney General’s latest guidance, continue to take this approach in all of our work with our law enforcement partners throughout Colorado.”

It is unclear at this time whether the Sessions Memo indicates that the Trump administration will strongly enforce the federal laws applicable to cannabis or what types of activities will be targeted for enforcement. However, a significant change in the federal government’s enforcement policy with respect to current federal laws applicable to cannabis could cause significant financial damage to us. We do not currently cultivate, distribute or sell cannabis. We may be irreparably harmed by a change in enforcement policies of the federal government depending on the nature of such change. As of the date of this Report, we have provided products and services to state-approved cannabis cultivators and dispensary facilities. Accordingly, we could be subject to criminal prosecution, which could lead to imprisonment and/or the imposition of penalties, fines, or forfeiture .

The Cole Memo

Because of the discrepancy between the laws in some states, which permit the distribution and sale of medical and recreational cannabis, from federal law that prohibits any such activities, DOJ Deputy Attorney General James M. Cole issued the Cole Memo concerning cannabis enforcement under the CSA.

At the time of its issuance, the Cole Memo reiterated Congress’s determination that cannabis is a dangerous drug and that the illegal distribution and sale of cannabis is a serious crime that provides a significant source of revenue to large-scale criminal enterprises, gangs, and cartels. The Cole Memo noted that the DOJ was committed to enforcement of the CSA consistent with those determinations. It also noted that the DOJ was committed to using its investigative and prosecutorial resources to address the most significant threats in the most effective, consistent, and rational way. In furtherance of those objectives, the Cole Memo provided guidance to DOJ attorneys and law enforcement to focus their enforcement resources on persons or organizations whose conduct interferes with any one or more of the following important priorities (the “Enforcement Priorities”) in preventing:

the distribution of cannabis to minors;

revenue from the sale of cannabis from going to criminal enterprises, gangs, and cartels;

the diversion of cannabis from states where it is legal under state law in some form to other states;

state-authorized cannabis activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;

violence and the use of firearms in the cultivation and distribution of cannabis;

drugged driving and the exacerbation of other adverse public health consequences associated with cannabis use;

the growing of cannabis on public lands and the attendant public safety and environmental dangers posed by cannabis production on public lands; and

cannabis possession or use on federal property.

Although the Sessions Memo has rescinded the Cole Memo and it is unclear at this time what the ultimate impact of that rescission will have on our business, if any, we intend to continue to conduct rigorous due diligence to verify the legality of all activities that we engage in and ensure that our activities do not interfere with any of the Enforcement Priorities set forth in the Cole Memo.

FinCEN

FinCEN provided guidance regarding how financial institutions can provide services to cannabis-related businesses consistent with their BSA obligations. For purposes of the FinCEN guidelines, a “financial institution” includes any person doing business in one or more of the following capacities:

bank (except bank credit card systems);

broker or dealer in securities;

money services business;

telegraph company;

card club; and

a person subject to supervision by any state or federal bank supervisory authority.

In general, the decision to open, close, or refuse any particular account or relationship should be made by each financial institution based on a number of factors specific to that institution. These factors may include its particular business objectives, an evaluation of the risks associated with offering a particular product or service, and its capacity to manage those risks effectively. Thorough customer due diligence is a critical aspect of making this assessment.

In assessing the risk of providing services to a cannabis-related business, a financial institution should conduct customer due diligence that includes: (i) verifying with the appropriate state authorities whether the business is duly licensed and registered; (ii) reviewing the license application (and related documentation) submitted by the business for obtaining a state license to operate its cannabis-related business; (iii) requesting from state licensing and enforcement authorities available information about the business and related parties; (iv) developing an understanding of the normal and expected activity for the business, including the types of products to be sold and the type of customers to be served (e.g., medical versus recreational customers); (v) ongoing monitoring of publicly available sources for adverse information about the business and related parties; (vi) ongoing monitoring for suspicious activity, including for any of the red flags described in this guidance; and (vii) refreshing information obtained as part of customer due diligence on a periodic basis and commensurate with the risk. With respect to information regarding state licensure obtained in connection with such customer due diligence, a financial institution may reasonably rely on the accuracy of information provided by state licensing authorities, where states make such information available.

As part of its customer due diligence, a financial institution should consider whether a cannabis-related business implicates one of the Cole Memo Enforcement Priorities or violates state law. This is a particularly important factor for a financial institution to consider when assessing the risk of providing financial services to a cannabis-related business. Considering this factor also enables the financial institution to provide information in BSA reports pertinent to law enforcement’s priorities. A financial institution that decides to provide financial services to a cannabis-related business would be required to file suspicious activity reports. It is unclear at this time what impact the Sessions Memo will have on customer due diligence by a financial institution.

While we believe we do not qualify as a financial institution in the United States, we cannot be certain that we do not fall under the scope of the FinCEN guidelines. We plan to use the FinCEN Guidelines, as may be amended, as a basis for assessing our relationships with potential tenants, clients and customers. As such, as we engage in financing activities, we intend to adhere to the guidance of FinCEN in conducting and monitoring our financial transactions. Because this area of the law is uncertain and is expected to evolve rapidly, we believe that FinCEN’s guidelines will help us best operate in a prudent, reasonable and acceptable manner. There is no assurance, however, that our activities will not violate some aspect of the CSA. If we are found to violate the federal statute or any other in connection with our activities, our company could face serious criminal and civil sanctions.

Moreover, since the use of cannabis is illegal under federal law, we may have difficulty acquiring or maintaining bank accounts and insurance, and our stockholders may find it difficult to deposit their stock with brokerage firms.

Licensing and Local Regulations

Where applicable, we apply for state licenses or similar approvals that are necessary to conduct our business in compliance with local laws. Our subsidiary, GC Corp., has been registered with Colorado’s Marijuana Enforcement Division (the “MED”) as an approved vendor since September 8, 2014. GCS, another subsidiary, has been registered as a MED approved vendor since March 11, 2015.

On May 1, 2020, the MED granted regulatory approval to the Company as a qualified and suitable buyer of licensed cannabis operations in the State. This authorization, known as a Suitability Approval, establishes the Copany as one of the first public companies authorized to acquire licensed cultivation, manufacturing and retail operations throughout Colorado.

Local laws at the county and municipal level add an additional layer of complexity to legalized cannabis. Despite a state’s adoption of legislation legalizing cannabis, counties and municipalities within the state may have the ability to otherwise restrict cannabis activities, including but not limited to cultivation, retail, distribution, manufacturing or consumption.

Zoning sets forth the approved use of land in any given city, county or municipality. Zoning is set by local governments or local voter referendum, and may otherwise be restricted by state laws. For example, under certain state laws a seller of liquor may not be allowed to operate within 1,000 feet of a school. There may be similar restrictions imposed on cannabis operators, which will restrict where cannabis operations may be located and the manner and size to which they can grow and operate. Zoning can be subject to change or withdrawal, discretionary approvals may be required for certain uses, and properties can be re-zoned. The zoning of our properties will have a direct impact on our business operations.

Employees

As of December 31, 2019, we had 76 full-time employees.

Corporate Contact Information

Our principal executive offices are located at 6565 E. Evans Avenue, Denver, Colorado 80224; Telephone No.: (303) 759-1300. Our website is http://www.generalcann.com. The content on our website is available for informational purposes only. It should not be relied upon for investment purposes, nor is it incorporated by reference into this Form 10-K.

Available Information

We maintain a website at www.generalcann.com and make available, free of charge, on our website, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K (including any amendments thereto), registration statements and other information filed with, or furnished to, the SEC, as soon as reasonably practicable after such documents are so filed or furnished, as well as our Code of Ethics. Any materials we file with the SEC, including our annual reports, quarterly reports, current reports, proxy statements, information statements and other information, are also available at the SEC’s Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.

ITEM 1A. RISK FACTORS.

Investing in our common stock involves a high degree of risk. You should carefully consider the following risks and all other information contained in this Form 10-K, including our consolidated financial statements and the related notes, before investing in our common stock. The risks and uncertainties described below are not the only ones we face, but include the most significant factors currently known by us that make investing in our common stock speculative or risky. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, also may become important factors that affect us. If any of the following risks materialize, our business, financial condition and results of operations could be materially harmed. In that case, the trading price of our common stock could decline, and you may lose some or all of your investment.

Risks Related to Our Business and Industry

We have a limited operating history in an evolving industry, which makes it difficult to accurately assess our future growth prospects.

Although we believe our management team has extensive knowledge of the cannabis industry and closely monitors changes in legislation, we also operate in an evolving industry that may not develop as expected. Furthermore, our operations continue to evolve under our business plan as we continually assess new strategic opportunities for our business within our industry. Assessing the future prospects of our business is challenging in light of both known and unknown risks and difficulties we may encounter. Growth prospects in our industry can be affected by a wide variety of factors including:

Competition from other similar companies;

Regulatory limitations on the products we can offer and markets we can serve;

Other changes in the regulation of medical and recreational cannabis use;

Changes in underlying consumer behavior, which may affect the business of our customers;

Our ability to access adequate financing on reasonable terms and our ability to raise additional capital in order to fund our operations;

Challenges with new products, services and markets; and

Fluctuations in the credit markets and demand for credit.

We may not be able to successfully address these factors, which could negatively impact our growth, harm our business and cause our operating results to be worse than expected.

Our business, results of operations and financial condition may be adversely affected by pandemic infectious diseases, particularly the recent novel coronavirus strain known as COVID-19.

Pandemic infectious diseases, such as the current COVID-19 strain, may adversely impact our business, consolidated results of operations and financial condition. The global spread of COVID-19 has created significant volatility and uncertainty and economic disruption. The extent to which COVID-19 impacts our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict, including: the duration and scope of the pandemic; governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic; the impact of the pandemic on economic activity and actions taken in response; the effect on our customers and customer demand our services, products and solutions; our ability to sell and provide its services and solutions, including as a result of travel restrictions and people working from home; the ability of our customers to pay for our services and solutions; and any closures of our offices and the offices and facilities of our customers. COVID-19, as well as measures taken by governmental authorities to limit the spread of this virus, may interfere with the ability of our employees, suppliers, and other business

providers to carry out their assigned tasks or supply materials or services at ordinary levels of performance relative to the requirements of our business, which may cause us to materially curtail certain of our business operations. We require additional funding and such funding may not be available to us as a result of contracting capital markets resulting from the COVID-19 pandemic. Any of these events could materially adversely affect our business, financial condition, results of operations and/or stock price.

We have a history of losses and may not achieve profitability in the future.

We generated net losses of approximately $12.4 million and $16.9 million, respectively, in the years ended December 31, 2019 and 2018. As of December 31, 2019, we had an accumulated deficit of approximately $64.2 million. We will need to generate and sustain increased revenues in future periods in order to become profitable, and, even if we do, we may not be able to maintain or increase any such level of profitability.

As we grow, we expect to continue to expend substantial financial and other resources on:

personnel, including significant increases to the total compensation we pay our employees as we grow our employee headcount;

expenses relating to increased marketing efforts;

strategic acquisitions of businesses and real estate; and

general administration, including legal, accounting and other compliance expenses related to being a public company.

These expenditures are expected to increase and may adversely affect our ability to achieve and sustain profitability as we grow. Our efforts to grow our business may also be more costly than we expect, and we may not be able to increase our revenues enough to offset our higher operating expenses. We may incur losses in the future for a number of reasons, including the other risks described in this Report, unforeseen expenses, difficulties, complications and delays and other unknown events. If we are unable to achieve and sustain profitability, the market price of our common stock may significantly decrease.

Cannabis remains illegal under federal law, and any change in the enforcement priorities of the federal government could render our current and planned future operations unprofitable or even prohibit such operations.

We operate in the cannabis industry, which is dependent on state laws and regulations pertaining to such industry; however, under federal law, cannabis remains illegal.

The United States federal government regulates drugs through the Controlled Substances Act (the “CSA”), which places controlled substances, including cannabis, on one of five schedules. Cannabis is currently classified as a Schedule I controlled substance, which is viewed as having a high potential for abuse and having no currently accepted medical use in treatment in the United States. No prescriptions may be written for Schedule I substances, and such substances are subject to production quotas imposed by the United States Drug Enforcement Administration (the “DEA”). Because of this, doctors may not prescribe cannabis for medical use under federal law, although they can recommend its use under the First Amendment.

Currently, numerous U.S. states, the District of Columbia and U.S. territories have legalized cannabis for medical and / or recreational adult use. Such state and territorial laws are in conflict with the federal CSA, which makes cannabis use and possession illegal at the federal level. Because cannabis is a Schedule I controlled substance, however, the development of a legal cannabis industry under the laws of these states is in conflict with the CSA, which makes cannabis use and possession illegal on a national level. The United States Supreme Court has confirmed that the federal government has the right to regulate and criminalize cannabis, including for medical purposes, and that federal law criminalizing the use of cannabis preempts state laws that legalize its use. We would likely be unable to execute our business plan if the federal government were to strictly enforce federal law regarding cannabis.

In light of such conflict between federal laws and state laws regarding cannabis, the previous administration under President Obama had effectively stated that it was not an efficient use of resources to direct law federal law enforcement agencies to prosecute those lawfully abiding by state-designated laws allowing the use and distribution of medical cannabis. For example, the prior DOJ Deputy Attorney General of the Obama administration, James M. Cole, issued a memorandum (the “Cole Memo”) to all United States Attorneys providing updated guidance to federal prosecutors concerning cannabis enforcement under the CSA (see “Business—Government and Industry Regulation—The Cole Memo”). In addition, the Financial Crimes Enforcement Network (“FinCEN”) provided guidelines on February 14, 2014, regarding how financial institutions can provide services to cannabis-related businesses consistent with their Bank Secrecy Act obligations (see “Business—Government and Industry Regulation—FinCEN”).

Furthermore, on January 4, 2018, former U.S. Attorney General, Jeff Sessions, issued a memorandum for all U.S. Attorneys (the “Sessions Memo”) stating that the Cole Memo was rescinded effectively immediately. In particular, Mr. Sessions stated that “prosecutors should follow the well-established principles that govern all federal prosecutions,” which require “federal prosecutors deciding which cases to prosecute to weigh all relevant considerations, including federal law enforcement priorities set by the Attorney General, the seriousness of the crime, the deterrent effect of criminal prosecution, and the cumulative impact of particular crimes on the community.” The Sessions Memo went on to state that given the DOJ’s well-established general principles, “previous nationwide guidance specific to marijuana is unnecessary and is rescinded, effective immediately.”

It is unclear at this time whether the Sessions Memo indicates that the Trump administration will strictly enforce the federal laws applicable to cannabis or what types of activities will be targeted for enforcement. However, a significant change in the federal government’s enforcement policy with respect to current federal laws applicable to cannabis could cause significant financial damage to us. We may be irreparably harmed by a change in enforcement policies of the federal government depending on the nature of such change. As of the date of this Report, we have provided products and services to state-approved cannabis cultivators and dispensary facilities. As a result, strict enforcement of federal prohibitions regarding cannabis could subject the Company to criminal prosecution.

Additionally, financial transactions involving proceeds generated by cannabis-related conduct can form the basis for prosecution under the federal money laundering statutes, unlicensed money transmitter statutes and the Bank Secrecy Act. Prior to the DOJ's rescission of the “Cole Memo”, supplemental guidance from the DOJ issued under the Obama administration directed federal prosecutors to consider the federal enforcement priorities enumerated in the “Cole Memo” when determining whether to charge institutions or individuals with any of the financial crimes described above based upon cannabis-related activity. It is unclear what impact the recent rescission of the “Cole Memo” will have, but federal prosecutors may increase enforcement activities against institutions or individuals that are conducting financial transactions related to cannabis activities.

Additionally, as we are always assessing potential strategic acquisitions of new businesses, we may in the future also pursue opportunities that include growing and/or distributing medical or recreational cannabis, should we determine that such activities are in the best interest of the Company and our stockholders. Any such pursuit would involve additional risks with respect to the regulation of cannabis, particularly if the federal government determines to strictly enforce all federal laws applicable to cannabis.

Federal prosecutors have significant discretion and no assurance can be given that the federal prosecutor in each judicial district where we operate our business will not choose to strictly enforce the federal laws governing cannabis production or distribution. Any change in the federal government's enforcement posture with respect to state-licensed cultivation of medical-use cannabis, including the enforcement postures of individual federal prosecutors in judicial districts where we

purchase properties, would result in our inability to execute our business plan, and we would likely suffer significant losses, which would adversely affect the trading price of our securities. Furthermore, following any such change in the federal government's enforcement position, we could be subject to criminal prosecution, which could lead to imprisonment and/or the imposition of penalties, fines, or forfeiture.

Any potential growth in the cannabis industry continues to be subject to new and changing state and local laws and regulations.

Continued development of the cannabis industry is dependent upon continued legislative legalization of cannabis at the state level, and a number of factors could slow or halt progress in this area, even where there is public support for legislative action. Any delay or halt in the passing or implementation of legislation legalizing cannabis use, or its cultivation, sale and distribution, or the re-criminalization or restriction of cannabis at the state level could negatively impact our business. Additionally, changes in applicable state and local laws or regulations, including zoning restrictions, permitting requirements, and fees, could restrict the products and services we offer or impose additional compliance costs on us or our customers and tenants. Violations of applicable laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our operations. We cannot predict the nature of any future laws, regulations, interpretations or applications, and it is possible that regulations may be enacted in the future that will be materially adverse to our business.

The cannabis industry faces significant opposition, and any negative trends will adversely affect our business operations.

We are substantially dependent on the continued market acceptance, and the proliferation of consumers, of medical and recreational cannabis. We believe that with further legalization, cannabis will become more accepted, resulting in growth in consumer demand. However, we cannot predict the future growth rate or future market potential, and any negative outlook on the cannabis industry may adversely affect our business operations.

Large, well-funded business sectors may have strong economic reasons to oppose the development of the cannabis industry. For example, medical cannabis may adversely impact the existing market for the current “cannabis pill” sold by mainstream pharmaceutical companies. Should cannabis displace other drugs or products, the medical cannabis industry could face a material threat from the pharmaceutical industry, which is well-funded and possesses a strong and experienced lobby. Any inroads the pharmaceutical, or any other potentially displaced, industry or sector could make in halting or impeding the cannabis industry could have a detrimental impact on our business.

We operate in a highly competitive industry.

The markets for ancillary businesses in the medical marijuana and recreational marijuana industries are competitive and evolving. There is no material aspect of our business that is protected by patents, copyrights, trademarks, or trade names, and we face strong competition from larger companies that may offer similar products and services to ours. Many of our current and potential competitors have longer operating histories, significantly greater financial, marketing and other resources and larger client bases than us, and there can be no assurance that we will be able to successfully compete against these or other competitors.

Given the rapid changes affecting the global, national, and regional economies generally and the medical marijuana and recreational marijuana industries, in particular, we may not be able to create and maintain a competitive advantage in the marketplace. Our success will depend on our ability to keep pace with any changes in our markets, particularly, legal and regulatory changes. Our success will also depend on our ability to respond to, among other things, changes in the economy, market conditions, and competitive pressures. Any failure by us to anticipate or respond adequately to such changes could have a material adverse effect on our financial condition and results of operations.

If we are unable to obtain capital, we may not be able to pay our debt obligations as they become due, and there is substantial doubt about our ability to continue as a going concern.

We may not generate sufficient cash flows from operations to retire our debt obligations and may not be able to raise sufficient capital from (a) the exercise of warrants and options for our common stock, (b) sale of our common stock, or (c) issuing additional long-term debt. Our failure to obtain additional capital and retire our debt obligations would negatively impact our ability to continue as a going concern. To that end our auditors report for the year ended December 31, 2019 includes disclosure of substantial doubt about our ability to continue as a going concern.

Our financial statements have been prepared assuming that we will continue as a going concern, which means we will be able to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future. Our ability to continue as a going concern is dependent upon our becoming profitable in the future and/or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. However, there can be no assurance that we will be successful in achieving these objectives.

We may be unable to obtain capital to execute our business plan.

Our business plan involves lending to and investing in companies in the cannabis industry, as well as the general expansion of our business within and outside of Colorado. In order to execute on our business plan, we will need additional capital. However, there can be no assurance that we will be able to obtain financing on agreeable terms, if at all, and any future sale of our equity securities will dilute the ownership of our existing stockholders and could be at prices substantially below the price of the shares of common stock sold in the past. If we are unable to obtain the necessary capital, we may need to delay the implementation of or curtail our business plan.

We face risks associated with strategic acquisitions and our business strategy.

As an important part of our business roll-up strategy, we strategically acquire businesses and real property, some of which may be material. These acquisitions involve a number of financial, accounting, managerial, operational, legal, compliance and other risks and challenges, including the following, any of which could adversely affect our results of operations:

The applicable restrictions on the cannabis industry and its participants limit the number of available suitable businesses and real properties that we can acquire;

Any acquired business or real property could under-perform relative to our expectations and the price that we paid for it, or not perform in accordance with our anticipated timetable;

We may incur or assume significant debt in connection with our acquisitions;

Acquisitions could cause our results of operations to differ from our own or the investment community’s expectations in any given period, or over the long term; and

Acquisitions could create demands on our management that we may be unable to effectively address, or for which we may incur additional costs.

Additionally, following any business acquisition, we could experience difficulty in integrating personnel, operations, financial and other systems, and in retaining key employees and customers.

We may record goodwill and other intangible assets on our consolidated balance sheet in connection with our acquisitions. If we are not able to realize the value of these assets, we may be required to incur charges relating to the impairment of these assets, which could materially impact our results of operations.

Our ability to grow our business depends on state laws pertaining to the cannabis industry.

Continued development of the cannabis industry depends upon continued legislative authorization of cannabis at the state level. The status quo of, or progress in, the cannabis industry is not assured and any number of factors could slow or halt further progress in this area. While there may be ample public support for legislative action permitting the manufacture and use of cannabis, numerous factors impact the legislative process. For example, many states that voted to legalize medical and/or adult-use cannabis have seen significant delays in the drafting and implementation of industry regulations and issuance of licenses. In addition, burdensome regulation at the state level could slow or stop further development of the medical-use cannabis industry, such as limiting the medical conditions for which medical cannabis can be recommended by physicians for treatment, restricting the form in which medical cannabis can be consumed, imposing significant registration requirements on physicians and patients or imposing significant taxes on the growth, processing and/or retail sales of cannabis, which could have the impact of dampening growth of the cannabis industry and making it difficult for cannabis businesses, including our tenants, to operate profitably in those states. Any one of these factors could slow or halt additional legislative authorization of cannabis, which could harm our results of operations, business and prospects.

Applicable state laws may prevent us from maximizing our potential income.

Depending on the laws of each particular state, we may not be able to fully realize our potential to generate profit. For example, some states have residency requirements for those directly involved in the cannabis industry, which may impede our ability to contract with cannabis businesses in those states. Furthermore, cities and counties are being given broad discretion to ban certain cannabis activities. Even if these activities are legal under state law, specific cities and counties may ban them.

Assets used in conjunction with cannabis businesses may be forfeited to the federal government.

Any assets used in conjunction with the violation of federal law are potentially subject to federal forfeiture, even in states where cannabis is legal. In July 2017, the U.S. Department of Justice issued a new policy directive regarding asset forfeiture, referred to as the “equitable sharing program.” Under this new policy directive, federal authorities may adopt state and local

forfeiture cases and prosecute them at the federal level, allowing for state and local agencies to keep up to 80% of any forfeiture revenue. This policy directive represents a reversal of the U.S. Department of Justice's policy under the Obama administration, and allows for forfeitures to proceed that are not in accord with the limitations imposed by state-specific forfeiture laws. This new policy directive may lead to increased use of asset forfeitures by local, state and federal enforcement agencies. If the federal government decides to initiate forfeiture proceedings against cannabis businesses, our investment in those businesses may be lost.

Our future success depends on our ability to grow and expand our customer base and operational territory.

Our success and the planned growth and expansion of our business depend on our products and services achieving greater and broader acceptance, resulting in a larger customer base, and on the expansion of our operations into new markets. However, there can be no assurance that customers will purchase our products and/or services, or that we will be able to continually expand our customer base. Additionally, if we are unable to effectively market or expand our product and/or service offerings, we will be unable to grow and expand our business or implement our business strategy.

Operating in new markets may expose us to new operational, regulatory or legal risks and subject us to increased compliance costs. We may need to modify our existing business model and cost structure to comply with local regulatory or other requirements. Facilities we open in new markets may take longer to reach expected revenue and profit levels on a consistent basis, may have higher construction, occupancy or operating costs, and may present different competitive conditions, consumer preferences and spending patterns than we anticipate. Any of the above could materially impair our ability to increase sales and revenue.

We and our existing and potential customers, clients and tenants have difficulty accessing the service of banks, which may make it difficult for them to operate.

Financial transactions involving proceeds generated by cannabis-related conduct can form the basis for prosecution under the federal money laundering statutes, unlicensed money transmitter statute and the Bank Secrecy Act. Previous guidance issued by the FinCen, a division of the U.S. Department of the Treasury, clarifies how financial institutions can provide services to cannabis-related businesses consistent with their obligations under the Bank Secrecy Act. Prior to the DOJ’s announcement in January 2018 of the rescission of the “Cole Memo” and related memoranda, supplemental guidance from the DOJ directed federal prosecutors to consider the federal enforcement priorities enumerated in the “Cole Memo” when determining whether to charge institutions or individuals with any of the financial crimes described above based upon cannabis-related activity. It is unclear what impact the recent rescission of the “Cole Memo” will have, but federal prosecutors may increase enforcement activities against institutions or individuals that are conducting financial transactions related to cannabis activities. The increased uncertainty surrounding financial transactions related to cannabis activities may also result in financial institutions discontinuing services to the cannabis industry.

Because the use, sale and distribution of cannabis remains illegal under federal law, many banks will not accept deposits from or provide other bank services to businesses involved with cannabis. Consequently, those businesses involved in the cannabis industry continue to encounter difficulty establishing banking relationships, which may increase over time. Our inability to maintain our current bank accounts would make it difficult for us to operate our business, increase our operating costs, and pose additional operational, logistical and security challenges and could result in our inability to implement our business plan. Furthermore, the inability to open bank accounts may make it difficult for our existing and potential customers, clients and tenants to operate and may make it difficult for them to contract with us.

Conditions in the economy, the markets we serve and the financial markets generally may adversely affect our business and results of operations.

Our business is sensitive to general economic conditions. We believe that the state of global economic conditions is particularly uncertain due to recent and expected shifts in political, legislative and regulatory conditions concerning, among other matters, international trade and taxation, and the impact of recent or future natural disasters and/or health and safety epidemics, including the outbreak of the COVID-19 virus in the first quarter of 2020. An uneven recovery or a renewed global downturn may put pressure on our sales due to reductions in customer demand as well as customers deferring purchases. Slower economic growth, volatility in the credit markets, high levels of unemployment, and other challenges that affect the economy adversely could affect us and our customers and suppliers. If growth in the economy or in any of the markets we serve slows for a significant period, if there is a significant deterioration in the economy or such markets or if improvements in the economy do not benefit the markets we serve, our business and results of operations could be adversely affected.

We depend on our management, certain key personnel and board of directors, as well as our ability to attract, retain and motivate qualified personnel.

Our future success depends largely upon the experience, skill, and contacts of our key personnel, officers and directors, and the loss of the services of these key personnel, officers or directors, particularly our chief executive officer and chairman of our board of directors, may have a material adverse effect upon our business. Additionally, our revenues are largely driven by several employees with particular expertise in cannabis-related security, apparel and operations. If one of these key employees were to leave, it would negatively impact our short and long-term results from operations. Shortages in qualified personnel could also limit our ability to successfully implement our growth plan. As we grow, we will need to attract and retain highly skilled experts in the cannabis industry, as well as managerial, sales and marketing, security and finance personnel. There can be no assurance, however, that we will be able to attract and retain such personnel.

Our reputation and ability to do business may be negatively impacted by the improper conduct by our business partners, employees or agents.

We depend on third party suppliers to produce and timely ship our orders. Products purchased from our suppliers are resold to our customers. These suppliers could fail to produce products to our specifications or quality standards and may not deliver units on a timely basis. Any changes in our suppliers to resolve production issues could disrupt our ability to fulfill orders. Any changes in our suppliers to resolve production issues could also disrupt our business due to delays in finding new suppliers.

Furthermore, we cannot provide assurance that our internal controls and compliance systems will always protect us from acts committed by our employees, agents or business partners in violation of U.S. federal or state laws. Any improper acts or allegations could damage our reputation and subject us to civil or criminal investigations and related shareholder lawsuits, could lead to substantial civil and criminal monetary and non-monetary penalties, and could cause us to incur significant legal and investigatory fees.

Due to our involvement in the cannabis industry, we may have difficulty obtaining various insurance policies that are desired to operate our business, which may expose us to additional risks and financial liabilities.

Insurance that is otherwise readily available, such as workers’ compensation, general liability, and directors’ and officers’ insurance, is more difficult for us to find and more expensive, because of our involvement in the cannabis industry. There are no guarantees that we will be able to find such insurance in the future, or that the cost will be affordable to us. If we are forced to go without such insurance, it may prevent us from entering into certain business sectors, may inhibit our growth, and may expose us to additional risk and financial liabilities.

A cybersecurity incident and other technology disruptions could result in a violation of law or negatively impact our reputation and relationships, our business operations and our financial condition.

Information and security risks have generally increased in recent years due to the rise in new technologies and the increased sophistication and activities of perpetrators of cyber-attacks. We use computers in substantially all aspects of our business operations and we also use mobile devices and other online activities to connect with our employees, customers, tenants, suppliers and other parties. Such uses give rise to cybersecurity risks, including the risk of security breaches, espionage, system disruption, theft and inadvertent release of information. Our business involves the storage and transmission of numerous classes of sensitive and/or confidential information and intellectual property, including employees’, customers’, tenants’ and suppliers’ personally identifiable information and financial and strategic information about us.

If we fail to adequately assess and identify cybersecurity risks associated with our business operations, we may become increasingly vulnerable to such risks. Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected. Accordingly, we, our customers and our suppliers may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is impossible for us, our customers and our suppliers to entirely mitigate this risk. Further, in the future we may be required to expend additional resources to continue to enhance information security measures and/or to investigate and remediate any information security vulnerabilities. We can provide no assurances that the measures we have implemented to prevent security breaches and cyber incidents will be effective in the event of a cyber-attack.

The theft, destruction, loss, misappropriation or release of sensitive and/or confidential information or intellectual property, or interference with our information technology systems or the technology systems of third-parties on which we rely, could result in business disruption, negative publicity, violation of privacy laws, loss of tenants, loss of customers, potential liability and competitive disadvantage, any of which could result in a material adverse effect on financial condition or results of operations.

We may be required to recognize impairment charges that could materially affect our results of operations.

We assess our intangible assets, and our other long-lived assets as and when required by GAAP to determine whether they are impaired. If they are impaired, we would record appropriate impairment charges. It is possible that we may be required to record significant impairment charges in the future and, if we do so, our results of operations could be materially adversely affected.

Changes in accounting standards could affect our reported financial results.

Our management uses significant judgment, estimates and assumptions in applying GAAP. New accounting standards that may be applicable to our financial statements, or changes in the interpretation of existing standards, could have a significant effect on our reported results of operations for the affected periods.

Risks Related to the Securities Markets and Ownership of Our Common Stock

The price of our common stock is volatile, and the value of your investment could decline.

The market price of our common stock has been, and may in the future, be volatile. Between January 1, 2015, and December 31, 2019, the closing price of our stock has ranged from a low of $0.37 per share to a high of $11.19 per share. Accordingly, it is difficult to forecast the future performance of our common stock. The market price of our common stock may be higher or lower than the price you pay, depending on many factors, some of which are beyond our control and may not be related to our operating performance. These fluctuations could cause you to lose all or part of your investment in our common stock. Factors that could cause fluctuations in the trading price of our common stock include the following:

regulatory developments at the federal, state or local level;

announcements of new products, services, relationships with strategic partners, acquisitions or other events by us or our competitors;

changes in general economic conditions;

price and volume fluctuations in the overall stock market from time to time;

significant volatility in the market price and trading volume of similar companies in our industry;

fluctuations in the trading volume of our shares or the size of our public float;

actual or anticipated changes in our operating results or fluctuations in our operating results;

major catastrophic events;

sales of large blocks of our stock; or

changes in senior management or key personnel.

In addition, if the market for cannabis company stocks or the stock market in general experiences loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, operating results or financial condition. The trading price of our common stock might decline in reaction to events that affect other companies in our industry, even if these events do not directly affect us. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. If our stock price continues to be volatile, we may become the target of securities litigation, which could result in substantial costs and divert our management’s attention and resources from our business. This could have a material adverse effect on our business, operating results and financial condition.

Trading and listing of securities of cannabis related businesses, including our common stock, may be subject to restrictions.

In the United States, many clearing houses for major broker-dealer firms, including Pershing LLC, the largest clearing, custody and settlement firm in the United States, have refused to handle securities or settle transactions of companies engaged in cannabis related business. This means that certain broker-dealers cannot accept for deposit or settle transactions in the securities of cannabis related businesses. Further, stock exchanges in the United States, including Nasdaq and the New York Stock Exchange, have historically refused to list certain cannabis related businesses, including cannabis retailers, that operate primarily in the United States. Our existing operations, and any future operations or investments, may become the

subject of heightened scrutiny by clearing houses and stock exchanges, in addition to regulators and other authorities in the United States. Any existing or future restrictions imposed by Pershing LLC, or any other applicable clearing house, stock exchange or other authority, on trading in our common stock could have a material adverse effect on the liquidity of our common stock.

We do not intend to pay dividends for the foreseeable future.

We do not currently anticipate paying dividends in the foreseeable future. The payment of dividends on our common stock will depend on our earnings and financial condition, as well as on other business and economic factors affecting our business, as our board of directors may consider relevant. Our current intention in the foreseeable future is to apply net earnings, if any, to increasing our capital base and our development and marketing efforts. There can be no assurance that we will ever have sufficient earnings to declare and pay dividends to the holders of our common stock and, in any event, a decision to declare and pay dividends is at the sole discretion of our board of directors. As a result, you may only receive a return on your investment in our common stock if the market price of our common stock increases compared to the price at which you purchased our common stock, which may never occur.

Were our common stock to be considered penny stock, and therefore become subject to the penny stock rules, U.S. broker-dealers may be discouraged from effecting transactions in shares of our common stock.

Broker-dealers are generally prohibited from effecting transactions in “penny stocks” unless they comply with the requirements of Section 15(h) of the Securities Exchange Act of 1934 (the “Exchange Act”) and the rules promulgated thereunder. These rules apply to the stock of companies whose shares are not traded on a national stock exchange, trade at less than $5.00 per share or who do not meet certain other financial requirements specified by the Securities and Exchange Commission (the “SEC”). Trades in our common stock are subject to these rules, which include Rule 15g-9 under the Exchange Act, which imposes certain requirements on broker/dealers who sell securities subject to the rule to persons other than established customers and accredited investors. For transactions covered by the rule, brokers/dealers must make a special written determination that the penny stock is a suitable investment for purchasers of the securities and receive the purchaser’s written agreement to the transaction prior to sale.

The penny stock rules also require a broker/dealer, prior to effecting a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document prepared by the SEC that provides information about penny stocks and the nature and level of risks in the penny stock market. A broker/dealer also must provide the customer with current bid and offer quotations for the relevant penny stock and information on the compensation of the broker/dealer and its salesperson in the transaction. A broker/dealer must also provide monthly account statements showing the market value of each penny stock held in a customer’s account. The bid and offer quotations, and the broker/dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation.

Our securities have in the past constituted “penny stock” within the meaning of the rules. Were our common stock to again be considered penny stock, and therefore become subject to the penny stock rules, the additional sales practice and disclosure requirements imposed upon U.S. broker-dealers may discourage such broker-dealers from effecting transactions in shares of our common stock, which could severely limit the market liquidity of such shares and impede their sale in the secondary market.

Our stockholders may experience significant dilution.

We have a significant number of warrants and options to purchase our common stock outstanding, the exercise of which would be dilutive to stockholders. In certain instances, the exercise prices are subject to adjustment if we issue or sell shares of our common stock or equity-based instruments at a price per share less than the exercise price then in effect. In such case, both the issuance and the adjustment would be dilutive to stockholders.

We may from time to time finance our future operations or acquisitions through the issuance of equity securities, which securities may also have rights and preferences senior to the rights and preferences of our common stock. We may also grant options to purchase shares of our common stock to our directors, employees and consultants, the exercise of which would also result in dilution to our stockholders.

We may face continuing challenges in complying with the Sarbanes-Oxley Act, and any failure to comply or any adverse result from management’s evaluation of our internal control over financial reporting may have an adverse effect on our stock price.

As a smaller reporting company as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, we are required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). Section 404 requires us to include an internal control report with our Annual Report on Form 10-K. The

report must include management’s assessment of the effectiveness of our internal control over financial reporting as of the end of the fiscal year. This report must also include disclosure of any material weaknesses in internal control over financial reporting that we have identified.

Failure to comply, or any adverse results from such evaluation, could result in a loss of investor confidence in our financial reports and have an adverse effect on the trading price of our equity securities. Achieving continued compliance with Section 404 may require us to incur significant costs and expend significant time and management resources. We cannot assure you that we will be able to fully comply with Section 404 or that we will be able to conclude that our internal control over financial reporting is effective at fiscal year-end. As a result, investors could lose confidence in our reported financial information, which could have an adverse effect on the trading price of our securities, as well as subject us to civil or criminal investigations and penalties. In addition, our independent registered public accounting firm may not agree with our management’s assessment or conclude that our internal control over financial reporting is operating effectively.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 2. PROPERTIES

None.

ITEM 3. LEGAL PROCEEDINGS

From time to time, we may be involved in various claims and legal actions in the ordinary course of business. We are not currently involved in any material legal proceedings outside the ordinary course of our business.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

On April 28, 2015, our common stock was uplisted and on May 6, 2015, resumed quotation on the OTC Market’s OTCQB. Quotation of our stock on the OTC Bulletin Board began on August 15, 2013. Trading was suspended on March 28, 2014, due to a suspension of trading order issued by the SEC. From April 10, 2014 to April 27, 2015, our common stock was traded under the symbol “CANN” on an unsolicited basis in the grey market. On June 6, 2018 we began trading on the OTCQX® Best Market after upgrading from the OTCQB® Venture Market.

Holders

As of May 5, 2020, we had approximately 59 holders of record of our common stock. A substantially greater number of holders of the Company’s common stock are “street name” or beneficial holders, whose shares of record are held by banks, brokers and other financial institutions. In addition, our Articles of Incorporation authorize the Board to issue up to 5,000,000 shares of preferred stock. The provisions in the Articles of Incorporation relating to the preferred stock allow directors to issue preferred stock with multiple votes per share and dividend rights, which would have priority over any dividends paid with respect to the holders of common stock. The issuance of preferred stock with these rights may make the removal of management difficult even if the removal would be considered beneficial to stockholders, generally, and will have the effect of limiting stockholder participation in certain transactions such as mergers or tender offers if these transactions are not favored by management.

Dividend Policy

Holders of our common stock are entitled to receive dividends as may be declared by the Board. The Board is not restricted from paying any dividends, but is not obligated to declare a dividend. No cash dividends have ever been declared and it is not anticipated that cash dividends will be paid in the near future. We currently intend to retain any future earnings to finance future growth. Any future determination to pay dividends will be at the discretion of the Board and will depend on our financial condition, results of operations, capital requirements and other factors the Board considers relevant.

Securities Authorized for Issuance under Equity Compensation Plans

The following table provides information regarding our equity compensation plans as of December 31, 2019:

Equity Compensation Plan Information


Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans
Equity compensation plans approved by security holders	11,883,780	(1)	$ 1.17	986,442
Equity compensation plans not approved by security holders	1,025,000	(2)	$ 3.02	–
Total	12,908,780		$ 1.32	986,442

(1)

(2)

The equity compensation plans not approved by security holders include 900,000 options to purchase shares of our common stock granted to Mr. Feinsod, our Executive Chairman of our Board of Directors, on December 8, 2017, and 135,000 warrants and options to purchase shares of our common stock granted to non-employees for services.

ITEM 6. SELECTED FINANCIAL DATA

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide the information required by this Item.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This Management’s Discussion and Analysis (“MD&A”) is intended to provide an understanding of our financial condition, results of operations and cash flows by focusing on changes in certain key measures from year to year. This discussion should be read in conjunction with the Consolidated Financial Statements and related notes in Item 8 of this Report.

Cautionary Statement Regarding Forward-looking Statements

Our MD&A contains forward-looking statements that discuss, among other things, future expectations and projections regarding future developments, operations and financial condition. All forward-looking statements are based on management’s existing beliefs about present and future events outside of management’s control and on assumptions that may prove to be incorrect. If any underlying assumptions prove incorrect, our actual results may vary materially from those anticipated, estimated, projected or intended. We undertake no obligation to publicly update or revise any forward-looking statements to reflect actual results, changes in expectations or events or circumstances after the date of this Report is filed.

Going Concern

The consolidated financial statements included elsewhere in this Form 10-K, have been prepared on a going concern basis, which assumes we will be able to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future. Our cash of approximately $224,994 as of December 31, 2019 is not sufficient to absorb our operating losses and retire our debt of $2,330,351 and other obligations as they come due. The warrants associated with this debt, if exercised, would provide sufficient funds to retire the debt; however, there is no guarantee that these warrants will be exercised. Our ability to continue as a going concern is dependent upon our generating profitable operations in the future and/or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Management believes that (a) we will be successful obtaining additional capital and (b) actions presently being taken to further implement our business plan and generate additional revenues provide opportunity for the Company to continue as a going concern. While we believe in the viability of our strategy to generate additional revenues and our ability to raise additional funds, there can be no assurances to that effect. Accordingly, there is substantial doubt about our ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

Results of Operations

As of December 31, 2019, we made the strategic decision to cease operations of Chiefton and STOA Wellness. All operations were abandoned in January 2020. Separately, we classified Iron Protection Group as held for sale as of December 31, 2019, in which the contracts of the Colorado division were sold in January 2020 and the remaining contracts in California have been abandoned. The completed and planned divestiture of these non-core businesses has changed the way in which we evaluate performance and allocate resources. As a result, during the year ended December 31, 2019, we revised our business segments, consistent with our management of the business and internal financial reporting structure.

The following tables set forth, for the periods indicated, statements of operations data. The tables and the discussion below should be read in conjunction with the accompanying consolidated financial statements and the notes thereto appearing in Item 8 in this Report.

Consolidated Results


		Year ended December 31,					Percent
		2019		2018		Change	Change
Revenues	$	3,666,346	$	1,737,256	$	1,929,090	111%
Costs and expenses		(12,258,035)		(12,308,231)		(219,804)	2%
Other expense		(1,925,411)		(5,564,335)		3,638,924	(65)%
Net loss from continuing operations		(10,787,100)		(16,135,310)		5,348,210	(33)%
Loss from discontinued operations		(1,675,539)		(838,448)		(837,091)	100%
Net loss	$	(12,462,639)	$	(16,973,758)	$	4,511,119	(27)%

The following discussion of our results of operations relates to our continuing operations. See Note 3 to the consolidated financial statements for information concerning discontinued operations.

Revenues

Revenue increased for our Operations and Investments Segments, offset by a decrease in revenues in our Security and Marketing Segments. See Segment discussions below for further details.

Costs and expenses


		Year ended December 31,					Percent
		2019		2018		Change	Change
Cost of service revenues	$	858,714	$	1,055,593	$	(196,879)	(19)%
Cost of goods sold		1,608,386		400,097		1,208,289	302%
Selling, general and administrative		4,379,800		3,411,724		968,076	28%
Share-based compensation		3,966,621		5,995,007		(2,028,386)	(34)%
Professional fees		1,598,818		1,383,367		215,451	16%
Depreciation and amortization		115,696		62,443		53,253	85%
	$	12,528,035	$	12,308,231	$	219,804	2%

Cost of service revenues typically fluctuates with the changes in revenue for our Operations Segments. Cost of goods sold varies with changes in product sales, including an increase in products sold by our Operations Segment, which have smaller margins. See Segment discussions below for further details.

Selling, general and administrative expense increased in 2019 primarily due to increases for (a) salaries; (b) premiums for liability, and directors and officers insurance; (c) computer and internet costs; and (d) marketing costs.

Share-based compensation included the following:


		Year ended December 31,					Percent
		2019		2018		Change	Change
Employee awards	$	3,040,497	$	3,626,271	$	(585,774)	(16)%
Consulting awards		85,683		306,466		(220,783)	(72)%
Feinsod Agreement		840,441		2,062,270		(1,221,829)	(59)%
	$	3,966,621	$	5,995,007	$	(2,028,386)	(34)%

Employee awards are issued under our 2014 Equity Incentive Plan, which was approved by shareholders on June 26, 2015, and expense varies primarily due to the number of stock options granted and the share price on the date of grant. Consulting awards are granted to third parties in lieu of cash for services provided. The Feinsod Agreement expense represents equity-based compensation pursuant to agreements with Michael Feinsod for serving as the Executive Chairman of our Board.

Professional fees consist primarily of accounting and legal expenses, and have increased slightly from 2018 due primarily to the cost of raising debt.

Depreciation and amortization expense increased due to normal depreciation expense for our ERP system.

Other Expense


		Year ended December 31,					Percent
		2019		2018		Change	Change
Amortization of debt discount	$	2,019,726	$	4,234,823	$	(2,215,097)	(52)%
Interest expense		345,371		323,557		21,814	7%
Gain on derivative liability		(816,986)		–		(816,986)	(100)%
Loss from Desert Created Investment		–		182,136		(182,136)	(100)%
Impairment of Desert Created Investment		–		823,819		(823,819)	(100)%
Gain/loss on extinguishment of debt		377,300		–		377,300	100%
	$	1,925,411	$	5,564,335	$	(3,638,924)	(65)%

Amortization of debt discount costs generally varies with our debt balance and, in 2019, includes $318,681 of costs associated with derivative warrants from the 2019 Warrants (as defined below). Interest expense varied between 2019 and 2018 due to the payoff of the 12% Notes in January 2018, the payoff of the Infinity Note in February 2018, and the issuance of the 8.5% Notes in April 2018. We recognized issuance costs in relation to the derivative warrants included in our registered direct offering in May 2019. The loss on investment in Desert Created is our 50% share of the net loss of Desert Created during the three quarters September 30, 2018. The impairment of Desert Created occurred primarily because the agreement was priced in November 2017, however, the transaction did not close until January 2018. In the interim, our stock price increased substantially, thus the consideration we paid, in equity instruments, was higher than the fair value of the investment received. In October 2018, we sold our 50% interest to DNFC for cash consideration of $23,045 and, accordingly, impaired the remaining balance. The gain on warrant derivative liability reflects the change in fair value of the 2019 Warrants.

Operations Consulting and Products


		Year ended December 31,					Percent
		2019		2018		Change	Change
Revenues	$	3,570,909	$	1,718,507	$	1,852,402	108%
Costs and expenses		(3,372,174)		(1,932,598)		(1,439,576)	74%
	$	198,735	$	(214,091)	$	412,826	193%

Increased revenues in 2019 primarily related to revenue from license application consulting; and an increase in product sales throughout 2019. The higher margin is due to completed applications in the third and fourth quarters of 2019. Costs and expenses increased in 2019 primarily due to increased product sales.

Investments


		Year ended December 31,					Percent
		2019		2018		Change	Change
Revenues	$	95,437	$	18,749	$	76,688	409%
Costs and expenses		(71,723)		–		(71,723)	100%
Investment in Desert Created		–		(1,005,955)		1,005,955	(100)%
	$	23,714	$	(987,206)	$	1,010,920	(102)%

The increase in revenues in 2019 is related to three new notes receivables that were executed during 2019. All revenue is from interest and loan origination fees related to these new notes. The investment in Desert Created includes an $823,819 impairment charge and our share of their net loss of $182,136.

Non-GAAP Financial Measures

For the non-GAAP Adjusted EBITDA (Earnings (loss) Before Interest, Taxes, Depreciation and Amortization) per share-basic and diluted measures presented above, we have provided (1) the most directly comparable GAAP measure; (2) a reconciliation of the differences between the non-GAAP measure and the most directly comparable GAAP measure; (3) an explanation of why our management believes this non-GAAP measure provides useful information to investors; and (4) additional purposes for which we use this non-GAAP measure.

We believe that the disclosure of Adjusted EBITDA per share-basic and diluted provides investors with a better comparison of our period-to-period operating results. We exclude the effects of certain items from net loss per share-basic and diluted when we evaluate key measures of our performance internally, and in assessing the impact of known trends and uncertainties on our business. We also believe that excluding the effects of these items provides a more balanced view of the underlying dynamics of our business. Adjusted EBITDA per share-basic and diluted excludes the impacts of interest expense, tax expense, depreciation and amortization, gain (loss) on its derivative liability, amortization of debt discount and share-based compensation. Weighted average number of common shares outstanding - basic and diluted (adjusted) excludes the impact of shares issued in connection with share-based compensation.

Tabular reconciliations of this supplemental non-GAAP financial information to our most comparable GAAP information are contained in this Report. We present such non-GAAP supplemental financial information, as we believe such information provides additional meaningful methods of evaluating certain aspects of our operating performance from period-to-period on a basis that may not be otherwise apparent on a non-GAAP basis. This supplemental financial information should be considered in addition to, not in lieu of, our Consolidated Financial Statements.


		Year ended December 31,
		2019		2018
Net loss attributable to common stockholders	$	(14,803,639)	$	(16,973,758)
Adjustment for loss from discontinued operations		1,675,539		838,448
Loss from continuing operations attributable to common stockholders		(13,128,100)		(16,135,310)
Adjustments:
Share-based expense		3,966,621		5,995,007
Depreciation and amortization		115,696		62,443
Impairment of Desert Created investment		–		823,819
Amortization of debt discount and equity issuance costs		2,019,726		4,234,823
Loss on extinguishment of debt		377,300		–
Interest expense		345,371		323,557
Gain on warrant derivative liability		(816,986)		–
Loss on investment of Desert Created		–		182,136
Total adjustments		6,007,728		11,621,785
Adjusted EBITDA	$	(7,120,372)	$	(4,513,525)
Per share basic and diluted:
Net loss	$	(0.39)	$	(0.49)
Adjusted EBITDA		(0.20)		(0.13)
Weighted-average shares outstanding:
Net loss		38,106,781		34,938,978
Adjusted EBITDA		36,222,752		34,297,078

Liquidity

Sources of liquidity

Our sources of liquidity include cash generated from operations, the cash exercise of common stock options and warrants, debt, and the issuance of common stock or other equity-based instruments. We anticipate our more significant uses of resources will include funding operations, developing infrastructure, as well as potential loans, investments, and business acquisitions.

In September 2019, we completed a $1,506,000 private placement with certain accredited investors pursuant to the 2019 12% Notes and the 2019 12% Warrants”). In July 2019, we completed a $855,000 private placement pursuant to the SBI Note.

In May 2019, we raised approximately $3 million by issuing three million shares of our common stock and three million warrants (“2019 Warrants”) to purchase shares of our common stock (together “2019 Units”) in a registered direct offering for $1.00 per 2019 Unit. The 2019 Warrants have an exercise price of $1.30 per share and are exercisable for five years from the date of issuance. We received cash of $2,604,355, which is net of $395,645 of issuance costs.

Sources and uses of cash

We had cash of approximately $224,994 and $8.0 million, respectively, as of and December 31, 2019 and 2018. Our cash flows from operating, investing and financing activities were as follows:


		Year ended December 31,
		2019		2018
Net cash used in operating activities	$	(5,328,661)	$	(5,726,207)
Net cash used in investing activities		(753,639)		(568,266)
Net cash provided by (used in) financing activitie		(1,649,875)		9,214,855

Net cash used in operating activities decreased in 2019 by $397,546 compared to 2018, primarily due to reduction of expenses and personnel. Where possible, we continue to use non-cash equity-based instruments to obtain consulting services and compensate employees.

Net cash used in investing activities in 2019 relates primarily to purchasing fixed assets, including the opening of STOA Wellness retail location. In the 2018, we purchased fixed assets and invested in the Flowhub SAFE.

Net cash used in financing activities related to the payoff of the notes payable, offset by a capital raise in May 2019. Net cash provided by financing activities in 2018 related to the exercise of warrants and options offset by paying off debt.

Capital Resources

We have no material commitments for capital expenditures as of December 31, 2019. Part of our growth strategy, however, is to acquire businesses. We would fund such activity through cash on hand, the issuance of debt, common stock, warrants for our common stock or a combination thereof.

Off-balance Sheet Arrangements

We currently have no off-balance sheet arrangements.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the amounts of revenues and expenses. Critical accounting policies are those that require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. In applying these critical accounting policies, our management uses its judgment to determine the appropriate assumptions to be used in making certain estimates. Actual results may differ from these estimates.

We define critical accounting policies as those that are reflective of significant judgments and uncertainties and which may potentially result in materially different results under different assumptions and conditions. In applying these critical accounting policies, our management uses its judgment to determine the appropriate assumptions to be used in making certain estimates. These estimates are subject to an inherent degree of uncertainty.

Purchase Accounting for Acquisitions

Acquisition of a business requires companies to record assets acquired and liabilities assumed at their respective fair market values at the date of acquisition. Any amount of the purchase price paid that is in excess of the estimated fair value of the net assets acquired is recorded as goodwill. We determine fair value using widely accepted valuation techniques, primarily discounted cash flows and market multiple analyses. These types of analyses require us to make assumptions and estimates regarding industry and economic factors, the profitability of future business strategies, discount rates and cash flow. If actual results are not consistent with our assumptions and estimates, or our assumptions and estimates change due to new information, we may be exposed to an impairment charge in the future.

Accounting for Discontinued Operations

We regularly review underperforming assets to determine if a sale or disposal might be a better way to monetize the assets. When an asset group is considered for sale or disposal, we review the transaction to determine if or when the entity qualifies as a discontinued operation in accordance with the criteria of FASB ASC Topic 205-20 “Discontinued Operations.” The FASB has issued authoritative guidance that raises the threshold for disposals to qualify as discontinued operations. Under this guidance, a discontinued operation is (1) a component of an entity or group of components that have been disposed of or are classified as held for sale and represent a strategic shift that has or will have a major effect on an entity’s operations and financial results, or (2) an acquired business that is classified as held for sale on the acquisition date.

Impairment of Long-lived Assets

We periodically evaluate whether the carrying value of long-lived assets has been impaired when circumstances indicate the carrying value of those assets may not be recoverable. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying value is not recoverable, the impairment loss is measured as the excess of the asset’s carrying value over its fair value.

Our impairment analyses require management to apply judgment in estimating future cash flows as well as asset fair values, including forecasting useful lives of the assets, assessing the probability of different outcomes, and selecting the discount rate that reflects the risk inherent in future cash flows. If the carrying value is not recoverable, we assess the fair value of long-lived assets using commonly accepted techniques, and may use more than one method, including, but not limited to, recent third party comparable sales and discounted cash flow models. If actual results are not consistent with our assumptions and estimates, or our assumptions and estimates change due to new information, we may be exposed to an impairment charge in the future.

Debt with Equity-linked Features

We may issue debt that has separate warrants, conversion features, or no equity-linked attributes.

When we issue debt with warrants, we determine the value of the warrants using the Black-Scholes Option Pricing Model (“Black-Scholes”) or the Binomial Model, using the stock price on the date of issuance, the risk-free interest rate associated with the life of the debt, and the estimated volatility of our stock.

When we issue debt with a conversion feature, we must first assess whether the conversion feature meets the requirements to be treated as a derivative. If the conversion feature within convertible debt meets the requirements to be treated as a derivative, we estimate the fair value of the convertible debt derivative using Black-Scholes upon the date of issuance, using the stock price on the date of issuance, the risk free interest rate associated with the life of the debt, and the estimated volatility of our stock. If the conversion feature is not treated as a derivative, we assess whether it is a beneficial conversion feature (“BCF”). A BCF exists if the conversion price of the convertible debt instrument is less than the stock price on the commitment date. This typically occurs when the conversion price is less than the fair value of the stock on the date the instrument was issued. The value of a BCF is equal to the intrinsic value of the feature, the difference between the conversion price and the common stock into which it is convertible.

Equity-based Payments

We estimate the fair value of equity-based instruments issued to employees or to third parties for services or goods using Black-Scholes or the Binomial Model, which requires us to estimate the volatility of our stock and forfeiture rate.

Revenue Recognition

On January 1, 2018, we adopted ASC Topic 606, “Revenue from Contracts with Customers” (“ASC 606”). The core principle of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASC 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.

The following five steps are applied to achieve that core principle:

Step 1: Identify the contract with the customer;

Step 2: Identify the performance obligations in the contract;

Step 3: Determine the transaction price;

Step 4: Allocate the transaction price to the performance obligations in the contract; and

Step 5: Recognize revenue when the company satisfies a performance obligation.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements


	Page
Report of Independent Registered Public Accounting Firm	29

Consolidated Balance Sheets	32

Consolidated Statements of Operations	33

Consolidated Statements of Cash Flows	34

Consolidated Statements of Changes in Stockholders’ Equity (Deficit)	35

Notes to Consolidated Financial Statements	36

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

General Cannabis Corp

Opinion on the consolidated financial statements and Internal Control Over Financial Reporting

We have audited the accompanying balance sheet of General Cannabis Corp (the “Company”) as of December 31, 2018, and the related consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows for the year ended December 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2018, and the results of its operations and its cash flows for the year ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established by COSO.

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements in the Company’s prior year 10-K filed on March 8, 2019, the Company’s cash balance of approximately $8.0 million is not sufficient to absorb the Company’s operating losses and retire their debt of $6,849,000 due May 1, 2019. Accordingly, there is substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Assessment of Internal Control over Financial Reporting under Item 9A. Our responsibility is to express an opinion on the entity’s consolidated financial statements and an opinion on the entity’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audit of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that responds to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

An entity’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. An entity’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the entity; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the entity are being made only in accordance with authorizations of management and directors of the entity; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the entity’s assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Hall & Company

Irvine, California

March 8, 2019

We have served as the Company's auditor since 2014.

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of

General Cannabis Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of General Cannabis Corp. (the “Company”) as of December 31, 2019, the related consolidated statements of operations, changes in stockholders’ equity (deficit) and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1 the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ Marcum LLP

Marcum LLP

We have served as the Company’s auditor since 2019.

Melville, NY

May 14, 2020

GENERAL CANNABIS CORP

CONSOLIDATED BALANCE SHEETS


		December 31,
		2019		2018
ASSETS
Current Assets
Cash and cash equivalents	$	122,390	$	7,604,562
Accounts receivable, net		85,204		116,622
Note receivable, net current portion		375,000		50,000
Prepaid expenses and other current assets		546,970		421,579
Assets held for sale		375,218		649,775
Assets of discontinued operations		47,453		144,365
Total current assets		1,552,235		8,986,903

Note receivable, net		93,333		–
Property and equipment, net		1,507,327		1,439,067
Investment		250,000		250,000
Assets held for sale		15,584		66,255
Assets of discontinued operations		83,525		–
Total Assets	$	3,502,004	$	10,742,225

LIABILITIES & STOCKHOLDERS’ EQUITY (DEFICIT)

Current Liabilities
Accounts payable and accrued expenses	$	1,221,194	$	442,707
Interest payable		93,375		–
Customer deposits		562,803		308,111
Accrued stock payable		80,657		–
Notes payable (net of discount)		2,230,684		5,273,906
Related party note payable (net of discount)		99,667		–
Warrant derivative liability		1,599,436		–
Liabilities held for sale		149,249		159,944
Liabilities of discontinued operations		207,993		6,220
Total current liabilities		6,245,058		6,190,888

Commitments and Contingencies (Note 12)		–		–

Stockholders’ Equity (Deficit)
Preferred stock, no par value; 5,000,000 shares authorized; no shares issued and outstanding at December 31, 2019 and 2018		–		–
Common Stock, $0.001 par value; 100,000,000 shares authorized; 39,497,480 shares and 36,222,752 shares issued and outstanding on December 31, 2019 and 2018, respectively		39,498		36,223
Additional paid-in capital		61,468,034		56,303,061
Accumulated deficit		(64,250,586)		(51,787,947)
Total Stockholders’ Equity (Deficit)		(2,743,054)		4,551,337

Total Liabilities & Stockholders’ Equity (Deficit)	$	3,502,004	$	10,742,225

See Notes to consolidated financial statements.

GENERAL CANNABIS CORP

CONSOLIDATED STATEMENTS OF OPERATIONS


		Year ended December 31,
		2019		2018
REVENUES
Service	$	1,787,863	$	1,186,624
Rent and interest		95,437		18,749
Product sales		1,783,046		531,883
Total revenues		3,666,346		1,737,256

COSTS AND EXPENSES
Cost of service revenues		858,714		1,055,593
Cost of goods sold		1,608,386		400,097
Selling, general and administrative		4,379,800		3,411,724
Share-based expense		3,966,621		5,995,007
Professional fees		1,598,818		1,383,367
Depreciation and amortization		115,696		62,443
Total costs and expenses		12,528,035		12,308,231

OPERATING LOSS		(8,861,689)		(10,570,975)

OTHER (INCOME) EXPENSE
Amortization of debt discount and equity issuance costs		2,019,726		4,234,823
Loss on extinguishment of debt		377,300		–
Interest expense, net		345,371		323,557
Gain on warrant derivative liability		(816,986)		–
Loss from Desert Created investment		–		182,136
Impairment of Desert Created investment		–		823,819
Total other expense, net		1,925,411		5,564,335

NET LOSS FROM CONTINUING OPERATIONS	$	(10,787,100)	$	(16,135,310)

Loss from discontinued operations		(1,675,539)		(838,448)

NET LOSS	$	(12,462,639)	$	(16,973,758)
Deemed dividend		(2,341,000)		–

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(14,803,639)	$	(16,973,758)

PER SHARE DATA Basic and diluted
Net loss from continuing operations per share	$	(0.28)	$	(0.46)
Net loss from discontinued operations per share	$	(0.04)	$	(0.02)
Net loss attributable to common stockholders per share	$	(0.39)	$	(0.49)
Weighted average number of common shares outstanding		38,106,781		34,938,978

See Notes to consolidated financial statements.

GENERAL CANNABIS CORP

CONSOLIDATED STATEMENTS OF CASH FLOWS


		Year ended December 31,
		2019		2018
OPERATING ACTIVITIES
Net loss	$	(12,462,639)	$	(16,973,758)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount and equity issuance costs		2,019,726		4,234,823
Loss on extinguishment of debt		377,300		–
Depreciation and amortization expense		196,247		149,504
Amortization of loan origination fees		(13,333)		–
Bad debt expense		174,249		87,592
Impairment of assets		147,035		–
Loss on disposal of property and equipment		104,803		–
Impairment of Desert Created investment		–		823,819
Loss from Desert Created investment		–		182,136
Gain on warrant derivative liability		(816,986)		–
Share-based payments		3,966,621		5,995,007
Changes in operating assets and liabilities:
Accounts receivable		(101,766)		(56,954)
Prepaid expenses and other assets		(138,254)		231,746
Inventory		(23,772)		(88,494)
Accounts payable and accrued liabilities		1,242,108		(311,628)
Net cash used in operating activities:		(5,328,661)		(5,726,207)

INVESTING ACTIVITIES
Purchase of property and equipment		(318,639)		(241,311)
Lending on notes receivable		(705,000)		(650,000)
Proceeds on notes receivable		270,000		600,000
Investment in Flowhub SAFE		–		(250,000)
Investment in Desert Created		–		(50,000)
Proceeds on investment in Desert Created		–		23,045
Net cash used in investing activities		(753,639)		(568,266)

FINANCING ACTIVITIES
Proceeds from sale of common stock and warrants		2,604,355		–
Proceeds from the exercise of warrants		–		3,985,197
Proceeds from exercise of stock options		188,770		721,034
Proceeds from notes payable		1,455,000		7,500,000
Payments on notes payable		(5,898,000)		(1,621,250)
Payments on Infinity Note related party		–		(1,370,126)
Net cash provided by (used in) financing activities		(1,649,875)		9,214,855

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(7,732,175)		2,920,382
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		7,957,169		5,036,787
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	224,994	$	7,957,169

SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash paid for interest	$	305,195	$	637,586

NON-CASH INVESTING & FINANCING ACTIVITIES
Deemed dividend from warrant repricing	$	2,603,000	$	–
Operating lease right-of-use asset/Operating lease liability		154,200		–
12% Warrants recorded as a debt discount and loss on extinguishment of debt
SBI Warrants recorded as a debt discount and loss on extinguishment of debt		28,800		–
15% Warrants recorded as a debt discount and additional paid-in capital		158,100		–
8.5% Note principal used to exercise 8.5% Warrants		–		651,000
8.5% Warrants recorded as debt discount and additional paid-in capital		–		5,366,000
Issuance of common stock for accrued stock payable		–		321,860
Issuance of common stock and warrants for investment in Desert Created		–		979,000

See Notes to consolidated financial statements.

GENERAL CANNABIS CORP

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)


					Additional
	Common Stock				Paid-in		Accumulated
	Shares		Amount		Capital		Deficit		Total
January 1, 2018	27,692,910	$	27,693	$	38,292,493	$	(34,814,189)	$	3,505,997
Common stock issued upon exercise of warrants for debt	7,546,286		7,547		4,795,510		–		4,803,057
Common stock issued upon exercise of stock options	731,264		731		720,303		–		721,034
Common stock issued for MHPS acquisition	104,359		104		154,896		–		155,000
Common stock and warrants issued for Desert Created acquisition	75,000		75		978,925		–		979,000
Common stock issued for services	72,933		73		234,928		–		235,001
Stock options granted to employees	–		–		3,626,271		–		3,626,271
Stock options under Feinsod Agreement	–		–		2,062,270		–		2,062,270
Warrants issued for services	–		–		71,465		–		71,465
Warrants issued with the 8.5% notes	–		–		5,366,000		–		5,366,000
Net loss	–		–				(16,973,758)		(16,973,758)
December 31, 2018	36,222,752		36,223		56,303,061		(51,787,947)		4,551,337
Sale of common stock, net of issuance costs	3,000,000		3,000		503,614		–		506,614
Warrants issued with the 12% Notes	–		–		392,000		–		392,000
Warrants issued with the 15% Notes	–		–		158,100		–		158,100
Warrants issued with the SBI Note	–		–		28,800		–		28,800
Common stock issued for property and equipment	5,000		5		7,995		–		8,000
Common stock issued upon exercise of stock options	269,728		270		188,500		–		188,770
Stock options granted to employees and consultants	–		–		3,885,964		–		3,885,964
Net loss							(12,462,639)		(12,462,639)
December 31, 2019	39,497,480	$	39,498	$	61,468,034	$	(64,250,586)	$	(2,743,054)

See Notes to consolidated financial statements.

GENERAL CANNABIS CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. NATURE OF OPERATIONS, HISTORY AND PRESENTATION

Nature of Operations

General Cannabis Corp, a Colorado Corporation (the “Company,” “we,” “us,” “our,” or “GCC”) (formerly, Advanced Cannabis Solutions, Inc.), was incorporated on June 3, 2013, and provides services and products to the regulated cannabis industry. On June 6, 2018 we began trading on the OTCQX® Best Market after upgrading from the OTCQB® Venture Market. As of December 31, 2019, our operations are segregated into the following two segments:

Operations Consulting and Products (“Operations Segment”)

Capital Investments and Real Estate (“Investments Segment”)

Held for Sale - Security and Cash Transportation Services (“Security Segment”)

We provide advanced security, including on-site professionals and cash transport, to licensed cannabis cultivators, cannabis processing facilities and retail shops, under the business name Iron Protection Group (“IPG”) in California and Colorado, and security services to non-cannabis customers in Colorado, such as hotels, apartment buildings and retail. On December 26, 2019, the board of directors and management made the strategic decision to investigate a possible buyer for the security segment and if no buyer could be found, cease operations of the security segment. We transferred all our Colorado security contracts and employees to a company on January 16, 2020. We will receive $1.00 per man hour worked on existing contracts for a period of one year. On February 6, 2020 we cancelled all our security contracts in California.

Discontinued Operations - Consumer Goods and Marketing Consulting (“Consumer Goods Segment”)

Our apparel business, Chiefton, has two primary revenue streams. Chiefton Supply strives to create innovative, unique t-shirts, hats, hoodies and accessories. Our apparel is sold through our on-line shop, cannabis retailers, non-cannabis retailers, and specialty t-shirt and gift shops. Chiefton Design provides design, branding and marketing strategy consulting services to the cannabis industry, which frequently includes sourcing and selling customer-specific apparel and accessories. On December 26, 2019, the board of directors and management made the strategic move to cease operations of Chiefton. All operations of Chiefton were abandoned on December 31, 2019.

Our CBD retail business, STOA Wellness, opened in July of 2019. STOA Wellness offers a curated collection of high quality CBD products for athletes and general wellness. On December 26, 2019, the board of directors committed to a plan to cease operations of STOA Wellness. We transferred all assets of STOA Wellness to an individual on January 10, 2020, in exchange for the release on the outstanding lease.

Basis of Presentation

The accompanying consolidated financial statements include the results of GCC and its ten wholly-owned subsidiary companies: (a) 6565 E. Evans Owner LLC, a Colorado limited liability company formed in 2014; (b) General Cannabis Capital Corporation, a Colorado corporation formed in 2015; (c) GC Security LLC (“GCS”), a Colorado limited liability company formed in 2015; (d) GC-NY Health, LLC, a New York limited liability company formed in 2019; (e) Standard

Cann, Inc., a Colorado corporation formed in 2019; (f) Cannasseur, LLC, a Colorado limited liability company formed in 2019; (g) Cannasseur Dispensary, LLC, a limited liability company formed in 2019; (h) Cannasseur Cultivation, LLC, a limited liability company formed in 2019; (i) Cannasseur Extraction, LLC, a limited liability company formed in 2019 and (j) GC Corp., a Colorado corporation, originally formed in 2013 under the name ACS Corp. In 2015, the name was changed to GC Corp. Intercompany accounts and transactions have been eliminated.

The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Although these estimates are based on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ from these estimates and assumptions. Furthermore, when testing assets for impairment in future periods, if management uses different assumptions or if different conditions occur, impairment charges may result.

Going Concern

The consolidated financial statements have been prepared on a going concern basis, which assumes we will be able to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future. Our cash of approximately $225,000 as of December 31, 2019, is not sufficient to absorb our operating losses and retire our debt of approximately $2,330,000. The warrants associated with this debt, if exercised, would provide sufficient funds to retire the debt; however, there is no guarantee that these warrants will be exercised. Our ability to continue as a going concern is dependent upon our generating profitable operations in the future and / or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Management believes that (a) we will be successful obtaining additional capital and (b) actions presently being taken to further implement our business plan and generate additional revenues provide opportunity for the Company to continue as a going concern. While we believe in the viability of our strategy to generate additional revenues and our ability to raise additional funds, there can be no assurances to that effect. Accordingly, there is substantial doubt about our ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

Significant Accounting Policies

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits with banks, and investments that are highly liquid and have maturities of three months or less at the date of purchase. We maintain our cash balances in financial institutions that, from time to time, may exceed amounts insured by the Federal Deposit Insurance Corporation ($250,000 as of December 31, 2019).

Inventory

Our inventory consists of finished goods, including apparel and supplies for the cannabis market. Inventory is stated at the lower of cost (net realizable value), using average cost to determine cost. We monitor inventory cost compared to selling price in order to determine if a write down to net realizable value is necessary. In December 2019, we ceased all operations of Chiefton and determined we would be ceasing operations of STOA in January 2020. As a result, we wrote down all of the remaining inventory to $0 as of December 31, 2019. We recognized $147,035 in expense as a result of this write down of inventory and is included in loss on discontinued operations on the statement of operations.

Accounts Receivable. net

Accounts receivable are recorded at the original invoiced amount due from our customers less an allowance for any potential uncollectible amounts. We control credit risk related to accounts receivable through credit approvals, credit limits and monitoring processes. In making the determination of the appropriate allowance for doubtful accounts, management considers prior experience with customers, analysis of accounts receivable aging reports, changes in customer payment patterns, and historical write-offs. The allowance for doubtful accounts totaled $111,000 and $9,000 as of December 31, 2019 and 2018, respectively. The amounts charged to operations and write-offs were immaterial for the periods presented.

Notes Receivable

Notes receivable consist primarily of amounts due to us related to the financing of different business ventures. Direct loan origination costs we incur are netted with loan origination fees we receive and the net amount, loan origination fees or costs, is included in notes receivable on the consolidated balance sheets. The loan origination fees or costs are amortized over the term of the underlying note receivable and included in interest income in the consolidated statements of operations. We report notes receivable at the

principal balance outstanding less an allowance for losses. We monitor the financial condition of the notes receivable and record provisions for estimated losses when we believe it is probable that the holders of the notes receivable will be unable to make their required payments. We charge interest at a fixed rate and interest income is calculated by applying the effective rate to the outstanding principal balance.

Right-of-use Asset / Lease Liability

We adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-02 “Leases (Topic 842)” on January 1, 2019, which requires all assets and liabilities arising from leases to be recognized in our consolidated balance sheets. In July 2018, the FASB added an optional transition method which the Company elected upon adoption of the new standard. This allowed us to recognize and measure leases existing at January 1, 2019 without restating comparative information. In addition, the Company elected to apply the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allows us to carry forward the historical lease classification. We first evaluated our leases to determine whether they are classified as a finance lease or as an operating lease. A lease is a finance lease if any of the following criteria are met: (a) ownership transfers, (b) the lease includes an option to purchase the underlying asset, (c) the lease term is for the major part of the remaining economic life of the underlying asset, (d) the present value of the lease payments equals or exceeds the fair value of the underlying asset, or (e) the underlying asset is of a specialized nature that is expected to have no alternative use to the lessor at the end of the lease term. All of our leases are classified as operating leases. We then determined whether the short-term exemption applies; that is, is the lease term 12 months or less and does not include a purchase option whose exercise is reasonably certain. If the short-term exemption applies then lease payments are recognized as expense and no asset or liability is recorded. If the short-term exemption does not apply, then we recorded an operating lease right-of-use asset and a corresponding operating lease liability equal to the present value of the lease payments. All of our leases entered into prior to 2019 met the short-term exemption, so modification to prior period financial position was is not required. The two-year commercial real estate lease we entered into in February 2019 did not meet the short-term exemption and, accordingly, we recorded the present value of the lease payments of $83,525, as a right-of-use asset and a lease liability in the consolidated balance sheet. We recognize operating lease expense on a straight-line basis over the life of the lease.

Property and Equipment, net

Property and equipment are recorded at historical cost, less accumulated depreciation. Major additions and improvements are capitalized, while replacements, maintenance and repairs, which do not improve or extend the life of the respective assets, are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets: thirty years for buildings, the lesser of five years or the life of the lease for leasehold improvements, and three to five years for furniture, fixtures and equipment, software and vehicles. Land is not depreciated. When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected in operations.

Business Combinations

Amounts paid for acquisitions are allocated to the assets acquired and liabilities assumed based on their estimated fair value at the date of acquisition. The fair value of identifiable intangible assets is based on detailed valuations that use information and assumptions provided by management, including expected future cash flows. We allocate any excess purchase price over the fair value of the net assets and liabilities acquired to goodwill. Identifiable intangible assets with finite lives are amortized over their useful lives. Acquisition-related costs, including advisory, legal, accounting, valuation and other costs, are expensed in the periods in which the costs are incurred. The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition date.

Intangible Assets

Intangible assets consist primarily of customer relationships and marketing-related intangibles. Our intangible assets are being amortized on a straight-line basis over a period of two years and are fully amortized as of December 31, 2019.

Impairment of Long-lived Assets

We periodically evaluate whether the carrying value of property, equipment and intangible assets has been impaired when circumstances indicate the carrying value of those assets may not be recoverable. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying value is not recoverable, the impairment loss is measured as the excess of the asset’s carrying value over its fair value.

Our impairment analyses require management to apply judgment in estimating future cash flows as well as asset fair values, including forecasting useful lives of the assets, assessing the probability of different outcomes, and selecting the discount rate that reflects the risk inherent in future cash flows. If the carrying value is not recoverable, we assess the fair value of long-lived assets using commonly accepted techniques, and may use more than one method, including, but not limited to, recent third-party comparable sales and undiscounted cash flow models. If actual results are not consistent with our assumptions and estimates, or our assumptions and estimates change due to new information, we may be exposed to an impairment charge in the future.

Investments

We use the equity method for investments when we are able to exercise significant influence over, but do not control, the investee, and are not the primary beneficiary of the investee’s activities. We include our portion of an equity-method investee’s net income or loss within other expense on the consolidated statements of operations. In the event that the cost basis in an investment exceeds the fair value of the underlying business, we record an impairment charge to reduce our carrying value to the estimated fair value.

We record investments that do not qualify for treatment under the equity method at fair value, unless there is no readily determinable fair value. We record at cost equity investments that do not have readily determinable fair value and assess for impairment at each reporting period. We are able to switch to fair value at our option.

Debt

We issue debt that may have separate warrants, conversion features, or no equity-linked attributes.

Debt with warrants When we issue debt with warrants, we treat the warrants as a debt discount, record as a contra-liability against the debt, and amortize the balance over the life of the underlying debt as amortization of debt discount expense in the consolidated statements of operations. The offset to the contra-liability is recorded as additional paid in capital in our consolidated balance sheets. If the debt is retired early, the associated debt discount is then recognized immediately as amortization of debt discount expense in the consolidated statement of operations. The debt is treated as conventional debt.

We determine the value of the non-complex warrants using the Black-Scholes Option Pricing Model (“Black-Scholes”) using the stock price on the date of issuance, the risk-free interest rate associated with the life of the debt, and the volatility of our stock. For warrants with complex terms, we use the binomial lattice model to estimate their fair value.

Modification of Debt - When we change the terms of existing notes payable, we evaluate the amendments under ASC 470-50, Debt Modification and Extinguishment to determine whether the change should be treated as a modification or as a debt extinguishment. This evaluation includes analyzing whether there are significant and consequential changes to the economic substance of the note. If the change is deemed insignificant then the change is considered a debt modification, whereas if the change is substantial the change is reflected as a debt extinguishment.

Fair Value of Financial Instruments

U.S. generally accepted accounting principles (“GAAP”) requires disclosing the fair value of financial instruments to the extent practicable for financial instruments which are recognized or unrecognized in the consolidated balance sheet. The fair value of the financial instruments disclosed herein is not necessarily representative of the amount that could be realized or settled, nor does the fair value amount consider the tax consequences of realization or settlement.

In assessing the fair value of financial instruments, the Company uses a variety of methods and assumptions, which are based on estimates of market conditions and risks existing at the time. For certain instruments, including accounts receivable and accounts payable, the Company estimated that the carrying amount approximated fair value because of the short maturities of these instruments. All debt is based on current rates at which the Company could borrow funds with similar remaining maturities and approximates fair value.

GAAP establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use on unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs consist of items that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is described below:

Level 1 Quoted prices in active markets for identical assets or liabilities. There are no fair valued assets or liabilities classified under Level 1 as of December 31, 2019 and 2018.

Level 2 Observable prices that are based on inputs not quoted on active markets but corroborated by market data. There are no fair valued assets or liabilities classified under Level 2 as of December 31, 2019 and 2018.

Level 3 Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs (see Note 12).

Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the liabilities. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s accounting and finance department, which reports to the Chief Financial Officer, determines its valuation policies and procedures. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s accounting and finance department and are approved by the Chief Financial Officer.

Level 3 Valuation Techniques:

Level 3 financial liabilities consist of the derivative liabilities for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate. The Company deems financial instruments which do not have fixed settlement provisions to be derivative instruments. In accordance with U.S. GAAP the fair value of these warrants is classified as a liability on the Company’s consolidated balance sheets because, according to the terms of the warrants, a fundamental transaction could give rise to an obligation of the Company to pay cash to its warrant holders. Such instruments do not have fixed settlement provisions and have also been recorded as derivative liabilities. Corresponding changes in the fair value of the derivative liabilities are recognized in earnings on the Company’s consolidated statements of operations in each subsequent period.

The Company’s derivative liabilities are carried at fair value and were classified as Level 3 in the fair value hierarchy due to the use of significant unobservable inputs.

Extinguishment of Notes Payable

When we change the terms of existing notes payable subsequent to the maturity date, we evaluate the amendments under ASC 470-50, Debt Modification and Extinguishment to determine whether the change should be treated as a debt extinguishment or as a debt modification. This evaluation includes analyzing whether there are significant and consequential changes to the economic substance of the note. If the change is deemed insignificant then the change is considered a debt modification, whereas if the change is substantial the change is reflected as a debt extinguishment. If determined to be a debt extinguishment, the difference between the fair value of the new instrument compared to the original instrument is reflected as a gain or loss on extinguishment of debt.

Warrants Instruments

Warrants with derivative features When we raise capital by issuing warrants that do not have complex terms, they are recorded as additional paid in capital in our consolidated balance sheet. When we issue warrants that have complex terms, such as a clause in which the warrant agreements contain a cash settlement provision whereby the holders could settle the warrants for cash upon a fundamental transaction that is considered outside of the control of management, such as a change of control, the warrants are considered to be a derivative that are recorded as a liability at fair value. The warrant derivative liability is adjusted to its fair value at the end of each reporting period, with the change being recorded as other expense or gain.

Revenue Recognition

We have two main revenue streams: (i) product sales; and (ii) licensing and consulting.

Product sales are recorded at the time that control of the products is transferred to customers. In evaluating the timing of the transfer of control of products to customers, we consider several indicators, including significant risks and rewards of products, our right to payment, and the legal title of the products. Based on the assessment of control indicators, sales are generally recognized when products are delivered to customers.

Revenue from licensing and consulting services is recognized when our obligations to our client are fulfilled which is determined when milestones in the contract are achieved.

ASC Topic 606 is a comprehensive revenue recognition model that requires revenue to be recognized when control of the promised goods or services are transferred to our customers at an amount that reflects the consideration that we expect to receive. Application of ASC Topic 606 requires us to use more judgment and make more estimates than under former guidance. Application of ASC Topic 606 requires a five-step model applicable to all product offerings revenue streams as follows:

Identification of the contract, or contracts, with a customer

A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and, (iii) we determine that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.

We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit or financial information pertaining to the customer.

Identification of the performance obligations in the contract

Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the goods or service either on its own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract.

When a contract includes multiple promised goods or services, we apply judgment to determine whether the promised goods or services are capable of being distinct and are distinct within the context of the contract. If these criteria are not met, the promised goods or services are accounted for as a combined performance obligation.

Determination of the transaction price

The transaction price is determined based on the consideration to which we will be entitled to receive in exchange for transferring goods or services to our customer. We estimate any variable consideration included in the transaction price using the expected value method that requires the use of significant estimates for discounts, cancellation periods, refunds and returns. Variable consideration is described in detail below.

Allocation of the transaction price to the performance obligations in the contract

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative Stand-Alone Selling Price (“SSP,”) basis. We determine SSP based on the price at which the performance obligation would be sold separately. If the SSP is not observable, we estimate the SSP based on available information, including market conditions and any applicable internally approved pricing guidelines.

Recognition of revenue when, or as, we satisfy a performance obligation

We recognize revenue at the point in time that the related performance obligation is satisfied by transferring the promised goods or services to our customer.

Principal versus Agent Considerations

When another party is involved in providing goods or services to our customer, we apply the principal versus agent guidance in ASC Topic 606 to determine if we are the principal or an agent to the transaction. When we control the specified goods or services before they are transferred to our customer, we report revenue gross, as principal. If we do not control the goods or services before they are transferred to our customer, revenue is reported net of the fees paid to the other party, as agent. Our evaluation to determine if we control the goods or services within ASC Topic 606 includes the following indicators:

We are primarily responsible for fulfilling the promise to provide the specified good or service.

When we are primarily responsible for providing the goods and services, such as when the other party is acting on our behalf, we have indication that we are the principal to the transaction. We consider if we may terminate our relationship with the other party at any time without penalty or without permission from our customer.

We have risk before the specified good or service have been transferred to a customer or after transfer of control to the customer.

We may commit to obtaining the services of another party with or without an existing contract with our customer. In these situations, we have risk of loss as principal for any amount due to the other party regardless of the amount(s) we earn as revenue from our customer.

The entity has discretion in establishing the price for the specified good or service.

We have discretion in establishing the price our customer pays for the specified goods or services.

Contract Liabilities

Contract liabilities consist of customer advance payments and billings in excess of revenue recognized. We may receive payments from our customers in advance of completing our performance obligations. We record contract liabilities equal to the amount of payments received in excess of revenue recognized, including payments that are refundable if the customer cancels the contract according to the contract terms. Contract liabilities have been historically recorded as current liabilities on our consolidated financial statements when the time to fulfill the performance obligations under terms of our contracts is less than one year. We have no Long-term contract liabilities which would represent the amount of payments received in excess of revenue earned, including those that are refundable, when the time to fulfill the performance obligation is greater than one year.

Share-based Payments

Employee and non-employee awards – We account for share-based compensation in accordance with the fair value recognition provisions of ASC 718, Compensation – Stock Compensation, and ASC 505, Equity, which require all share-based payments to employees and non-employees, including grants of employee stock options, to be recognized as an expense in the consolidated financial statements based on their fair values. The fair value of stock options is estimated using the Black-Scholes option pricing formula that requires assumptions for expected volatility, expected dividends, the risk-free interest rate and the expected term of the option. Stock options generally vest in one year. The Company accounts for forfeitures of share-based grants as they occur. If any of the assumptions used in the Black-Scholes model or the anticipated number of shares to be awarded change significantly, share-based compensation expense may differ materially in the future from that recorded in the current period.

Market price-based awards We may issue share-based payments that vest when certain market conditions are met, such as our common stock trading above a certain value for a specific number of days. We recognize expense for market price-based options at the estimated fair value of the options using the binomial lattice model over the estimated life of the options used in the model, or immediately upon the market conditions being met. We use historical data to estimate the expected price volatility, the expected stock option life and expected forfeiture rate. The risk-free interest rate is based on the United States Treasury yield curve in effect at the time of grant for the estimated life of the stock option.

Shipping and Handling

Payments by customers to us for shipping and handling costs are included in revenue on the consolidated statements of operations, while our expense is included in cost of goods sold. Shipping and handling for inventory are included as a component of inventory on the consolidated balance sheets, and in cost of goods sold in the consolidated statements of operations when the product is sold.

Income Taxes

We recognize deferred income tax assets and liabilities for the expected future tax consequences of temporary differences between the income tax and financial reporting carrying amount of our assets and liabilities. We monitor our deferred tax assets and evaluate the need for a valuation allowance based on the estimate of the amount of such deferred tax assets that we believe do not meet the more-likely-than-not recognition criteria. We also evaluate whether we have any uncertain tax positions and would record a reserve if we believe it is more-likely-than-not our position would not prevail with the applicable tax authorities and would be recorded in income tax expense. Our assessment of tax positions as of December 31, 2019 and 2018, determined that there were no material uncertain tax positions.

In general, the tax returns for the years ending December 31, 2016 through 2018 are open to examination by federal and state authorities.

Reportable Segments

Our reporting segments consist of: a) Operations Consulting and Products; and b) Capital Investments and Real Estate. Our Chief Executive Officer has been identified as the chief decision maker. Our operations are conducted primarily within the United States of America.

Related Parties

Related parties are any entities or individuals that, through employment, ownership or other means, possess the ability to direct or cause the direction of the management and policies of the Company. We disclose related party transactions that are outside of normal compensatory agreements, such as salaries or board of director fees. We consider the following individuals/companies to be related parties:

Michael Feinsod Chairman of our Board of Directors (“Board”).

Infinity Capital West, LLC (“Infinity Capital”) An investment management company that was founded and is controlled by Michael Feinsod.

Peter Boockvar Audit committee chairman.

Seth Oster – Board member

DB Arizona A company that borrowed $825,000 from GC Finance Arizona. Prior to our purchase in June 2017, we did not possess the ability to influence DB Arizona and DB Arizona did not have the ability to influence us. We include DB Arizona as a related party due to our relationship with Michael Feinsod and Infinity Capital, and their relationship with DB Arizona.

Recently Issued Accounting Standards

FASB ASU 2019-12 – “Income Taxes (Topic 740)” – In December 2019, the FASB issued guidance which simplifies certain aspects of accounting for income taxes. The guidance is effective for interim and annual reporting periods beginning after December 15, 2020, and early adoption is permitted. We do not expect adoption of this ASU to have a material effect on our consolidated financial statements.

FASB ASU 2018-013 “Fair Value Measurement (Topic 820)”- In August 2018, the FASB issued new disclosure guidance on fair value measurement. This new guidance modifies the disclosure requirements on fair value measurements, including removal and modifications of various current disclosures as well as some additional disclosure requirements for Level 3 fair value measurements. Some of these disclosure changes must be applied prospectively while others retrospectively depending on requirement. This guidance is required to be adopted by the Company beginning in fiscal year 2020, with early adoption permitted. We did not early adopt this guidance. The adoption of these changes is not expected to have an impact on our consolidated financial statements other than disclosures.

NOTE 2. INVESTMENTS AND ACQUISITIONS

Flowhub SAFE

On November 7, 2018, we invested $250,000 in Flowhub Holdings, LLC (“Flowhub”) through a simple agreement for future equity (the “Flowhub SAFE”). The Flowhub SAFE provides us with the right to either (a) future equity in Flowhub when it completes an equity financing, or (b) future equity in Flowhub or cash proceeds if there is a liquidity event. If there is an equity financing, Flowhub would issue to us (a) a number of standard preferred units equal to our investment divided by the price per share of the standard preferred units if the pre-money valuation is less than or equal to the valuation cap ($35 million); or (b) a number of safe preferred units equal to the purchase amount divided by the valuation cap ($35 million), if the pre-money valuation is greater than the valuation cap. If there is a liquidity event, we will receive either (a) a cash payment equal to the purchase amount or (b) automatically receive a number of common units equal to the purchase amount divided by the liquidity price. Our investment in the Flowhub SAFE is recorded on the cost method of accounting and included under investment on the consolidated balance sheet and is shown as long-term, as it is not readily convertible into cash.

Desert Created Company LLC / DB Products Arizona, LLC

In January 2018, we entered into a limited liability company operating agreement with DNFC LLC (“DNFC”), pursuant to the formation of Desert Created Company LLC (“Desert Created”). Each party owned a 50% interest in Desert Created, which took over the assets and operations of DB Products Arizona, LLC (“DB Arizona”). Desert Created produces and distributes cannabis-infused edible products in Arizona. In connection with the formation of Desert Created, we contributed 75,000 shares of our common stock and warrants to purchase 75,000 shares of our common stock, at an exercise price of $2.00 per share, to members of DNFC (collectively, the “DNFC Sellers”). This pricing was agreed to in November 2017, however, the transaction did not close until January 2018. In the interim, our stock price increased substantially, which was the reason for the initial impairment noted below. In October 2018, we sold our 50% interest to DNFC for cash consideration of $23,045 and, accordingly, impaired the remaining balance.

The 75,000 shares of our common stock were valued at $461,000, based on the closing price per share of our common stock on January 24, 2018, or $7.23 per share, reduced by a discount of 15% due to the restrictions on the DNFC Seller’s ability to immediately sell such shares. The warrants were valued at $518,000, using the Black-Scholes model, assuming a life of 5.0 years, a risk-free interest rate of 1.2% and a volatility of 150%. The fair value of Desert Created was estimated based on the relative fair value of the underlying assets and liabilities, consisting primarily of cash, accounts receivable, equipment and accounts payable.

The purchase price allocation was as follows:


Common Stock	$	461,000
Warrants		518,000
Initial investment in Desert Created	$	979,000

Fair value of Desert Created	$	347,000
Percentage ownership		50%
Fair value of 50% of Desert Created		173,500
Initial investment in Desert Created		979,000
Initial impairment	$	805,500

The income and losses related to Desert Created were recognized using the equity method of accounting. The value of the investment as of December 31, 2018, consists of the following and is included in prepaid expenses and other current assets on the balance sheet:


Initial investment in Desert Created	$	979,000
Initial impairment		(805,500)
Additional investment		50,000
Net loss		(182,136)
Additional impairment		(18,319)
Proceeds from sale of investment		(23,045)
December 31, 2018	$	–

NOTE 3. DISCONTINUED OPERATIONS

Security Segment

On December 26, 2019, the board of directors and management made the strategic decision to investigate a possible buyer for the security segment and if no buyer could be found, cease operations of the security segment. We transferred all our Colorado security contracts and employees to a company on January 16, 2020. We will receive $1.00 per man hour worked on existing contracts for a period of one year. On February 6, 2020 we cancelled all our security contracts in California. The assets and liabilities classified as held for sale for the security segment are presented separately in the balance sheet and the operating results for the years ended December 31, 2019 and 2018 are presented as discontinued operations.

Assets and liabilities of discontinued operations held for sale included the following:


		December 31,
		2019		2018
Cash and cash equivalents	$	77,380	$	352,607
Accounts receivable, net		280,058		277,857
Prepaid expenses and other current assets		17,780		19,311
Current assets held for sale	$	375,218	$	649,775

Property and equipment, net	$	15,584	$	24,008
Intangibles		–		42,247
Noncurrent assets held for sale	$	15,584	$	66,255

Accounts payable and accrued expenses	$	88,309	$	78,065
Customer deposits		60,940		81,879
Current liabilities held for sale	$	149,249	$	159,944

A breakdown of the discontinued operations is presented as follows:


		Year ended December 31,
		2019		2018
Service revenues	$	2,118,732	$	2,602,365

Cost of service revenues		1,650,823		2,033,544
Cost of goods sold		–		4,373
Selling, general and administrative		877,795		795,381
Professional fees		4,219		104,730
Depreciation and amortization		51,654		87,061
Total costs and expenses		2,584,491		3,025,089

OPERATING LOSS		(465,759)		(422,724)

Interest expense, net		3,422		2,421

NET LOSS FROM DISCONTINUED OPERATIONS	$	(469,181)	$	(425,145)

The cash flows related to discontinued operations have not been segregated, and are included in the consolidated statements of cash flows. The following table provides selected information on cash flows related to discontinued operations for 2019 and 2018.


	Year ended December 31,
	2019	2018
Receivables	(2,201)	(86,373)
Prepaids and other	10,951	(7,715)
Depreciation and amortization	51,654	87,061
Capital expenditures	(2,556)	(11,139)
Accounts payable and accrued expenses	10,244	2,479
Customer deposits	(20,939)	60,878

Consumer Goods Segment

On December 26, 2019, the board of directors and management made the strategic move to cease operations of Chiefton. On December 26, 2019, the board of directors committed to a plan to cease operations of STOA Wellness. We transferred all assets of STOA Wellness to an individual on January 10, 2020, in exchange for the release on the outstanding lease. The assets and liabilities classified as discontinued operations for the consumer goods segment are presented separately in the balance sheet and the operating results for the years ended December 31, 2019 and 2018 are presented as discontinued operations.

Assets and liabilities of discontinued operations included the following:


		December 31,
		2019		2018
Cash and cash equivalents	$	25,223	$	–
Accounts receivable, net		7,836		21,102
Prepaid expenses and other current assets		14,394		–
Inventory		–		123,263
Current assets discontinued operations	$	47,453	$	144,365

Right to use asset	$	83,525	$	–
Noncurrent assets discontinued operations	$	83,525	$	–

Accounts payable and accrued expenses	$	124,468	$	4,920
Customer deposits		–		1,300
Operating lease liability – current portion		83,525		–
Current liabilities discontinued operations	$	207,993	$	6,220

A breakdown of the discontinued operations is presented as follows:


		Year ended December 31,
		2019		2018
Service	$	–	$	145,079
Product		222,220		134,012
Total Revenues		222,220		279,091

Cost of service revenues		–		59,227
Cost of goods sold		223,354		186,120
Selling, general and administrative		833,742		410,529
Professional fees		110,064		36,518
Depreciation and amortization		28,897		–
Impairment of assets		232,521		–
Total costs and expenses		1,428,578		692,394

OPERATING LOSS		(1,206,358)		(413,303)

NET LOSS FROM DISCONTINUED OPERATIONS	$	(1,206,358)	$	(413,303)


	Year ended December 31,
	2019	2018
Receivables	13,266	1,962
Prepaids and other	(14,394)	–
Inventory	–	(88,494)
Depreciation and amortization	28,897	–
Capital expenditures	(114,384)	–
Accounts payable and accrued expenses	119,548	4,920
Customer deposits	(1,300)	1,300
Loss on disposal of segment	232,521	–

NOTE 4. ACCOUNTS RECEIVABLE AND CUSTOMER DEPOSITS

Our accounts receivable consisted of the following:


		December 31,
		2019		2018
Accounts receivable	$	196,204	$	125,622
Less: Allowance for doubtful accounts		(111,000)		(9,000)
Total	$	85,204	$	116,622

We record bad debt expense when we conclude the credit risk of a customer indicates the amount due under the contract is not collectible. We recorded bad debt expense of $103,182 and $15,864, respectively, during the years ended December 31, 2019 and 2018.

As of December 31, 2019, and 2018, prepaid expenses and other current assets includes $0 and $18,164 of unbilled revenue, respectively, representing amounts for services completed but not billed.

Our customer deposit liability had the following activity:


		Amount
December 31, 2018	$	308,111
Additional deposits received		2,252,416
Less: Deposits recognized as revenue		(1,997,724)
December 31, 2019	$	562,803

NOTE 5. NOTES RECEIVABLE

Our notes receivable consisted of the following:


		December 31, 2019		December 31, 2018
CCR Note	$	375,000	$	–
BB Note		100,000		–
BRB Realty		–		50,000
Total principal		475,000		50,000
Unamortized loan origination fee		(6,667)		–
		468,333		50,000
Less: Current portion		(375,000)		(50,000)
Long-term portion	$	93,333	$	–

In March 2019, we agreed to loan $375,000 to Consolidated C.R., LLC (“CCR”) pursuant to the terms of a convertible promissory note (“CCR Note”), bearing interest at 12% per annum, collateralized by virtually all of the assets of CCR and a maturity date of September 2020. Interest is due on the first of every month starting in November 2019. CCR is a vertically integrated medical cannabis company located in San Juan, Puerto Rico. As of December 31, 2019, we had loaned $375,000, of which $155,000 was loaned in the first quarter, to CCR under the CCR Note. The CCR Note included a loan origination fee of $15,000, which is being recognized as interest income over the term of the agreement.

On January 3, 2019, we loaned $100,000 to Beacher Brewing, LLC (“BB”) pursuant to the terms of a promissory note (“BB Note”), bearing interest at 11% per annum and a maturity date of January 3, 2020. Interest is due in advance at the beginning of each quarter. On December 13, 2019, we agreed to extend the maturity date to January 3, 2021.

On December 13, 2018, we loaned $50,000 to BRB Realty, LLC (“BRB”) pursuant to the terms of a promissory note (“BRB Note”), bearing interest at 13% per annum and a maturity date of June 12, 2019. On January 19, 2019 the BRB Note was amended with an additional loan amount of $250,000 bearing an interest rate of 13% and a new maturity date of July 15, 2019. On July 15, 2019, BRB Realty extended the maturity date, in accordance with the terms of the BRB Note, an additional six months with an increased interest rate to 15%. Interest is due at the beginning of each month. In December 2019, we agreed to forgive $30,000 of the note receivable in exchange for early payment. The note was paid off on December 3, 2019 and the $30,000 was recorded as bad debt expense and is included in sales, general and administrative on the consolidated statement of operations. The BRB Note included a loan origination fee of $5,000, which is being recognized as interest income over the term of the agreement.

NOTE 6. PREPAIDS AND OTHER CURRENT ASSETS

Our Prepaids and other current assets consist of the following:


		December 31,
		2019		2018
Prepaid insurance	$	74,026	$	81,667
Prepaid product for resale		292,306		173,852
Other		180,638		166,060
	$	546,970	$	421,579

NOTE 7. PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following:


		December 31,
		2019		2018
Land	$	800,000	$	800,000
Buildings		508,104		508,104
Furniture, fixtures and equipment		331,467		274,380
Software		120,111		–
		1,759,682		1,582,484
Less: Accumulated depreciation		(252,355)		(143,417)
	$	1,507,327	$	1,439,067

Depreciation expense was $115,696 and $62,443, respectively, for the years ended December 31, 2019 and 2018.

NOTE 8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Our accounts payable and accrued expenses consist of the following:


		December 31,
		2019		2018
Accounts payable	$	879,347	$	125,151
Accrued payroll, taxes and vacation		305,259		232,313
Property taxes and other		36,588		85,243
	$	1,221,194	$	442,707

NOTE 9. ACCRUED STOCK PAYABLE

The following tables summarize the changes in accrued common stock payable:


		Amount	Number of Shares
December 31, 2018	$	–	–
Employee stock award accrual		80,657	34,469
December 31, 2019	$	80,657	34,469

On January 29, 2019, we granted an employee $100,000 worth of our common stock, with fifty percent vesting on July 29, 2019 and the remaining amount vesting over eighteen months. Based on a stock price of $2.34 on the date of grant, the employee would receive 42,736 shares of our common stock upon vesting. We are recognizing the value of the grant ratably over the vesting periods. As of December 31, 2019, no stock had been issued to the employee and as a result we are recognizing the stock liability.

NOTE 10. NOTES PAYABLE

Our notes payable consisted of the following:


		December 31,		December 31,
		2019		2018
2019 12% Notes	$	1,506,000	$	–
8.5% Notes		–		6,849,000
SBI Note		750,000		–
2019 15% Notes		200,000		–
Related party note payable		100,000		–
Unamortized debt discount		(225,649)		(1,575,094)
		2,330,351		5,273,906
Less: Current portion		(2,330,351)		(5,273,906)
Long-term portion	$	–	$	–

2019 12% Notes

In September 2019, we completed a private placement with certain accredited investors pursuant to (a) a senior unsecured promissory note, bearing interest at 12% payable quarterly, with principal due October 31, 2020, with an option for us to extend the due date to October 31, 2021 (“2019 12% Notes”) and (b) warrants with an exercise price of $1.30 per share and a life of 1.1 years; however, if we prepay at any time the life extends to October 31, 2022 (“2019 12% Warrants”) (combined the “2019 12% Agreements”). We may prepay the 2019 12% Notes at any time, but in any event must pay at least one year of interest.

We issued an aggregate of $1,506,000 under the 2019 12% Notes and warrants to purchase an aggregate of 1,506,000 shares of common stock. We received $400,000 in cash and $1,106,000 from modifying the outstanding principal under the 8.5% Notes; see 8.5% Notes below. The change in terms of the 8.5% Notes is treated as a debt extinguishment and the fair value of the warrants of $298,500 is included in our consolidated statement of operations and as additional paid-in capital.

The relative fair value of the 2019 12% Warrants was recorded as a debt discount and additional paid-in capital of $93,500. For the year ended December 31, 2019, amortization of debt discount includes $23,432. The 2019 12% Notes are otherwise treated as conventional debt.

For purposes of determining the loss on extinguishment of debt and the debt discount, the underlying assumptions used in the Black-Scholes model to determine the fair value of the 2019 12% Warrants were:


Current stock price	$ 0.82 - 0.92
Exercise price	$ 1.30
Risk-free interest rate	1.63 - 1.68 %
Expected dividend yield	–
Expected term (in years)	1.10
Expected volatility	124 %

8.5% Notes

In April 2018, we completed a $7,500,000 private placement pursuant to a promissory note (“8.5% Notes”) and warrant purchase agreement (the “8.5% Agreement”) with certain accredited investors, bearing interest at 8.5%, with principal due May 1, 2019, and interest payable quarterly. During the second quarter this note was extended to be due June 1, 2019. On June 6, 2019, we made payments of approximately $5.7 million, leaving approximately $1.1 million outstanding. In the event of default, the interest rate increases to 18%. The 8.5% Notes are collateralized by a security interest in substantially all of our assets. We may prepay the 8.5% Notes at any time, but in any event must pay at least one year of interest. In September 2019, we modified the debt agreement into the 2019 12% Notes.

Subject to the terms and conditions of the 8.5% Agreement, each investor was granted fully-vested warrants equal to their note principal times 80%, or six million warrants, with an exercise price of $2.35 per share and a life of two years (the “8.5% Warrants”). Should we issue any equity-based instruments at a price lower than the exercise price(s) of the 8.5% Warrants, other than under our Incentive Plan (as defined below), the exercise price(s) of the 8.5% Warrants will be adjusted to the lower price. If the shares underlying the 8.5% Warrants were not registered for resale on a registration statement within six months, we would have issued an additional warrant to each purchaser at the same exercise price for one-half of the shares covered by the initial 8.5% Warrants. A registration statement related to the 8.5% Warrants was declared effective on June 5,

2018. We may call the 8.5% Warrants at $0.01 per share if our stock trades above $8.00 per share for 15 consecutive days. The 8.5% Warrants may be exercised at the option of the holder by paying cash or by applying the amount due under the 8.5% Notes as consideration.

We received $7,500,000 of cash for issuing the 8.5% Notes. The relative fair value of the 8.5% Warrants was recorded as a debt discount and additional paid-in capital of $5,366,000. For the years ended December 31, 2019 and 2018, amortization of debt discount expense was $1,575,094 and $3,790,906, respectively, from the 8.5% Notes. The 8.5% Notes are otherwise treated as conventional debt.

For purposes of determining the debt discount, the underlying assumptions used in the binomial lattice model to determine the fair value of the 8.5% Warrants as of April 2018, were:


Current stock price	$ 4.18
Exercise price	$ 2.35
Risk-free interest rate	2.46 %
Expected dividend yield	–
Expected term (in years)	2.0
Expected volatility	134 %
Number of iterations	5

SBI Debt

In July 2019, we completed a $855,000 private placement pursuant to a promissory note (“SBI Note”) with a certain accredited investor, bearing interest at 10% with principal due on October 18, 2019. On October 18, 2019, SBI agreed to an extension to November 1, 2019. On November 1, 2019, SBI agreed to another extension of the debt to November 15, 2019. On November 15, 2019, SBI agreed to another extension of debt to November 29, 2019 with an increase in principal amount of the note from $855,000 to $905,000. On November 27, 2019, SBI agreed to an extension of the note to December 13, 2019. On December 13, 2019, SBI agreed to extend the maturity date to December 20, 2019. On December 30, 2019 SBI agreed to extend the maturity date of the note to January 31, 2020, upon the payment of $195,911, of which $40,911 was for accrued interest and $155,000 towards the outstanding principal of the note. See Note 16 for further detail. The change in terms of the SBI note is treated as a debt extinguishment. The additional $50,000 of principal was treated as a debt extinguishment and included in our consolidated statement of operations.

We received $755,000 of cash for issuing the SBI Note and the difference between the cash received and the principal amount was recorded as a debt discount of $100,000 and has been fully amortized.

15% Notes

In December 2019, we sold $300,000 promissory notes (“15% Notes”) and warrants to certain accredited investors. The promissory notes, bear interest at 15%, with principal due January 31, 2021, and interest payable quarterly. We may prepay the 15% Notes at any time, but in any event must pay at least six months of interest. Included in these notes is an amount of $100,000 from a board member, a related party.

The warrants granted to the investors are fully-vested and the number of shares underlying the warrants three time the principal amount of the Notes or nine hundred thousand warrants, with an exercise price of $0.45 per share (the “15% Warrants”). The 15% Warrants were issued in three tranches, A, B, and C. All the warrants have the same terms except the expiration dates. Warrant A has an expiration date of December 31, 2020, Warrant B has an expiration date of December 31, 2021 and Warrant C has an expiration date of December 31, 2022.

We received $300,000 of cash for issuing the 15% Notes. The relative fair value of the 15% Warrants was recorded as a debt discount and additional paid-in capital of $158,100. For the years ended December 31, 2019 and 2018, amortization of debt discount expense was $2,519 and $0, respectively, from the 15% Notes. The 15% Notes are otherwise treated as conventional debt.

For purposes of determining the debt discount, the underlying assumptions used in the binomial lattice model to determine the fair value of the 15% Warrants as of December 2019, were:


Current stock price	$ 0.54 - 0.67
Exercise price	$ 0.45
Risk-free interest rate	1.60 - 1.62 %
Expected dividend yield	–
Expected term (in years)	1.01 3.06
Expected volatility	118 - 119 %

NOTE 11. WARRANT DERIVATIVE LIABILITY

On May 31, 2019 we received gross proceeds of $3 million by issuing three million shares of our common stock and three million warrants (“2019 Warrants”) to purchase shares of our common stock (together “2019 Units”) in a registered direct offering for $1.00 per 2019 Unit (combined the “2019 Capital Raise”). The 2019 Warrants, issued with the 2019 Capital Raise, are accounted for as a derivative liability. The 2019 Warrant agreements contain a cash settlement provision whereby the holders could settle the warrants for cash based on the Black-Scholes value, upon certain fundamental transactions, as defined in the 2019 Warrant agreement, that are considered outside of the control of management, such as a change of control.

The following are the key assumptions that were used to determine the fair value of the 2019 Warrants:


		May 31,		December 31,
		2019		2019
Number of shares underlying the warrants		3,000,000		3,000,000
Fair market value of stock	$	0.95	$	0.63
Exercise price	$	1.30	$	0.45
Volatility		133%		124%
Risk-free interest rate		1.93%		1.69%
Warrant life (years)		5.00		4.41

The following table sets forth a summary of the changes in the fair value of the warrant derivative liability, our Level 3 financial liabilities that are measured at fair value on a recurring basis:


		December 31,
		2019		2019
Beginning balance	$	–	$	–
Recognition of warrant derivative liability on May 31, 2019		2,416,422		–
Change in fair value of warrants derivative liability		(816,986)		–
Ending balance	$	1,599,436	$	–

NOTE 12. COMMITMENTS AND CONTINGENCIES

Legal

From time to time, the Company is a party to various litigation matters incidental to the conduct of its business. The Company is not presently a party to any legal proceedings that would have a material adverse effect on its business, operating results, financial condition or cash flows.

NOTE 13. DEFERRED TAXES

The income tax was $0 as of December 31, 2019 and 2018.

Significant components of the Company's deferred tax assets at December 31, 2019 and 2018 are shown below. A valuation allowance has been established as realization of such deferred tax assets has not met the more likely-than-not threshold requirement. The increase in the valuation allowance in 2019 represents the increase in deferred tax assets that the Company has determined is not more likely than not of being recovered. If the Company's judgment changes and it is determined that the Company will be able to realize these deferred tax assets, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets will be accounted for as a reduction to income tax expense.

The components of net deferred tax assets are as follows:


		December 31,
		2019		2018
Net operating loss carryforwards	$	7,116,767	$	5,383,012
Equity-based instruments		5,810,660		5,004,624
Long-lived assets and other		491,730		555,138
Capital loss carryforward		120,318		–
Deferred tax asset valuation allowance		(13,539,475)		(10,942,774)
	$	–	$	–

A reconciliation of our income tax provision and the amounts computed by applying statutory rates to income before income taxes is as follows:


		Year ended December 31,
		2019		2018
Income tax benefit at statutory rate	$	(2,617,154)	$	(3,564,489)
State income tax benefit, net of Federal benefit		(455,846)		(620,849)
Equity-based instruments		146,446		(326,242)
Fair market value adjustment/loss on extinguishment derivative liabilities		(108,416)		–
Amortization of debt discount		498,018		1,044,210
Other		(59,749)		47,895
Valuation allowance		2,596,701		3,419,475
	$	–	$	–

As of December 31, 2019 and 2018, the Company had federal and state net operating loss carryforwards of approximately $29 million and $22 million, respectively. Of the current net operating loss carryforwards, $14 million expire starting in 2033 through 2037 and $15 million do not expire.

Pursuant to the Internal Revenue Code Sections 382 and 383, use of the Company's U.S. federal and state net operating loss carryforwards may be limited in the event of a cumulative change in ownership of more than 50% within a three-year period.

NOTE 14. STOCKHOLDERS’ EQUITY

2019 Capital Raise

On May 31, 2019 we received gross proceeds of $3 million by issuing three million shares of our common stock and three million warrants (“2019 Warrants”) to purchase shares of our common stock (together “2019 Units”) in a registered direct offering for $1.00 per 2019 Unit (combined the “2019 Capital Raise”). The 2019 Warrants have an exercise price of $1.30 per share and are exercisable for five years from the date of issuance. We received cash of $2,604,355 which is net of $395,645 of issuance costs, of which $318,681 is included as amortization of debt discount and equity issuance costs and $76,964 is included as a reduction of additional paid in capital. Of the gross proceeds, we recorded $2,416,422 as a warrant derivative liability, as discussed in Note 11. We used a portion of the net proceeds from the issuance of the 2019 Units to pay down the 8.5% Notes by $5,743,000, leaving $1,106,000 outstanding.

Share-based compensation

Share-based compensation expense consisted of the following:


		Year ended December 31,
		2019		2018
Employee Awards	$	3,040,497	$	3,626,271
Consulting Awards		85,683		306,466
Feinsod Agreement		840,441		2,062,270
	$	3,966,621	$	5,995,007

Employee Stock Options

On October 29, 2014, the Board authorized the adoption of and, on June 26, 2015, our stockholders ratified, our 2014 Equity Incentive Plan for the issuance of 10 million shares of our common stock and, in April 2018, stockholders approved an increase of 5 million shares of common stock that may be granted (the “Incentive Plan”). The Incentive Plan provides for the issuance of up to 15 million shares of our common stock and is designed to provide an additional incentive to executives, employees, directors and key consultants, aligning our long term interests with participants. A Registration Statement on Form S-8 for the initial 10 million shares automatically became effective in May 2016, and a Registration Statement on Form S-8 for the additional 5 million shares and 900,000 shares under the Feinsod Agreement automatically became effective in June 2018 (collectively, the “Registration Statements”). The Registration Statements relate to 15,000,000 shares of our common stock, which are issuable pursuant to or, upon exercise of, options that have been granted or may be granted under our Incentive Plan. As of December 31, 2019, there were 986,442 shares available to issue under the Incentive Plan.

Share-based compensation costs for award grants to employees and directors (“Employee Awards”) are recognized on a straight-line basis over the service period for the entire award, with the amount of compensation cost recognized at any date equaling at least the portion of the award that is vested. The following summarizes the Black-Scholes assumptions used to value the Employee Awards granted:


	Year ended December 31,
	2019	2018
Exercise price	$0.55 2.37	$ 1.71 7.17
Stock price on date of grant	$0.55 2.37	$ 1.71 7.17
Volatility	119 - 130%	131 140 %
Risk-free interest rate	1.43 2.60%	2.1 2.9 %
Expected life (years)	3.0	3.0
Dividend yield	–	–

The following summarizes Employee Awards activity:


	Number of Shares		Weighted-average Exercise Price per Share	Weighted-average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding at December 31, 2018	9,173,380		1.68
Granted	5,927,390		0.98
Exercised	(269,728)		0.70
Forfeited or expired	(3,947,262)		1.80
Outstanding at December 31, 2019	10,883,780		1.28	5.4	$	61,000

Exercisable at December 31, 2019	7,331,365	$	1.51	5.8	$	8,000

As of December 31, 2019, there was approximately $838,267 of total unrecognized compensation expense related to unvested Employee Awards, which is expected to be recognized over a weighted-average period of twelve and a half months.

Consulting Services

As needed, we may issue warrants and options to third parties in exchange for consulting services. Stock-based compensation costs for award grants to third parties for consulting services (“Consulting Awards”) are recognized on a straight-line basis over the contractual term.

The fair value of each warrant grant is estimated using Black-Scholes. We use historical data to estimate the expected price volatility. The risk-free interest rate is based on the United States Treasury yield curve in effect at the time of valuation for the estimated life of the option. The following summarizes the Black-Scholes assumptions to value the Consulting Awards granted:


	Year ended December 31,
	2019	2018
Exercise price	$0.71 2.37	$ 3.08
Stock price, date of valuation	$0.71 2.37	$ 3.08
Volatility	125 - 141%	134 %
Risk-free interest rate	1.64 2.62%	2.3 %
Expected life (years)	2.0 5.0	2.0
Dividend yield	–	–

The following summarizes Consulting Awards activity:


	Number of Shares	Weighted-average Exercise Price per Share	Weighted-average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding at December 31, 2018	50,000	2.53
Granted	85,000	1.31
Exercised	–	–
Forfeited or expired	(10,000)	1.40
Outstanding and exercisable at December 31, 2019	125,000	1.79	1.1	$	0.00

We granted 25,000 shares of common stock with a fair value of $92,500 to a non-employee for consulting services, which were issued in July 2018. Additionally, we granted 47,933 shares of common stock with a fair value of $142,500 to non-employees for consulting services, which were issued in October 2018. During 2019, we granted 85,000 options with a fair value of $93,614 to non-employees for consulting services.

Feinsod Employment Agreement

On December 8, 2017, we entered into an agreement (the “Feinsod Agreement”) with Michael Feinsod for his continued service as our Executive Chairman of our Board of Directors. Pursuant to the agreement, Mr. Feinsod received (a) 600,000 stock options that vest on the anniversary date of the agreement for the next three years, or 200,000 per year (“Time-based Options”); and (b) three tranches of 100,000 stock options that vest when our stock price has an average trading price for 20 days of $3.50, $5.00 and $6.50 (“Market-based Options”). The options have an exercise price of $3.45 per share and a ten-year life. These options were not issued under the Incentive Plan; however, the underlying shares were included in the Registration Statement on Form S-8 that automatically became effective in June 2018. During the quarter ended March 31, 2018, the $3.50 and $5.00 Market-based Options vested and, accordingly, the expense associated with those options was recognized immediately.

On August 6, 2019, we entered into an agreement (the “Feinsod Agreement”) with Michael Feinsod for his permanent service as our Chief Executive Officer. Pursuant to the agreement, Mr. Feinsod received 1,000,000 stock options that vest when our stock price has a trading price of equal to or above $4.51 per share for five consecutive days. The options have an exercise price of $0.83 per share and a ten-year life. These options were issued under the Incentive Plan. The options were valued using the Monte Carlo method. For the year ended December 31, 2019, we recognized approximately $116,000 of share-based compensation expense related to these options.

The underlying assumptions used in the Monte Carlo simulations to determine the fair value of options were:


	August 6, 2019
Current stock price	$ 0.83
Exercise price	$ 0.83
Vesting goal	$ 4.51
Risk-free interest rate	1.73 %
Expected term (in years)	10
Expected volatility	123%

DB Option Agreement warrants

In order to extend the DB Option Agreement with Infinity Capital, in March 2016 we granted Infinity Capital warrants to purchase 100,000 shares of our common stock at an exercise price of $0.67 per share with a five year life. All 100,000 warrants were still outstanding as of December 31, 2019.

IPG Acquisition Warrants

In connection with the IPG acquisition in 2015, we issued to IPG 500,000 fully-vested warrants to purchase a) 250,000 shares of our common stock at $4.50 per share, (the “IPG $4.50 Warrants”), and b) 250,000 shares of our common stock at $5.00 per share (the “IPG $5.00 Warrants”) (collectively, the “IPG Warrants”). All of these warrants expired unexercised during the quarter ended March 31, 2018.

Warrants with Debt

The following summarizes warrants issued with debt activity:


	Number of Shares		Weighted-average Exercise Price per Share	Weighted-average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding at December 31, 2017	3,351,700	$	0.65
Granted	6,000,000		2.35
Exercised	(3,316,786)		0.77
Expired	(42,700)		5.00
Outstanding at December 31, 2018	5,992,214		2.26
Granted	2,481,000		0.98
Exercised	–		–
Expired	–		–
Outstanding and exercisable at December 31, 2019	8,473,214		1.00	0.5	$	162,990

On May 31, 2019, we issued the 2019 Units at $1.00, which triggered the “down round” feature specified in the 8.5% Warrants. We calculated the difference between the 8.5% Warrants’ fair value on the date the down round feature was triggered using the original exercise price and the new exercise price. On October 18, 2019, November 1, 2019 and again on December 11, 2019, we issued additional warrants at $1.00, $0.68 and $0.45, respectively. These triggered the “down round” feature on both the 8.5% warrants and the 2019 Units. The difference in fair value of the effect of the down round feature is reflected in our consolidated financial statements as a deemed dividend and as a reduction to income available to common stockholders in the basic earnings per share calculation.

The underlying assumptions used in the binomial lattice model to determine the fair value of the 8.5% Warrants were:


	Pre-Trigger	Post-Trigger
Current stock price	$ 0.95	$ 0.95
Exercise price	$ 2.35	$ 1.00
Risk-free interest rate	2.21 %	2.21 %
Expected dividend yield	–	–
Expected term (in years)	0.89	0.89
Expected volatility	123%	123%


	Pre-Trigger	Post-Trigger
Current stock price	$ 0.70	$ 0.70
Exercise price	$ 1.00	$ 0.68
Risk-free interest rate	1.55 %	1.55 %
Expected dividend yield	–	–
Expected term (in years)	0.47	0.47
Expected volatility	114%	114%


	Pre-Trigger	Post-Trigger
Current stock price	$ 0.67	$ 0.67
Exercise price	$ 0.68	$ 0.45
Risk-free interest rate	1.61 %	1.61 %
Expected dividend yield	–	–
Expected term (in years)	0.36	0.36
Expected volatility	113%	113%

The underlying assumptions used in the binomial lattice model to determine the fair value of the 2019 Warrants were:


	Pre-Trigger	Post-Trigger
Current stock price	$ 0.63	$ 0.63
Exercise price	$ 1.30	$ 1.00
Risk-free interest rate	1.56 %	1.56 %
Expected dividend yield	–	–
Expected term (in years)	4.62	4.62
Expected volatility	115%	115%


	Pre-Trigger	Post-Trigger
Current stock price	$ 0.70	$ 0.70
Exercise price	$ 1.00	$ 0.68
Risk-free interest rate	1.55 %	1.55 %
Expected dividend yield	–	–
Expected term (in years)	4.58	4.58
Expected volatility	114%	114%


	Pre-Trigger	Post-Trigger
Current stock price	$ 0.67	$ 0.67
Exercise price	$ 0.68	$ 0.45
Risk-free interest rate	1.61 %	1.61 %
Expected dividend yield	–	–
Expected term (in years)	4.47	4.47
Expected volatility	113%	113%

Fall 2017 Capital Raise

During the year ended December 31, 2017, in a private placement we raised $4 million of equity by issuing four million shares of our common stock and four million warrants (“Fall 2017 Warrants”) to purchase shares of our common stock (together “Units”) for $1.00 per Unit. The Fall 2017 Warrants had an exercise price of $0.50 per share and were exercisable for two years. If our common stock closed above $5.00 for ten consecutive days, we could call the warrants, giving the warrant holders 10 days to exercise. During the quarter ended March 31, 2018, we called the warrants and all were exercised. In consideration for the sale of the Units, we received $3,750,000 in cash and extinguished $250,000 of 12% Notes.

NOTE 15. NET LOSS PER SHARE

Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the reporting period. Diluted net loss per share is computed similarly to basic loss per share, except that it includes the potential dilution that could occur if dilutive securities are exercised.

Outstanding stock options and common stock warrants are considered anti-dilutive because we are in a net loss position. Accordingly, the number of weighted average shares outstanding for basic and fully diluted net loss per share are the same.

The following summarizes equity instruments that may, in the future, have a dilutive effect on earnings per share:


	December 31,
	2019	2018
Stock options	12,833,780	10,073,380
Warrants	11,773,214	6,217,214
Accrued stock payable	42,736	–
	24,649,730	16,290,594

NOTE 16. SUBSEQUENT EVENTS

Beginning in early 2020, there has been an outbreak of coronavirus (COVID-19), initially in China and which has spread to other jurisdictions, including locations where we do business. The full extent of the outbreak, related business and travel restrictions and changes to behavior intended to reduce its spread are uncertain as of the date of the Report as this continues to evolve globally. Therefore, the full extent to which coronavirus may impact our results of operations, liquidity or financial position is uncertain. Management continues to monitor the impact that the COVID-19 pandemic is having on the Company and the economies in which we operate. We anticipate that our liquidity may be materially impacted by the coronavirus outbreak.

On January 8, 2020 we entered a $975,000 deed of trust (the “Mortgage Loan”) secured by a first mortgage lien on the property located in Denver, Colorado. The Mortgage Loan matures on December 31, 2020 and accrues interest at a rate of equal to the greater of 5.25% in excess of the Prime Rate or 10% per annum, payable on a monthly basis. This loan was paid in full on March 20, 2020 with the sale of our building.

On January 24, 2020, we entered into an asset purchase agreement with Dalton Adventures, LLC (the “Seller”), pursuant to which we agreed to acquire the assets of the Seller and which constitutes the business of SevenFive Farm, a cultivation facility in Boulder, Colorado. The purchase price to be paid for the assets is equal to 1.4 times the Seller’s gross revenue for the 12-month period prior to the closing; provided that the purchase price will not be lower than $3,000,000. The purchase price will be paid by issuing to the Seller shares of common stock of the Company equal to the purchase price divided by the volume weighted average per share price of our shares for 30 consecutive trading days ending on the second trading day prior to the closing (the “VWAP”); provided that if the VWAP exceeds $0.85 per share, then the VWAP will equal $0.85 per share for purposes of the forgoing calculation. The Seller may require us to repurchase in cash 25% of the shares issued to the Seller at the closing at a repurchase price equal to the same VWAP used to determine the number of shares issued to the Seller at closing. The closing is subject to approval of the transaction by the Colorado Marijuana Enforcement Division, which was received on May 13, 2020, as well as other customary closing conditions.

On February 18, 2020, we entered into a promissory note exchange agreement (the “Exchange Agreement”) pursuant to which the original SBI Note was exchanged for a new convertible promissory note (the “Convertible Note”). The Convertible Note has a principal amount of $934,000, an interest rate of 10% per annum and a maturity date of February 18, 2021. The Convertible Note may be converted at the option of SBI into shares of Common Stock at a conversion price equal to 80% of the Market Price; provided that the conversion price shall in no event be less than $0.45 per share.

On March 20, 2020 we sold our greenhouse office building located in Denver, Colorado, to certain individuals for a sale price of $1,499,000 and net proceeds of approximately $600,000.

On April 7, 2020, we entered into an Asset Purchase Agreement (the “Agreement”) with The Organic Seed, LLC, doing business under the name Cannasseur (the “Seller”), pursuant to which we agreed to acquire the assets of the Seller which includes a recreational retail dispensary, a 12,000 square foot light deprivation greenhouse, and a manufacturing facility based in Pueblo West, Colorado. The Agreement provides the purchase price to acquire Cannasseur is $2,350,000 (the “Purchase Price”). The purchase price will be paid by issuing to the Seller shares of common stock of the Company equal to the purchase price divided by the volume weighted average per share price of the Company’s shares for 30 consecutive trading days ending on the second trading day prior to the closing (the “VWAP”); provided that if the VWAP exceeds $0.55 per share, then the VWAP will equal $0.55 per share for purposes of the foregoing calculation; and if the VWAP is less than $0.45 per share, then the VWAP will be adjusted to equal $0.45 for the purposes of the foregoing calculation. The closing is subject to approval of the transaction by the Colorado Marijuana Enforcement Division, as well as other customary closing conditions.

NOTE 17. SEGMENT INFORMATION

Our operations are organized into two segments: Operations Consulting and Products; and Capital Investments and Real Estate. All revenue originates, and all assets are located in the United States. Segment information is presented in accordance with ASC 280, “Segments Reporting.” This standard is based on a management approach that requires segmentation based upon the Company’s internal organization and disclosure of revenue and certain expenses based upon internal accounting methods. The Company’s financial reporting systems present various data for management to run the business, including internal profit and loss statements prepared on a basis not consistent with GAAP. The following information is presented net of discontinued operations. For more information see Note 3.

Year ended December 31


2019		Operations		Investments		Total
Services	$	1,787,863	$	–	$	1,787,863
Rent and interest		–		95,437		95,437
Product		1,783,046		–		1,783,046
Total Revenues		3,570,909		95,437		3,666,346
Costs and expenses		(3,372,174)		(71,723)		(3,443,897)
	$	198,735	$	23,714		222,449
Corporate						(11,009,549)
				Net loss	$	(10,787,100)


2018		Operations		Investments		Total
Services	$	1,186,624	$	–	$	1,186,624
Rent and interest		–		18,749		18,749
Product		531,883		–		531,883
Total Revenues		1,718,507		18,749		1,737,256
Costs and expenses		(1,932,598)		–		(1,932,598)
Investment in Desert Created		–		(1,005,955)		(1,005,955)
	$	(214,091)	$	(987,206)		(1,201,297)
Corporate						(14,934,013)
				Net loss	$	(16,135,310)


		December 31,
Total assets		2019		2018
Operations	$	441,841	$	134,786
Investments		402,988		300,000
Corporate		2,135,395		9,447,044
	$	2,980,224	$	9,881,830

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial and Accounting Officer, as appropriate to allow timely decisions regarding required disclosure.

We carried out an evaluation under the supervision and with the participation of management, including our Principal Executive Officer and Principal Financial and Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2019, the end of the period covered by this report. Based on that evaluation, our Principal Executive Officer and Principal Financial and Accounting Officer have concluded that our disclosure controls and procedures were effective as of December 31, 2019.

Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive officer and principal financial officer and effected by the Board, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures of are being made only in accordance with authorizations of our management and directors; and

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Because of inherent limitations, our internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Assessment of Internal Control over Financial Reporting

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2019. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework (2013). Based on management’s assessment, management concluded that its internal control over financial reporting was effective as of December 31, 2019, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP.

Changes in Internal Control over Financial Reporting

There have been no changes in our existing internal control structure over financial reporting during 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Our current officers and directors are listed below. Directors are generally elected at an annual stockholders’ meeting and hold office until the next annual stockholders’ meeting, or until their successors are elected and qualified. Executive officers are elected by directors and serve at the Board’s discretion.


Name	Age	Position
Michael Feinsod	49	Executive Chairman of Board and Director
Steve Gutterman	50	Chief Executive Officer and Director
Peter Boockvar	50	Director
Mark Green	45	Director
Seth Oster	51	Director
Jessica Bast	42	Principal Financial and Accounting Officer

Michael Feinsod was appointed a director and elected Executive Chairman of the Board on August 4, 2014. Mr. Feinsod is the Managing Member of Infinity Capital, LLC, an investment management company he founded in 1999. Since January 2014, Mr. Feinsod has been an investor in the cannabis industry. Mr. Feinsod was a director of The Kingstone Companies, Inc. from 2008 through June 2015. From 2006 through 2013, he served in various executive positions at Ameritrans Capital Corporation, a business development company. Mr. Feinsod served as an officer and director of Elk Associates Funding Corporation, a Small Business Investment Company, from December 2006 until April 2013. In April 2013, in connection with a settlement agreement, the United States Small Business Administration was appointed as the receiver of Elk Associates Funding Corporation. Mr. Feinsod served as an investment analyst and portfolio manager at Mark Boyar & Company, Inc. He is admitted to practice law in New York and served as an associate in the Corporate Law Department of Paul, Hastings, Janofsky & Walker LLP. Mr. Feinsod holds a JD from Fordham University School of Law and a BA from The George Washington University. We believe that Mr. Feinsod’s corporate finance, legal and executive-level experience, as well as his service on the boards of other public companies, give him the qualifications and skills to serve as one of our directors.

Steve Gutterman was appointed a director and as our Chief Executive Officer on December 13, 2019. Mr. Gutterman has more than two decades of experience leading high growth businesses in highly regulated industries. Most recently, Mr. Gutterman served as President of Harvest Health & Recreation, one of the largest cannabis multi-state operators in the US, where he led the company’s public offering and led its global operations. Prior to that, he served as Chief Executive Officer of market research company Mobile Accord and before that as Executive Vice President and Chief Operating Officer of E*TRADE Bank, a $35 billion federally regulated thrift. Mr. Gutterman holds a JD/MBA from Columbia University and BA Cum Laude in Political Science from Tufts University. We believe that Mr. Gutterman is qualified to act as one of our directors due to his past experience serving as the President of a multi-state cannabis company.

Peter Boockvar was appointed a director on June 26, 2015. Mr. Boockvar is the Chief Investment Officer of Bleakley Advisory Group, New Jersey based wealth management firm with approximately $6 billion in assets under management. Mr. Boockvar manages the Investment Committee and is the portfolio manager of two investment strategies. He has 26 years of investing experience after initially training as a corporate bond analyst at Donaldson, Lufkin and Jenrette. He is also the Editor of The Boock Report, a macro economic and market newsletter that covers all areas of the globe. Prior to this he was the Chief Market Analyst with The Lindsey Group, a macro economic and market research firm. The firm is run by Larry Lindsey, a former Federal Reserve Governor and senior economic advisor to former President George W. Bush. Mr. Boockvar spent a brief time at Omega Advisor, a New York based hedge fund run by Leon Cooperman, as a macro analyst and portfolio manager. From October 1994 to December 2012, he was an employee and partner at Miller Tabak + Co where most recently he was the equity strategist and a portfolio manager. Mr. Boockvar served as a director of Ameritrans Capital Corporation, a business development company, from May 2008 thru July 2013. He also served as a director of Elk Associates Funding Corporation, a Small Business Investment Company, from May 2008 until April 2013. In April 2013, in connection with a settlement agreement, the United States Small Business Administration was appointed as the receiver of Elk Associates Funding Corporation. He is a CNBC contributor and appears regularly on their television network. Mr. Boockvar graduated Magna Cum Laude with a BBA in Finance from The George Washington University. We believe that Mr. Boockvar’s extensive knowledge of financial systems and investment company experience gives him the qualifications and skills to serve as one of our directors.

Mark Green was appointed a director on January 27, 2017. Mr. Green has over 18 years of investing experience across public and private markets, spanning several business cycles. In various leadership positions at industry leading firms focused on investment banking, capital markets, private equity and investment management, Mr. Green has been instrumental in the development of several successful platforms and ventures and has built an extensive network of industry contacts and relationships. Mark Green is a Co-Founder and Managing Partner of Chatham Road Capital, a credit-focused investment firm that seeks to capitalize on market imbalances and inefficiencies in the public and private markets. The firm’s investment philosophy is based upon fundamental and technical analysis, a comprehensive understanding of the capital markets and disciplined execution on investment ideas. Mr. Green oversees all investment activities, portfolio and risk management, and business development. Between 2010 and the beginning of 2017, Mr. Green served as a Managing Director of Leucadia National Corporation, a diversified holding company, and Jeffries LLC, a subsidiary of Leucadia, where he managed real estate principal investment activities and the commercial real estate debt business. From 2006 to 2010, Mr. Green was a founding member of the U.S. real estate finance group at UBS, where he oversaw the commitment of approximately $10 billion of principal debt and equity investments. From 2005 to 2006, he was a Managing Director at Eurohypo AG, and from 2000 to 2005, he was an Executive Director at CIBC World Markets. Mr. Green holds an MBA from Columbia Business School and a BS Cum Laude from Skidmore College. Mr. Green has appeared as a guest speaker at Columbia University, New York University and the Urban Land Institute on various occasions, and is a founding member of Columbia Business School’s Real Estate Circle, a real estate industry group consisting of top executives. We believe that Mr. Green is qualified to act as one of our directors due to his significant real estate and land use experience.

Seth Oster was appointed a director on August 12, 2019. Mr. Oster has over 25 years of experience leading corporate communications, marketing and public affairs efforts at high levels of the federal government and in the private sector. He currently serves as Global Chief Communications Officer at leading talent and entertainment company United Talent Agency (UTA). He has previously held positions as the top communications executive for Paul Allen’s Vulcan, Inc, accounting and consulting giant KPMG, and publicly traded companies, including Napster and Stamps.com. Mr. Oster also has an extensive background in politics—having served in both the legislative and executive branches of the U.S. government. Mr. Oster was appointed by President Barack Obama in 2009 to lead public affairs at the U.S. Environmental Protection Agency (EPA) and earlier in his career was a top aide to U.S. Senator Dianne Feinstein. Mr. Oster is a graduate of The George Washington University. We believe that Mr. Oster is qualified to act as one of our directors due to his significant experience leading corporate communications, marketing and public affairs efforts in the federal government and in the private sector.

Jessica Bast was appointed as our Principal Financial and Accounting Officer on February 18, 2020. Prior to her appointment as Principal Accounting Officer, Ms. Bast served as our Vice President/Controller beginning September 11, 2017. In addition, Ms. Bast was Technical Accounting Research Manager at Pinnacle Agricultural Distribution from July 2016 to September 2017, she was Controller of Active Fashion Group from May 2015 to May 2016, and she was Audit Manager of Hein & Associates, LLP (now Moss Adams) from September 2004 to April 2015. Ms. Bast holds a Bachleor of Science degree in Accounting from Metropolitan State Unversity and is a licensed Certified Public Accountant in the state of Colorado.

Family Relationships

There are no family relationships among any of our officers or directors.

Involvement in Legal Proceedings

Based on information submitted by the directors and executive officers, none of the directors or executive officers is involved in, or has been involved in, legal proceedings during the past ten years that are material to an evaluation of the ability or integrity of any director or executive officer.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors, executive officers and persons who own more than 10% of our stock (collectively, “Reporting Persons”) to file with the SEC initial reports of ownership and changes in ownership of our common stock. Reporting Persons are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. Other than as disclosed herein and based solely on a review of the reports furnished to us, or written representations from reporting persons that all reportable transaction were reported, we believe that during the fiscal year ended December 31, 2019, our officers, directors and greater than ten percent stockholders timely filed all reports and did not miss any filings as required to file under Section 16(a).

Code of Ethics Policy

The Board has established a corporate Code of Ethics, as defined by Item 406 of Regulation S-K of the Exchange Act, and applies to our principal executive officer, principal financial officer, principal accounting officer or controller and all persons performing similar functions. Among other matters, the Code of Ethics is designed to ensure that:

Company business is conducted in an ethical, moral and legal manner; reports, documents and other public communications made by the Company are delivered in a timely, fair, complete, accurate and understandable manner;

mechanisms to monitor and promote compliance with applicable governmental laws, rules and regulations are established and maintained;

business transactions are properly authorized and completely and accurately recorded on the Company’s books and records in accordance with generally accepted accounting principles and established Company financial policies;

employees work together in order to provide a mechanism for members of the organization to inform senior management of deviations from policies and procedures governing honest and ethical behavior.

Our Code of Ethics may be found at www.generalcannabis.com/code-of-ethics.

Corporate Governance

Director Independence

Mr. Peter Boockvar, Mr. Seth Oster and Mr. Mark Green are considered as “independent” as such term is defined by the natural securities exchanges.

Board Meetings and Committees

During 2019, the Board of Directors met six times, the Audit Committee met six times, the Compensation Committee met one time and the Nominating and Corporate Governance Committee (the “Nominating Committee”) met one time. Each director who was on the Board during this timeframe attended at least 75% of the aggregate number of meetings held during his term of service.

Audit Committee

Our Audit Committee includes each Mr. Mr. Boockvar and Mr. Green. The Audit Committee, among other things:

reviews the annual audited consolidated financial statements with management and the independent auditors and determines whether to recommend to the Board of Directors that they be included in our Annual Report on Form 10-K;

reviews proposed major changes to our auditing and accounting principles and practices;

reviews and evaluates our system of internal control;

reviews significant financial reporting issues raised by management or the independent auditors; and

establishes procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters as well as the confidential and anonymous submission by our employees of concerns regarding questionable accounting or auditing matters.

The Board has determined that Mr. Boockvar is an “audit committee financial expert” as defined in the applicable rules and regulations of the Exchange Act and that Mr. Boockvar and Mr. Green are “independent directors” as defined under the rules of the national securities exchanges. Mr. Boockvar serves as chair of the Audit Committee.

Compensation Committee

The Compensation Committee oversees our executive compensation and recommends various incentives for key employees to encourage and reward increased corporate financial performance, productivity and innovation. The Compensation Committee is responsible for: (a) assisting the Board in fulfilling its fiduciary duties with respect to the oversight of our compensation plans, policies and programs, including assessing our overall compensation structure, reviewing all executive compensation programs, incentive compensation plans and equity-based plans, and determining executive compensation; and (b) reviewing the adequacy of the Compensation Committee charter on an annual basis.

Mr. Boockvar, Mr. Oster and Mr. Green are the members of the Compensation Committee, and Mr. Green serves as chair of the Compensation Committee. During the year ended December 31, 2019, no executive officer of the Company served as a member of the compensation committee (or any other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served on the Company’s Compensation Committee. Our Chief Executive Officer, upon request, may attend selected meetings of the Compensation Committee.

Nominating and Corporate Governances Committee

The purpose of the Nominating Committee is to identify suitable qualified candidates to be proposed for appointment or election to the Board and to develop corporate governance policies for the Board. The members of the Nominating Committee are Mr. Boockvar and Mr. Oster each of whom the Board has determined is an “independent director” as defined under the rules of the national securities exchanges. Mr. Oster serves as Chair of the Nominating Committee.

Committee Charters

The Charters of the Audit Committee and the Compensation Committee are available on our website at https://www.generalcann.com/investor-relations/#board.

Role in Risk Oversight

Companies face a variety of risks, including credit risk, liquidity risk, and operational risk. The Board of Directors believes an effective risk management system will allow the Company to (1) make timely identifications of the material risks that the Company faces, (2) communicate necessary information with respect to material risks to senior executives and, as appropriate, to the Board or Audit Committee, (3) implement appropriate and responsive risk management strategies consistent with the Company’s risk profile, and (4) integrate risk management into Company decision-making.

The Board has designated the Audit Committee to take the lead in overseeing risk management. The Audit Committee discusses with management the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Company’s risk assessment and risk management policies.

The Board encourages management to promote a corporate culture that incorporates risk management into the Company’s corporate strategy and day-to-day business operations. The Board also works, with the input of the Company’s executive officers, to assess and analyze the most likely areas of future risk for the Company.

Attendance at Annual Meetings of the Stockholders

We have no policy requiring Directors and Director Nominees to attend its annual meeting of stockholders; however, all Directors and Director Nominees are encouraged to attend.

Indemnification of Officers and Directors

Our Articles of Incorporation provide that we may indemnify any and all of our officers, directors, employees or agents or former officers, directors, employees or agents, against expenses actually and necessarily incurred by them, in connection with the defense of any legal proceeding or threatened legal proceeding, except as to matters in which such persons shall be determined to not have acted in good faith and in our best interest.

Stockholder Communications

Stockholders may send communications to our directors as a group or individually, by writing to those individuals or the group: c/o the Chief Executive Officer c/o General Cannabis Corp, 6565 E. Evans Avenue, Denver, CO 80224. The Chief Executive Officer will review all correspondence received and will forward all correspondence that is relevant to the duties and responsibilities of the Board or the business of the Company to the intended director(s). Examples of inappropriate communication include business solicitations, advertising and communication that is frivolous in nature, relates to routine business matters (such as product inquiries, complaints or suggestions), or raises grievances that are personal to the person submitting the communication. Upon request, any director may review communication that is not forwarded to the directors pursuant to this policy.

ITEM 11. EXECUTIVE COMPENSATION

The following table provides certain information regarding compensation awarded to, earned by or paid to each of our named executive officers in the years ended December 31, 2019 and 2018.

Summary Compensation Table


Name & Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards ($)⁽²⁾	All Other Compensation ($)	Total ($)
Steve Gutterman
Chief Executive Officer	2019	17,708	—	—	129,053	—	146,762
(Joined December 13, 2019)

Michael Feinsod⁽³⁾
Former Chief Executive Officer	2019	204,750	—	—	131,654	—	336,404

Jessica Bast	2019	134,222	—	—	66,039	—	200,261
Principal Financial and Accounting Officer	2018	109,051	—	—	46,504	—	155,555

Robert Frichtel⁽¹⁾	2019	32,667	—	—	41,849	106,476	180,992
Former Chief Executive Officer	2018	195,917	—	—	125,554	—	321,471

Brian Andrews⁽⁴⁾	2019	172,764	50,000	—	151,496	—	374,260
Former Chief Financial Officer and Principal Financial and Accounting Officer	2018	166,322	—	—	129,198	—	295,520

(1)

On January 7, 2019, Mr. Frichtel retired as Chief Executive Officer and provided his resignation to the Board of Directors. On January 7, 2019, the Board appointed Michael Feinsod, the Chairman of the Board, as Interim Chief Executive Officer of the Company.

(2)

Represents equity-based compensation expense calculated in accordance with the provisions of Accounting Standards Codification Section 718 — Compensation — Stock Compensation, using the Black-Scholes option pricing model as set forth in Notes to our consolidated financial statements in Item 8.

(3)

On January 7, 2019, Mr. Feinsod was appointed Interim Chief Executive Officer of the Company. On August 5, 2019, Mr. Feinsod was appointed Chief Executive Officer of the Company. On December 16, 2019, Mr. Feinsod resigned as Chief Executive Officer, but has remained the Executive Chariman of the Board of Directors.

(4)

On December 31, 2019, Mr. Andrews retired as Chief Financial Officer and provided his resignation to the Board of Directors.

Employment Agreements

Steve Gutterman – In connection with his appointment as Chief Executive Officer, we entered into an employment agreement with Mr. Gutterman dated December 13, 2019. The term of the employment agreement will continue until December 13, 2023 unless terminated earlier as provided in the employment agreement. The employment agreement provides for an annual base salary of $425,000 and Mr. Gutterman is eligible to receive an annual bonus of up to 250% of Mr. Gutterman’s base salary, with the bonus amount dependent on the level of achievement by the Company of certain performance metrics. In light of the uncertainty and adverse economic conditions caused by the COVID-19 pandemic and its potential impact on the business of the Company, Mr. Gutterman agreed to a 50% reduction in his base salary, effective April 29, 2020. Mr. Gutterman entered into an amendment dated April 29, 2020, to his prior employment agreement with the Company dated December 13, 2019, in order to reflect the salary reduction,

In connection with his appointment as Chief Executive Officer, Mr. Gutterman was also granted an option to purchase 1,250,000 shares of Common Stock, with 250,000 of the shares underlying the initial stock options being vested on the date of grant, and with the remaining 1,000,000 of the shares underlying the initial stock options vesting as to one-quarter of the shares on each yearly anniversary of the date of grant. Mr. Gutterman is also entitled to receive an additional option to purchase 50,000 share of the Common Stock each fiscal quarter beginning on the first fiscal quarter of 2020. The employment agreement provides that if we terminate Mr. Gutterman’s employment at any time without cause (as defined in the employment agreement), Mr. Gutterman will be entitled to receive, subject to his execution of a general release of claims in favor of the Company, an amount equal to 12 months of his then current annual base salary.

Michael Feinsod – On December 13, 2019, Mr. Feinsod resigned as Chief Executive Officer. On August 5, 2019, the Board appointed Mr. Feinsod as Chief Executive Officer. Mr. Feinsod has held the position of Interim Chief Executive Officer of the Company since January 7, 2019. In connection with his appointment as Chief Executive Officer, we entered into an amendment of Mr. Feinsod’s prior employment agreements with the Company dated January 21, 2019 and December 8, 2017 (the “Amendment”).

Pursuant to the Amendment, Mr. Feinsod was granted an option (the “Stock Option) to purchase 1,000,000 shares of the Company’s common stock, with a par value of $0.01 per share (“Common Stock”), with an exercise price equal to $0.83 per share, which was the closing price of the Common Stock on the OTCQX on the date of grant. The Stock Option shall vest in full on the first date on which the closing price for Common Stock equals or exceeds $4.51 per share for five (5) consecutive trading days.

In connection with his appointment as Interim Chief Executive Officer, we entered into a new employment agreement with Mr. Feinsod on January 21, 2019. The new employment agreement provides for an annual base salary of $210,000. Mr. Feinsod is also eligible for an annual discretionary bonus based on his achievement of pre-established performance goals and other criteria established by the board of directors.

In addition, on December 8, 2017, we entered into an agreement with Mr. Feinsod for his continued service as Executive Chairman of our Board of Directors, which was previously filed by the Company with the SEC on a Form 8-K on December 14, 2017 (the “Executive Chairman Employment Agreement”). Pursuant to the Executive Chairman Employment Agreement, Mr. Feinsod received (a) 600,000 stock options that vest on the anniversary date of the agreement for the next three years, or 200,000 per year (“Time-based Options”); and (b) three tranches of 100,000 stock options that vest when our stock price has an average trading price for 20 days of $3.50, $5.00 and $6.50 (“Market-based Options”). The options have an exercise price of $3.45 per share and a ten-year life. These options were not issued under our 2014 Equity Incentive Plan.

In light of the uncertainty and adverse economic conditions caused by the COVID-19 pandemic and its potential impact on the business of the Company, Mr. Feinsod agreed to a 100% reduction in his base salary, effective April 24, 2020. Mr. Gutterman entered into an amendment dated April 24, 2020, to his prior employment agreement with the Company dated December 8, 2017, in order to reflect the salary reduction.

The table below reflects all outstanding equity awards made to any named executive officer that were outstanding at December 31, 2019.

OUTSTANDING EQUITY AWARDS


	Option Awards
Name	Grant Date	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable	Option Exercise Price($)	Option Expiration Date
Steve Gutterman	December 13, 2019	250,000	1,000,000	$ 0.63	December 13, 2024

Jessica Bast	October 2, 2019	–	23,080	0.67	October 2, 2024
	July 29, 2019	–	25,000	0.55	July 29, 2024
	June 4, 2019	15,000	15,000	0.97	June 4, 2024
	April 24, 2019	18,070	–	1.66	April 24, 2024
	January 21, 2019	16,580	–	2.37	January 21, 2024
	December 23, 2018	2,695	–	1.71	December 23, 2023
	October 12, 2018	5,120	–	3.37	October 12, 2023
	June 27, 2018	6,000	–	3.71	June 27, 2023
	March 30, 2018	7,500	–	2.21	March 30, 2023
	December 21, 2017	5,000	–	4.23	December 21, 2022
	September 11, 2017	25,000	–	1.45	September 11, 2022

Brian Andrews	June 4, 2019	52,500	–	0.97	June 30, 2020
	December 23, 2018	12,500	–	1.71	June 30, 2020
	October 12, 2018	25,000	–	3.37	June 30, 2020
	September 20, 2018	30,000	–	4.02	June 30, 2020
	June 27, 2018	30,000	–	3.71	June 30, 2020
	March 30, 2018	35,000	–	2.21	June 30, 2020
	December 21, 2017	25,000	–	4.23	June 30, 2020
	September 15, 2017	300,000	–	1.39	June 30, 2020
	June 20, 2017	15,000	–	1.92	June 30, 2020
	March 31, 2017	7,500	–	2.41	June 30, 2020
	January 24, 2017	25,000	–	2.69	June 30, 2020

Compensation of Directors

The following table shows information regarding the compensation earned during the fiscal year ended December 31, 2019 by our Board of Directors for service on the board of directors.


Name	Fees Earned or Paid in Cash	Stock Awards	Option Awards	Total
Michael Feinsod	$15,000	—	$ 215,386	$ 230,386
Robert Frichtel	—	—	20,523	20,523
Peter Boockvar	—	—	225,246	225,246
Mark Green	—	—	225,246	225,246
Duncan Levin	—	—	216,353	216,353
Seth Oster	—	—	40,255	40,255

Outstanding Director Option Awards at Fiscal Year End

The following options granted as director compensation were outstanding as of December 31, 2019: Michael Feinsod —3,673,080; Robert Frichtel — 0; Peter Boockvar — 1,975,000; Mark Green — 775,000; Duncan Levin — 400,000; and Seth Oster — 175,000 .

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information regarding beneficial ownership of our common stock as of May 5, 2020: (i) by each of our directors, (ii) by each of the Named Executive Officers, (iii) by all of our executive officers and directors as a group, and (iv) by each person or entity known by us to beneficially own more than five percent (5%) of any class of our outstanding shares. As of May 5, 2020, there were 40,281,881 shares of our common stock outstanding.


	Common Stock Beneficially Owned
Named Executive Officers and Directors:	Number of Shares	Percentage of Shares
Steve Gutterman⁽¹⁾	250,000	*
Jessica Bast⁽²⁾	115,965	*
Brian Andrews⁽³⁾	557,500	1%
Michael Feinsod⁽⁴⁾	6,249,980	14%
Peter Boockvar⁽⁵⁾	1,825,000	4%
Mark Green⁽⁶⁾	625,000	2%
Seth Oster⁽⁷⁾	78,692	*
All current directors and executive officers as a group ((6) persons)	9,452,137	20%

Indicates less than 1%.

(1)

Includes options to purchase 250,000 shares of common stock.

(2)

Includes options to purchase 115,695 shares of common stock.

(3)

Includes options to purchase 557,500 shares of common stock.

(4)

Includes 996,800 shares of common stock beneficially owned by Mr. Feinsod and Infinity Capital, options to purchase 4,844,180 shares of common stock, and warrants to purchase 409,000 shares of common stock. As the managing member of Infinity Capital, Mr. Feinsod may be deemed to be the beneficial owner of the shares of common stock that are held by Infinity Capital

(5)

Includes options to purchase 1,825,000 shares of common stock.

(6)

Includes options to purchase 625,000 shares of common stock.

(7)

Includes warrants to purchase 25,000 shares of common stock.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, DIRECTOR INDEPENDENCE

Transactions with Related Persons

None

Director Independence

Mr. Peter Boockvar, Mr. Seth Oster and Mr. Mark Green are considered as “independent” directors under the applicable definition of the listing standards of the NASDAQ Capital Market.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Audit Fees

Audit fees consist of fees for professional services rendered for the audit of our consolidated financial statements included in our Annual Report on Form 10-K and the review of financial statements included in our Quarterly Reports on Form 10-Q. Audit-related fees relate to procedures performed in conjunction with our Form S-1 and Form S-8 filings. The aggregate fees billed for professional services rendered by our principal accountants, Marcum LLP and Hall and Company, Inc., were as follows:


		2019		2018
Audit	$	162,028	$	218,000
Audit-related		24,000		52,150
Tax		–		–
Total	$	186,028	$	270,150

Pre–Approval Policy of Services Performed by Independent Registered Public Accounting Firms

The Audit Committee pre-approves all auditing services and permitted non-audit services, if any, including tax services, to be performed for us by our independent auditor, subject to the de minimis exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act, which are approved by the Audit Committee prior to the completion of the audit. The scope of the pre-approval includes pre-approval of all fees and terms of engagement. The Audit Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant pre-approvals of audit and permitted non-audit services, provided that decisions of such subcommittee to grant pre-approvals shall be presented to the full Audit Committee at its next scheduled meeting.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

The following Exhibits are filed with this Report:


Exhibit Number		Exhibit Name
1		Securities Purchase Agreement (Incorporated by reference to Exhibit 1 to our Form 8-K filed on August 3, 2015)
2.1		Articles of Merger (Acquisition of shares in Advanced Cannabis Solutions) (Incorporated by reference to Exhibit 2 to our registration statement on Form S-1, File No. 333-163342)
2.2*		Asset Purchase Agreement dated as of January 24, 2020, by and between the Company and Dalton Adventures, LLC
2.3*		Asset Purchase Agreement, dated as of April 7, 2020, between the Company and the Organic Seed, LLC
3.1		Amended and Restated Articles of Incorporation (Incorporated by reference to Exhibit 3.3 to our registration statement on Form S-1, File No. 333-163342)
3.2		Articles of Amendment (name change) (Incorporated by reference to Exhibit 3.6 to our Form 8-K filed on June 18, 2015)
3.3		Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.1 to our Form 8-K filed on February 1, 2017)
10.1		Warrant to Purchase Common Stock (Incorporated by reference to Exhibit 4.5 to our Form 8-K filed on April 6, 2016)
10.2		Form of Common Stock Purchase Warrant (Incorporated by reference to Exhibit 4.1 to our Form 8-K filed June 4, 2019)
10.3†		Executive Chairman of the Board and Director Agreement between the Company and Michael Feinsod dated August 4, 2014 (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed on August 5, 2014)
10.4		Form of Employee Nonstatutory Stock Option Agreement (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed on July 16, 2015)
10.5		Warrant to Purchase Common Stock (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed on August 3, 2015)


10.6		Option for the Company to Purchase Note and Equity Interest (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed on November 9, 2015)
10.7		Form of Amendment to Option to Purchase Note and Equity Interest (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed on June 8, 2016)
10.8		Form of Warrant to Purchase Common Stock (Incorporated by reference to Exhibit 10.2 to our Form 8-K filed on June 8, 2016)
10.9†		Employment Agreement, dated as of December 8, 2017, among the Company and Michael Feinsod (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed on December 14, 2017)
10.10†		Form of Time-Based Options Award (Incorporated by reference to Exhibit 10.2 to our Form 8-K filed on December 14, 2017)
10.11†		Form of Performance-Based Options Award (Incorporated by reference to Exhibit 10.3 to our Form 8-K filed on December 14, 2017)
10.12†		Amended and Restated 2014 Equity Incentive Plan (Incorporated by reference to Exhibit 10.2 to our Form 10-Q filed on November 8, 2018)
10.13		Agreement with Flowhub Holdings, LLC Safe dated November 5, 2018 (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed on November 9, 2018)
10.14		Form of First Amendment to Secured Promissory Note (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed May 6, 2019)
10.15		Form of Securities Purchase Agreement (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed June 4, 2019)
10.16		Promissory Note Purchase Agreement (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed July 24, 2019)
10.17		Form of Promissory Note (Incorporated by reference to Exhibit 10.2 to our Form 8-K filed July 24, 2019)
10.18†		Amendment to Agreements, dated August 6, 2019 (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed August 6, 2019)
10.19		Form of Securities Exchange Agreement (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed September 17, 2019)
10.20		Form of Securities Purchase Agreement (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed September 26, 2019)
10.21		Contract to Buy and Sell Real Estate (Commercial) (Incorporated by reference to Exhibit 10.5 to our Form 8-K filed November 20, 2019)
10.22		Deed of Trust Note dated December 31, 2019 (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed January 14, 2020)
10.23		Deed of Trust, Assignment of Leases and rents, Security Agreement and Fixture Filing dated January 8, 2020 (Incorporated by reference to Exhibit 10.2 to our Form 8-K filed January 14, 2020)
10.24		Form of Unsecured Promissory Note (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed February 24, 2020)
10.25		Form of 2020 A Warrant to Purchase Shares of Common Stock (Incorporated by reference to Exhibit 10.2 to our Form 8-K filed February 24, 2020)
10.26		Convertible Promissory Note (Incorporated by reference to Exhibit 10.3 to our Form 8-K filed February 24, 2020)
10.27		Promissory Note Exchange Agreement (Incorporated by reference to Exhibit 10.4 to our Form 8-K filed February 24, 2020)
10.28†*		Employment Agreement, dated December 13, 2019, between Steve Gutterman and the Company
10.29†*		Amendment to Employment Agreement, dated April 29, 2020, between Steve Gutterman and the Company
10.30†*		Amendment to Employment Agreement, dated April 24, 2020, between Michael Feinsod and the Company
14.1		Code of Ethics
21.1*		Subsidiaries
23.1*		Consent of Hall & Company
23.2*		Consent of Marcum LLP
31.1*		Certification pursuant to Section 302 of the SarbanesOxley Act of 2002 of Principal Executive Officer
31.2*		Certification pursuant to Section 302 of the SarbanesOxley Act of 2002 of Principal Financial and Accounting Officer
32.1*		Certification pursuant to Section 906 of the SarbanesOxley Act of 2002 of the Principal Executive and Financial Officers
101		XBRL Interactive Data Files

(*) Filed herewith.

(†) Denotes management contract or compensatory plan, contract or arrangement

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.


Signature	Title	Date

/s/ Steve Gutterman	Principal Executive Officer	May 14, 2020
Steve Gutterman

In accordance with the Exchange Act, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


Signature	Title	Date

/s/ Steve Gutterman	Principal Executive Officer and Director	May 14, 2020
Steve Gutterman

/s/ Jessica Bast	Principal Financial and Accounting Officer	May 14, 2020
Jessica Bast

/s/ Michael Feinsod	Chairman of the Board of Directors	May 14, 2020
Michael Feinsod

/s/ Seth Oster	Director	May 14, 2020
Seth Oster

/s/ Peter Boockvar	Director	May 14, 2020
Peter Boockvar

/s/ Mark Green	Director	May 14, 2020
Mark Green

Exhibit 2.2

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (the “Agreement”) is entered into on January 24, 2020, by and between General Cannabis Corp., a Colorado Corporation (“Buyer”), or its assigns, and Dalton Adventures, LLC, a Colorado limited liability company (“Seller”). Seller and Buyer are sometimes referred to individually as a “Party” and collectively as the “Parties.”

Recitals

Seller owns and operates a retail marijuana cultivation facility (the “Business”) located at 3705 75th Street Boulder, CO 80301 (the “Premises”);

Seller is licensed and authorized to cultivate and sell retail marijuana at the Premises under the Marijuana Code; and

Buyer desires to purchase certain assets from Seller, and Seller desires to sell certain assets to Buyer, subject to the terms of this Agreement and the Related Agreements.

NOW THEREFORE, the Parties agree as follows:

Terms

ARTICLE I

DEFINITIONS AND CONSTRUCTION

1.1

Definitions. Capitalized terms have the meanings set forth below unless defined elsewhere in this Agreement.

“Affiliate” means any Person that directly or indirectly through one or more intermediaries, Controls, is Controlled by or is under common Control with the Person specified.

“Application Fees” means all fees paid to Governmental Authorities associated with the Change of Ownership applications.

“Assets” means the Licenses; including inventory, growing plants, furniture, fixtures, business personal property of any kind, nature, character, or description, operated, owned, or leased by Seller at the Premises, and any intellectual property owned by Seller, as more fully described on Exhibit A.

“Business Day” means a day other than Saturday, Sunday, or any day on which banks located in the State of Colorado are authorized or obligated to close.

“CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and any rules or regulations promulgated thereunder.

“Change of Ownership” means the transfer of ownership of the Licenses from Seller to Buyer.

“Charter Documents” means with respect to any Person, the articles or certificate of incorporation, formation or organization and by-laws, the limited partnership agreement, the partnership agreement or the limited liability company agreement, or such other organizational documents of the Person, including those that are required to be registered or kept in the place of incorporation, organization or formation of the Person and which establish the legal personality of the Person.

“County” means Boulder County, Colorado.

“Claim” means any demand, claim, action, investigation, or Proceeding.

“Contract” means any legally binding written contract, lease, license, evidence of indebtedness, mortgage, indenture, purchase order, binding bid, letter of credit, security agreement or other written and legally binding arrangement.

“Control” means the power, direct or indirect, to direct or cause the direction of the management and policies of a Person whether through ownership of voting securities or ownership interests, by Contract or otherwise, and specifically with respect to a corporation, partnership or limited liability company, means direct or indirect ownership of at least 50% of the voting securities in the corporation or of the voting interest in a partnership or limited liability company.

“Due Diligence Period” means the period of time beginning on the date of this Agreement and ending 30 days thereafter.

“Environmental Laws” means any federal, state, local or foreign law (including, without limitation, common law), treaty, judicial decision, regulation, rule, judgment, order, decree, injunction, permit or governmental restriction or any agreement with any Governmental Authority or other third party, whether now or hereafter in effect, relating to the environment, human health and safety or to pollutants, contaminants, wastes or chemicals or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous substances, wastes or materials.

“Environmental Liabilities” means any and all liabilities arising in connection with or in any way relating to Seller (or any predecessor of Seller or any prior owner of all or part of its business and assets), any property now or previously owned, leased or operated by Seller, the Business (as currently or previously conducted), the Assets or any activities or operations occurring or conducted at the Premises (including, without limitation, offsite disposal), whether accrued, contingent, absolute, determined, determinable or otherwise, which (i) arise under or relate to any Environmental Law and (ii) relate to actions occurring or conditions existing on or prior to the Closing.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Final Governmental Approval” means the final decisions by the MED and the County in writing approving the Change of Ownership, and such approvals (a) do not include any responsibility of Buyer or Buyer’s owners for the actions of Seller or Seller’s owner with respect to an administrative investigation or administrative disciplinary action by the MED or the County; and (b) do not subject Buyer or Buyer’s owners to discipline by the MED or the County for the actions of Seller or Seller’s owner with respect to an administrative investigation or administrative disciplinary action by the MED or the County.

“Governmental Authority” means any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of the United States or any state, county, city or other political subdivision or similar governing entity.

“Gross Revenue” means all revenue received by Seller for sale of inventory in the ordinary course of business, less any deductions to Seller’s revenue for returns, discounts, or contract disputes.

“Hazardous Substances” means any pollutant, contaminant, waste or chemical or any toxic, radioactive, ignitable corrosive, reactive or otherwise hazardous substance, waste or material or any substance, waste or material having any constituent elements displaying any of the foregoing characteristics including, without limitation, petroleum, its derivatives, by-products and other hydrocarbons, and any substance, waste or material regulated under any Environmental Law.

“Interim Period” means the time period from the date of this Agreement through and including the Closing.

“Knowledge” when used in a particular statement of fact in this Agreement, means the actual knowledge (as opposed to any constructive or imputed knowledge) of a Party or its owners, without inquiry.

“Laws” means all laws, statutes, rules, regulations, ordinances, and other pronouncements having the effect of law of a Governmental Authority, except for any United States federal law, rule or regulation related to marijuana which this Agreement may violate.

“Licenses” means the following licenses held by Seller:

(a)

Seller’s State of Colorado Retail Marijuana Cultivation Facility License Number 403R-00501; and

(b)

Seller’s Boulder County Retail Marijuana Cultivation License Number RMB-15-0007.

“Lien” means any mortgage, pledge, assessment, security interest, lien, or other similar encumbrance.

“Loss” means any and all losses, judgments, liabilities, amounts paid in settlement, damages, fines, penalties, deficiencies, losses, and expenses (including interest, court costs, reasonable fees of attorneys, accountants and other experts or other reasonable expenses of litigation or other Proceedings or of any Claim, default or assessment), but only to the extent the losses (a) are not reasonably expected to be covered by a payment from some third party or by insurance or otherwise recoverable from third parties, and (b) are net of any associated benefits arising in connection with the loss, including any associated Tax benefits.

“Marijuana Code” means, collectively, Sections 14 and 16 of Article XVIII of the Colorado Constitution, the Colorado Marijuana Code, §§ 44-10-101, et seq., C.R.S., as the same may be supplemented or amended from time to time, together with the regulations promulgated thereunder, and all applicable local Laws and regulations thereto promulgated by a Governmental Authority.

“Material Adverse Effect” means any occurrence, condition, change, development, event or effect that has or could reasonably be expected to have a materially adverse effect on the assets, properties, financial condition, or results of operations on a Party, as the context dictates, taken as a whole.

“MED” means the Colorado Marijuana Enforcement Division.

“Permits” means all licenses (including the Licenses), permits, certificates of authority, authorizations, approvals, registrations, franchises, and similar consents granted by a Governmental Authority related to the transactions contemplated by this Agreement.

“Person” means any natural person, corporation, general partnership, limited partnership, limited liability company, proprietorship, other business organization, trust, union, association, or Governmental Authority.

“Proceeding” means any complaint, lawsuit, action, suit, Claim (including claim of a violation of Law), or other proceeding at law or in equity or order or ruling, in each case by or before any Governmental Authority or arbitral tribunal.

“Related Agreements” means that certain Employment Agreement between Buyer and Seller dated January 24, 2020 (“EA”), attached as Exhibit F, and that certain Commercial Lease Agreement between Buyer and Dalton Farms, LLC (“Landlord”) dated January 24, 2020 (“Lease”), attached as Exhibit G.

“Securities Act” means the Securities Act of 1933, as amended.

“Tax” or “Taxes” means any federal, state, local, or foreign income, gross receipts, ad valorem, sales, use, employment, social security, disability, occupation, property, severance, value added, goods and services, documentary, stamp duty, transfer, conveyance, capital stock, excise, or withholding tax or other taxes imposed by or on behalf of any Governmental Authority, including any interest, penalty or addition thereto.

“Tax Return” means any declaration, report, statement, form, return or other document or information required to be supplied to a Governmental Authority in connection with Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“Termination Date” means October 1, 2020.

1.2

Rules of Construction.

(a)

All article, section, subsection, schedules and exhibit references used in this Agreement are to articles, sections, subsections, schedules and exhibits to this Agreement unless otherwise specified. The exhibits and schedules attached to this Agreement constitute a part of this Agreement and are incorporated herein for all purposes.

(b)

If a term is defined as one part of speech (such as a noun), it has a corresponding meaning when used as another part of speech (such as a verb). Unless the context of this Agreement clearly requires otherwise, words importing the masculine gender include the feminine and neutral genders and vice versa. Words in the plural form include the singular form, and words in the singular form include the plural form. The words “includes” or “including” means “including without limitation,” the words “hereof,” “hereby,” “herein,” “hereunder” and similar terms in this Agreement refer to this Agreement as a whole and not any particular section or article in which the words appear and any reference to a Law includes any rules and regulations promulgated thereunder. Currency amounts referenced herein are in U.S. dollars.

(c)

Whenever this Agreement refers to a number of days, the number refers to calendar days unless Business Days are specified. Whenever any action must be taken hereunder on or by a day that is not a Business Day, then the action may be validly taken on or by the next day that is a Business Day.

(d)

Each Party and its respective attorneys have been given an equal opportunity to negotiate the terms and conditions of this Agreement, and any rule of construction to the effect that ambiguities are to be resolved against the drafting Party or any similar rule operating against the drafter of an agreement will not be applicable to the construction or interpretation of this Agreement.

ARTICLE II

PURCHASE OF BUSINESS, PAYMENT, AND CLOSING

2.1

Purchase of Assets. At the Closing, and subject to the terms of this Agreement, Seller shall sell to Buyer and Buyer shall purchase from Seller the Assets.

2.2

Purchase Price; Issuance of Buyer Shares; Adjustments.

(a)

The purchase price for the Assets (the “Purchase Price”) is equal to 1.4 times Seller’s Gross Revenue for the twelve-month period prior to the Closing, provided, that the Purchase Price will not be lower than $3,000,000.00, notwithstanding anything to the contrary set forth in this Agreement. Buyer shall pay the Purchase Price by issuing to Seller the number of shares of common stock of Buyer (the “Buyer Shares”) equal to: (i) the Purchase Price divided by (ii) the volume weighted average price of the Buyer Shares for 30 consecutive trading days ending on the second trading day prior to the Closing (the “VWAP Price”); provided, that if the VWAP Price exceeds $0.85, then the VWAP Price will be adjusted to equal $0.85 for the purpose of the foregoing calculation of the number of Buyer Shares to be issued to Seller.

(b)

The Purchase Price will be allocated among the Assets as set forth in the “Allocation Statement” attached as Exhibit B and in accordance with Section 1060 of the Code. The Parties shall (i) be bound by the Allocation Statement and (ii) act in accordance with the Allocation for all tax purposes.

(c)

If an adjustment is made with respect to the Purchase Price pursuant to Section 2.2(g) the Allocation Statement will be adjusted in accordance with Section 1060 of the Code and as agreed by the Parties. The Parties file any additional information return required to be filed as provided in Section 1060 of the Code and to treat the Allocation Statement as adjusted in the manner described in Section 2.2(g)

(d)

No later than 30 days prior to the filing of their respective Forms 8594 relating to the transactions contemplated by this Agreement, each Party shall deliver to the other Party a copy of its Form 8594.

(e)

Buyer shall make reasonable efforts to register the resale of all Buyer Shares issued in this transaction on a Form S-1, or, if available, Form S-3. For a period of six months following the Closing, Buyer shall not lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right, or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly the Buyer Shares subject to such lockup.

(g)

At the Closing, Seller shall deliver to Buyer a statement of the current working capital balance (current assets less current liabilities) of the Assets prepared in accordance with Generally Accepted Accounting Principles (the “Closing Working Capital Balance”), certified to be an accurate statement by John Barker Dalton. The Purchase Price shall be adjusted by the amount of the Closing Working Capital Balance.

2.3

Closing. The closing for the purchase and sale of the Assets (the “Closing”) will be held within five Business Days of Final Governmental Approval (the “Closing Date”). The Closing will be at a time and place agreed to by the Parties, unless the Parties agree that the Closing need not occur at a specific location.

2.4

Documents Deliverable at Closing. At the Closing:

(a)

Seller shall provide to Buyer (collectively, “Seller’s Closing Documents”)

(i)

An executed Seller’s Officer’s Certificate in the form attached hereto as Exhibit C;

(ii)

The Closing Working Capital Balance; and

(iii)

The Bill of Sale for the Assets in the form attached hereto as Exhibit E.

(a)

Buyer shall provide to Seller an executed Buyer’s Officer’s Certificate in the form attached hereto as Exhibit D.

ARTICLE III

SELLER’S STATEMENTS OF FACT

Seller states that the following are true as of the date of this Agreement:

3.1

Seller’s Organization. Seller is a limited liability company duly formed, validly existing and in good standing under the Laws of the State of Colorado and has all requisite limited liability company power and authority to conduct its Business as it is now being conducted in accordance with the Laws.

3.2

Authority. Seller has all requisite power and authority to execute and deliver this Agreement and the other instruments to be delivered by Seller at the Closing, to perform its obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby, subject to approvals required by the Marijuana Code. Subject to approvals required by the Marijuana Code, the execution and delivery of this Agreement and the other instruments to be delivered by Seller at the Closing, and the performance by Seller of its obligations hereunder and thereunder, have been duly and validly authorized by necessary action. This Agreement has been, and the instruments to be delivered by Seller at the Closing will at the Closing be, duly and validly executed and delivered by Seller and constitute (or, in the case of instruments to be delivered by Seller at the Closing, will at the Closing constitute) the legal, valid and binding obligation of Seller enforceable against it in accordance with its terms, subject to approvals required by the Marijuana Code, except as the same may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, arrangement, moratorium or other similar Laws relating to or affecting the rights of creditors generally, or by general equitable principles.

3.3

No Conflicts; Consents and Approvals. The execution and delivery by Seller of this Agreement do not, and the performance by Seller of its obligations under this Agreement does not:

(a)

violate or result in a breach of its Charter Documents;

(b)

violate or result in a default under any material Contract to which Seller is a party, except for any violation or default that would not be expected to result in a Material Adverse Effect on Seller’s ability to perform its obligations hereunder; or

(c)

(i) violate or result in a breach of any Law applicable to Seller, except for the violations or breaches that would not result in a Material Adverse Effect on Seller’s ability to perform its obligations hereunder or (ii) require any consent or approval of any Governmental Authority other than the MED and the County and under any Law applicable to Seller, other than in each case any consent or approval which, if not made or obtained, would not reasonably be expected to result in a Material Adverse Effect on Seller.

3.4

Proceedings. Except as disclosed herein, there is no Proceeding pending, or to Seller’s Knowledge threatened, against Seller before or by any Governmental Authority, which seeks a writ, judgment, order or decree restraining, enjoining, or otherwise prohibiting or making illegal any of the transactions contemplated by this Agreement.

3.5

Broker. Seller does not have any liability or obligation to pay fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which Seller or any of its Affiliates could become liable or obligated. Seller has engaged broker, Paul Isenbergh (“Broker”) in connection with the transactions contemplated by this Agreement. Any liability, fee or commission due to Broker shall be Seller’s sole responsibility, and Broker is not intended, nor shall be construed as a third-party beneficiary of this Agreement.

3.6

Compliance with Laws and Orders. Seller is in compliance with all Laws and orders applicable to it except where any non-compliance would not reasonably be expected to result in a Material Adverse Effect on Seller; provided, however, that this Section 3.6 does not address matters relating to Taxes, which are exclusively addressed by Section 3.7, or Permits, which are exclusively addressed by Section 3.8. Seller has no Knowledge of any fact, circumstance, or condition which could cause the Assets or the Premises to violate the Marijuana Code concerning required testing or contaminants. Seller has no Knowledge of any fact, circumstance, or condition which could cause the Assets or the Premises to violate the Colorado Pesticide Applicator’s Act, C.R.S. §§ 35-10-101, et. seq.

3.7

Taxes. Except as would not have a Material Adverse Effect on Seller, (a) All Tax Returns that are required to have been filed by Seller have been duly and timely filed; (b) all Taxes that are required to have been paid by Seller have been duly and timely paid in full; (c) all withholding Tax requirements imposed on Seller have been satisfied in full in all respects; (d) Seller does not have in force any waiver of any statute of limitations with respect to Taxes or any extension of time with respect to a Tax assessment or deficiency; and (e) there are no threatened, pending, or active audits or Proceedings involving unpaid Taxes of Seller.

3.8

Permits. Seller possesses all Permits that are required for the ownership and operation of its Business in the manner in which it is currently owned. All Permits described in this Section 3.8 are in full force and effect, and Seller is in compliance with each such Permit.

3.9

Operating Facility. The business at the Premises is a licensed Retail Marijuana Cultivation Facility as defined in the Marijuana Code.

3.10

Seller’s Member. John Barker Dalton is the sole member of Seller.

3.11

Environmental Matters. To Seller’s Knowledge, Seller is in compliance with all Environmental Laws and any other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in such Environmental Laws, insofar as failure to comply with the same could result in any liability affecting, or other reduce the value of the Assets. Seller has no Knowledge of any liabilities arising in connection with or in any way relating to the Assets of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, arising under or relating to any Environmental Law, and there are no facts, events, conditions, situations or set of circumstances which could reasonably be expected to result in or be the basis for any such liability. Seller is not aware of any event, condition, circumstance, activity, practice, incident, action or plan which will interfere with or prevent continued compliance with or which would give rise to any liability under any Environmental Law or give rise to any common law or statutory liability, based on or resulting from Seller’s or its agents’ manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling, or the emission, discharge, or release into the environment, of any Hazardous Substance, that could result in any liability affecting, or other reduce the value of, the Assets or Business. To Seller’s Knowledge, Seller has taken all actions necessary under applicable requirements of Environmental Law to register any products or materials required to be registered by Seller (or any of its agents) thereunder. To Seller’s Knowledge, there is no Proceeding, notice or demand letter pending or threatened against Seller relating in any way to Environmental Laws, or notice or demand letter issued, entered, promulgated or approved thereunder. To Seller’s Knowledge, no property now or previously owned, leased or operated by Seller, nor any property to which Hazardous Substances located on or resulting from the use of any Asset or the Premises have been transported, is listed or, proposed for listing on the National Priorities List promulgated pursuant to CERCLA, on CERCLIS (as defined in CERCLA) or on any similar federal, state, local or foreign list of sites requiring investigation or cleanup.

3.12

Securities.

(a)

Purchase Entirely for Own Account. The Buyer Shares will be acquired for investment for Seller’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and Seller has no present intention of selling, granting any participation in, or otherwise distributing the same. Seller does not presently have any Contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any other Person with respect to any of such Buyer Shares. Seller has not been formed for the specific purpose of acquiring such Buyer Shares.

(b)

Disclosure of Information. Seller has had an opportunity to discuss to Seller’s satisfaction Buyer’s business, management, financial affairs and the terms and conditions of the offering of the Buyer Shares with Buyer’s management and has had an opportunity to review Buyer’s facilities. Such discussions, as well as any written information delivered by Buyer to Seller, were intended to describe the aspects of Buyer’s business which Buyer believes to be material.

(c)

Restricted Securities. The Buyer Shares have not been registered and are being issued to Seller pursuant to Section 4(2) of the Securities Act or Regulation D promulgated under the Securities Act. The Buyer Shares are “restricted securities” under applicable U.S. federal and state securities Laws and a resale of the Buyer Shares may be made only pursuant to registration under the Securities Act or an available exemption from registration.

(d)

Rule 144. Seller is familiar with the provisions of Rule 144 promulgated under the Securities Act, which, in substance, permits limited public resale of “restricted securities” acquired, directly or indirectly, from the issuer of the securities (or from an affiliate of such issuer), in a non-public offering subject to the satisfaction of certain conditions and which rule requires, among other things, that Buyer be subject to the reporting requirements of the Exchange Act, that resales of securities take place only after the holder of the shares has held the shares for certain specified time periods, and under certain circumstances, and that resales of securities be limited in volume and take place only pursuant to brokered transactions. Buyer has provided no assurances as to whether seller will be able to resell any or all of the Buyer Shares pursuant to Rule 144.

(e)

Resale Restrictions. If all of the applicable requirements of Rule 144 are not satisfied, registration under the Securities Act, compliance with Regulation A promulgated under the Securities Act, or some other registration exemption will be required with respect to the Buyer Shares. Notwithstanding the fact that Rule 144 is not exclusive, the staff of the Securities and Exchange Commission has expressed its opinion that Persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk.

(f)

No General Solicitation. Neither Buyer, nor any of its officers, employees, agents, directors, members, attorneys, shareholders, or partners (a) has engaged the services of a broker, investment banker or finder to contact any potential investor, nor has Seller or any of Seller’s officers, employees, agents, directors, members or partners, agreed to pay any commission, fee or other remuneration to any third party to solicit or contact any potential investor; (b) engaged in any general solicitation; or (c) published any advertisement in connection with the offer and sale of the Buyer Shares being issued hereunder.

(g)

Reliance on Exemption. The Buyer Shares are being offered and issued to it in reliance on specific exemptions from the registration requirements of federal and state securities Laws. Buyer is relying in part upon the truth and accuracy of, and Seller’s compliance with, the statements of fact, representations, warranties, agreements, acknowledgements and understandings of Seller set forth in this Article III in order to determine the availability of such exemptions and the eligibility of Seller to acquire the Buyer Shares.

3.13

No Other Representations and Warranties. Except for the representations and warranties contained in this Article III, neither Seller nor any other Person has made or makes any other express or implied representation or warranty, either written or oral, on behalf of Seller, including any representation or warranty as to the accuracy or completeness of any information, documents or material regarding the Business and the Assets furnished or made available to Buyer in any form (including any information, documents, or material delivered to Buyer on behalf of Seller for purposes of this Agreement), or as to the future revenue, profitability, or success of the Business, or any representation or warranty arising from statute or otherwise in Law.

(collectively, “Seller’s Statements of Fact”).

ARTICLE IV

BUYER’S STATEMENTS OF FACT

Buyer states that the following is true as of the date of this Agreement:

4.1

Organization. Buyer is a corporation duly formed, validly existing and in good standing under the Laws of the State of Colorado and has all requisite corporate power and authority to conduct its business as it is now being conducted.

4.2

Authority. Buyer has all requisite power and authority to execute and deliver this Agreement and the other instruments to be delivered by Buyer at the Closing, to perform its obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby, subject to approvals required by the Marijuana Code. The execution and delivery by Buyer of this Agreement and the other instruments to be delivered by Buyer at the Closing, and the performance by Buyer of its obligations hereunder and thereunder, have been duly and validly authorized by necessary action. This Agreement has been, and the instruments to be delivered by Buyer at the Closing will at the Closing be, duly and validly executed and delivered by Buyer and constitutes (or, in the case of instruments to be delivered by Buyer at the Closing, will at the Closing constitute) the legal, valid and binding obligations of Buyer enforceable against Buyer in accordance with their terms, except as the same may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, arrangement, moratorium or other similar Laws relating to or affecting the rights of creditors generally, or by general equitable principles.

4.3

No Conflicts; Consents and Approvals. The execution and delivery by Buyer of this Agreement do not, and the performance by Buyer of its obligations hereunder and the consummation of the transactions contemplated hereby do not:

(a)

violate or result in a breach of its Charter Documents;

(b)

violate or result in a default under any material Contract to which Buyer is a party, except for any such violation or default that would not reasonably be expected to result in a Material Adverse Effect on Buyer’s ability to perform its obligations hereunder; or

(c)

(i) violate or result in a breach of any Law applicable to Buyer, except as would not reasonably be expected to result in a Material Adverse Effect on Buyer’s ability to perform its obligations hereunder or (ii) require any consent or approval of any Governmental Authority (other than the MED and the County) under any Law applicable to Buyer, other than in each case any such consent or approval which, if not made or obtained, would not reasonably be expected to result in a Material Adverse Effect on Buyer’s ability to perform its obligations hereunder.

4.4

Proceedings. There is no Proceeding pending or, to Buyer’s Knowledge threatened, against Buyer before or by any Governmental Authority, which seeks a writ, judgment, order or decree restraining, enjoining, or otherwise prohibiting or making illegal any of the transactions contemplated by this Agreement.

4.5

Compliance with Laws and Orders. Buyer is not in violation of, or in default under, any Law or order applicable to Buyer the effect of which, in the aggregate, would reasonably be expected to hinder, prevent or delay Buyer from performing its obligations hereunder.

4.6

Broker. Buyer does not have any liability or obligation to pay fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which Seller or any of its Affiliates could become liable or obligated.

4.7

Securities. All common shares of stock of Buyer are issued subject to the restrictions on transfer pursuant to Section 2.2(e) of this Agreement. (collectively, “Buyer’s Statements of Fact”).

ARTICLE V
COVENANTS

5.1

Regulatory and Other Approvals. During the Interim Period:

(a)

Each Party shall attempt to obtain as promptly as practicable all material consents and approvals that either Party or its respective Affiliates are required to obtain in order to consummate the transactions contemplated hereby; provided that, for purposes of clarification, and notwithstanding anything to the contrary in this Agreement, the obtaining of the consents and approvals will not be a condition to the Closing except to the extent set forth in Articles VI or VII, as applicable.

(b)

Each Party shall (i) make or cause to be made the filings required of the Person or any of its applicable Affiliates under any Laws applicable to it with respect to the transactions contemplated by this Agreement and to pay any fees due of it in connection with the filings, as promptly as is reasonably practicable, provided that, for purposes of clarification, and notwithstanding anything to the contrary in this Agreement, the filings and payments will not be conditions to the Closing except to the extent set forth in Articles VI and VII; (ii) cooperate with the other Party and furnish the information that is necessary in connection with the other Party’s filings; (iii) use reasonable efforts to cause the expiration of the notice or waiting periods under any Laws applicable to it with respect to the consummation of the transactions contemplated by this Agreement as promptly as is reasonably practicable; (iv) promptly inform the other Party of any communication from or to, and any proposed understanding or agreement with, any Governmental Authority in respect of the filings; (v) reasonably consult and cooperate with the other Party in connection with any analyses, appearances, presentations, memoranda, briefs, arguments, and opinions made or submitted by or on behalf of any Party in connection with all meetings, actions or other Proceedings with Governmental Authorities relating to the filings; (vi) comply, as promptly as is reasonably practicable, with any requests received by the Party under any Laws for additional information, documents or other materials with respect to the filings, (vii) attempt to resolve any objections as may be asserted by any Governmental Authority with respect to the transactions contemplated by this Agreement; and (viii) contest and resist any action or other Proceeding instituted (or threatened in writing to be instituted) by any Governmental Authority challenging the transactions contemplated by this Agreement as violative of any Law.

(c)

If a Party (or any of its applicable Affiliates) intends to participate in any meeting with any Governmental Authority with respect to the filings and if permitted by, or acceptable to, the applicable Governmental Authority, it shall give the other Party reasonable prior notice of, and an opportunity to participate in, the meeting.

(d)

In connection with any such filings, Buyer shall cooperate in good faith with Governmental Authorities and with Seller and undertake promptly any and all action required to lawfully complete the transactions contemplated by this Agreement.

(e)

Each Party shall provide prompt notification to the other when it becomes aware that any such consent or approval referred to in this Section 5.1 is obtained, taken, made, given or denied, as applicable.

(f)

In furtherance of the foregoing covenants:

(i)

Each Party shall prepare, or cause its Affiliates to prepare, as soon as is practicable following the execution of this Agreement, all necessary filings applicable to it and in connection with the transactions contemplated by this Agreement that may be required under any Laws; provided that, for purposes of clarification, and notwithstanding anything to the contrary in this Agreement, the filings will not be conditions to the Closing except to the extent set forth Articles VI and VII.

(ii)

Each Party shall promptly furnish the other Party with copies of any notices, correspondence or other written communication received by it from the relevant Governmental Authority, shall promptly make any appropriate or necessary subsequent or supplemental filings required of it, and shall cooperate in the preparation of the filings as is reasonably necessary and appropriate.

(iii)

Each Party shall not, and shall cause its respective Affiliates not to, take any action that could reasonably be expected to adversely affect the approval of any Governmental Authority.

5.2

Access of Buyer; Due Diligence. During the Interim Period, Seller shall provide Buyer with reasonable access, upon reasonable notice and during normal business hours, to the Business and the Premises, subject to the Marijuana Code. During the Due Diligence Period, Seller shall provide Buyer, upon request, with access to Seller’s books and records, Seller’s standard operating procedures, and with reasonable access to Seller’s employees in order to allow Buyer to conduct due diligence.

5.3

Certain Restrictions. During the Interim Period, except as permitted or required by the other terms of this Agreement, or consented to in writing by Buyer, Seller shall not take any of the following actions:

(a)

Dissolution of Seller;

(b)

Sale of the Business or any Assets outside of the ordinary course of business; or

(c)

Materially alter the pricing of its finished inventory, harvested or growing marijuana.

5.4

Updating. From time to time prior to the Closing, Seller may, at its option, supplement or amend and deliver updates to Buyer as necessary to complete or correct any information in this Agreement or Seller’s Statements of Fact; provided that any such supplement, amendment or update may only be made as to circumstances occurring after the date hereof.5.6

5.5

Further Assurances. Subject to the terms and conditions of this Agreement, at any time or from time to time after the Closing, at a Party’s request and without further consideration, the other Party shall execute and deliver to the requesting Party such other instruments of sale, transfer, conveyance, assignment and confirmation, provide such materials and information and take such other actions as the Party may reasonably request in order to consummate the transactions contemplated by this Agreement.

5.6

Delay by the MED or the County of Notification of Final Governmental Approval. Notwithstanding anything to the contrary set forth in Section 5.1(e), if Final Governmental Approval occurs, but the MED or the County does not promptly notify a Party of Final Governmental Approval, and such delay causes or might cause one or more of the Parties to violate the Marijuana Code, the Parties shall work in good faith to take all necessary action to ensure that the Parties minimize or eliminate any violations of the Marijuana Code and that the Business continue in the ordinary course. Each Party will be responsible for its respective out-of-pocket expenses incurred by such Party with respect to this Section 5.6.

5.7

Buyer’s Obligations if No Closing. If the Closing does not occur by reason of Buyer’s default for any reason or if Buyer terminates this Agreement after Final Governmental Approval, Buyer shall cooperate with Seller in executing all documents reasonably necessary to void the Change of Ownership.

5.8

Application Fees. Buyer shall pay the Application Fees.

5.9

Non Solicitation.

(a)

The “Restricted Period” begins on the Closing Date and ends on the second anniversary of the Closing Date.

(b)

“Competing Business” means any business, except for the Business, engaged the cultivation and sale of marijuana.

(d)

During the Restricted Period, Seller and its Affiliates shall not employ, retain, engage or solicit the employment or engagement of services of any employee of Buyer, the Business or any of Buyer’s Affiliates on a full- or part-time basis.

(e)

During the Restricted Period, Seller and its Affiliates shall not solicit customers of the Business in connection with a Competing Business.

(f)

Any violation of this Section 5.9 may result in irreparable injury to Buyer and the Business and Buyer will be entitled to seek an injunction against Seller and its Affiliates from any court having jurisdiction over the matter, restraining any further violation of this Section 5.9, which rights shall be cumulative and in addition to any other rights or remedies to which Buyer may be entitled. Each of Seller and its Affiliates acknowledges that it has carefully read this Agreement and has given careful consideration to the restraints imposed upon Seller by this Section 5.9, and is in full accord as to their necessity for the reasonable and proper protection of the legitimate business interests relating to the Business and Buyer’s business now existing and to be developed in the future. Each of Seller and its Affiliates expressly acknowledges and agrees that each and every restraint imposed by this Section 5.9 is reasonable with respect to subject matter, time period and geographical area.

(g)

If any covenant set forth in this Section 5.9 is adjudicated to exceed the time, geographic, product or service or other limitations permitted by applicable law in any jurisdiction, then any court is expressly empowered to reform such covenant, and such covenant will be deemed reformed, in such jurisdiction to the maximum time, geographic, product or service or other limitations permitted by the applicable Law. The covenants contained in this Section 5.9 and each provision thereof are severable and distinct covenants and provisions. The invalidity or unenforceability of any such covenant or provision as written will not invalidate or render unenforceable the remaining covenants or provisions hereof, and any such invalidity or unenforceability in any jurisdiction will not invalidate or render unenforceable such covenant or provision in any other jurisdiction. To the extent the provisions of Section 5.9 conflict with the provisions of Section 10.12, the provisions of Section 5.9 will control.

(h)

Seller shall cause its Affiliates to comply with the obligations set forth in this Section 5.9.

5.10

Post-Closing Covenants Concerning the Buyer Shares.

(a)

Buyer Repurchase of Buyer Shares. Seller may require Buyer to repurchase 25% of the Buyer Shares (the “Option Shares”) at the average price for the Buyer Shares on the date of the Closing. Seller may exercise its option to sell such Option Shares under this Section 5.10(a) as follows:

(i)

Seller shall provide written notice to Buyer of Seller’s intent to exercise the option under this Section 5.10(a) at least 30 days prior to Seller’s exercise of such option;

(ii)

Seller shall exercise the option by providing written notice to Buyer during the period from 8:00 a.m. applicable Mountain Time on the one-year anniversary of the Closing to 5:00 p.m. applicable Mountain Time on the date which is two Business Days after the one-year anniversary of the Closing (the “Exercise Period”).

(iii)

If Seller does not timely notify Buyer of its intent to exercise the option, or does not exercise the option during the Exercise Period, Seller will be deemed to have waived the option.

(b)

Default and Remedies.

(i)

If Buyer does not buy the Option Shares from Seller within 30 days of Seller’s timely exercise of the option, Seller may notify Buyer in writing of Buyer’s default concerning the option.

(ii)

If Buyer does not cure its default under this Section 5.10 within 30 days of receiving notice of default from Buyer under this Section 5.10(b), Seller will be entitled to exercise any right or remedy available to Seller.

(c)

Hedging. Seller shall not engage in hedging transactions with the Buyer Shares unless in compliance with the Securities Act.

(d)

Resale Restrictions. Notwithstanding anything to the contrary set forth in this Agreement, Seller shall not sell the Buyer Shares in violation of the Laws, including Rule 144 promulgated under the Securities Act.

ARTICLE VI

BUYER’S CONDITIONS TO CLOSING

The obligation of Buyer to consummate the Closing is subject to the fulfillment of each of the following conditions (except to the extent waived in writing by Buyer in its sole discretion):

6.1

Statements of Fact. (a) Seller’s Statements of Fact will be true and correct on and as of the Closing as though made on and as of the Closing (other than those Statements of Fact that speak to an earlier date); and (b) in the case of Seller’s Statements of Fact that speak to an earlier date, such Statements of Fact will be true and correct as of the earlier date.

6.2

Performance. Seller has performed and complied in all material respects with the agreements, covenants, and obligations required by this Agreement to be performed or complied with by Seller at or before the Closing.

6.3

Seller’s Deliverables. Seller has delivered to Buyer at the Closing Seller’s Closing Documents.

6.4

Orders and Laws. There is no Law or order (except for any such order issued in connection with a Proceeding instituted by Buyer or its Affiliates) restraining, enjoining or otherwise prohibiting or making illegal the consummation of the transactions contemplated by this Agreement or the operation of the Business.

6.5

Consents and Approvals. All terminations or expirations of waiting periods imposed by any Governmental Authority with respect to this Agreement have occurred; provided, however, that the absence of any appeals and the expiration of any appeal period with respect to any of the foregoing will not constitute a condition to the Closing hereunder.

6.6

No Material Adverse Effect. No Material Adverse Effect exists.

6.7

Final Governmental Approval. Final Governmental Approval has occurred.

6.8

Buyer’s Diligence. Buyer will have conducted any and all due diligence, including without limitation, at Seller’s expense, an appraisal of the Assets, the results of which will be satisfactory to Buyer and Buyer’s financing sources in their sole discretion.

ARTICLE VII

SELLER’S CONDITIONS TO CLOSING

The obligation of Seller to consummate the Closing is subject to the fulfillment of each of the following conditions (except to the extent waived in writing by Seller in its sole discretion):

7.1

Statements of Fact. (a) Buyer’s Statements of Fact will be true and correct on and as of the Closing as though made on and as of the Closing (other than those Statements of Fact that speak to an earlier date); and (b) in the case of those Statements of Fact that speak as to an earlier date, such Statements of Fact will be true and correct as of the earlier date.

7.2

Performance. Buyer will have performed and complied in all material respects with the agreements, covenants and obligations required by this Agreement to be so performed or complied with by Buyer at or before the Closing.

7.3

Buyer’s Deliverables. Buyer will have delivered to Seller the Purchase Price and Buyer’s Officer’s Certificate.

7.4

Orders and Laws. There is no Law or order (except for any such order issued in connection with a Proceeding instituted by Seller or its Affiliates) restraining, enjoining or otherwise prohibiting or making illegal the consummation of the transactions contemplated by this Agreement.

7.5

Consents and Approvals. All terminations or expirations of waiting periods imposed by any Governmental Authority with respect to this Agreement will have occurred; provided, however, that the absence of any appeals and the expiration of any appeal period with respect to any of the foregoing will not constitute a condition to the Closing hereunder.

7.6

Final Governmental Approval. Final Governmental Approval will have occurred.

7.7

Lease. Landlord and Buyer shall have executed the Lease.

ARTICLE VIII

TERMINATION & SELLER RIGHT OF REVERSION

8.1

Termination. This Agreement may be terminated in one or more of the following ways:

(a)

At any time before the Closing, by Seller or Buyer, by written notice to the other, if any Law or final order of a Governmental Authority restrains, enjoins or otherwise prohibits or makes illegal the sale of the Assets pursuant to this Agreement;

(b)

At any time before the Closing, by Seller or Buyer, by written notice to the other, if a Party has materially breached its Statements of Fact or obligations under this Agreement and the breach would or does result in the failure of any condition set forth in Articles VI or VII;

(c)

At any time during the Due Diligence Period, by Buyer, by written notice to Seller, if Buyer has discovered any fact, circumstance, or condition which would render any of Seller’s Statements of Fact false, or create a Material Adverse Effect upon any of the Assets, in Buyer’s reasonable discretion.

(d)

At any time on or after the Termination Date, by either Party, by written notice to the other Party.

8.2

Effect of Valid Termination. If this Agreement is validly terminated pursuant to Section 8.1, there will be no liability or obligation hereunder on the part of either Party or any of their respective Affiliates, except as provided herein, provided, however, that Article I, Sections 5.7, 5.8, 8.2, 9.4, and Article X (other than Section 10.11) will survive any such termination.

8.3

Reversion of Licenses. In the event of the bankruptcy or insolvency or the filing by or against Tenant of a petition in bankruptcy or for reorganization or arrangement or for the appointment of a receiver or trustee of all or a portion of Buyer’s property; (a) prior to the Closing Date, this Agreement shall automatically terminate and Buyer and Seller shall take all steps necessary to void or withdraw any applications for Chane of Ownership; or (b) on or within five years after the Closing Date, the ownership of the Licenses shall automatically revert to Seller, subject to approval by MED and Boulder County. Buyer shall cooperate with Seller and take all steps requested by Seller to transfer ownership of the Licenses to Seller, or its assignee. Buyer shall bear all costs and fees associated therewith, including, but not limited to reasonable attorney fees.

ARTICLE IX

LIMITATIONS ON LIABILITY, THIRD-PARTY CLAIMS, AND ARBITRATION

9.1

Indemnity. From and after the Closing:

(a)

Seller shall indemnify, defend, and hold harmless Buyer from and against all Losses incurred or suffered by Buyer resulting from:

(i)

any breach as of the Closing (as though made on and as of the Closing except to the extent a statement of fact is expressly made as of an earlier date, in which case only as of the earlier date) of Seller’s Statements of Fact; and

(ii)

any breach of any covenant or agreement of Seller contained in this Agreement.

(b)

Buyer shall indemnify, defend, and hold Seller harmless from and against all Losses incurred or suffered by Seller resulting from:

(i)

any breach as of the Closing (as though made on and as of the Closing Date except to the extent a statement of fact is expressly made as of an earlier date, in which case only as of the earlier date) of Buyer’s Statements of Fact; and

(ii)

any breach of any covenant or agreement of Buyer contained in this Agreement.

(c)

If Buyer suffers any Loss, for which Seller is obligated to indemnify Buyer, for a material breach of Seller’s Statements of Fact, Buyer may redeem certain Buyer Shares from Seller as follows:

(i)

Buyer will deliver notice to Seller of (a) the nature of; (b) the amount of; (c) the date of the Loss for which Buyer is entitled to indemnification, along with the number of Buyer Shares required to compensate Buyer for such Loss, calculated at the average daily price for Buyer’s common stock on the date of the Loss identified in such notice (the “Redemption Shares”).

(ii)

Buyer shall redeem the Redemption Shares, and Seller shall allow Buyer to redeem such Redemption Shares, for the price of one dollar.

9.2

Limitations of Liability. Notwithstanding anything in this Agreement to the contrary:

(a)

Seller’s Statements of Fact and Buyer’s Statements of Fact will survive the Closing; provided, however, that no claim may be made with respect to any statement of fact, covenant, agreement, or obligation of Sections 9.1(a)(i) or (b)(i) that a Party breaches later than one year following the Closing;

(b)

Buyer shall give written notice to Seller within a reasonable period of time after becoming aware of any breach by Seller of any statement of fact, covenant, agreement, or obligation in this Agreement, but in any event no later than 30 days after becoming aware of such breach;

(c)

Seller shall give written notice to Buyer within a reasonable period of time after becoming aware of any breach by Buyer of any statement of fact, covenant, agreement or obligation in this Agreement, but in any event no later than 30 days after becoming aware of such breach;

(d)

the Parties have a duty to mitigate any Loss in connection with this Agreement;

(e)

Seller’s liability with respect to Section 9.1 is limited to Losses incurred or suffered by Buyer in an amount no more than $3,000,000.00.

(f)

Buyer’s liability with respect to Section 9.1 is limited to Losses incurred or suffered by Seller in an amount no more than $3,000,000.00.

9.3

Procedure with Respect to Third-Party Claims.

(a)

If a Party is threatened with or becomes subject to a third party Claim, and such Party (the “Claiming Party”) believes it has a claim entitled to indemnification from the other Party (the “Responding Party”) as provided in Section 9.1 as a result, then the Claiming Party shall notify the Responding Party in writing of the basis for the Claim setting forth the nature of the Claim in reasonable detail. The failure of the Claiming Party to so notify the Responding Party will not relieve the Responding Party of liability hereunder except to the extent that the defense of the Claim is prejudiced by the failure to give the notice.

(b)

If any Proceeding is brought by a third party against a Claiming Party and the Claiming Party gives notice to the Responding Party pursuant to Section 9.3(a), the Responding Party may participate in the Proceeding and, to the extent that it wishes, to assume the defense of the Proceeding, if (i) the Responding Party provides written notice to the Claiming Party that the Responding Party intends to undertake the defense, (ii) the Responding Party conducts the defense of the third-party Claim actively and diligently with counsel reasonably satisfactory to the Claiming Party, and (iii) if the Responding Party is a party to the Proceeding, the Responding Party or the Claiming Party has not determined in good faith that joint representation would be inappropriate because of a conflict of interest. The Claiming Party may, in its sole discretion, employ separate counsel (who may be selected by the Claiming Party in its sole discretion) in any such action and to participate in the defense thereof, and the Claiming Party shall pay the fees and expenses of its counsel. The Claiming Party shall cooperate with the Responding Party and its counsel in the defense or compromise of the Claim. If

the Responding Party assumes the defense of a Proceeding, no compromise or settlement of the Claims may be effected by the Responding Party without the Claiming Party’s consent unless (x) there is no finding or admission of any violation of Law or any violation of the rights of any Person and no effect on any other Claims that may be made against the Claiming Party, and (y) the sole relief provided is monetary damages that the Responding Party pays in full.

(c)

If notice is given to the Responding Party of the commencement of any third-party Proceeding and the Responding Party does not, within 14 days after the Claiming Party’s notice is given pursuant to Section 9.3(a), give notice to the Claiming Party of its election to assume the defense of the Proceeding, any of the conditions set forth in clauses (i) through (iii) of Section 9.3(b) above become unsatisfied or a Claiming Party determines in good faith that there is a reasonable probability that a Proceeding may adversely affect it other than as a result of monetary damages for which it would be entitled to indemnification from the Responding Party under this Agreement, then the Claiming Party may (upon notice to the Responding Party) undertake the defense, compromise or settlement of the Claim; provided, however, that the Responding Party shall reimburse the Claiming Party for the Losses associated with defending against the third-party Claim (including reasonable attorneys’ fees and expenses) and will remain otherwise responsible for any liability with respect to amounts arising from or related to the third-party Claim, in both cases to the extent it is ultimately determined that the Responding Party is liable with respect to the third-party Claim for a breach under this Agreement. The Responding Party may elect to participate in the Proceedings, negotiations or defense at any time at its own expense.

9.4

Mandatory Binding Arbitration.

(a)

Except for Claims arising under Section 10.11, any dispute, Claim, interpretation, controversy, or issues of public policy arising out of or relating to this Agreement, including the determination of the scope or applicability of this Section 9.4, will be determined exclusively by arbitration held in Denver, Colorado, and will be governed exclusively by the Colorado Revised Arbitration Act, §§ 13-22-201, et seq.,

C.R.S. (the “CRAA”).

(b)

The arbitrator will be selected from the roster of arbitrators at Judicial Arbiter Group, Inc. in Denver, Colorado (“JAG”), unless the Parties agree otherwise. If the Parties do not agree on the selection of a single arbitrator within ten days after a demand for arbitration is made, then the arbitrator will be selected by JAG from among its available professionals. Arbitration of all disputes and the outcome of the arbitration will remain confidential between the Parties except as necessary to obtain a court judgment on the award or other relief or to engage in collection of the judgment.

(c)

The Parties irrevocably submit to the exclusive jurisdiction of the state courts located in Denver, Colorado, with respect to this Section 9.4 to compel arbitration, to confirm an arbitration award or order, or to handle court functions permitted under the CRAA. The Parties irrevocably waive defense of an inconvenient forum to the maintenance of any such action or other proceeding. The Parties may seek recognition and enforcement of any Colorado state court judgment confirming an arbitration award or order in any United States state court or any court outside the United States or its territories having jurisdiction with respect to recognition or enforcement of such judgment.

(d)

The Parties waive (i) any right of removal to the United States federal courts and (ii) any right in the United States federal courts to compel arbitration, to confirm any arbitration award or order, or to seek any aid or assistance of any kind.

ARTICLE X MISCELLANEOUS

10.1

No Third-Party Beneficiaries. The terms and provisions of this Agreement are intended solely for the benefit of the Parties and their respective successors or permitted assigns, and it is not the intention of the Parties to confer third-party beneficiary rights upon any other Person.

10.2

Entire Agreement. This Agreement supersedes all prior discussions and agreements between the Parties and/or their Affiliates with respect to the subject matter hereof and contains the sole and entire agreement between the Parties and their Affiliates with respect to the subject matter hereof.

10.3

Waiver. Any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver will be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving the term or condition. No waiver by a Party of any term or condition of this Agreement, in any one or more instances, will be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. All remedies, either under this Agreement or by Law, are cumulative and not alternative.

10.4

Succession and Assignment. This Agreement is binding upon and will inure to the benefit of the Parties and their successors and assigns. Buyer may assign its rights, interests and obligations hereunder. Seller may not assign this Agreement or any of its rights, interests, or obligations hereunder.

10.5

Counterparts; Electronic or Fax Signatures. This Agreement may be executed in counterparts, each of which will be an original and all of which, when taken together, will constitute one instrument notwithstanding that all parties have not executed the same counterpart. Signatures that are transmitted electronically or by fax will be effective as originals.

10.6

Headings. The headings used in this Agreement have been inserted for convenience of reference only and do not modify, define, or limit any of its terms or provisions.

10.7

Notices. Any notice, request, demand, Claim, or other communication hereunder will be in writing and will be deemed delivered: (a) three Business Days after it is sent by U.S. mail, certified mail, return receipt requested, postage prepaid; or (b) one Business Day after it is sent via a reputable nationwide overnight courier or sent via email, in each of the foregoing cases to the intended recipient as set forth below:

If to Buyer:

General Cannabis Corp.

6565 E. Evans Avenue

Denver, CO 80224

Attn: Michael Feinsod

With a copy to:

McAllister Garfield, P.C.

Attention: Daniel J. Garfield, Esq.

501 S. Cherry St., Ste. 480

Denver, Colorado 80246

Phone: 720-722-0048

E-mail: dgarfield@mcallistergarfield.com

If to Seller:

Dalton Adventures, LLC

3705 75th Street

Boulder, CO 80301

Email: barker@sevenfivefarm.com

With a copy to:

The Law Office of Colin James Fletcher, P.C.

Attention: Colin James Fletcher, Esq.

3900 E. Mexico Ave., Suite 300

Denver, CO 80210

Phone: (303) 309-2151

Email: colin.fletcher@locjf.com

Any Party may give any notice, request, demand, Claim, or other communication hereunder by personal delivery, electronically, or fax, but no such notice, request, demand, Claim, or other communication will be deemed to have been duly given unless and until it is actually received by the Party for whom it is intended. A Party may change the address to which notices, requests, demands, Claims, and other communications hereunder are to be delivered by giving notice to the other Party in the manner herein set forth.

10.8

Governing Law. This Agreement is governed by and construed and enforced in accordance with the Laws of the State of Colorado, without giving effect to any conflict or choice of law provision that would result in imposition of another state’s Law. THE PARTIES ACKNOWLEDGE THAT (A) COLORADO HAS PASSED AMENDMENTS TO THE COLORADO CONSTITUTION AND ENACTED CERTAIN LEGISLATION TO GOVERN THE MARIJUANA INDUSTRY AND (B) THE POSSESSION, SALE, MANUFACTURE, AND CULTIVATION OF MARIJUANA IS ILLEGAL UNDER FEDERAL LAW. THE PARTIES WAIVE ANY DEFENSES BASED UPON INVALIDITY OF CONTRACTS FOR PUBLIC POLICY REASONS AND/OR THE SUBSTANCE OF THE CONTRACT VIOLATING FEDERAL LAW.

10.9

Waiver of Right to Trial by Jury. EACH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND WITH RESPECT TO ANY COUNTERCLAIM THEREIN.

10.10

Attorneys’ Fees. If either Party brings a Proceeding to enforce the provisions of this Agreement, the substantially prevailing Party will be entitled to recover its reasonable attorneys’ fees and expenses incurred in such action from the non-prevailing Party as determined by the arbitrator or a court of law.

10.11

Specific Performance. The rights of the Parties to consummate the transactions contemplated hereby (including the satisfaction of any condition to the Closing) are special, unique, and of extraordinary character, and if either Party violates or fails or refuses to perform any covenant or agreement made by it herein, the non-breaching Party may be without an adequate remedy at law. If either Party violates or fails or refuses to perform any covenant or agreement made by it herein, the non-breaching Party may (at any time prior to the earlier of a) valid termination of this Agreement pursuant to Article VIII and b) the Closing), subject to the terms hereof, institute and prosecute an action to enforce specific performance of the covenant or agreement. The Parties irrevocably submit to the exclusive jurisdiction of the state courts located in Denver, Colorado, with respect to this Section 10.11. The Parties irrevocably waive defense of an inconvenient forum to the maintenance of any such action or other proceeding with respect to this Section 10.11.

10.12

Invalid Provisions. If a dispute between the Parties arises out of this Agreement or the subject matter of this Agreement, the Parties would want a court or arbitrator to interpret this Agreement as follows:

(a)

With respect to any provision held to be unenforceable, by modifying that provision to the minimum extent necessary to make it enforceable or, if that modification is not permitted by law or public policy, by disregarding the provision;

(b)

if an unenforceable provision is modified or disregarded in accordance with this Section 10.12, by holding the rest of the Agreement will remain in effect as written;

(c)

by holding that any unenforceable provision will remain as written in any circumstances other than those in which the provision is held to be unenforceable; and

(d)

if modifying or disregarding the unenforceable provision would result in a failure of an essential purpose of this Agreement, by holding the entire Agreement unenforceable.

Upon the determination that any term or other provision of this Agreement is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to affect the original intent of the Parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

10.13

Expenses. Except as otherwise provided in this Agreement, whether or not the transactions contemplated hereby are consummated, each Party shall pay its own costs and expenses incurred in anticipation of, relating to and in connection with the negotiation and execution of this Agreement and the transactions contemplated hereby.

10.14

Amendments. The Parties may amend any provision of this Agreement only by a written instrument signed by the Parties.

10.15

Confidentiality and Publicity. This Agreement is confidential and will not be disclosed to any third party (other than the Parties’ Affiliates, attorneys, accountants, auditors, or other advisors, or Governmental Authorities) except as required for Tax purposes or as required by Law. A Party receiving a request for this Agreement shall promptly notify the other Party to afford it the opportunity to object or seek a protective order regarding this Agreement or information contained herein. Seller may issue a press release or public announcement concerning any of the transactions contemplated by this Agreement.

10.16

Advice of Counsel. Each Party has had the opportunity to seek the advice of independent legal counsel and has read and understood each of the terms and provisions of this Agreement.

10.17

MED Reformation. This Agreement and the transactions contemplated hereby are subject to review by the MED and the County. If the MED or the County determines that this Agreement must be reformed, the Parties shall negotiate in good faith to so reform this Agreement according to such Governmental Authority’s requirements while effectuating the original intent of this Agreement as near as possible.

[Remainder of page intentionally left blank; signatures on following page]

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the Parties as of the date first above written.


DALTON ADVENTURES, LLC

By:	/s/ Barker Dalton
Name:	John Barker Dalton
Title:	Manager and sole member


GENERAL CANNABIS CORP.

By:	/s/ Steve Gutterman
Name:	Steve Gutterman
Title:	CEO

EXHIBIT A

ASSETS

EXHIBIT B

Allocation Statement

(Attached)

EXHIBIT C

SELLER’S OFFICER’S CERTIFICATE

DALTON ADVENTURES, LLC

, 2020

This Seller’s Officer’s Certificate is delivered with respect to Article VI of that certain Asset Purchase Agreement dated January , 2020 (the “APA”) by and between Dalton Adventures, LLC, a Colorado limited liability company, and General Cannabis Corp., a Colorado corporation. Capitalized terms used in this certificate that are defined in the APA have the respective meanings ascribed to them in the APA.

I, John Barker Dalton, the duly elected, qualified and acting manager of Seller, on behalf of Seller, hereby certify as follows:

Seller’s Statements of Fact are true and correct on and as of the Closing as though made on and as of the Closing.

Seller has performed and complied in all material respects with the agreements, covenants, and obligations required by the APA to be performed or complied with by Seller at or before the Closing.

IN WITNESS WHEREOF, the undersigned has executed this Officer’s Certificate on behalf of Seller as of the date first written above.

DALTON ADVENTURES, LLC

By:

Name: John Barker Dalton

Title: Manager and sole member

EXHIBIT D

BUYER’S OFFICER’S CERTIFICATE

GENERAL CANNABIS CORP.

, 2020

This Buyer’s Officer’s Certificate is delivered with respect to Article VII of that certain Asset Purchase Agreement dated January , 2020 (the “APA”) by and between Dalton Adventures, LLC, a Colorado limited liability company, and General Cannabis Corp., a Colorado corporation. Capitalized terms used in this certificate that are defined in the APA have the respective meanings ascribed to them in the APA.

I, , as the duly elected, qualified and acting of Buyer, hereby certify as follows:

Buyer’s Statements of Fact are true and correct on and as of the Closing as though made on and as of the Closing.

Buyer has performed and complied in all material respects with the agreements, covenants, and obligations required by the APA to be performed or complied with by Buyer at or before the Closing.

IN WITNESS WHEREOF, the undersigned has executed this Officer’s Certificate on behalf of Buyer as of the date first written above.

GENERAL CANNABIS CORP.

By:

Name:

Title:

EXHIBIT E

BILL OF SALE

THIS BILL OF SALE (this “Bill of Sale”) is entered into on , 2020, by Dalton Adventures, LLC, a Colorado limited liability company (“Seller”), for the benefit of General Cannabis Corp., a Colorado corporation (“Buyer”).

Recitals

Seller and Buyer entered into that certain Asset Purchase Agreement dated January , 2020 (the “APA”), whereby Buyer agreed to purchase the Assets from Seller; and

Capitalized terms not defined herein have the respective meanings ascribed to them in the APA.

NOW THEREFORE, Seller certifies as follows:

Terms

Sale of Assets. In accordance with the terms and conditions of the APA, Seller hereby sells, transfers, conveys, assigns and delivers unto Buyer all of the Assets subject to the APA, free and clear of all Liens.

Title. Seller has good and marketable title to the Assets, free and clear of all Liens, and Buyer hereby receives such good and marketable title thereto.

Warranty. Seller shall warrant and defend the sale, transfer, conveyance, assignment and conveyance of the Assets hereunder against each and every person or persons claiming against any or all of the same.

Further Assurances. Seller shall take all steps necessary to put Buyer in actual possession and operating control of the Assets, to carry out the intent of the APA and this Bill of Sale, and to more effectively sell, transfer, convey, assign and reduce to possession and record to title any of the Assets, including by executing and delivering, or causing to be executed and delivered, such further instruments or documents of transfer, assignment and conveyance, or by taking such other actions as may be requested by Buyer.

Independent Covenants. This Bill of Sale is subject in all respects to the terms and conditions of the APA. Nothing contained in this Bill of Sale will be deemed to diminish any of the obligations, agreements, covenants, or statements of fact of Seller set forth in the APA.

Dispute Resolution. If a dispute arises under this Bill of Sale, such dispute will be settled by in accordance with the provisions set forth in Section 9.4 of the APA.

Electronic or Fax Signatures. This Bill of Sale may be executed electronically or by fax which will each be effective as original signature.

IN WITNESS WHEREOF, this Bill of Sale has been duly executed and delivered by the duly authorized representative of Seller as of the date first above written.

DALTON ADVENTURES, LLC

By:

Name: John Barker Dalton

Title: Manager and sole member

EXHIBIT F

EMPLOYMENT AGREEMENT

(See Attached)

Exhibit G

Commercial Lease

(See Attached)

COMMERCIAL LEASE AGREEMENT

THIS COMMERCIAL LEASE AGREEMENT (“Lease”) is made and entered into January 24, 2020 (“Effective Date”), by and between Dalton Farms, LLC, a Colorado limited liability company (“Landlord”), and General Cannabis Corp., a Colorado corporation (“Tenant”). Landlord and Tenant may be referred to in this Lease individually as a “Party” or collectively as the “Parties.”

WHEREAS, Landlord owns and operates state and local licenses for the Retail Marijuana Cultivation Facility State License # 403R-00501/ Associated Boulder County Local License # RMB- 15-0007 (“Licenses”) situated at the greenhouse facility consisting of approximately 17,000 square feet as more particularly described in the diagram attached and incorporated by reference into this Lease as Exhibit A (“Leased Premises”), located at 3705 75th Street Boulder, CO 80301 (“Real Property”);

WHEREAS, Landlord is in the business of owning and operating the Licenses at the Leased Premises (“Business”) pursuant to Article XVIII, Section 16 of the Colorado Constitution, CRS §§ 44-10-101, et seq., and any applicable rules regulations or local laws promulgated pursuant thereto (“Code”);

WHEREAS, Tenant or an affiliate of Tenant is acquiring the Licenses and other assets of the Business located at the Leased Premises pursuant to that certain Asset Purchase Agreement between Dalton Adventures, LLC, a Colorado limited liability company (“Seller”) and Tenant dated January 24, 2020 (“APA”).

WHEREAS, in connection with this Lease and the APA, the sole owner of Landlord and Seller, John Barker Dalton (“Dalton”), and Tenant entered into that certain Employment Agreement dated January 24, 2020 (“EA”).

NOW, THEREFORE, in consideration of the mutual covenants and agreements and the respective representations and warranties herein contained, and on the terms and subject to the conditions herein set forth, the parties hereto, intending to be legally bound, hereby agree as follows:

AGREEMENT

LEASED PREMISES. In consideration of the mutual covenants and agreements set forth herein, Landlord does hereby lease to Tenant and Tenant does hereby lease from the Landlord, the Leased Premises, subject to the terms and conditions set forth in this Lease, the APA and the EA. The APA and EA may be referred to in this Lease as the “Related Agreements.” For clarity, Tenant is leasing only the Leased Premises, not the entirety of the Real Property. Tenant may be required to purchase the Real Property pursuant to Section 6(D) of this Lease and subject to the terms of the EA.

TERM.

Initial Term. The initial term of this Lease shall be FIVE (5) years, to commence on the Closing Date (as defined in the APA) (“Initial Term”). Despite any other provision contained in this Lease, Tenant shall at no time have the right to possession of the Leased Premises until the date the change of ownership application is approved, and the Licenses transferred to Tenant, by Boulder County and the Marijuana Enforcement Division (“MED”). Tenant shall have all rights to access the Leased Premises and conduct due diligence pursuant to Section 5.2 of the APA.

Option to Renew: Tenant shall have the right to extend the term of this Lease for TWO (2) additional periods of FIVE (5) years upon written notice to Landlord at least ONE HUNDRED TWENTY (120) days prior to the end of the Initial Term or Renewal Term, as the case may be (each, a “Renewal Term”). Each Renewal Term shall be subject to the same terms, covenants and conditions in this Lease.

RENT

Base Rent. Tenant shall pay to Landlord the sum of THIRTY THOUSAND UNITED STATES DOLLARS ($30,000.00 USD) on or before the THIRD (3rd) day of each month (“Base Rent”).

Base Rent shall increase ONE AND ONE-HALF PERCENT (1.5%) on January 1, 2021 and each year thereafter this Lease is in effect. For example, Base Rent for the period January 1, 2021 through December 31, 2021 shall be THIRTY THOUSAND NINE HUNDRED UNITED STATES DOLLARS ($30,900.00). Base Rent for the period January 1, 2022 through December 31, 2022 shall be THIRTY-ONE THOUSAND EIGHT HUNDRED TWENTY-SEVEN UNITED STATES DOLLARS ($31,827.00), and so on.

Security Deposit. Tenants shall pay Landlord THIRTY THOUSAND UNITED STATES DOLLARS ($30,000.00 USD) upon the execution of this Lease as a security deposit for the Leased Premises (“Security Deposit”). Landlord may apply the Security Deposit to any sums due and owing under this Lease.

Additional Rent. All other sums as are required to be paid by Tenant under this Lease in addition to Base Rent, including, but not limited to, Operating Costs (as defined below), shall be referred to as “Additional Rent.” Tenant shall pay to Landlord all Additional Rent on or before the THIRD (3rd) day of each month this Lease is in effect.

Operating Costs:

(1)

Definition of Operating Costs. The term “Operating Costs” as used herein shall mean all expenses, costs and disbursements of every kind and nature arising from or related to the ownership, operation and maintenance of the Leased Premises. For avoidance of doubt, where an Operating Cost is incurred for the entire Real Property, Tenant’s share of Operating Costs shall be the pro rata portion of such Operating Cost, by square footage. Operating Costs, include but are not limited to, the following:

all supplies and materials used in the operation and maintenance of the Leased Premises;

costs of all utilities and maintenance of utility systems for the Leased Premises, including but not limited to the cost of water, power, heating, lighting, air conditioning, ventilating, sewer and trash disposal;

costs of all third-party maintenance and service agreements for the Leased Premises, including, but not limited to, alarm service, janitorial service, window cleaning, security service, grounds maintenance and heating, ventilating and air conditioning systems;

costs of insurance relating to the Leased Premises, including, but not limited to, the costs of casualty, liability and property damage insurance applicable to the Leased Premises;

all real estate taxes and assessments for tax years or partial tax years occurring during the Initial Term or any Renewal Term, including without limitation special assessments, imposed upon the Leased Premises by any governmental bodies or authorities, and all charges specifically imposed in lieu of such taxes and any costs incurred in connection with appealing or contesting such assessments. The term “taxes” as used in this paragraph shall not include state, local or federal personal and corporate income taxes measured by the income of Landlord; estate and inheritance taxes, franchise, succession and transfer taxes; interest on taxes and penalties resulting from failure to pay real estate taxes; and ad valorem taxes on Landlord’s personal property, and on Landlord’s leasehold improvements to the extent that the same exceed standard building allowances;

costs of any repairs and general maintenance to the Leased Premises, or any part thereof and the equipment therein;

capital investment items, tenant improvements and any repairs, maintenance or improvements at the Leased Premises;

costs for lighting, heating and cooling, painting and cleaning the Leased Premises, costs of maintenance, lighting, sanding, paving repairs, restriping, regarding and general maintenance of parking areas, snow and ice removal, rubbish removal and landscaping; and

costs of licensing, permits, service and usage charges, costs of compliance with all rules and regulations and orders of governmental authorities pertaining to the Leased Premises, including those related to engineering and environmental issues, air pollution control and monitoring air quality, and any costs of any environmental clean-up undertaken by Landlord.

(2)

Estimate Statement. Landlord shall provide Tenant with a yearly statement setting forth Landlord’s reasonable estimate of the Operating Costs (“Estimate Statement”), including, either separately or together with the other Operating Costs, an estimate of taxes and insurance for the next calendar year, which such Estimate Statement may be revised from time to time as is determined reasonably necessary by the Landlord but no more than one time for every SIX (6) month period under this Lease. Landlord shall furnish the first Estimate Statement within SIXTY (60) days after the Effective Date and thereafter within NINETY (90) days after the close of each calendar year or as soon thereafter as is reasonably possible. Until a new Estimate Statement is provided, Tenant shall continue to pay monthly estimates in the manner set forth above based upon the previous Estimate Statement. Landlord shall, within a reasonable period of time not to exceed ONE HUNDRED TWENTY (120) days after each calendar year, provide Tenant with a reconciliation statement comparing the Operating Costs paid by Tenant with Landlord’s actual expenses for such calendar year. In the event such reconciliation statement reveals an underpayment of Operating Costs, Tenant shall, within THIRTY (30) days, pay to Landlord the amount of such underpayment. If, on the other hand, the reconciliation statement reveals an overpayment, Landlord shall immediately refund the amount of such overpayment to Tenant.

USE OF THE LEASED PREMISES. Tenant shall utilize the Leased Premises only for cultivation of marijuana, and activities related thereto, in a manner authorized by the Code and any applicable laws, excluding US federal law related to marijuana, including, but not limited to, the Controlled Substances Act of 1970, as amended. Landlord consents to Tenant’s use of the Leased Premises as a Retail Marijuana Cultivation Facility (as defined in the Code), provided Tenant complies with all State of Colorado and Boulder County laws, including, but not limited to, any zoning or land use requirements. Landlord shall provide any information and execute any related documentation required by (or requested to be completed by) the MED and Boulder County, in order for: (a) Tenant to demonstrate possession of the Leased Premises, (b) Landlord’s consent to use the Leased Premises as a Retail Marijuana Cultivation Facility, (c) executing any necessary form of property owner affidavit(s) to be executed and re-executed (if necessary) by Landlord, as reasonably requested by Tenant, and (d) to obtain any applicable license(s) and permit(s) necessary for Tenant and any subtenants to conduct the Business, all of the foregoing at Tenant’s sole expense.

UTILITIES AND CARE OF LEASED PREMISES

Utilities and Services – Tenant. On the Closing Date, Tenant place in its name all contracts and services for electricity, water/sewer charges, trash removal, and any telephone, television, or communication or security service or any other service required for operation of the Business at the Leased Premises. Tenant shall pay for sprinkler system repairs and maintenance and start up and shut down. In addition, during winter months, the Tenant shall clean and remove snow and provide salt or sand as needed. Tenant will not use, occupy, or permit the Leased Premises or any part thereof for purposes deemed to be hazardous. Parties shall not perform any act or carry on any practices which may injure the Real Property.

Tenant Covenants. Except for the use set forth in Section 4, Tenant covenants not to do or permit anything to be done in or about the Leased Premises or bring or keep anything therein which will in any way increase the rate of fire or other insurance upon the Leased Premises or Real Property without prior written consent of Landlord. Tenant shall, at its sole cost and expense, comply with any and all requirements of any insurance company necessary for the maintenance of reasonable fire and public liability insurance covering the Leased Premises, including, but no limited to, Tenant’s obligations under Section 10 of this Lease. Excluding US federal law related to marijuana, including, but not limited to, the Controlled Substances Act of 1970, as amended, Tenant shall comply at all times with all laws, rules, ordinances, orders, directions, regulations and requirements of, state, county and municipal authorities, including, but not limited to, the Code, now in force or which may hereafter be in force, which shall impose any duty upon Landlord or Tenant with respect to the use, occupation, cleanliness, safety or alteration of the Leased Premises, including the installation of such additional facilities as may be required for the conduct and continuance of Tenant’s operation of the Business at the Leased Premises, all at Tenant’s sole cost and expense.

Maintenance of Condition of Leased Premises. Tenant covenants, and at its sole expense, keep the Leased Premises and every aspect thereof in a good, safe, clean and attractive condition, and in fair judgment free from dirt, rubbish, snow, ice, obstructions, and unsightly or hazardous conditions. Tenant shall not use any electrical equipment, which, in the Landlord’s reasonable opinion, will overload the wiring installations or interfere with the reasonable use thereof by the Landlord.

No Lien. Tenant shall promptly pay when due all invoices and amounts due to third-parties, including, but no limited to contractors, employees and those performing services at the Leased Premises. Tenant shall permit no lien or encumbrance to attach to the Leased Premises or Real Property

EVENTS OF DEFAULT.

Tenant Default. The occurrence of any of the following shall constitute a default by Tenant and a material breach of this Lease:

(1)

Tenant’s failure to pay any amount due under this Lease within FIFTEEN (15) days of the due date, including, but not limited to Base Rent or Additional Rent, when due in accordance with the provisions of this Lease, and said default is not cured within FIFTEEN (15) days following written notice of default;

(2)

Tenant’s failure to perform any covenant, condition, term, or provision of this Lease, and fails to cure such default within THIRTY (30) days after written notice thereof, or, for defaults which are not capable of cures within such 30 day period in Tenant’s reasonable discretion, Tenant fails to commence curing such default and prosecute such cure diligently until completion;

(3)

Tenant abandoning the Leased Premises or otherwise notifying Landlord of Tenants early termination or repudiation of this Lease;

(4)

Any lien or encumbrance to attaching to the Leased Premises or Real Property as a result of Tenant’s activities or default to third parties that is not attributable to Dalton’s individual, and not vicarious, acts or omissions; provided, however, that any lien which Tenant timely disputes in a court of competent jurisdiction will not constitute a default unless such court enters a final, non-appealable order denying Tenant’s claim for relief in such action; or

The bankruptcy or insolvency of Tenant or the filing by or against Tenant of a petition in bankruptcy or for reorganization or arrangement or for the appointment of a receiver or trustee of all or a portion of Tenant’s property, or Tenant’s assignment for the benefit of creditors.

Security of Tenant Performance. To secure the performance of Tenant’s obligations under this Lease, Tenant hereby grants to Landlord a security interest in all of Tenant’s property on the Leased Premises, including, but not limited to, the Licenses, and excluding any inventory or marijuana and any other property prohibited by the Code. Landlord may file any document evidencing its secured interest in Tenant’s property, including, but not limited to any UCC financing statement. Tenant shall cooperate with Landlord and furnish any document or information upon request for Landlord to evidence, attach or perfect Landlord’s interest. Tenant designates Landlord as Tenant’s attorney-in-fact and authorizes Landlord to file any document on Tenant’s behalf to evidence, attach or perfect Landlord’s interest. Upon any default under this Lease by Tenant, any or all of Tenant’s obligations to Landlord secured hereby shall be immediately due and payable. Landlord shall have all rights and remedies of a secured party available at law and in equity. This security agreement and the security interest hereby created shall survive the termination of this Lease.

Landlord’s Remedies. Upon default by Tenant, Landlord may:

(1)

Terminate this Lease;

(2)

Exercise any of Landlords rights under Section 6(B) of this Lease;

(3)

The above remedies are non-exclusive, and Landlord’s exercise of any remedy shall not preclude Landlord’s exercise of any remedy available to Landlord under this Lease, at law or in equity.

Termination of Employment Agreement. In the event Company terminates the EA (“EA Termination”), Tenant shall be obligated, upon Landlord’s written notice, to purchase the Real Property on the following terms:

(1)

The purchase price for the Real Property shall be fair market value, as determined by an independent appraiser selected by Landlord and Tenant within TEN (10) days of EA Termination;

(2)

Tenant may pay the purchase price (a) within ONE HUNDRED EIGHTY (180) days of EA Termination, or (b) pursuant to promissory note, secured by deed of trust for the Real Property, payable over TEN (10) years from the date of EA Termination, which shall bear interest at a rate equal to then published prime rate of interest in the Wall Street Journal on the date of EA Termination plus TWO PERCENT (2%).

Surrender of Leased Premises. Upon termination or expiration of this Lease, Tenant shall promptly surrender and deliver the Leased Premises to the Landlord without demand thereof and in good condition, except for ordinary wear and tear. Landlord shall return Tenant’s Security Deposit minus any expenses for amounts due to Landlord, including, but not limited to, costs of repair and maintenance in excess of ordinary wear and tear.

REPAIRS, MAINTENANCE, ALTERATIONS AND IMPROVEMENTS While this Lease is in effect, Tenant, at its sole cost and expense, shall keep and maintain the Leased Premises in good order, condition and repair in all aspects, including, but not limited to, foundation, structure, sidewalks, exterior walls, windows, downspouts, gutters, roof, mechanical systems such as including heating, air conditioning, plumbing, HVAC and dehumidification systems, non-structural elements, including, but not limited to, interior walls, floors, ceilings, utility systems and components, glass, windows, doors, fixtures, leasehold improvements and equipment. Tenant agrees that any repairs or replacements to or of properties of any kind within or upon the Leased Premises shall be at least equal in quality to the original properties repaired or replaced. Tenant agrees that the type of business use and purpose contemplated by this Lease may involve potentially unique environmental and/or health hazards and, therefore, Tenant shall be responsible to mitigate and remedy any such hazard and shall defend, indemnify, hold harmless the Landlord and property owner in the event of any claim of whatsoever kind made by any individual, business or entity for which the basis is an environmental or health hazard reasonably associated with and/or proximately caused by the business use and purpose contemplated by this Lease. In the event Tenant fails or refuses to perform any of such covenants within FIFTEEN (15) days following written notice, or for repairs which may not be completed within such 15 day period in Tenant’s reasonable discretion, fails to commence such repairs within FIFTEEN (15) days and diligently prosecute completion of such repairs, Tenant shall be in default under this Lease, and Landlord shall have the right, but never the obligation, to perform, or cause to be performed, any maintenance or repair. Landlord shall invoice Tenant for any such repairs or maintenance, which shall be due as Additional Rent. Landlord’s collection of Additional Rent for such repairs will be Landlord’s exclusive remedy for Tenant’s default under this Section 7.

TENANT ALTERATIONS, IMPROVEMENTS OR ADDITIONS. Tenant may make any alterations, improvements, and/or additions to the Leased Premises at Tenant’s sole cost and expense. To the extent any such improvements interfere with Landlord’s access, use or quiet enjoyment of the Real Property, Tenant shall obtain Landlord approval prior to commencing any work.

LIMITATION OF LIABILITY; INDEMNIFICATION.

Limitation of Landlord Liability. IN NO EVENT WILL LANDLORD BE LIABLE TO THE TENANT OR TO ANY THIRD PARTY FOR ANY LOSS OF USE, REVENUE, OR PROFIT OR LOSS OF DATA OR FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, EXEMPLARY, SPECIAL, OR PUNITIVE DAMAGES WHETHER ARISING OUT OF BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE), OR OTHERWISE, REGARDLESS OF WHETHER SUCH DAMAGE WAS FORESEEABLE AND WHETHER OR NOT TENANT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT WILL LANDLORD’S LIABILITY ARISING OUT OF OR RELATED TO THIS LEASE, WHETHER ARISING OUT OF OR RELATED TO BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE), OR OTHERWISE, EXCEED THE AMOUNT SIX (6) MONTHS OF BASE RENT.

Tenant Indemnification of Landlord. Tenant shall release, indemnify and hold harmless Landlord, its owners, affiliates, agents, successors and assigns, from an against all third-party claims, demands, causes of action and damages (“Claims”) arising from or related to this Lease to the extent any such Claims do not result from Landlord’s negligence or more culpable act or omission.

10.

INSURANCE.

Tenant Required Minimum Limits. At all times during the Term of this Lease, Tenant shall procure and maintain, at its sole cost and expense, commercial general liability insurance with limits no less than THREE MILLION UNITED STATES DOLLARS ($3,000,000.00 USD) per occurrence and THREE MILLION UNITED STATES DOLLARS ($3,000,000.00 USD) in the aggregate, including bodily injury and property damage, products liability, completed operations, advertising liability, extended fire coverage, crop, finished product and any other type reasonably requested by Landlord, which policy will include contractual liability coverage insuring the activities of Tenant under this Lease.

Landlord Required Insurance. While this Lease is in effect, Landlord shall maintain the insurance policies in effect at the time of mutual execution of this Lease, which have been disclosed to Tenant in the course of conducting due diligence in connection with the APA. Landlord’s insurance shall be secondary, and Tenant’s insurance shall be primary, for any claims.

Minimum Coverage Types Required. All insurance policies required by this Lease shall: (a) be issued by insurance companies reasonably acceptable to the Parties; (b) provide that such insurance carriers give the Parties at least 30 days’ prior written notice of cancellation or non- renewal of policy coverage; provided that, prior to any such cancellation, each Party shall have new insurance policies in place that meet the requirements of this Section 10; (c) waive any right of subrogation of the insurers against the other Party, its owners, affiliates, agents, successors and assigns; (d) provide that such insurance be primary insurance and any similar insurance in the name of and/or for the benefit of each Party shall be excess and non- contributory; and (e) name the other Party, its owners, affiliates, agents, successors and assigns as additional insureds.

Furnishing Statements. Upon the written request of Landlord, Tenant shall provide copies of the certificates of insurance and policy endorsements for all insurance coverage required by this Section 10, and shall not do anything to invalidate such insurance. This Section 10 shall not be construed in any manner as waiving, restricting, or limiting the liability of either Party for any obligations imposed under this Lease (including but not limited to, any provisions requiring Tenant to indemnify, defend, and hold Landlord harmless under this Lease).

11.

ACCESS TO LEASED PREMISES. Landlord and its agents shall have the right to enter upon the Leased Premises, provided Landlord and any accompanying parties are recorded as visitors to the Leased Premises and escorted by a licensed employee or owner of the Tenant in accordance with the Code at reasonable hours (and in emergencies, at all times) to inspect the same, to make repairs, additions or alterations to the Leased Premises, and for any other lawful purpose. Landlord agrees to provide Tenant with reasonable notice, whenever it deems it necessary to enter upon the Leased Premises. Landlord shall put forth sufficient effort to arrange for Tenant to be present at all times Landlord desires to enter upon the Leased Premises. Landlord agrees to never allow any person or party into the Leased Premises, unless supervised at all times and provided Tenant has agreed in writing (email shall suffice) to allow any such person or party access to the Leased Premises. For a period commencing ninety (90) days prior to the end of the Initial Term or any Renewal Term, Landlord may have reasonable access to the Leased Premises for the purpose of exhibiting the same to prospective tenants and to post “For Lease” signs upon the Leased Premises.

12.

ASSIGNMENT AND SUBLETTING. Tenant may not assign or transfer this Lease, or sublet the Leased Premises or any part thereof, or grant any license, concession or other right to occupy any portion of the Leased Premises without the prior written consent of Landlord, which shall not be unreasonably withheld, conditioned, or delayed. Any assignment of this Lease or subletting of the Leased Premises without Landlord consent shall be null and void.

13.

SUBORDINATION. Tenant accepts this Lease subject and subordinate to any mortgage(s), deed(s) of trust, ground lease(s) or other lien(s) now or subsequently arising upon the Leased Premises or the Real Property, and to renewals, modifications, refinancings and extensions thereof (collectively referred to as a “Mortgage”). This clause shall be self-operative, but no later than TEN (10) business days after written request from Landlord or any holder of a Mortgage (a “Mortgagee”), Tenant shall execute a commercially reasonable subordination agreement. Any Mortgagee may at any time to subordinate its Mortgage to this Lease. No such Mortgage shall encumber or place a lien upon Tenant’s property or the Licenses without Tenant’s prior written consent. No later than TEN (10) business days after written request by Landlord or any Mortgagee, Tenant shall, without charge, attorn to any successor to Landlord’s interest in the Lease. Tenant hereby waives its rights under any current or future law which gives or purports to give Tenant any right to terminate or otherwise adversely affect this Lease and the obligations of Tenant hereunder in the event of any such foreclosure proceeding or sale. Should Tenant fail to sign and return any such documents within said ten (10) business day period, Tenant shall be in default hereunder.

14.

DAMAGE OR DESTRUCTION. In case the Leased Premises shall be partially or totally destroyed, the same shall be repaired as speedily as possible at the expense of Tenant, unless Landlord shall elect not to rebuild or repair as hereinafter provided. Tenant shall cooperate with Landlord to furnish a claim in a reasonable time under Tenant’s insurance required under Section 10 of this Lease for all reconstruction or repair in the event of damage or destruction of the Leased Premises.

Landlord Option to Repair. If FIFTY PERCENT (50%) or more of the Leased Premises is damaged or destroyed, or if the Leased Premises is damaged or destroyed, or the cost of repair THIRTY PERCENT (30%) of the fair market value of the Leased Premises in Tenant’s reasonable discretion, then in any such event, Landlord may, if it so elects, rebuild or put the Leased Premises in good condition and fit for occupancy within a reasonable time after such destruction or damage, or may within SIXTY (60) days after such occurrence give Tenant notice in writing terminating this Lease as of the date of such occurrence. If Landlord elects to repair or rebuild the Leased Premises, it shall, within SIXTY (60) days after such occurrence, give Tenant notice of its intention to repair and then proceed with reasonable speed to make such repairs. Unless Landlord elects to terminate this Lease, this Lease shall remain in full force and effect, and all sums due shall continue to be paid as provided in this Lease.

Tenant’s Continuing Operations. During any period of reconstruction or repair of the Leased Premises Tenant shall continue the operation of the Business within the Leased Premises to the extent reasonably possible. During the period from the occurrence of the casualty until Landlord’s repairs are completed, the Base Rent shall be abated by an amount equal to a pro rata reduction based upon the damaged square footage as a ratio to the total square footage of the Leased Premises. However, there shall be no abatement of the other charges or Additional Rent provided for herein, and under no circumstances shall Tenant be entitled to compensation for lost profits, or any other special, indirect or consequential damages. In no event shall Tenant be entitled to any abatement of Base Rent, Additional Rent or any sum due hereunder if the fire, damage or other casualty is the result of carelessness or negligence of Tenant or Tenant’s agents, officers, directors, employees, or licensees. In such case, Tenant’s liability for the payment of rent and the performance of its other Lease obligations shall continue and Tenant shall be liable to Landlord for all damage and loss suffered by Landlord in connection therewith.

Tenant Option to Terminate. Landlord agrees that if the Leased Premises are so damaged by a cause other than the carelessness or negligence of the Tenant to be unusable by Tenant or any subtenant for its intended purposes, and if the Leased Premises cannot be restored to a usable condition within ONE HUNDRED TWENTY (120) days following the date the damage occurred, then Tenant shall have the right to terminate the Lease by giving written notice to Landlord effective the date of the occurrence. If Landlord and Tenant cannot agree as to whether restoration can be accomplished within ONE HUNDRED TWENTY (120) day period, then Landlord and Tenant shall select an independent local contractor to determine whether repairs may be completed in that time. Tenant’s notice of termination must be given within TEN (10) days following the mutual determination by Landlord and Tenant, or the determination by the independent contractor, as the case may be. If Tenant does not give timely notice of termination, then Tenant shall be deemed to have waived its right to terminate the Lease under this provision.

15.

SIGNAGE. Tenant shall install no exterior sign or door lettering unless required by the Code without Landlord’s written consent, which may be withheld in Landlord’s sole diction

16.

NOTICES. Any notice, request, demand, Claim, or other communication hereunder will be in writing and will be deemed delivered: (a) THREE (3) Business Days after it is sent by U.S. mail, certified mail, return receipt requested, postage prepaid; or (b) ONE (1) Business Day after it is sent via a reputable nationwide overnight courier or sent via email, in each of the foregoing cases to the intended recipient as set forth below:

If to Tenant:

General Cannabis Corp.

6565 E. Evans Avenue

Denver, CO 80224

Attn: Steve Gutterman

E-mail: sgutterman@generalcann.com

With a copy to:

McAllister Garfield, P.C.

Attention: Daniel J. Garfield, Esq.

501 S. Cherry St., Ste. 480

Denver, Colorado 80246

Phone: 720-722-0048

E-mail: dgarfield@mcallistergarfield.com

If to Landlord:

Dalton Farms, LLC 3705 75th Street

Boulder, CO 80301

Email: barker@sevenfivefarm.com

With a copy to:

The Law Office of Colin James Fletcher, P.C.

Attention: Colin James Fletcher, Esq.

3900 E. Mexico Ave., Suite 300

Denver, CO 80210

Phone: (303) 309-2151

Email: colin.fletcher@locjf.com

17.

GOVERNING LAW; VENUE. This Lease is governed by and construed and enforced in accordance with the Laws of the State of Colorado, without giving effect to any conflict or choice of law provision that would result in imposition of another state’s Law. Any claim or dispute under this Lease shall be brought exclusively in a court of competent jurisdiction in Boulder, CO, Colorado, and he Parties consent to venue and submit to personal jurisdiction therein. THE PARTIES ACKNOWLEDGE THAT (A) COLORADO HAS PASSED AMENDMENTS TO THE COLORADO CONSTITUTION AND ENACTED CERTAIN LEGISLATION TO GOVERN THE MARIJUANA INDUSTRY AND (B) THE POSSESSION, SALE, MANUFACTURE, AND CULTIVATION OF MARIJUANA IS ILLEGAL UNDER FEDERAL LAW. THE PARTIES WAIVE ANY DEFENSES BASED UPON INVALIDITY OF CONTRACTS FOR PUBLIC POLICY REASONS AND/OR THE SUBSTANCE OF THE CONTRACT VIOLATING FEDERAL LAW.

18.

WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS LEASE AND WITH RESPECT TO ANY COUNTERCLAIM THEREIN.

19.

ATTORNEYS’ FEES. If either Party brings a proceeding to enforce the provisions of this Lease, the substantially prevailing Party will be entitled to recover its reasonable attorneys’ fees and expenses incurred in such action from the non-prevailing Party as determined by the arbitrator or a court of law.

20.

SPECIFIC PERFORMANCE. The rights of the Parties under Section 6.D. of this Lease are special, unique, and of extraordinary character, and if either Party violates or fails or refuses to perform any covenant or agreement made by it therein, the non-breaching Party may be without an adequate remedy at law. If either Party violates or fails or refuses to perform any covenant or agreement made by it herein, the non-breaching Party may, subject to the terms hereof, institute and prosecute an action to enforce specific performance of the covenant or agreement.

21.

INVALID PROVISIONS. If a dispute between the Parties arises out of this Lease or the subject matter of this Agreement, the Parties would want a court or arbitrator to interpret this Agreement as follows:

(a)

(b)

if an unenforceable provision is modified or disregarded in accordance with this Section 21, by holding the rest of the Agreement will remain in effect as written;

(c)

by holding that any unenforceable provision will remain as written in any circumstances other than those in which the provision is held to be unenforceable; and

(d)

if modifying or disregarding the unenforceable provision would result in a failure of an essential purpose of this Agreement, by holding the entire Agreement unenforceable.

Upon the determination that any term or other provision of this Lease is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Lease so as to affect the original intent of the Parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

22.

EXPENSES. Except as otherwise provided in this Lease, whether or not the transactions contemplated hereby are consummated, each Party shall pay its own costs and expenses incurred in anticipation of, relating to and in connection with the negotiation and execution of this Lease and the transactions contemplated hereby.

23.

AMENDMENTS. The Parties may amend any provision of this Lease only by a written instrument signed by the Parties.

24.

CONFIDENTIALITY AND PUBLICITY. This Agreement is confidential and will not be disclosed to any third party (other than the Parties’ Affiliates, attorneys, accountants, auditors, or other advisors, or Governmental Authorities) except as required for tax purposes or as required by law. A Party receiving a request for this Agreement shall promptly notify the other Party to afford it the opportunity to object or seek a protective order regarding this Agreement or information contained herein. Tenant may issue a press release or public announcement concerning any of the transactions contemplated by this Lease and the Related Agreements.

25.

Advice of Counsel. Each Party has had the opportunity to seek the advice of independent legal counsel and has read and understood each of the terms and provisions of this Lease.

26.

MED REFORMATION. This Lease is subject to review by the MED and Boulder County. If the MED or Boulder County determines that this Lease must be reformed, the Parties shall negotiate in good faith to so reform this Lease according to such requirements while effectuating the original intent of this Lease as near as possible.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the Parties hereto have executed this Lease as of the date first written above.


LANDLORD:		TENANT:

Dalton Farms, LLC		General Cannabis Corp.

/s/ Barker Dalton		/s/ Steve Gutterman
John Barker Dalton, Sole Member		Printed Name: Steve Gutterman
		Its: CEO

Exhibit A

Leased Premises Diagram

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of January 24, 2020 (“Effective Date”), is entered into by and between General Cannabis Corp., a Colorado corporation (the “Company”), and John Barker Dalton, an individual (“Employee”).

WHEREAS, the Company and Employee wish to enter into a new employment agreement that will supersede and replace in all respects any previous agreements between the Company and Employee;

WHEREAS, this Agreement is subject to that certain Asset Purchase Agreement between Company and Dalton Adventures, LLC (“Seller”) dated January 24, 2020 (“APA”) and that certain Commercial Lease Agreement between Company and Dalton Farms, LLC (“Landlord”) dated January 24, 2020;

NOW, THEREFORE, in consideration of the foregoing and the mutual promises, terms, provisions, and conditions set forth in this Agreement, the parties hereby agree as follows:

Employment. Effective as of the Effective Date, Employee’s employment with the Company is governed by this Agreement. Employee’s employment with the Company is at will and not for any specified period and may be terminated by either Employee or the Company at any time, with or without cause.

Position and Duties.

(a)

During Employee’s employment with the Company, Employee shall serve as Managing Director of the Company and shall have such duties and authority commensurate with the position of Managing Director and as shall be assigned to him from time to time by the Chief Executive Officer and Board of Directors of the Company (the “Board”).

(b)

Employee shall devote his best efforts, business time and attention (except for permitted vacation periods and reasonable periods of illness or other incapacity) to the business and affairs of the Company and its Subsidiaries (as defined below). Employee shall perform his duties, responsibilities and functions to the Company and its Subsidiaries hereunder in good faith and to the best of his abilities in a diligent, trustworthy, professional and efficient manner and shall comply with the Company’s and its Subsidiaries’ general employment policies and practices, as they may be amended from time to time; provided, that when the terms of this Agreement conflict with such general employment policies or practices, this Agreement shall control. So long as Employee is employed by the Company, Employee shall not, without the prior written consent of the Board, accept other employment or perform other services for compensation that materially interfere with Employee’s employment or with his performance hereunder

(c)

For purposes of this Agreement, “Subsidiaries” shall mean any corporation or other entity of which the securities or other ownership interests having the voting power to elect a majority of the board of directors or other governing body are then, owned by the Company, directly or through one or more Subsidiaries.

Compensation.

(a)

Base Salary. Employee’s base salary shall be $120,000 per annum and shall be subject to increase from time to time in the Board’s sole discretion (the “Base Salary”), which salary shall be paid by the Company in regular installments in accordance with the Company’s general payroll practices (in effect from time to time).

(b)

Annual Bonus. During Employee’s employment with the Company, Employee shall be eligible to receive an annual discretionary incentive payment based upon the attainment of one or more pre-established performance goals and/or such other criteria as may be established by the Board in its sole discretion.

(c)

Initial Option Grant. In connection with Employee’s hiring, Employee will receive options to purchase 100,000 shares of common stock of the Company, subject to the approval of the Company’s Board of Directors. The options will vest over a period of one year. The exercise price of the stock options will be equal to the closing price of the Company’s common stock on the OTCQX on the grant date of the stock options. The stock options will be subject to the terms and conditions of the Company’s 2014 Equity Incentive Plan and the Company’s standard stock option agreement.

Employee Benefits.

(a)

Insurance and Employee Programs. During Employee’s employment with the Company, Employee shall be eligible for all employee benefit programs (including any retirement plan, life insurance, group medical and dental, and short-term disability policies, plan and programs) established and maintained for the benefit of the Company’s employees of comparable rank and status as Employee, subject to the provisions of such plans and programs.

(b)

Expense Reimbursement. During Employee’s employment with the Company, the Company shall reimburse Employee for all reasonable business expenses incurred by Employee in the course of performing his duties and responsibilities under this Agreement which are consistent with the Company’s policies in effect from time to time with respect to travel, entertainment, cell phone and other business expenses, subject to the Company’s requirements with respect to reporting and documentation of such expenses.

(c)

Paid Time Off. During Employee’s employment with the Company, Employee shall be entitled to paid vacation and holidays in accordance with the Company’s policy. Employee shall also be entitled to such periods of sick leave as is customarily provided by the Company to its employees of comparable rank and status of Employee.

(d)

Withholding. All amounts payable to Employee as compensation hereunder shall be subject to all required and customary employment and income withholding obligations by the Company.

Termination of Employment.

(a)

Accrued Obligations. If Employee’s employment with the Company is terminated, Employee shall be entitled to (A) any accrued but unpaid Base Salary through the date of termination, and (B) unreimbursed business expenses that are reimbursable in accordance with Section 4(b).

(b)

Termination of Employee Benefits. Except as otherwise expressly provided herein, Employee shall not be entitled to any other salary, bonuses, employee benefits or compensation from the Company or its Subsidiaries after the termination of Employee’s employment with the Company and all of Employee’s rights to salary, bonuses, employee benefits and other compensation hereunder which would have accrued or become payable after the termination of Employee’s employment with the Company (other than vested retirement or other benefits accrued on or prior to the termination of Employee’s employment with the Company, including, without limitation, any vested rights under any equity plan of the Company or other amounts owing hereunder as of the date of such termination or expiration that have not yet been paid) shall cease upon such termination or expiration, other than those expressly required under applicable law (such as COBRA). All such salary, bonuses, employee benefits or compensation shall be deemed unearned and all conditions for any right to receive such payments shall be deemed unsatisfied.

(c)

Definition of Cause. For purposes of this Agreement, “Cause” shall be determined by the Board and shall mean with respect to Employee one or more of the following: (i) Employee’s willful breach of his covenants contained in this Agreement, in any material respect, which breach remains substantially uncured for fifteen (15) or more days after Employee’s receipt of written notice from the Company of such breach; (ii) Employee’s willful failure or refusal to perform the duties and responsibilities lawfully required to be performed by Employee under the terms of this Agreement or otherwise reasonably requested by the Company; (iii) Employee’s gross negligence or willful misconduct in the performance of his duties on behalf of the Company or any of its Subsidiaries; (i) Employee’s willful commission of an act of material dishonesty adversely affecting the Company or any of its Subsidiaries, or the commission of an act constituting common law fraud or a felony or the commission of any other act or omission involving misappropriation, embezzlement, material dishonesty, or theft with respect to the Company or any of its Subsidiaries; or (v) any willful or intentional act or omission materially aiding or abetting a competitor or supplier of the Company or any of its Subsidiaries to the disadvantage or detriment of the Company and its Subsidiaries.

(d)

Definition of Disability. For purposes of this Agreement, “Disability” shall mean Employee’s inability to perform his duties and responsibilities, with reasonable accommodation, as provided herein due to physical or mental disability or sickness extending for, or reasonably expected to extend for, greater than one hundred and eighty (180) days in any twelve-month period.

(e)

Employee acknowledges and agrees that the Company has no obligation to pay Employee any severance.

Confidential Information.

(a)

Employee acknowledges that the continued success of the Company and its Subsidiaries and affiliates, depends upon the use and protection of a large body of confidential, proprietary, and/or trade secret information. All such confidential, proprietary and trade secret information now existing or developed during the term of Employee’s employment hereunder will be referred to in this Agreement as “Confidential Information.” Confidential Information will be interpreted broadly to include all information of any sort (whether embodied in a tangible or intangible form) that is (i) related to the Company’s or its Subsidiaries’ business and (ii) not generally or publicly known. Confidential Information includes, without specific limitation, the information, observations and data obtained by Employee during the course of his performance under this Agreement concerning the business and affairs of the Company and its Subsidiaries and affiliates, information concerning acquisition opportunities in or reasonably related to the Company’ or its Subsidiaries’ or affiliates’ business or industry of which Employee becomes aware during Employee’s employment with the Company, the persons or entities that are current, former or prospective suppliers or customers of any one or more of them during Employee’s course of performance under this Agreement, as well as development, transition and transformation plans, methodologies and methods of doing business, strategic, marketing and expansion plans, including plans regarding planned and potential sales, financial and business plans, confidential employee lists and contact information, compensation and incentive structures and strategies, confidential information concerning sales, including volumes, pricing, and margins, new and existing programs and services, prices and terms, customer service, integration processes, requirements and costs of providing service, support and equipment. Therefore, Employee agrees that he shall not disclose to any unauthorized person or use for his own account any of such Confidential Information without the Board’s prior written consent, unless and to the extent that any Confidential Information (i) becomes generally known to and available for use by the public other than as a result of Employee’s improper acts or omissions to act or (ii) is required to be disclosed pursuant to any applicable law or court order. Employee agrees that he shall not disclose any Confidential Information after his employment ends. If requested by the Company in writing, Employee agrees to deliver to the Company at the end of Employee’s employment with the Company, or at any other time the Company may request, all memoranda, notes, plans, records, reports and other documents (and copies thereof and all electronic data residing on any electronic device) relating to the business of the Company or its Subsidiaries or affiliates (including, without limitation, all Confidential Information) that he may then possess or have under his control, provided that Employee may retain copies of Employee’s personnel information, such as performance evaluations, payroll information and the like.

(b)

During Employee’s employment with the Company, Employee shall not use or disclose any confidential information or trade secrets, if any, of any former employers or any other person to whom Employee has an obligation of confidentiality, and shall not bring onto the premises of the Company or its Subsidiaries or affiliates any unpublished documents or any property belonging to any former employer or any other person to whom Employee has an obligation of confidentiality unless consented to in writing by the former employer or person. Employee shall use in the performance of his duties only information that is (i) generally known and used by persons with training and experience comparable to Employee’s and that is (x) common knowledge in the industry or (y) is otherwise legally in the public domain, (ii) otherwise provided or developed by the Company or its Subsidiaries or affiliates or (iii) in the case of materials, property or information belonging to any former employer or other person to whom Employee has an obligation of confidentiality, approved for such use in writing by such former employer or person. If at any time during employment with the Company or any Subsidiary of the Company, Employee believes he is being asked to engage in work that will, or will be likely to, jeopardize any confidentiality or other obligations Employee may have to former employers or other persons, Employee shall promptly advise the Board so that Employee’s duties can be modified appropriately.

(c)

Employee shall promptly notify the Company of any intended or unintended, unauthorized disclosure or use of any trade secrets or Confidential Information by Employee or any other person or entity of which Employee becomes aware. Employee shall cooperate fully with the Company in the procurement of any protection of the Company’s rights to or in any of the trade secrets or Confidential Information.

(d)

Employee understands that the Company and its Subsidiaries and affiliates will receive from third parties confidential or proprietary information (“Third Party Information”) subject to a duty on the Company’s and its Subsidiaries’ and affiliates’ part to maintain the confidentiality of such information and to use it only for certain limited purposes. During Employee’s employment with the Company and thereafter, and without in any way limiting the provisions of Section 6(a) above, Employee will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than personnel of the Company or its Subsidiaries and affiliates who need to know such information in connection with their work for the Company or such Subsidiaries and affiliates) or use, except in connection with his work for the Company or its Subsidiaries and affiliates, such Third Party Information unless expressly authorized by the Board’s written consent.

(e)

Notwithstanding anything to the contrary contained herein:

(1)

Nothing in this Agreement shall prohibit Employee from reporting possible violations of federal or state law or regulation to, or otherwise cooperating with or providing information requested by, any governmental agency or entity, including, but not limited to, the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or making other disclosures that are protected under the whistleblower provisions of federal law or regulation. Employee does not need the prior authorization of the Company to make any such reports or disclosures and is not required to notify the Company that he has made such reports or disclosures; and

(2)

Employee will not be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that is made (A) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney and (B) solely for the purposes of reporting or investigating a suspected violation of law or is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. If Employee files a lawsuit for retaliation by the Company for reporting a suspected violation of law, Employee may disclose the Company’s trade secrets to his attorney and use the trade secret information in the court proceeding if Employee (x) files any document containing the trade secret under seal and (y) does not disclose the trade secret, except pursuant to court order.

Employee Proprietary Information Agreement. Upon reasonable request by Company, Employee shall execute a separate agreement between the parties hereto made a part hereof (the “Employee Proprietary Information Agreement”) covering, among other things, non-disclosure and assignment of inventions.

Non-Compete; Non-Solicitation.

(a)

In recognition of the importance to the Company of the preservation and protection of its intellectual property, name and goodwill and in consideration for employment and/or continued employment, access to or continued access to Confidential Information, training, compensation and benefits, as well as other good and valuable consideration provided by the Company to Employee, the receipt and sufficiency of which are hereby acknowledged by Employee, the parties agree that during Employee’s employment with the Company and for a period of six (6) months following the termination of Employee’s employment with the Company without Cause (the “Non- Compete”) Employee shall not, directly or indirectly, as a partner, joint venturer, member, lender, employer, employee, advisor, contractor, consultant, shareholder, principal or agent, engage in, control, advise with respect to, manage or furnish consulting or other services to, nor have any interest in, any business relating to the regulated cannabis industry within the state of Colorado and the area to the West of the Rocky Mountains, including businesses involved in the cultivation, production and retail sides of the cannabis business, and security, marketing, operational consulting and products, real estate and financing for the industry. The Non-Compete shall not prohibit Employee from owning less than 5% of the outstanding stock of any publicly-traded corporation.

(b)

Employee acknowledges that the foregoing geographic restriction on competition is fair and reasonable, given the geographic scope of Company’s business operations and the nature of Employee’s position with the Company. Employee also acknowledges that while employed by the Company, Employee will have access to information that would be valuable or useful to Company’s competitors, and therefore acknowledges that the foregoing restrictions on Employee’s future employment and business activities are fair and reasonable. Employee acknowledges and is prepared for the possibility that Employee’s standard of living may be reduced during the noncompetition period, and assumes and accepts any risk associated with that possibility.

(c)

Employee acknowledges the following provisions of Colorado law, set forth in Colorado Revised Statutes § 8-2-113(2):

Any covenant not to compete which restricts the right of any person to receive compensation for performance of skilled or unskilled labor for any employer shall be void, but this subsection (2) shall not apply to:

(i)

Any contract for the purchase and sale of a business or the assets of a business;

(ii)

Any contract for the protection of trade secrets;

(iii)

Any contract provision providing for the recovery of the expense of educating and training an employee who has served an employer for a period of less than two (2) years; and

(iv)

Executive and management personnel and officers and employees who constitute professional staff to executive and management personnel.

(d)

Employee acknowledges that this Agreement is a contract for the protection of trade secrets under § 8-2-113(2)(b), and is intended to protect the Confidential Information identified above; and that Employee is an executive and management employee or professional staff to executive or management personnel, within the meaning of § 8-2-113(2)(d).

(e)

Employee agrees that during Employee’s employment with the Company and for six (6) months after the termination of Employee’s employment with the Company, Employee shall not, without the Company’s written permission, directly or indirectly through another person or entity (i) induce or attempt to induce any employee of the Company or any of its Subsidiaries to leave the employ of the Company or such Subsidiary, or in any way interfere with the relationship between the Company or any of its Subsidiaries and any employee thereof, (ii) hire any person who was an employee of the Company or any of its Subsidiaries at any time during the six (6) months preceding such hiring, unless such person was terminated by the Company without cause, or (iii) induce or attempt to induce any customer, supplier, licensee, licensor, franchisee or other business relation of the Company or any of its Subsidiaries to cease doing business with the Company or such Subsidiary, or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company or any of its Subsidiaries (including, without limitation, making any negative or disparaging statements or communications about the Company or its Subsidiaries or affiliates), (iv) directly or indirectly acquire or attempt to acquire any business which the Company or its Subsidiaries identified as a potential acquisition target during or prior to Employee’s employment with the Company (an “Acquisition Target”), or take any action to induce or attempt to induce any Acquisition Target to consummate any acquisition, investment or other similar transaction with any person or entity other than the Company or its Subsidiaries. For purposes of this Section 8(e), the term “employee” shall include consultants and independent contractors of the Company and its Subsidiaries.

(f)

Employee agrees that the covenants made in this Section 8 shall be construed as agreements independent of any other provision(s) of this Agreement and shall survive any order of a court of competent jurisdiction terminating any other provision(s) of this Agreement.

Trade Secrets; Remedies; Restrictions.

(a)

Employee further acknowledges and agrees with the Company that Employee’s service to the Company requires the use of information, including programs, methods, techniques, and processes, that the Company and its Subsidiaries have made reasonable efforts to keep confidential and that derives independent economic value, actual or potential, from not being generally known to the public or to other person who can obtain economic value from its disclosure or use (collectively, “Trade Secrets”). Employee acknowledges and agrees that the Company would be irreparably damaged if Employee were to use or disclose such Trade Secrets to third parties, including any person or entity competing with the Company and its Subsidiaries or engaged in a material line of business similar to that engaged in by the Company or its Subsidiaries. Employee accordingly covenants and agrees with the Company that during the period commencing on the date of this Agreement, throughout Employee’s employment, and after such employment terminates, Employee shall not, directly or indirectly, either for himself or for any other person participate in any business, other than for the Company and its Subsidiaries, in which Employee would be required to employ, reveal or otherwise utilize or disclose Company Trade Secrets. Employee further acknowledges and agrees that during the period commencing on the date of this Agreement, throughout Employee’s employment, and after such employment terminates for a period of six (6) months, Employee shall keep the Company’s Trade Secrets strictly confidential and not disclose them to any third parties.

(b)

In the event of the breach or a threatened breach by Employee of any of the provisions of Sections 6, 7, 8, or 9, the Company would suffer irreparable harm, and in addition and supplementary to other rights and remedies existing in its favor, the Company shall be entitled to specific performance and/or injunctive or other equitable relief from a court of competent jurisdiction in order to enforce or prevent any violations of the provisions hereof (without posting a bond or other security). In addition, in the event a court of competent jurisdiction determines that Employee breached or violated Sections 6, 7, 8, or 9, the periods of such restrictive covenants will be tolled until such breach or violation has been duly cured.

(c)

If, at the time of enforcement of Sections 6, 7, 8, or 9 of this Agreement, a court holds that the restrictions stated herein are unreasonable under circumstances then existing the parties hereto agree that the maximum period, scope or geographic area held reasonable by the court shall be substituted for the stated period, scope or area. Employee acknowledges that the restrictions contained in Sections 6, 7, 8, or 9 are reasonable in all respects and necessary to protect the goodwill of the businesses of the Company and its Subsidiaries and that, without such protection, the Company’s and its Subsidiaries’ customer, distributor and supplier relations and competitive advantage would be adversely affected.

10.

Employee’s Representations. Employee hereby represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by Employee do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Employee is a party or by which he is bound, (ii) Employee is not a party to or bound by any other employment agreement, noncompete agreement or, except in the ordinary course of business, confidentiality agreement with any other person or entity except as disclosed in writing to the Company prior to the date hereof, and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Employee, enforceable in accordance with its terms. Employee hereby acknowledges and represents that he has consulted with independent legal counsel regarding his rights and obligations under this Agreement and that he fully understands the terms and conditions contained herein.

11.

Survival. To the extent contemplated by this Agreement, the respective rights and obligations of the parties hereto shall survive and continue in full force in accordance with their terms notwithstanding the termination of Employee’s employment with the Company.

12.

Notices. Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, sent by reputable overnight courier service, mailed by first class mail, return receipt requested, or by facsimile transmission or electronic mail in pdf format, to the recipient at the address below indicated:

Notices to Employee:

John Barker Dalton

3705 N. 75th Street

Boulder, CO 80301

720-442-1009

Barker@sevenfivefarm.com

Notices to Company:

General Cannabis Corp.

6565 East Evans Avenue

Denver, CO 80224

Attention: Chief Executive Officer

Email: sgutterman@generalcann.com

or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notices required or permitted hereunder shall be deemed given upon personal delivery to the appropriate address, or three (3) days after the date of mailing if sent by certified or registered mail, or one (1) day after the date of mailing if sent by overnight delivery service, or the day of transmission of such notice by facsimile or email if sent during normal business hours of the recipient, and if sent after normal business hours of the recipient then on the next business day. Each party may change its address, facsimile number or email address for receipt of notice by giving notice of the change to the other party.

13.

Modification; Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, the provision shall be modified to the minimum extent necessary to be valid, legal and enforceable. If it cannot be so modified, the provision shall be severed, and this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. The invalidity, illegality or unenforceability of any provision shall not affect any other provision of this Agreement or any action in any other jurisdiction.

14.

15.

No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party.

16.

Counterparts. This Agreement may be executed in separate counterparts (including by means of facsimile or by electronic mail in .pdf format), each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

17.

Successors and Assigns. This Agreement will be binding upon and inure to the benefit of the Company and any successor to the Company, including without limitation any persons acquiring directly or indirectly all or substantially all of the business or assets of the Company whether by purchase, merger, consolidation, reorganization or otherwise (and such successor shall thereafter be deemed the “Company” for the purposes of this Agreement). This Agreement will inure to the benefit of and be enforceable by Employee’s personal or legal representatives, executors, administrators, successors, heirs, distributees and legatees, but otherwise will not otherwise be assignable, transferable or delegable by Employee. Except as expressly provided in the immediately preceding sentence, Employee shall not, without the prior written consent of the Company, assign, transfer or delegate this Agreement or any of Employee’s rights or obligations hereunder.

18.

Choice of Law. This Agreement shall be construed and enforced in accordance with the laws of the State of Colorado, notwithstanding any state’s choice-of-law rules to the contrary.

19.

Arbitration. Any dispute, claim or controversy arising out of or relating to this Agreement or the breach, termination, enforcement, interpretation or validity thereof, including the determination of the scope or applicability of this agreement to arbitrate, shall be determined by arbitration in Denver, Colorado before three (3) arbitrator(s). The arbitration shall be administered by JAMS pursuant to its Comprehensive Arbitration Rules and Procedures. Judgment on the Award may be entered in any court having jurisdiction. This clause shall not preclude parties from seeking provisional remedies in aid of arbitration from a court of appropriate jurisdiction, in which case each party consents to the jurisdiction and venue of the state and federal courts located in Denver, Colorado. The reasonable attorney’s fees and costs of the party ultimately prevailing in such dispute shall be borne by the other party.

20.

Amendment and Waiver. The provisions of this Agreement may be amended or waived only with the prior written consent of both the Company (as approved by the Board) and Employee, and no course of conduct or course of dealing or failure or delay by any party hereto in enforcing or exercising any of the provisions of this Agreement (including, without limitation, the Company’s right to terminate Employee’s employment with the Company for Cause) shall affect the validity, binding effect or enforceability of this Agreement or be deemed to be an implied waiver of any provision of this Agreement.

21.

Deductions/Withholdings on Behalf of Employee. The Company and its respective Subsidiaries shall be entitled to deduct or withhold from any amounts owing from the Company or any of its Subsidiaries to Employee any federal, state, local or foreign withholding taxes, excise tax, or employment taxes (“Taxes”) imposed with respect to Employee’s compensation or other payments from the Company or any of its Subsidiaries or Employee’s ownership interest in the Company (including, without limitation, wages, bonuses, dividends, the receipt or exercise of equity options and/or the receipt or vesting of restricted equity).

22.

Corporate Opportunity. During Employee’s employment with the Company, Employee shall submit to the Board all business, commercial and investment opportunities or offers presented to Employee or of which Employee becomes aware which relate to the business of the Company Business at any time during Employee’s employment with the Company (“Corporate Opportunities”). If the Company elects not to pursue a submitted Corporate Opportunity, Employee shall have the right to accept or pursue such Corporate Opportunity.

23.

Employee’s Cooperation. During Employee’s employment with the Company, Employee shall, subject to the Company reimbursing Employee for out-of-pocket expenses, cooperate with the Company and its Subsidiaries in any internal investigation or administrative, regulatory or judicial proceeding as reasonably requested by the Company (including, without limitation, Employee being available to the Company upon reasonable notice for interviews and factual investigations, appearing at the Company’s request to give testimony without requiring service of a subpoena or other legal process, volunteering to the Company all pertinent information and turning over to the Company all relevant documents which are or may come into Employee’s possession, all at times and on schedules that are reasonably consistent with Employee’s other permitted activities and commitments).

24.

Notwithstanding anything herein to the contrary, a termination of employment shall be deemed to have occurred at the time such termination constitutes a “separation from service” within the meaning of Code Section 409A for purposes of any provision of this Agreement providing for the payment of any amounts or benefits in connection with a termination of employment and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean a “separation from service.” Further, if, on the date of a “separation from service” (as defined in Code Section 409A), Employee is a “specified employee” (as defined in Code Section 409A), no amounts that would constitute deferred compensation payable hereunder that are subject to Code Section 409A shall be made until the earliest date on which payment is permissible under 409A(a)(2)(B)(i) (the six (6)-month delay rule for specified employees). To the extent that reimbursements or other in-kind benefits under this Agreement constitute “nonqualified deferred compensation” for purposes of Code Section 409A, (A) all such expenses or other reimbursements hereunder shall be made on or prior to the last day of the taxable year in which such expenses were incurred by Employee, (B) any right to such reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (C) no such reimbursement, expenses eligible for reimbursement, or in-kind benefits provided in any taxable year shall in any way affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year. For purposes of Code Section 409A, Employee’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Company. Notwithstanding any other provision to the contrary, in no event shall any payment under this Agreement that constitutes “deferred compensation” for purposes of Code Section 409A be subject to offset by any other amount unless otherwise permitted by Code Section 409A.

* * * * *

IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date first written above.


	GENERAL CANNABIS CORP.

	By:	/s/ Steve Gutterman
	Name:	Steve Gutterman
	Title:	CEO


		/s/ Barker Dalton
	Name:	Barker Dalton

[Signature Page to Employment Agreement of John Barker Dalton]

Exhibit 2.3

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (the “Agreement”) is entered into on April 7th, 2020, by and between General Cannabis Corp., a Colorado Corporation (“Buyer”), or its assigns, and The Organic Seed LLC, a Colorado limited liability company (“Seller”). Seller and Buyer are sometimes referred to individually as a “Party” and collectively as the “Parties.”

Recitals

Seller owns and operates a licensed retail marijuana cultivation, a licensed retail marijuana store, a licensed retail marijuana manufacturing, a licensed medical marijuana cultivation, and a licensed medical marijuana manufacturing (collectively the “Business”) located at 41 North Precision Drive, Pueblo West, CO 81007 ( the “Leased Premises”);

Seller is licensed and authorized to harvest, cultivate, manufacture, and sell retail and medical marijuana at the Leased Premises under the Marijuana Code; and

Buyer desires to purchase certain assets from Seller, and Seller desires to sell certain assets to Buyer.

NOW THEREFORE, the Parties agree as follows:

Terms

ARTICLE I

DEFINITIONS AND CONSTRUCTION

1.1

Definitions. Capitalized terms have the meanings set forth below unless defined elsewhere in this Agreement.

“Affiliate” means any Person that directly or indirectly through one or more intermediaries, Controls, is Controlled by or is under common Control with the Person specified.

“Application Fees” means all fees paid to Governmental Authorities associated with the Change of Ownership applications.

“Assets” means the Licenses; including inventory, growing plants, furniture, fixtures, business personal property of any kind, nature, character, or description, operated, owned, or leased by Seller at the Leased Premises, and any intellectual property owned by Seller, as more fully described on Exhibit A.

“Business Day” means a day other than Saturday, Sunday, or any day on which banks located in the State of Colorado are authorized or obligated to close.

“CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and any rules or regulations promulgated thereunder.

“Change of Ownership” means the transfer of ownership of the Licenses from Seller to Buyer.

“County” means Pueblo County, Colorado.

“Claim” means any demand, claim, action, investigation, or Proceeding.

“Due Diligence Period” means the period of time beginning on the date of this Agreement and ending 30 days thereafter.

“Environmental Laws” means any federal, state, local or foreign law (including, without limitation, common law), treaty, judicial decision, regulation, rule, judgment , order, decree, injunction, permit or governmental restriction or any agreement with any Governmental Authority or other third party, whether now or hereafter in effect, relating to the environment, human health and safety or to pollutants, contaminants, wastes or chemicals or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous substances, wastes or materials.

“Environmental Liabilities” means any and all liabilities arising in connection with or in any way relating to Seller (or any predecessor of Seller or any prior owner of all or part of its business and assets), any property now or previously owned, leased or operated by Seller, the Business (as currently or previously conducted), the Assets or any activities or operations occurring or conducted at the Leased Premises (including, without limitation, offsite disposal), whether accrued, contingent, absolute, determined, determinable or otherwise, which (i) arise under or relate to any Environmental Law and (ii) relate to actions occurring or conditions existing on or prior to the Closing.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Final Governmental Approval” means the final decisions by the MED and the County in writing approving the Change of Ownership, and such approvals (a) do not include any responsibility of Buyer or Buyer’ s owners for the actions of Seller or Seller’ s owner with respect to an administrative investigation or administrative disciplinary action by the MED or the County; and (b) do not subject Buyer or Buyer’s owners to discipline by the MED or the County for the actions of Seller or Seller’s owner with respect to an administrative investigation or administrative disciplinary action by the MED or the County.

“Interim Period” means the time period from the date of this Agreement through and including the Closing.

“Licenses” means the following licenses held by Seller:

(a)

Seller’s State of Colorado Retail Marijuana Store License Numbers 402R-00196;

(b)

Seller’s Pueblo County Conditional Use Permit for License Number 402R-00196;

(c)

Seller’s State of Colorado Retail Marijuana Cultivation Facility License Number 403R-00254;

(d)

Seller’s Pueblo County Conditional Use Permit for License Number 403R00254;-

(e)

Seller’s State of Colorado Retail Marijuana Products Manufacturing License Number 404R-00063;

(f)

Seller’s Pueblo County Conditional Use Permit for License Number 404R-00063;

(g)

Seller’s State of Colorado Infused Product Manufacturing License Number 404-00374;

(h)

Seller’s Pueblo County Conditional Use Permit for License Number 404-00374;

(i)

Seller’s State of Colorado Optional Premises Cultivation License Number 403-01422; and

(j)

Seller’s Pueblo County Conditional Use Permit for License Number 40-01422.

“Lien” means any mortgage, pledge, assessment, security interest, lien, or other similar encumbrance.

“Marijuana Code” means, collectively, Sections 14 and 16 of Article XVIII of the Colorado Constitution, the Colorado Marijuana Code, §§ 44-10-101, .et seq., C.R.S., as the same may be supplemented or amended from time to time, together with the regulations promulgated thereunder, and all applicable local Laws and regulations thereto promulgated by a Governmental Authority.

“MED” means the Colorado Marijuana Enforcement Division.

“Securities Act” means the Securities Act of 1933, as amended.

“Termination Date” means January 31, 2021.

1.2

Rules of Construction.

(a)

(b)

(c)

(d)

ARTICLE II

PURCHASE OF BUSINESS, PAYMENT, AND CLOSING

2.1

Purchase of Assets. At the Closing, Seller shall sell to Buyer and Buyer shall purchase from Seller the Assets.

2.2

Purchase Price; Issuance of Buyer Shares; Adjustments.

(a)

The purchase price for the Assets is $2,350,000.00 (the “Purchase Price”).

(b)

Buyer shall pay the Purchase Price by issuing to Seller the number of shares of common stock of Buyer (the “Buyer Shares”) equal to: (1) the Purchase Price divided by (2) the volume weighted average price of the Buyer Shares for 30 consecutive trading days ending on the second trading day prior to The Closing. (the “VWAP Price”); provided, that:

(i)

if the VWAP Price is less than $0.45, then the VWAP Price will be adjusted to equal $0.45 for the purpose of the foregoing calculation of the number of Buyer Shares to be issued to Seller; or

(ii)

if the VWAP Price exceeds $0.55, then the VWAP Price will be adjusted to equal $0.55 for the purpose of the foregoing calculation of the number of Buyer Shares to be issued to Seller.

(c)

(d)

(e)

At the Closing, Seller will retain any uncollected accounts receivable and all cash and funds in depository accounts. Seller will be responsible for satisfying all accounts payable as of the date of Closing.

2.3

2.4

Documents Deliverable at Closing. At the Closing:

(a)

Seller shall provide to Buyer (collectively, “Seller’s Closing Documents”)

(i)

An executed Seller’s Officer’s Certificate in the form attached hereto as Exhibit C;

(ii)

The Closing Working Capital Balance; and

(iii)

The Bill of Sale for the Assets in the form attached hereto as Exhibit E.

(b)

Buyer shall provide to Seller an executed Buyer’s Officer’s Certificate in the form attached hereto as Exhibit D.

ARTICLE III

SELLER’S STATEMENTS OF FACT

Seller states that the following are true as of the date of this Agreement:

3.1

3.2

3.3

No Conflicts; Consents and Approvals. The execution and delivery by Seller of this Agreement do not, and the performance by Seller of its obligations under this Agreement does not:

(a)

violate or result in a breach of its Charter Documents;

(b)

(c)

3.4

3.5

3.6

Compliance with Laws and Orders. Seller is in compliance with all Laws and orders applicable to it except where any non-compliance would not reasonably be expected to result in a Material Adverse Effect on Seller; provided, however, that this Section 3.6 does not address matters relating to Taxes, which are exclusively addressed by Section 3.7, or Permits, which are exclusively addressed by Section 3.8. Seller has no Knowledge of any fact, circumstance, or condition which could cause the Assets or the Leased Premises to violate the Marijuana Code concerning required testing or contaminants. Seller has no Knowledge of any fact, circumstance, or condition which could cause the Assets or the Leased Premises to violate the Colorado Pesticide Applicator’s Act, C.R.S. §§ 35-10-101, et. seq.

3.7

3.8

3.9

Operating Facility. The licensed business at the Leased Premises is a Retail Marijuana Cultivation Facility, a Retail Marijuana Products Manufacturing Facility, a Retail Marijuana Store, a Medical Marijuana Products Manufacturing Facility, and an Optional Premises Cultivation, as defined in the Marijuana Code.

3.10

Seller’s Members. Ryan Griego and Nicholas Dremel are the only members of Seller.

3.11

Environmental Matters. Seller is in compliance with all Environmental Laws and any other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in such Environmental Laws, insofar as failure to comply with the same could result in any liability affecting, or other reduce the value of the Assets. There are no liabilities arising in connection with or in any way relating to the Assets of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, arising under or relating to any Environmental Law, and there are no facts, events, conditions, situations or set of circumstances which could reasonably be expected to result in or be the basis for any such liability.

There has not been any event, condition, circumstance, activity, practice, incident, action or plan which will interfere with or prevent continued compliance with or which would give rise to any liability under any Environmental Law or give rise to any common law or statutory liability, based on or resulting from Seller’s or its agents’ manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling, or the emission, discharge, or release into the environment, of any Hazardous Substance, that could result in any liability affecting, or other reduce the value of, the Assets or Business. Seller has taken all actions necessary under applicable requirements of Environmental Law to register any products or materials required to be registered by Seller (or any of its agents) thereunder. There is no Proceeding, notice or demand letter pending or threatened against Seller relating in any way to Environmental Laws, or notice or demand letter issued, entered, promulgated or approved thereunder. No property now or previously owned, leased or operated by Seller, nor any property to which Hazardous Substances located on or resulting from the use of any Asset or the Leased Premises have been transported, is listed or, to Seller’s Knowledge, proposed for listing on the National Priorities List promulgated pursuant to CERCLA, on CERCLIS (as defined in CERCLA) or on any similar federal, state, local or foreign list of sites requiring investigation or cleanup.

3.12

Securities.

(a)

Purchase Entirely for Own Account. The Buyer Shares will be acquired for investment for Seller’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and Seller has no present intention of selling, granting any participation in, or otherwise distributing the same, provided, however, debt due Precision Management, Brett Bennett and 41 N Precision Drive LLC by Seller will be satisfied by a transfer of Buyer Shares (the “Debt Share Transfer”). Seller does not presently have any Contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any other Person with respect to any of such Buyer Shares except with regards to the Debt Share Transfer. Seller has not been formed for the specific purpose of acquiring such Buyer Shares.

(b)

Disclosure of Information. Seller has had an opportunity to discuss to Seller’s satisfaction Buyer’s business, management, financial affairs and the terms and conditions of the offering of the Buyer Shares with Buyer’s management and has had an opportunity to review Buyer’ s business. Such discussions, as well as any written information delivered by Buyer to Seller, were intended to describe the aspects of Buyer’s business which Buyer believes to be material.

(c)

(d)

(e)

Resale Restrictions. If all of the applicable requirements of Rule 144 are not satisfied, registration under the Securities Act, compliance with Regulation A promulgated under the Securities Act, or some other registration exemption will be required with respect to the Buyer Shares. Notwithstanding the fact that Rule 144 is not exclusive, the staff of the Securities and Exchange Commission has expressed its opinion that Persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and ‘ t hat such persons and their respective brokers who participate in such transactions do so at their own risk.

(f)

(g)

3.13

(collectively, “Seller’ s Statements of Fact”).

ARTICLE IV

BUYER’S STATEMENTS OF FACT

Buyer states that the following is true as of the date of this Agreement:

4.1

4.2

4.3

(a)

violate or result in a breach of its Charter Documents;

(b)

(c)

4.4

Proceedings. There is no Proceeding pending or, to Buyer’s Knowledge threatened, against Buyer before or by any Governmental Authority, which seeks a writ, judgment order or decree restraining, enjoining, or otherwise prohibiting or making illegal any of the transactions contemplated by this Agreement.

4.5

4.6

(collectively, “Buyer’s Statements of Fact”).

ARTICLE V

COVENANTS

5.1

Regulatory and Other Approvals. During the Interim Period:

(a)

(b)

(c)

(d)

(e)

(f)

In furtherance of the foregoing covenants:

(i)

(ii)

(iii)

Each Party shall not, and shall cause its respective Affiliates not to, take any action that could reasonably be expected to adversely affect the approval of any Governmental Authority.

5.2

Access of Buyer; Due Diligence. During the Interim Period, Seller shall provide Buyer with reasonable access, upon reasonable notice and during normal business hours, to the Business and the Leased Premises, subject to the Marijuana Code. During the Due Diligence Period, Seller shall provide Buyer, upon request, with access to Seller’s books and records, Seller’s standard operating procedures, and with reasonable access to Seller’s employees in order to allow Buyer to conduct due diligence.

5.3

(a)

Dissolution of Seller; or

(b)

Sale of the Business or any Assets outside of the ordinary course of business.

5.4

5.5

5.6

Delay by the MED or the County of Notification of Fin al Governmental Approval. Notwithstanding anything to the contrary set forth in Section 5.l(e), if Final Governmental Approval occurs, but the MED or the County does not promptly notify a Party of Final Governmental Approval, and such delay causes or might cause one or more of the Parties to violate the Marijuana Code, the Parties shall work in good faith to take all necessary action to ensure that the Parties minimize or eliminate any violations of the Marijuana Code and that the Business continue in the ordinary course. Each Party will be responsible for its respective out-of-pocket expenses incurred by such Party with respect to this Section 5.6.

5.7

5.8

Application Fees. Buyer shall pay the change of ownership application fees and prorated annual license renewal fees for all state and county licenses.

5.9

Non Solicitation.

(a)

The “Restricted Period” begins on the Closing Date and ends on the second anniversary of the Closing Date.

(b)

“Competing Business” means any business, except for the Business, engaged the cultivation and sale of marijuana.

(d)

(e)

During the Restricted Period, Seller and its Affiliates shall not solicit customers of the Business in connection with a Competing Business.

(f)

(g)

If any covenant set forth in this Section 5.9 is adjudicated to exceed the time, geographic, product or service or other limitations permitted by applicable law in any jurisdiction, then any court is expressly empowered to reform such covenant, and such covenant will be deemed reformed, in such jurisdiction to the maximum time, geographic, product or service or other limitations permitted by the applicable Law. The covenants contained in this Section 5.9 and each provision thereof are severable and distinct covenants and provisions. The invalidity or unenforceability of any such covenant or provision as written will not invalidate or render unenforceable the remaining covenants or provisions hereof, and any such invalidity or unenforceability in any jurisdiction will not invalidate or render unenforceable such covenant or provision in any other jurisdiction. To the extent the provisions of this Section 5.9 conflict with the provisions of Section 10.12, the provisions of this Section 5.9 will control.

(h)

Seller shall cause its Affiliates to comply with the obligations set forth in this Section 5.9.

5.10

Post-Closing Covenants Concerning the Buyer Shares.

(a)

Seller shall not engage in hedging transactions with the Buyer Shares except in compliance with the Securities Act.

(b)

Notwithstanding anything to the contrary set forth in this Agreement, Seller shall not sell the Buyer Shares in violation of the Laws, including Rule 144 promulgated under the Securities Act.

(c)

Buyer shall make reasonable efforts to register the resale of the Buyer Shares issued as part of this Agreement on a Form S-1, or, if available, Form S-3. For a period of six months following the Closing, Seller shall not lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right, or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, fifty percent (50%) of the Buyer Shares that Seller receives under this Agreement.

ARTICLE VI

BUYER’S CONDITIONS TO CLOSING

The obligation of Buyer to consummate the Closing is subject to the fulfillment of each of the following conditions (except to the extent waived in writing by Buyer in its sole discretion):

6.1

6.2

6.3

Seller’s Deliverables. Seller has delivered to Buyer at the Closing Seller’ s Closing Documents.

6.4

6.5

Consents and Approvals. All terminations or expirations of waiting periods imposed by any Governmental Authority with respect to this Agreement have occurred; provided , however , that the absence of any appeals and the expiration of any appeal period with respect to any of the foregoing will not constitute a condition to the Closing hereunder.

6.6

No Material Adverse Effect. No Material Adverse Effect exists.

6.7

Final Governmental Approval. Final Governmental Approval has occurred.

6.8

6.9

Employment Agreements. Buyer has entered into employment agreements with both Ryan Griego and Nicholas Dremel in the form attached hereto as Exhibit F.

6.10

Lease. The landlord for the Leased Premises will have agreed in writing to a new lease for the Leased Premises with Buyer as tenant, in form and substance acceptable to both Seller and Buyer in its sole discretion..

ARTICLE VII

SELLER’S CONDITIONS TO CLOSING

The obligation of Seller to consummate the Closing is subject to the fulfillment of each of the following conditions (except to the extent waived in writing by Seller in its sole discretion):

7.1

7.2

7.3

Buyer’s Deliverables. Buyer will have delivered to Seller the Purchase Price and Buyer’s Officer’s Certificate.

7.4

7.6

Consents and Approvals. All terminations or expirations of wa1tmg periods imposed by any Governmental Authority with respect to this Agreement will have occurred; provided, however , that the absence of any appeals and the expiration of any appeal period with respect to any of the foregoing will not constitute a condition to the Closing hereunder.

7.7

Final Governmental Approval. Final Governmental Approval will have occurred.

ARTICLE VIII

TERMINATION

8.1

Termination. This Agreement may be terminated in one or more of the following ways:

(a)

(b)

At any time before the Closing, by Buyer, by written notice to Seller, if Seller has materially breached its Statements of Fact or obligations under this Agreement and the breach would or does result in the failure of any condition set forth in Article VI.;

(c)

(d)

At any time on or after the Termination Date, by either Party, by written notice to the other Party.

8.2

ARTICLE IX

LIMITATIONS ON LIABILITY, THIRD-PARTY CLAIMS, AND ARBITRATION

9.1

Indemnity. From and after the Closing:

(a)

Seller shall indemnify, defend, and hold harmless Buyer from and against all Losses incurred or suffered by Buyer resulting from:

(i)

(ii)

any breach of any covenant or agreement of Seller contained in this Agreement.

(b)

Buyer shall indemnify, defend, and hold Seller harmless from and against all Losses incurred or suffered by Seller resulting from:

(i)

(ii)

any breach of any covenant or agreement of Buyer contained in this Agreement.

(c)

If Buyer suffers any Loss, for which Seller is obligated to indemnify Buyer, for a material breach of Seller’s Statements of Fact, Buyer may redeem certain Buyer Shares from Seller as follows:

(i)

(ii)

Buyer shall redeem the Redemption Shares, and Seller shall allow Buyer to redeem such Redemption Shares, for the price of one dollar.

9.2

Limitations of Liability. Notwithstanding anything in this Agreement to the contrary:

(a)

Seller’ s Statements of Fact and Buyer’ s Statements of Fact will survive the Closing; provided, however, that no claim may be made with respect to any statement of fact, covenant, agreement, or obligation of Sections 9.1(a)(i) or (b)(i) that a Party breaches later than one year following the Closing;

(b)

(c)

(d)

the Parties have a duty to mitigate any Loss m connection with this Agreement;

(e)

Seller’s liability with respect to Section 9.1 is limited to Losses incurred or suffered by Buyer in an amount no more than $2,350,000.00.

(f)

Buyer’s liability with respect to Section 9.1 is limited to Losses incurred or suffered by Seller in an amount no more than $2,350,000.00.

9.3

Procedure with Respect to Third-Party Claims.

(a)

(b)

(c)

9.4

Mandatory Mediation.

(a)

Except for Claims arising under Section 5.9 or Section 10.11, any dispute, Claim, interpretation, controversy, or issues of public policy arising out of or relating to this Agreement, including the determination of the scope or applicability of this Section 9.4, will be subject to mandatory mediation prior to the filing of any arbitration action as described in Section 9.5.

(b)

The mediator will be selected from the roster of mediatores at Judicial Arbiter Group, Inc. in Denver, Colorado (“JAG”), unless the Parties agree otherwise. If the Parties do not agree on the selection of a single mediator within ten days after a demand for mediation is made, then the mediator will be selected by JAG from among its available professionals. The mediation will be held within 45 days of the selection of the mediator. All communications, both written and oral, during mediation are confidential and will be treated as settlement negotiations for purposes of the Colorado Rules of Evidence. The mediation process will be confidential pursuant to terms agreed to by the Parties and the mediator. Each Party shall bear an equal share of any costs and fees associated with mediation, except for legal fees and expenses incurred by the Parties.

(c)

If the Parties are unable to resolve a dispute, Claim, interpretation, controversy, or issue of public policy pursuant to this Section 9.4, the Parties shall engage in binding arbitration pursuant to Section 9.5.

9.5

Mandatory Binding Arbitration.

(a)

Except for Claims arising under Section 5.9 or Section 10.11, any dispute, Claim, interpretation, controversy, or issues of public policy arising out of or relating to this Agreement, including the determination of the scope or applicability of this Section 9.5, will be determined exclusively by arbitration held in Denver, Colorado, and will be governed exclusively by the Colorado Revised Arbitration Act, §§ 13-22-201, et seq., C.R.S. (the “CRAA’’).

(b)

(c)

(d)

ARTICLE X

MISCELLANEOUS

10.1

10.2

10.3

10.4

10.5

10.6

Headings. The headings used in this Agreement have been inserted for convenience of reference only and do not modify, define, or limit any of its terms or provisions.

10.7


	If to Buyer:	General Cannabis Corp. 6565 E. Evans Avenue Denver, CO 80224 Attn: Michael Feinsod

	With a copy to:	McAllister Garfield, P.C. Attention: Daniel J. Garfield, Esq. 501 S. Cherry St., Ste. 480 Denver, Colorado 80246 Phone: 720-722-0048 E-mail: dgarfield@mcallistergarfield.com

	If to Seller:	The Organic Seed, LLC 41 North Precision Dr. Pueblo West, CO 81007

		Attn: Ryan Griego

	With a copy to:
		Attention:

		Phone:
		Email:

10.8

10.9

Waiver of Right to Trial by Jury. EACH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BYLAW TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND WITH RESPECT TO ANY COUNTERCLAIM THEREIN.

10.10

10.11

Specific Performance. The rights of Buyer to consummate the transactions contemplated hereby (including the satisfaction of any condition to the Closing) are special, unique, and of extraordinary character, and if Seller violates or fails or refuses to perform any covenant or agreement made by it herein, Buyer may be without an adequate remedy at law. If Seller violates or fails or refuses to perform any covenant or agreement made by them herein, Buyer may (at any time prior to the earlier of a) valid termination of this Agreement pursuant to Article VIII and b) the Closing), subject to the terms hereof, institute and prosecute an action to enforce specific performance of the covenant or agreement. The Parties irrevocably submit to the exclusive jurisdiction of the state courts located in Denver, Colorado, with respect to this Section 10.11. The Parties irrevocably waive defense of an inconvenient forum to the maintenance of any such action or other proceeding with respect to this Section 10.11.

10.12

(a)

(b)

if an unenforceable provision is modified or disregarded in accordance with this Section 10.12, by holding the rest of the Agreement will remain in effect as written;

(c)

by holding that any unenforceable provision will remain as written in any circumstances other than those in which the provision is held to be unenforceable; and

(d)

if modifying or disregarding the unenforceable provision would result in a failure of an essential purpose of this Agreement, by holding the entire Agreement unenforceable.

10.13

10.14

Amendments. The Parties may amend any provision of this Agreement only by a written instrument signed by the Parties.

10.15

10.16

Advice of Counsel. Each Party has had the opportunity to seek the advice of independent legal counsel and has read and understood each of the terms and provisions of this Agreement.

10.17

[Remainder of page intentionally left blank; signatures on following page]

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the Parties as of the date first above written.

THE ORGANIC SEED, LLC

By: /s/ Ryan Griego

Name: Ryan Griego

Title: Member

GENERAL CANNABIS CORP.

By: /s/ Steve Gutterman

Name: Steve Gutterman

Title: CEO

EXHIBIT A

ASSETS

EXHIBIT B

ALLOCATION STATEMENT

(Attached)

EXHIBIT C

SELLER'S OFFICER’S CERTIFICATE

THE ORGANIC SEED, LLC

, 2020

This Seller's Officer's Certificate is delivered with respect to Article VI of that certain Asset Purchase Agreement dated April 7th, 2020 (the "AEA") by and between The Organic Seed, LLC, a Colorado limited liability company, and General Cannabis Corp., a Colorado corporation. Capitalized terms used in this certificate that are defined in the AP A have the respective meanings ascribed to them in the APA.

I, Ryan Griego, the duly elected, qualified, and acting of Seller, on behalf of Seller, hereby certify as follows:

Seller's Statements of Fact are true and correct on and as of the Closing as though made on and as of the Closing.

Seller has performed and complied in all material respects with the agreements, covenants, and obligations required by the APA to be performed or complied with by Seller at or before the Closing.

IN WITNESS WHEREOF, the undersigned has executed this Officer's Certificate on behalf of Seller as of the date first written above.

THE ORGANIC SEED, LLC

By:

Name: Ryan Griego

Title:

EXHIBIT D

BUYER'S OFFICER'S CERTIFICATE

GENERAL CANNABIS CORP.

April 7th, 2020

This Buyer's Officer's Certificate is delivered with respect to Article VII of that certain Asset Purchase Agreement dated , 2020 (the “APA”) by and between The Organic Seed, LLC , a Colorado limited liability company, and General Cannabis Corp., a Colorado corporation. Capitalized terms used in this certificate that are defined in the APA have the respective meanings ascribed to them in the APA.

I, , as the duly elected, qualified and acting of Buyer, hereby certify as follows:

Buyer's Statements of Fact are true and correct on and as of the Closing as though made on and as of the Closing.

Buyer has performed and complied in all material respects with the agreements, covenants, and obligations required by the AP A to be performed or complied with by Buyer at or before the Closing.

IN WITNESS WHEREOF, the undersigned has executed this Officer's Certificate on behalf of Buyer as of the date first written above.

GENERAL CANNABIS CORP.

By:

Name:

Title:

EXHIBIT E

BILL OF SALE

THIS BILL OF SALE (this "Bill of Sale") is entered into on April 7th, 2020, by The Organic Seed, LLC, a Colorado limited liability company ("Seller"), for the benefit of General Cannabis Corp., a Colorado corporation ("Buyer").

Recitals

Seller and Buyer entered into that certain Asset Purchase Agreement dated January , 2020 (the "APA"), whereby Buyer agreed to purchase the Assets from Seller; and

Capitalized terms not defined herein have the respective meanings ascribed to them in the APA.

NOW THEREFORE, Seller certifies as follows:

Terms

Title. Seller has good and marketable title to the Assets, free and clear of all Liens, and Buyer hereby receives such good and marketable title thereto.

Further Assurances. Seller shall take all steps necessary to put Buyer in actual possession and operating control of the Assets, to carry out the intent of the AP A and this Bill of Sale, and to more effectively sell, transfer, convey, assign and reduce to possession and record to title any of the Assets, including by executing and delivering, or causing to be executed and delivered, such further instruments or documents of transfer, assignment and conveyance, or by taking such other actions as may be requested by Buyer.

Independent Covenants. This Bill of Sale is subject in all respects to the terms and conditions of the AP A. Nothing contained in this Bill of Sale will be deemed to diminish any of the obligations, agreements, covenants, or statements of fact of Seller set forth in the AP A.

Dispute Resolution. If a dispute arises under this Bill of Sale, such dispute will be settled by in accordance with the provisions set forth in Section 9.4 of the AP A.

Electronic or Fax Signatures. This Bill of Sale may be executed electronically or by fax which will each be effective as original signature.

IN WITNESS WHEREOF, this Bill of Sale has been duly executed and delivered by the duly authorized representative of Seller as of the date first above written.

THE ORGANIC SEED, LLC

By:

Name: Ryan Griego

Title: Member

EXHIBIT F

EMPLOYMENT AGREMENT

(See Attached)

Exhibit 10.28

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of December 13, 2019 (“Effective Date”), is entered into by and between General Cannabis Corp., a Colorado corporation (the “Company”), and Steve Gutterman, an individual (“Employee”).

WHEREAS, the Company wishes to employ Employee, and Employee wishes to accept such employment, on the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the foregoing and the mutual promises, terms, provisions, and conditions set forth in this Agreement, the parties hereby agree as follows:

Employment. Subject to the terms and conditions set forth in this Agreement, the Company hereby offers, and Employee hereby accepts, employment, effective as of the Effective Date. Subject to the provisions for earlier termination hereinafter provided, Employee’s employment with the Company will be for a term commencing on the Effective Date and ending on the fourth (4th) anniversary of the Effective Date (such term, the “Employment Term”). Employee’s employment may be terminated by either Employee or the Company at any time prior to the end of the Employment Term, with or without Cause. Notwithstanding the foregoing, Employee’s employment with the Company will end at the end of the Employment Term without any further action by the Company or Employee.

Position and Duties.

(a)

During Employee’s employment with the Company, Employee shall serve as Chief Executive Officer of the Company and as a member of the Board of Directors of the Company (the “Board”). Employee shall have such duties and authority commensurate with the position of Chief Executive Officer and member of the Board and as shall be assigned to him from time to time by the Board.

(b)

Employee shall report to the Board and Employee shall devote his best efforts, business time and attention (except for permitted vacation periods and reasonable periods of illness or other incapacity) to the business and affairs of the Company and its Subsidiaries (as defined below). Employee shall perform his duties, responsibilities and functions to the Company and its Subsidiaries hereunder in good faith and to the best of his abilities in a diligent, trustworthy, professional and efficient manner and shall comply with the Company’s and its Subsidiaries’ general employment policies and practices, as they may be amended from time to time; provided, that when the terms of this Agreement conflict with such general employment policies or practices, this Agreement shall control. So long as Employee is employed by the Company, Employee shall not, without the prior written consent of the Board, accept other employment or perform other services for compensation that materially interfere with Employee’s employment or with his performance hereunder

(c)

Compensation.

(a)

Base Salary. Employee’s base salary shall be $425,000 per annum and shall be subject to increase from time to time in the Board’s sole discretion (the “Base Salary”), which salary shall be paid by the Company in regular installments in accordance with the Company’s general payroll practices (in effect from time to time).

(b)

Bonus.

(i)

During Employee’s employment with the Company, Employee shall be eligible to receive an annual bonus payment of up to 250% of the Base Salary based upon the EBITDA (as defined below) of the Company at the end of each fiscal year beginning with fiscal year 2020. If the EBITDA of the Company is greater than $5 million and less than $10 million for such fiscal year, such bonus payment will be 50% of the Base Salary paid during such fiscal year. If the EBITDA of the Company is greater than or equal to $10 million and less than $15 million for such fiscal year, such bonus payment will be 150% of the Base Salary paid during such fiscal year. If the EBITDA of the Company is greater than or equal to $20 million for such fiscal year, such bonus payment will be 250% of the Base Salary paid during such fiscal year. Determination of the Company’s EBITDA shall be made in good faith and in the sole and absolute discretion of the Board. Any such bonus payment shall be made by April 30th of the year following the close of the fiscal year to which the bonus is attributable. The amount of the bonus shall be paid 50% in cash and 50% in Common Stock of the Company, with the value of such shares based on the ten- day daily volume weighted average of the closing price of the Company’s Common Stock on the applicable quotation system or stock exchange for the ten consecutive trading days immediately prior to the date on which such bonus payment is made. Such shares shall be issued as bonus shares under the Company’s 2014 Equity Incentive Plan (the “Plan”).

(ii)

“EBITDA” of the Company means the earnings before interest, taxes, depreciation and amortization of the Company and its subsidiaries, and before such other expenses as may be determined by the Board in its sole and absolute discretion.

(iii)

To be eligible for and receive payment of any bonus, including any bonus based on the Company’s EBITDA, Employee must be employed by the Company at the time such bonus is paid.

(c)

Stock Options. In connection with the execution of this Agreement, you will receive options to purchase 1,250,000 shares of Common Stock of the Company (the “Initial Options”), with 250,000 of the shares underlying the Initial Options being vested on the date of grant, and with the remaining 1,000,000 of the shares underlying the Initial Options vesting as to one-quarter (1/4) of the shares on each yearly anniversary of the date of grant. The Initial Options shall be subject to the terms and conditions of the Company’s 2014 Equity Incentive Plan (the “Plan”) and the Company’s standard stock option agreement which provides for the cessation of vesting upon termination of employment for any reason.

In addition to the Initial Options, during his employment with the Company, Employee shall be entitled to receive an additional option to purchase 50,000 shares of the Company’s Common Stock each fiscal quarter beginning on the first fiscal quarter of 2020. Such additional stock options shall be granted at the same time that quarterly options are granted to other employees of the Company and the members of the Board. For the avoidance of doubt, Employee shall not be entitled to receive any option grants made to members of the Board solely as compensation for service on the Board.

Employee Benefits.

(a)

Insurance and Employee Programs. During Employee’s employment with the Company, Employee shall be eligible for all employee benefit programs (including any retirement plan, life insurance, group medical and dental, and short-term and long-term disability policies, plan and programs) established and maintained for the benefit of the Company’s employees of comparable rank and status as Employee, subject to the provisions of such plans and programs.

(b)

(c)

Paid Time Off. During Employee’s employment with the Company, Employee shall be entitled to paid vacation and holidays in accordance with the Company’s policy. Notwithstanding any Company policy, at all times Employee will be entitled to not less than four 4 weeks of vacation per calendar year during his employment with the Company. Employee shall also be entitled to such periods of sick leave as is customarily provided by the Company to its employees of comparable rank and status of Employee.

(d)

Withholding. All amounts payable to Employee as compensation hereunder shall be subject to all required and customary employment and income withholding obligations by the Company.

Termination of Employment.

(a)

Accrued Obligations. If Employee’s employment with the Company is terminated, Employee shall be entitled to (A) his accrued but unused vacation, (B) any accrued but unpaid Base Salary through the date of termination, and (C) unreimbursed business expenses that are reimbursable in accordance with Section 4(b).

(b)

Severance Compensation and Benefits. Employee shall be entitled to receive Severance Compensation (“Severance Compensation”) if terminated by the Company without Cause; provided, that any payment of Severance Compensation shall be conditioned upon Employee executing and delivering to the Company a release in form attached as Exhibit A hereto (the “Release”). Employee shall not be entitled to any Severance Compensation with respect to any other type of termination of employment with the Company, including termination due to death or Disability or termination due to the end of the Employment Term;

Severance Compensation shall be an amount equal to twelve (12) months of the annual base salary being paid to Employee at the time of termination. If Employee is entitled to Severance Compensation, the Severance Compensation shall be payable for a period of twelve (12) months following termination, subject to all required deductions and tax withholdings. The Company will pay the Severance Compensation to Employee on its regularly scheduled payroll dates or, in its discretion, in a lump sum.

In the event a court of competent jurisdiction finds Employee breached the Release or any of the post-employment obligations set out in Sections 6, 7 and 8, Employee shall not be entitled to any Severance Compensation, and Employee shall immediately repay to the Company any and all Severance Compensation received by Employee.

(c)

Termination of Employee Benefits. Except as otherwise expressly provided herein, particularly in Section 5(b) above, Employee shall not be entitled to any other salary, bonuses, employee benefits or compensation from the Company or its Subsidiaries after the termination of Employee’s employment with the Company and all of Employee’s rights to salary, bonuses, employee benefits and other compensation hereunder which would have accrued or become payable after the termination of Employee’s employment with the Company (other than vested retirement or other benefits accrued on or prior to the termination of Employee’s employment with the Company, including, without limitation, any vested rights under any equity plan of the Company or other amounts owing hereunder as of the date of such termination or expiration that have not yet been paid) shall cease upon such termination or expiration, other than those expressly required under applicable law (such as COBRA). All such salary, bonuses, employee benefits or compensation shall be deemed unearned and all conditions for any right to receive such payments shall be deemed unsatisfied.

(d)

Definition of Cause. For purposes of this Agreement, “Cause” shall be determined by the Board and shall mean with respect to Employee one or more of the following: (i) Employee’s willful breach of his covenants contained in this Agreement, in any material respect, which breach remains substantially uncured for fifteen (15) or more days after Employee’s receipt of written notice from the Company of such breach; (ii) Employee’s willful failure or refusal to perform the duties and responsibilities lawfully required to be performed by Employee under the terms of this Agreement or otherwise reasonably requested by the Company; (iii) Employee’s gross negligence or willful misconduct in the performance of his duties on behalf of the Company or any of its Subsidiaries; (iv) Employee’s willful commission of an act of material dishonesty adversely affecting the Company or any of its Subsidiaries, or the commission of an act constituting common law fraud or a felony or the commission of any other act or omission involving misappropriation, embezzlement, material dishonesty, or theft with respect to the Company or any of its Subsidiaries; or (v) any willful or intentional act or omission materially aiding or abetting a competitor or supplier of the Company or any of its Subsidiaries to the disadvantage or detriment of the Company and its Subsidiaries.

(e)

(f)

Employee acknowledges and agrees that the Company has no obligation to pay Employee any severance, except as expressly provided herein.

Confidential Information.

(a)

Employee acknowledges that the continued success of the Company and its Subsidiaries and affiliates, depends upon the use and protection of a large body of confidential, proprietary, and/or trade secret information. All such confidential, proprietary and trade secret information now existing or developed during the term of Employee’s employment hereunder will be referred to in this Agreement as “Confidential Information.” Confidential Information will be interpreted broadly to include all information of any sort (whether merely remembered or embodied in a tangible or intangible form) that is (i) related to the Company’s or its Subsidiaries’ business and (ii) not generally or publicly known. Confidential Information includes, without specific limitation, the information, observations and data obtained by Employee during the course of his performance under this Agreement concerning the business and affairs of the Company and its Subsidiaries and affiliates, information concerning acquisition opportunities in or reasonably related to the Company’ or its Subsidiaries’ or affiliates’ business or industry of which Employee becomes aware during Employee’s employment with the Company, the persons or entities that are current, former or prospective suppliers or customers of any one or more of them during Employee’s course of performance under this Agreement, as well as development, transition and transformation plans, methodologies and methods of doing business, strategic, marketing and expansion plans, including plans regarding planned and potential sales, financial and business plans, confidential employee lists and contact information, compensation and incentive structures and strategies, confidential information concerning sales, including volumes, pricing, and margins, new and existing programs and services, prices and terms, customer service, integration processes, requirements and costs of providing service, support and equipment. Therefore, Employee agrees that he shall not disclose to any unauthorized person or use for his own account any of such Confidential Information without the Board’s prior written consent, unless and to the extent that any Confidential Information (i) becomes generally known to and available for use by the public other than as a result of Employee’s improper acts or omissions to act or (ii) is required to be disclosed pursuant to any applicable law or court order. Employee agrees that he shall not disclose any Confidential Information after his employment ends. If requested by the Company in writing, Employee agrees to deliver to the Company at the end of Employee’s employment with the Company, or at any other time the Company may request, all memoranda, notes, plans, records, reports and other documents (and copies thereof and all electronic data residing on any electronic device) relating to the business of the Company or its Subsidiaries or affiliates (including, without limitation, all Confidential Information) that he may then possess or have under his control, provided that Employee may retain copies of Employee’s personnel information, such as performance evaluations, payroll information and the like.

(b)

(c)

Employee shall promptly notify the Company of any intended or unintended, unauthorized disclosure or use of any trade secrets or Confidential Information by Employee or any other person or entity of which Employee becomes aware. Employee shall cooperate fully with the Company in the procurement of any protection of the Company’ rights to or in any of the trade secrets or Confidential Information.

(d)

(e)

Notwithstanding anything to the contrary contained herein:

(1)

nothing in this Agreement shall prohibit Employee from reporting possible violations of federal or state law or regulation to, or otherwise cooperating with or providing information requested by, any governmental agency or entity, including, but not limited to, the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or making other disclosures that are protected under the whistleblower provisions of federal law or regulation. Employee does not need the prior authorization of the Company to make any such reports or disclosures and is not required to notify the Company that he has made such reports or disclosures; and

(2)

Employee Proprietary Information Agreement. Employee agrees to execute, perform and abide by the terms and provisions of a separate agreement between the parties hereto dated on even date herewith and attached hereto as Exhibit B and made a part hereof (the “Employee Proprietary Information Agreement”) covering, among other things, non-disclosure and assignment of inventions.

Non-Solicitation.

(a)

Employee agrees that during Employee’s employment with the Company and for eighteen (18) months after the termination of Employee’s employment with the Company, Employee shall not, without the Company’s written permission, directly or indirectly through another person or entity (i) induce or attempt to induce any employee of the Company or any of its Subsidiaries to leave the employ of the Company or such Subsidiary, or in any way interfere with the relationship between the Company or any of its Subsidiaries and any employee thereof or (ii) induce or attempt to induce any customer, supplier, licensee, licensor, franchisee or other business relation of the Company or any of its Subsidiaries to cease doing business with the Company or such Subsidiary, or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company or any of its Subsidiaries (including, without limitation, making any negative or disparaging statements or communications about the Company or its Subsidiaries or affiliates), (iii) directly or indirectly acquire or attempt to acquire any

business which the Company or its Subsidiaries identified as a potential acquisition target during or prior to Employee’s employment with the Company (an “Acquisition Target”), or take any action to induce or attempt to induce any Acquisition Target to consummate any acquisition, investment or other similar transaction with any person or entity other than the Company or its Subsidiaries. In addition to the foregoing, Employee agrees that Employee shall not at any time, without the Company’s written permission, directly or indirectly through another person or entity hire any person who was an employee of the Company or any of its Subsidiaries at any time during the twelve (12) months preceding such hiring, unless such person was terminated by the Company without cause. For purposes of this Section 8(a), the term “employee” shall include consultants and independent contractors of the Company and its Subsidiaries.

(b)

Trade Secrets; Remedies; Restrictions.

(a)

Employee further acknowledges and agrees with the Company that Employee’s service to the Company requires the use of information, including programs, methods, techniques, and processes, that the Company and its Subsidiaries have made reasonable efforts to keep confidential and that derives independent economic value, actual or potential, from not being generally known to the public or to other person who can obtain economic value from its disclosure or use (collectively, “Trade Secrets”). Employee acknowledges and agrees that the Company would be irreparably damaged if Employee were to use or disclose such Trade Secrets to third parties, including any person or entity competing with the Company and its Subsidiaries or engaged in a material line of business similar to that engaged in by the Company or its Subsidiaries. Employee accordingly covenants and agrees with the Company that during the period commencing on the date of this Agreement, throughout Employee’s employment, and after such employment terminates, Employee shall not, directly or indirectly, either for himself or for any other person participate in any business, other than for the Company and its Subsidiaries, in which Employee would be required to employ, reveal or otherwise utilize or disclose Company Trade Secrets. Employee further acknowledges and agrees that Employee shall not use or disclose Company Trade Secrets during the period commencing on the date of this Agreement, throughout Employee’s employment, and after such employment terminates, for any purpose contrary to the Company’s and its Subsidiaries’ interests, including to engage in any competitive activities with the Company or its Subsidiaries, but rather will keep the Company’s Trade Secrets strictly confidential and not disclose them to any third parties.

(b)

In the event of the breach or a threatened breach by Employee of any of the provisions of Sections 6, 7, 8, or 9, the Company would suffer irreparable harm, and in addition and supplementary to other rights and remedies existing in its favor, the Company shall be entitled to specific performance and/or injunctive or other equitable relief from a court of competent jurisdiction in order to enforce or prevent any violations of the provisions hereof (without posting a bond or other security). In addition, in the event Employee breaches or violates Sections 6, 7, 8, or 9, the periods of such restrictive covenants will be tolled until such breach or violation has been duly cured.

(c)

10.

Employee’s Representations. Employee hereby represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by Employee do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Employee is a party or by which he is bound, (ii) Employee is not a party to or bound by any other employment agreement, noncompete agreement or, except in the ordinary course of business, confidentiality agreement with any other person or entity except as disclosed in writing to the Company prior to the date hereof, and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Employee, enforceable in accordance with its terms. Employee hereby acknowledges and represents that he has consulted with independent legal counsel regarding his or her rights and obligations under this Agreement and that he fully understands the terms and conditions contained herein.

11.

12.

Notices. Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, sent by reputable overnight courier service, mailed by first class mail, return receipt requested, or by facsimile transmission or electronic mail in .pdf format, to the recipient at the address below indicated:

Notices to Employee:

Steve Gutterman

798 Jasmine st

Denver, co 80220

Email: sdguttenman@gmail.com

Notices to Company:

General Cannabis Corp.

6565 East Evans Avenue

Denver, CO 80224

Attention: Michael Feinsod

Email: mfeinsod@infinitycap.com

13.

14.

Complete Agreement. This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. If there is a conflict between the provisions of this Agreement and the provisions of the documents expressly referred to herein, this language of this Agreement shall control.

15.

16.

17.

18.

Choice of Law. This Agreement shall be construed and enforced in accordance with the laws of the State of Colorado, notwithstanding any state’s choice-of-law rules to the contrary.

19.

20.

21.

22.

23.

24.

Section 409A Compliance. The intent of the parties is that payments and benefits under this Agreement comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations and guidance promulgated thereunder (collectively “Code Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith. To the extent that any provision hereof is modified in order to comply with Code Section 409A, such modification shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the original intent and economic benefit to Employee and the Company of the applicable provision without violating the provisions of Code Section 409A. In no event whatsoever shall the Company be liable for any additional tax, interest or penalty that may be imposed on Employee by Code Section 409A or damages for failing to comply with Code Section 409A. Notwithstanding anything herein to the contrary, a termination of employment shall be deemed to have occurred at the time such termination constitutes a “separation from service” within the meaning of Code Section 409A for purposes of any provision of this Agreement providing for the payment of any amounts or benefits in connection with a termination of employment and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean a “separation from service.” Further, if, on the date of a “separation from service” (as defined in Code Section 409A), Employee is a “specified employee” (as defined in Code Section 409A), no amounts that would constitute deferred compensation payable hereunder that are subject to Code Section 409A shall be made until the earliest date on which payment is permissible under 409A(a)(2)(B)(i) (the six (6)-month delay rule for specified employees). This provision shall not apply to any Severance Compensation payments made pursuant to Section 5(b) of this Agreement. To the extent that reimbursements or other in-kind benefits under this Agreement constitute “nonqualified deferred compensation” for purposes of Code Section 409A, (A) all such expenses or other reimbursements hereunder shall be made on or prior to the last day of the taxable year in which such expenses were incurred by Employee, (B) any right to such reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (C) no such reimbursement, expenses eligible for reimbursement, or in-kind benefits provided in any taxable year shall in any way affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year. For purposes of Code Section 409A, Employee’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Company. Notwithstanding any other provision to the contrary, in no event shall any payment under this Agreement that constitutes “deferred compensation” for purposes of Code Section 409A be subject to offset by any other amount unless otherwise permitted by Code Section 409A.

* * * * *

IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date first written above.


	GENERAL CANNABIS CORP.


	By:
	Name:	Michael Feinsod
	Title:	Chief Executive Officer


		/s/ Steve Gutterman
		STEVE GUTTERMAN

[Signature Page to Employment Agreement of Steve Gutterman]

EXHIBIT A

GENERAL RELEASE

THIS GENERAL RELEASE (“Release”) is entered into as of , by Steve Gutterman, an individual (“Employee”), for the benefit of General Cannabis Corp., a Colorado corporation (the “Company”), and the other Released Parties (as defined below). Capitalized terms used but not otherwise defined herein shall have the meanings given to such terms in the Employment Agreement (as defined below).

WHEREAS, Employee is a holder of equity of the Company and a former employee of the Company and its subsidiaries; and

WHEREAS, in consideration for the receipt of the Severance Compensation to be paid by the Company, as described further in Section 5(b) of the Employment Agreement, Employee hereby desires to release and forever discharge as of the date hereof the Released Parties to the extent provided below.

NOW, THEREFORE, in consideration of the mutual promises, agreements and covenants contained herein, and for other valuable consideration, receipt of which is hereby acknowledged, Employee, intending to be legally bound, agrees as follows:

Employee agrees that, in consideration of and subject to the performance by the Company of its obligations under the Employment Agreement, dated as of February 21, 2018 the “Employment Agreement”), he does hereby release and forever discharge as of the date hereof the Company, its parent, subsidiaries and their respective affiliates and all present and former directors, officers, agents, representatives, employees, successors and assigns of the Company, its parent and subsidiaries and their respective affiliates and the Company’s and parent’s direct or indirect owners (collectively, the “Released Parties”) as provided below.

Employee understands that the Severance Compensation paid or granted to him under Section 5(b) of the Employment Agreement represents, in part, consideration for his signing of this Release and is not salary, wages or benefits to which he was already entitled. Employee understands and agrees that he will not receive the Severance Compensation specified in Section 5(b) of the Employment Agreement unless he executes this Release and does not revoke this Release within the time period permitted hereafter or breach this Release. The Severance Compensation will not be considered compensation for purposes of any employee benefit plan, program, policy or arrangement maintained or hereafter established by the Company or its affiliates.

Except as provided in paragraph 5 below and except for the provisions of the Employment Agreement which expressly survive the termination of Employee’s employment with the Company, Employee knowingly and voluntarily (for himself, his heirs, executors, administrators and assigns) releases and forever discharges the Company, its parent and subsidiaries and the other Released Parties from any and all claims, suits, controversies, actions, causes of action, cross-claims, counter-claims, demands, debts, compensatory damages, liquidated damages, punitive or exemplary damages, other damages, claims for costs and attorneys’ fees, or liabilities of any nature whatsoever in law and in equity, both past and present (through the date this Release becomes effective and enforceable) and whether known or unknown, suspected, or claimed against the Company, its parent and subsidiaries or any of the Released Parties which Employee, his spouse, or any of his heirs, executors, administrators or assigns, may have, which arise out of or are connected with his employment with, or his separation or termination from, the Company (including, but not limited to, any allegation, claim or violation, arising under: Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967, as amended (including the Older Workers Benefit Protection Act); the Equal Pay Act of 1963, as amended; the Americans with Disabilities Act of 1990; the Family and Medical Leave Act of 1993; the Worker Adjustment Retraining and Notification Act; the Employee Retirement Income Security Act of 1974; the Fair Labor Standards Act; or their state or local counterparts; or under any other federal, state or local civil or human rights law, or under any other local, state, or federal law, regulation or ordinance; or under any public policy, contract or tort, or under common law; or arising under any policies, practices or procedures of the Company; or any claim for wrongful discharge, breach of contract, infliction of emotional distress, defamation; or any claim for costs, fees, or other expenses, including attorneys’ fees incurred in these matters) (all of the foregoing collectively referred to herein as the “Claims”); provided, however, that, notwithstanding anything to the contrary contained herein, his Claims and this Release shall not cover and shall specifically exclude Employee’s rights and claims, directly or indirectly, arising from or under or related to (A) any obligation of the Company to provide benefits or payments under Section 5(a) of the Employment Agreement, (B) any rights Employee may have to vested benefits under any employee benefit plan or program, including vested equity, 401(k) contributions and health insurance claims, (C) any rights of indemnification or contribution, whether pursuant to the Released Parties’ certificate of incorporation, bylaws, limited liability company agreement, contract, applicable law or otherwise, and/or (D) any claims that cannot be released as a matter of law.

Employee represents that he has made no assignment or transfer of any right, claim, demand, cause of action, or other matter covered by paragraph 3 above.

Employee specifically releases all claims against the Released Parties under the Age Discrimination in Employment Act (“ADEA”) relating to Employee’s employment and its termination.

In signing this Release, Employee acknowledges and intends that it shall be effective as a bar to each and every one of the Claims hereinabove mentioned or implied. Employee expressly consents that this Release shall be given full force and effect according to all of its express terms and provisions, including those relating to unknown and unsuspected Claims (notwithstanding any state statute that expressly limits the effectiveness of a general release of unknown, unsuspected and unanticipated Claims), if any, as well as those relating to any other Claims hereinabove mentioned or implied. Employee acknowledges and agrees that this waiver is an essential and material term of this Release and that without such waiver the Company would not have agreed to the terms of the Employment Agreement. Employee further agrees that in the event that Employee should bring a Claim seeking damages against a Released Party, or in the event Employee should seek to recover against any Released Party in any Claim brought by a governmental agency on his behalf, this Release shall serve as a complete defense to such Claims. Employee further agrees that he is not aware of any pending charge or complaint of the type described in paragraph 3 as of the execution of this Release.

Employee agrees that neither this Release, nor the furnishing of the consideration for this Release, shall be deemed or construed at any time to be an admission by the Company or any Released Party of any improper or unlawful conduct.

Employee agrees that he will forfeit the Severance Compensation under the Employment Agreement if Employee challenges the validity of this Release except as otherwise permitted any law. Employee also agrees that if he violates this Release by suing the Company, its parent or subsidiaries or the Released Parties, except as expressly permitted by law, Employee must return the Severance Compensation received by him pursuant to the Employment Agreement. In the event of such a lawsuit, the prevailing party shall be entitled to recover from the losing party the costs and expenses of the lawsuit, including reasonable attorneys’ fees.

Employee agrees that this Release is confidential and agrees not to disclose any information regarding the terms of this Release, except to Employee’s immediate family and to any tax, legal or other counsel that Employee has consulted regarding the meaning or effect hereof or as required by law, and Employee will instruct each of the foregoing not to disclose the same to anyone.

10.

Employee represents that Employee has not filed or caused to be filed against any of the Released Parties, individually or collectively, any lawsuit, complaint, charge, proceeding, or the like, before any local, state, or federal agency, court, or other body (each, a “Proceeding”), and Employee covenants and agrees that Employee will not do so at any time hereafter with respect to the subject matter of this Release and claims released pursuant to this Release (including, without limitation, any claims relating to the termination of Employee’s employment), except as may be necessary to enforce this Release or Employee’s rights to the Severance Compensation under the Employment Agreement, to seek a determination of the validity of the waiver of Employee’s rights under the ADEA, or to initiate or participate in an investigation or proceeding conducted by the Equal Employment Opportunity Commission (“EEOC”) or other governmental agency as permitted by law. Except as otherwise provided in the preceding sentence, (i) Employee will not initiate or cause to be initiated on his behalf any Proceeding, and will not participate (except as required or expressly permitted to do so by law) in any Proceeding of any nature or description against any of the Released Parties individually or collectively that in any way involves the allegations and facts that Employee could have raised against any of the Released Parties individually or collectively as of the date hereof, and (ii) Employee waives any right he may have to benefit in any manner from any relief (monetary or otherwise) arising out of any Proceeding.

11.

Whenever possible, each provision of this Release shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Release is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Release shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

BY SIGNING THIS RELEASE, EMPLOYEE REPRESENTS AND AGREES (EXCEPT AS SET FORTH BELOW) THAT:

EMPLOYEE HAS READ THIS RELEASE CAREFULLY;

EMPLOYEE UNDERSTANDS ALL OF THE TERMS OF THE RELEASE AND KNOWS THAT EMPLOYEE IS GIVING UP IMPORTANT RIGHTS, INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS AMENDED; THE EQUAL PAY ACT OF 1963, THE AMERICANS WITH DISABILITIES ACT OF 1990; AND THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED;

EMPLOYEE VOLUNTARILY CONSENTS TO EVERYTHING IN THIS RELEASE;

EMPLOYEE HAS BEEN ADVISED TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING THIS RELEASE AND EMPLOYEE HAS DONE SO OR, AFTER CAREFUL READING AND CONSIDERATION EMPLOYEE HAS CHOSEN NOT TO DO SO OF EMPLOYEE’S OWN VOLITION;

EMPLOYEE HAS HAD AT LEAST 21 DAYS FROM THE DATE OF HIS RECEIPT OF THIS RELEASE;

EMPLOYEE UNDERSTANDS THAT HE HAS SEVEN DAYS AFTER THE EXECUTION OF THIS RELEASE TO REVOKE IT AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL SUCH REVOCATION PERIOD HAS EXPIRED;

EMPLOYEE HAS SIGNED THIS RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE OF ANY COUNSEL RETAINED TO ADVISE EMPLOYEE WITH RESPECT TO IT; AND

EMPLOYEE AGREES THAT THE PROVISIONS OF THIS RELEASE MAY NOT BE AMENDED, WAIVED, CHANGED OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY EMPLOYEE.

This Release shall not become effective until the eighth (8th) day following Employee’s execution of it.

[Signature Pages Follow]


DATE:
		STEVE GUTTERMAN

[Signature Page ta General Release]

EXHIBIT B

EMPLOYEE PROPRIETARY INFORMATION AGREEMENT

As a condition of my becoming employed by General Cannabis Corp., a Colorado corporation (the “Company”), and in consideration of my employment relationship with the Company and my receipt of the compensation now and hereafter paid to me by the Company, I agree to the following:

Employment Relationship. I understand and acknowledge that this Agreement does not alter, amend or expand upon any rights I may have to continue in an employment relationship with, or in the duration of my employment relationship with, the Company under any existing agreements between the Company and me, including but not limited to the employment agreement entered into by and between the Company and me, dated as of the date hereof (the “Employment Agreement”), or under applicable law. Any employment relationship between the Company and me shall be referred to herein as the “Relationship.”

Inventions.

(a)

Inventions Retained and Licensed. I have attached hereto, as Exhibit I, a list describing with particularity all inventions, original works of authorship, developments, improvements, and trade secrets which were made by me prior to the commencement of the Relationship (collectively referred to as “Prior Inventions”), which belong solely to me or belong to me jointly with another, which relate in any way to any of the Company’s proposed businesses, products or research and development, and which are not assigned to the Company hereunder; or, if no such list is attached, I represent that there are no such Prior Inventions. If, in the course of my Relationship with the Company, I incorporate into a Company product, process or machine a Prior Invention owned by me or in which I have an interest, the Company is hereby granted and shall have a non-exclusive, royalty-free, irrevocable, perpetual, worldwide license (with the right to sublicense) to make, have made, copy, modify, make derivative works of, use, sell and otherwise distribute such Prior Invention as part of or in connection with such product, process or machine.

(b)

Assignment of Inventions. I agree that I will promptly make full written disclosure to the Company, will hold in trust for the sole right and benefit of the Company, and hereby assign to the Company, or its designee, all my right, title and interest throughout the world in and to any and all inventions, original works of authorship, developments, concepts, know-how, improvements or trade secrets, whether or not patentable or registrable under copyright or similar laws, which I may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, during the period of time in which I am employed by the Company (collectively referred to as “Inventions”).

(c)

Maintenance of Records. I agree to keep and maintain adequate and current written records of all Inventions made by me (solely or jointly with others) during the term of my Relationship with the Company. The records may be in the form of notes, sketches, drawings, flow charts, electronic data or recordings, laboratory notebooks, and any other format. The records will be available to and remain the sole property of the Company at all times. I agree not to remove such records from the Company’s place of business except as expressly permitted by Company policy which may, from time to time, be revised at the sole election of the Company for the purpose of furthering the Company’s business. I agree to return all such records (including any copies thereof) to the Company at the time of termination of my Relationship with the Company as provided for in Section 3.

(d)

Patent and Copyright Rights. I agree to assist the Company, or its designee, at its expense, in every proper way to secure the Company, or its designee’s, rights in the Inventions and any copyrights, patents, trademarks, mask work rights, moral rights, or other intellectual property rights relating thereto in any and all countries, including the disclosure to the Company or its designee of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments, recordations, and all other instruments which the Company or its designee shall deem necessary in order to apply for, obtain, maintain and transfer such rights and in order to assign and convey to the Company or its designee and any successors, assigns and nominees the sole and exclusive rights, title and interest in and to such Inventions, and any copyrights, patents, mask work rights or other intellectual property rights relating thereto. I further agree that my obligation to execute or cause to be executed, when it is in my power to do so, any such instrument or papers shall continue after the termination of this Agreement until the expiration of the last such intellectual property right to expire in any country of the world. If the Company or its designee is unable because of my mental or physical incapacity or unavailability or for any other reason to secure my signature to apply for or to pursue any application for any United States or foreign patents, copyright, mask works, or other registrations covering Inventions or original works of authorship assigned to the Company or its designee as above, then I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agent and attorney in fact, to act for and in my behalf and stead to execute and file any such applications and to do all other lawfully permitted acts to further the application for, prosecution, issuance, maintenance or transfer of letters patent, copyright or other registrations thereon with the same legal force and effect as if originally executed by me. I hereby waive and irrevocably quitclaim to the Company or its designee any and all claims, of any nature whatsoever, which I now or hereafter have for infringement of any and all proprietary rights assigned to the Company or such designee.

Company Property; Returning Company Documents. I acknowledge and agree that I have no expectation of privacy with respect to the Company’s telecommunications, networking or information processing systems (including, without limitation, stored company files, e-mail messages and voice messages) and that my activity and any files or messages on or using any of those systems may be monitored at any time without notice. I further agree that any property situated on the Company’s premises and owned by the Company, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by Company personnel at any time with or without notice. I agree that, at the time of termination of my Relationship with the Company, I will deliver to the Company (and will not keep in my possession, recreate or deliver to anyone else) any and all devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, laboratory notebooks, materials, flow charts, equipment, other documents or property, or reproductions of any of the aforementioned items, developed by me pursuant to the Relationship or otherwise belonging to the Company, its successors or assigns. In the event of the termination of the Relationship, I agree to sign and deliver the “Termination Certification” attached hereto as Exhibit II, however, my failure to sign and deliver the Termination Certificate shall in no way diminish my continuing obligations under this Agreement.

Representations and Covenants.

(a)

Facilitation of Agreement. I agree to execute promptly any proper oath or verify any proper document required to carry out the terms of this Agreement upon the Company’s written request to do so.

(b)

Conflicts. I represent that my performance of all the terms of this Agreement does not and will not breach any agreement I have entered into, or will enter into with any third party, including without limitation any agreement to keep in confidence proprietary information acquired by me in confidence or in trust prior to commencement of my Relationship with the Company.

(c)

Voluntary Execution. I certify and acknowledge that I have carefully read all of the provisions of this Agreement and that I understand and will fully and faithfully comply with such provisions.

General Provisions.

(a)

Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Colorado, without giving effect to the principles of conflict of laws.

(b)

Entire Agreement. This Agreement sets forth the entire agreement and understanding between the Company and me relating to the subject matter herein and merges all prior discussions between us. No modification or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing signed by both parties.

(c)

Severability. If any term or provision of this Agreement or the application thereof to any circumstance shall, in any jurisdiction and to any extent, be invalid or unenforceable, such term or provision shall be ineffective as to such jurisdiction to the extent of such invalidity or unenforceability without invalidating or rendering unenforceable the remaining terms and provisions of this Agreement or the application of such terms and provisions to circumstances other than those as to which it is held invalid or unenforceable, and a suitable and equitable term or provision shall be substituted therefor to carry out, insofar as may be valid and enforceable, the intent and purpose of the invalid or unenforceable term or provision.

(d)

Successors and Assigns. This Agreement will be binding upon my heirs, executors, administrators and other legal representatives, and my successors and assigns.

(e)

Survival. The provisions of this Agreement shall survive the termination of the Relationship and the assignment of this Agreement by the Company to any successor in interest or other assignee.

(f)

Remedies. I acknowledge and agree that violation of this Agreement by me may cause the Company irreparable harm, and therefore agree that the Company will be entitled to seek extraordinary relief in court, including but not limited to temporary restraining orders, preliminary injunctions and permanent injunctions without the necessity of posting a bond or other security and in addition to and without prejudice to any other right and remedies that the Company may have for a breach of this Agreement.

(g)

Counterparts; Electronic Signature. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original but all of which shall constitute one and the same agreement. This Agreement may be executed by facsimile or electronic (.pdf) signature and a facsimile or electronic (.pdf) signature shall constitute an original for all purposes.

(h)

ADVICE OF COUNSEL. I ACKNOWLEDGE THAT, IN EXECUTING THIS AGREEMENT, I HAVE HAD THE OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND I HAVE READ AND UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF THIS AGREEMENT. THIS AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.

[Signature Page Follows]

The parties have executed this Employee Proprietary Information Agreement on the respective dates set forth below:


	GENERAL CANNABIS CORP.


	By:
	Name:	Michael Feinsod
	Title:	Chief Executive Officer


		/s/ Steve Gutterman
		STEVE GUTTERMAN

[Signature Page ta Employee Proprietary Information Agreement]

EXHIBIT D

PRIOR INVENTIONS

None.

EXHIBIT D

TERMINATION CERTIFICATION

This is to certify that I do not have in my possession, nor have I failed to return, any devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, laboratory notebooks, flow charts, materials, equipment, other documents or property, or copies or reproductions of any aforementioned items belonging to General Cannabis Corp., a Colorado corporation (the “Company”).

I further certify that I have complied with all the terms of the Company’s Employee Proprietary Information Agreement signed by me, including the reporting of any inventions and original works of authorship (as defined therein), conceived or made by me (solely or jointly with others) covered by that agreement.

I further agree that, in compliance with the Employee Proprietary Information Agreement, I will preserve as confidential all trade secrets, confidential knowledge, data or other proprietary information relating to products, processes, know-how, designs, formulas, developmental or experimental work, computer programs, data bases, other original works of authorship, customer lists, business plans, financial information or other subject matter pertaining to any business of the Company or any of its employees, clients, consultants or licensees.

I further agree that for eighteen (18) months from the date of this Certificate, I shall not either directly or indirectly solicit, induce, recruit or encourage any of the Company’s employees or consultants to terminate their relationship with the Company, or attempt to solicit, induce, recruit, encourage or take away, hire, or otherwise engage the services of employees or consultants of the Company, either for myself or for any other person or entity. Further, I shall not at any time use any Confidential Information of the Company to negatively influence any of the Company’s clients or customers from purchasing Company products or services or to solicit or influence or attempt to influence any client, customer or other person either directly or indirectly, to direct his or its purchase of products and/or services to any person, firm, corporation, institution or other entity in competition with the business of the Company.


Date:
			(Employee’s Signature)

[Signature Page to Termination Certification]

Exhibit 10.29

AMENDMENT TO

EMPLOYMENT AGREEMENT

This Amendment, dated as of _______ __, 2020 (the "Amendment") is by and between General Cannabis Corp. (the "Company") and Steve Gutterman (the "Employee").

WHEREAS, the Company and the Employee entered into an Employment Agreement dated as of December 13, 2019 with respect to Employee's services as Chief Executive Officer of the Company (the "Employment Agreement");

WHEREAS, the Company and the Employee desire to amend the Employment Agreement pursuant to the terms of Section 20 of the Employment Agreement; and

WHEREAS, capitalized terms not otherwise defined in this Amendment shall have the meanings set forth in the Employment Agreement.

NOW THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, the Company and the Employee agree as follows:

Amendment of Section 3(a). The Employment Agreement shall be amended to reduce the Base Salary to $212,500, such that Section 3(a) of the Employment Agreement shall be amended and restated in its entirety to read as follows:

“Base Salary. Employee’s base salary shall be $212,500 per annum and shall be subject to increase from time to time in the Board’s sole discretion (the “Base Salary”), which salary shall be paid by the Company in regular installments in accordance with the Company’s general payroll practices (in effect from time to time).”

Terms of Agreement; Conflicting Terms. Except as expressly modified hereby, all terms, conditions and provisions of the Employment Agreement shall continue in full force and effect. In the event of any inconsistency or conflict between the Employment Agreement and this Amendment, the terms, conditions and provisions of this Amendment shall govern and control.

Governing Law. This Amendment is to be construed in accordance with and governed by the internal laws of the State of Colorado without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of Colorado to the rights and duties of the parties.

Counterparts. This Amendment may be executed in counterparts, each of which shall be enforceable against the party actually executing such counterpart, and which taken together shall constitute one and the same instrument.

Entire Agreement. This Amendment and the Employment Agreement constitute the entire and exclusive agreement between the parties with respect to this subject matter. All previous discussions and agreements with respect to this subject matter are superseded by the Employment Agreement and this Amendment.

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first set forth above.


	COMPANY

	General Cannabis Corp.

	By:
	Name:
	Title:


	EMPLOYEE


	Name:	Steve Gutterman

Exhibit 10.30

AMENDMENT TO

EMPLOYMENT AGREEMENT

This Amendment, dated as of _______ __, 2020 (the "Amendment") is by and between General Cannabis Corp. (the "Company") and Michael Feinsod (the "Employee").

WHEREAS, the Company and the Employee entered into an Employment Agreement dated as of December 8, 2017 and amended August 6, 2019 with respect to Employee's services as Executive Chairman of the Board of Directors of the Company (the "Employment Agreement");

WHEREAS, the Company and the Employee desire to amend the Employment Agreement pursuant to the terms of Section 10(g) of the Employment Agreement; and

WHEREAS, capitalized terms not otherwise defined in this Amendment shall have the meanings set forth in the Employment Agreement.

Amendment of Section 3(a). The Employment Agreement shall be amended to reduce the base salary to $0, such that Section 3(a) of the Employment Agreement shall be amended and restated in its entirety to read as follows:

“Cash Compensation. The Company shall pay the Executive a base salary of $0 per month, paid on the last day of each calendar month, subject to all applicable employment and income tax withholdings.”

Governing Law. This Amendment is to be construed in accordance with and governed by the internal laws of the State of New York without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of New York to the rights and duties of the parties.

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first set forth above.


	COMPANY

	General Cannabis Corp.

	By:
	Name:
	Title:


	EMPLOYEE


	Name:	Michael Feinsod

Exhibit 21.1

List of Subsidiaries


Name of Entity	Jurisdiction
6565 E. Evans Avenue LLC	Colorado
GC Corp	Colorado
GC Security LLC	Colorado
General Cannabis Capital Corporation	Colorado
Standard Cann, Inc.	Colorado
Cannasseur LLC	Colorado
Cannasseur Dispensary LLC	Colorado
Cannasseur Cultivation LLC	Colorado
Cannasseur Extraction LLC	Colorado

Exhibit 23.1

[EXH23_01002.GIF]

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statements Nos. 333-225413 and 333-210910 on Form S-8 of our report dated March 8, 2019, relating to the consolidated financial statements and the effectiveness of internal control over financial reporting of General Cannabis Corp and subsidiaries, appearing in this Annual Report on Form 10-K for the year ended December 31, 2018.

/s/ Hall & Company

Hall & Company Certified Public Accountants & Consultants, Inc.

Irvine, CA

May 14, 2020

Exhibit 23.2

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT

We consent to the incorporation by reference in this Registration Statement of General Cannabis Corp. on Form S-8 (File Nos. 333-225413 and 333-210910) of our report, which includes an explanatory paragraph as to the Company’s ability to continue as a going concern, dated May 14, 2020, with respect to our audit of the consolidated financial statements of General Cannabis Corp. as of December 31, 2019 and for the year then ended, appearing in the Annual Report on Form 10-K of General Cannabis Corp. for the year ended December 31, 2019.

/s/ Marcum LLP

Marcum LLP

Melville, NY

May 14, 2020

Exhibit 31.1

CERTIFICATIONS

Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002
(Subsections (A) And (B) Of Section 1350, Chapter 63 of Title 18, United States Code)

I, Steve Gutterman, certify that:

1. I have reviewed this annual report on Form 10-K of General Cannabis Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or cause such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have significant role in the registrant's internal control over financial reporting.


May 14, 2020		/s/ Steve Gutterman
		Steve Gutterman, Chief Executive Officer, Principal Executive Officer

Exhibit 31.2

CERTIFICATIONS

Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002
(Subsections (A) And (B) Of Section 1350, Chapter 63 of Title 18, United States Code)

I, Jessica Bast, certify that:

1. I have reviewed this annual report on Form 10-K of General Cannabis Corporation;

b) any fraud, whether or not material, that involves management or other employees who have significant role in the registrant's internal control over financial reporting.


May 14, 2020		/s/ Jessica Bast
		Jessica Bast, Principal Financial and Accounting Officer

Exhibit 32.1

In connection with the Annual Report of General Cannabis Corporation (the “Company”) on Form 10-K for the period ended December 31, 2019 as filed with the Securities and Exchange Commission (the “Report”), Steve Gutterman, the Company’s Chief Executive Officer, Principal Executive Officer, and Jessica Bast the Company’s Principal Financial and Accounting Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of their knowledge:


	(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of the Company.


May 14, 2020		/s/ Steve Gutterman
		Steve Gutterman, Chief Executive Officer, Principal Executive Officer


May 14, 2020		/s/ Jessica Bast
		Jessica Bast, Principal Financial and Accounting Officer