TREES Corp (Colorado) 10-Q

ITEM 1. FINANCIAL STATEMENTS GENERAL CANNABIS CORP CONDENSED CONSOLIDATED BALANCE SHEETS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2021 ​ ​ ​ ​ (Unaudited) ​ December 31, 2020 Assets ​ ​ Current assets ​ ​ Cash and cash equivalents ​ $ 2,307,604 ​ $ 750,218 Accounts receivable, net of allowance of $ 30,000 and $ 9,000 , respectively ​ 178,784 ​ 140,605 Current portion of notes receivable, net of allowance of nil and $ 125,000 , respectively ​ ​ — ​ ​ 350,000 Inventories, net ​ ​ 590,983 ​ ​ 371,799 Prepaid expenses and other current assets ​ 198,176 ​ 225,122 Assets of discontinued operations - current portion ​ 284,700 ​ 712,010 Total current assets ​ 3,560,247 ​ 2,549,754 ​ ​ ​ ​ ​ ​ ​ Right-of-use operating lease asset ​ ​ 1,816,632 ​ ​ 1,836,455 Property and equipment, net ​ ​ 642,769 ​ ​ 411,525 Investment, held for sale ​ — ​ 208,761 Intangible assets, net ​ ​ 887,500 ​ ​ 984,375 Goodwill ​ ​ 2,484,200 ​ ​ 2,484,200 Assets of discontinued operations ​ ​ 35,178 ​ ​ 43,697 Total assets ​ $ 9,426,526 ​ $ 8,518,767 ​ ​ ​ ​ ​ ​ ​ Liabilities and Stockholders' Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current liabilities ​ ​ ​ Accounts payable and accrued expenses ​ $ 856,093 ​ $ 1,344,269 Interest payable ​ 296,207 ​ 16,790 Operating lease liability, current ​ ​ 376,362 ​ ​ 370,800 Accrued stock payable ​ 60,900 ​ 94,861 Warrant derivative liability ​ 134,234 ​ 561,368 Liabilities of discontinued operations ​ 138,461 ​ 742,064 Total current liabilities ​ 1,862,257 ​ 3,130,152 ​ ​ ​ ​ ​ ​ ​ Operating lease liability, non-current ​ ​ 1,495,394 ​ ​ 1,499,280 Long-term notes payable (net of discount) ​ ​ 4,272,858 ​ ​ 2,598,965 Related party long-term notes payable (net of discount) ​ ​ 280,137 ​ ​ 289,579 Total liabilities ​ ​ 7,910,646 ​ ​ 7,517,976 Commitments and contingencies (Note 9) ​ ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ Stockholders’ equity ​ ​ Preferred stock, no par value; 5,000,000 shares authorized; no shares issued and outstanding, respectively ​ ​ — ​ ​ — Common stock, $ 0.001 par value; 200,000,000 shares authorized; 62,266,275 shares and 60,813,673 shares issued and outstanding , respectively ​ ​ 62,264 ​ ​ 60,813 Additional paid-in capital ​ 80,140,373 ​ 75,891,414 Accumulated deficit ​ ( 78,686,757 ) ​ ( 74,951,436 ) Total stockholders’ equity ​ 1,515,880 ​ 1,000,791 Total liabilities and stockholders’ equity ​ $ 9,426,526 ​ $ 8,518,767 ​ See Notes to condensed consolidated financial statements. ​ 3 Table of Contents GENERAL CANNABIS CORP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ Six months ended ​ ​ ​ June 30, ​ June 30, ​ ​ ​ 2021 ​ 2020 ​ 2021 ​ 2020 ​ Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cultivation sales ​ $ 698,608 ​ $ 509,175 ​ $ 1,347,941 ​ $ 509,175 ​ Interest ​ ​ — ​ ​ 45,369 ​ ​ 14,472 ​ ​ 62,098 ​ Total revenue ​ ​ 698,608 ​ ​ 554,544 ​ ​ 1,362,413 ​ ​ 571,273 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Costs and expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of sales ​ ​ 511,426 ​ ​ 281,243 ​ ​ 1,066,631 ​ ​ 281,243 ​ Selling, general and administrative ​ ​ 582,059 ​ ​ 862,029 ​ ​ 1,180,750 ​ ​ 1,713,265 ​ Stock-based compensation ​ ​ ( 41,648 ) ​ ​ 434,365 ​ ​ 62,284 ​ ​ 1,006,939 ​ Professional fees ​ ​ 353,833 ​ ​ 508,991 ​ ​ 616,148 ​ ​ 1,106,027 ​ Depreciation and amortization ​ ​ 72,788 ​ ​ 21,097 ​ ​ 190,469 ​ ​ 49,201 ​ Total costs and expenses ​ ​ 1,478,458 ​ ​ 2,107,725 ​ ​ 3,116,282 ​ ​ 4,156,675 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating loss ​ ​ ( 779,850 ) ​ ​ ( 1,553,181 ) ​ ​ ( 1,753,869 ) ​ ​ ( 3,585,402 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other expenses (income) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amortization of debt discount and equity issuance costs ​ ​ 185,460 ​ ​ 72,516 ​ ​ 253,790 ​ ​ 138,837 ​ Interest expense ​ ​ 190,627 ​ ​ 103,672 ​ ​ 293,683 ​ ​ 274,720 ​ Loss on extinguishment of debt ​ ​ — ​ ​ 48,908 ​ ​ — ​ ​ 1,186,336 ​ (Gain) loss on derivative liability ​ ​ ( 102,761 ) ​ ​ 4,541 ​ ​ 1,095,983 ​ ​ ( 1,371,079 ) ​ (Gain) loss on sale of assets ​ ​ — ​ ​ ( 82 ) ​ ​ 1,467 ​ ​ ( 139,187 ) ​ Total other expenses, net ​ ​ 273,326 ​ ​ 229,555 ​ ​ 1,644,923 ​ ​ 89,627 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss from continuing operations before income taxes ​ ​ ( 1,053,176 ) ​ ​ ( 1,782,736 ) ​ ​ ( 3,398,792 ) ​ ​ ( 3,675,029 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss from discontinued operations ​ ​ ( 323,077 ) ​ ​ ( 117,636 ) ​ ​ ( 336,529 ) ​ ​ ( 239,522 ) ​ Loss from operations before income taxes ​ ​ ( 1,376,253 ) ​ ​ ( 1,900,372 ) ​ ​ ( 3,735,321 ) ​ ​ ( 3,914,551 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Provision for income taxes ​ ​ — ​ ​ 40,535 ​ ​ — ​ ​ 40,535 ​ Net loss ​ ​ ( 1,376,253 ) ​ ​ ( 1,940,907 ) ​ ​ ( 3,735,321 ) ​ ​ ( 3,955,086 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deemed dividend ​ ​ — ​ ​ ( 98,000 ) ​ ​ — ​ ​ ( 98,000 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss attributable to common stockholders ​ $ ( 1,376,253 ) ​ $ ( 2,038,907 ) ​ $ ( 3,735,321 ) ​ $ ( 4,053,086 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Per share data - basic and diluted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss from continuing operations per share ​ $ ( 0.02 ) ​ $ ( 0.04 ) ​ $ ( 0.05 ) ​ $ ( 0.09 ) ​ Net loss from discontinued operations per share ​ $ 0.00 ​ $ 0.00 ​ $ ( 0.01 ) ​ $ 0.00 ​ Net loss attributable to common stockholders per share ​ $ ( 0.02 ) ​ $ ( 0.04 ) ​ $ ( 0.06 ) ​ $ ( 0.09 ) ​ Weighted average number of common shares outstanding ​ ​ 62,183,748 ​ ​ 46,013,634 ​ ​ 61,972,553 ​ ​ 42,841,140 ​ ​ See Notes to condensed consolidated financial statements. ​ 4 Table of Contents GENERAL CANNABIS CORP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ Six months ended June 30, ​ ​ 2021 ​ 2020 Cash flows from operating activities ​ ​ ​ Net loss ​ $ ( 3,735,321 ) ​ $ ( 3,955,086 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ Amortization of debt discount and equity issuance costs ​ 253,790 ​ 138,837 Depreciation and amortization ​ 198,988 ​ 65,409 Amortization of loan origination fees ​ ​ — ​ ​ ( 4,973 ) Loss on extinguishment of debt ​ ​ — ​ ​ 1,186,336 Non-cash lease expense ​ ​ 206,900 ​ ​ 50,328 Bad debt expense ​ ​ ( 21,163 ) ​ ​ 128,491 Loss on disposal of property and equipment ​ ​ 2,967 ​ ​ 5,183 Loss (gain) on warrant derivative liability ​ 1,095,983 ​ ( 1,371,079 ) Stock-based compensation ​ 62,284 ​ 1,006,939 Gain on sale of building ​ ​ — ​ ​ ( 139,187 ) Changes in operating assets and liabilities, net of acquisitions ​ ​ ​ ​ Accounts receivable ​ ( 175,676 ) ​ ( 344 ) Prepaid expenses and other assets ​ 529,224 ​ 107,115 Inventories ​ ( 219,184 ) ​ 32,792 Accounts payable and accrued liabilities ​ ​ ( 712,362 ) ​ ​ ( 414,877 ) Operating lease liabilities ​ ​ ( 185,401 ) ​ ​ ( 45,000 ) Income taxes ​ ​ — ​ ​ 40,535 Net cash used in operating activities: ​ ( 2,698,972 ) ​ ( 3,168,581 ) ​ ​ ​ ​ ​ ​ ​ Cash flows from investing activities ​ ​ Purchase of property and equipment ​ ( 327,805 ) ​ ( 79,427 ) Proceeds from sale of investment ​ ​ 208,761 ​ ​ — Proceeds on notes receivable ​ ​ 433,393 ​ ​ — Proceeds from sale of building ​ ​ — ​ ​ 1,421,134 Net cash provided by investing activities ​ 314,349 ​ 1,341,707 ​ ​ ​ ​ ​ ​ ​ Cash flows from financing activities ​ ​ ​ Proceeds from the sale of common stock and warrants - accrued stock payable ​ ​ — ​ ​ 2,185,000 Proceeds from the exercise of warrants ​ ​ — ​ ​ 90,000 Proceeds from exercise of stock options ​ ​ 181,709 ​ ​ — Proceeds from notes payable ​ ​ 3,960,000 ​ ​ 1,500,000 Payments on notes payable ​ ​ ( 200,000 ) ​ ​ ( 975,000 ) Net cash provided by financing activities ​ 3,941,709 ​ 2,800,000 ​ ​ ​ ​ ​ ​ ​ Net increase in cash and cash equivalents ​ 1,557,086 ​ 973,126 Cash and cash equivalents, beginning of period ​ 755,769 ​ 224,994 Cash and cash equivalents, end of period ​ $ 2,312,855 ​ $ 1,198,120 ​ ​ ​ ​ ​ ​ ​ Supplemental schedule of cash flow information ​ ​ Cash paid for interest ​ $ 14,266 ​ $ 273,167 ​ ​ ​ ​ ​ ​ ​ Non-cash investing & financing activities ​ ​ Cashless warrant exercises ​ $ 1,557,078 ​ $ 903,779 Beneficial conversion feature ​ $ 1,110,039 ​ $ 233,500 10 % Warrants recorded as a debt discount and additional paid-in capital ​ $ 1,239,300 ​ $ — Issuance of common stock to a consultant ​ $ 100,000 ​ $ — Deemed dividend from 8.5 % warrant repricing ​ $ — ​ $ 98,000 Operating lease right-of-use asset/operating lease liability ​ $ — ​ $ 2,721,069 15 % Warrants recorded as a debt discount and additional paid-in capital ​ $ — ​ $ 167,163 15 % Warrants recorded as a loss on extinguishment of debt and additional paid-in capital ​ $ — ​ $ 668,336 Debt converted to equity ​ $ — ​ $ 957,056 Issuance of common stock to an employee ​ $ — ​ $ 100,000 Stock issued in connection with SevenFive Farm acquisition ​ $ — ​ $ 2,861,495 ​ See Notes to condensed consolidated financial statements. ​ 5 Table of Contents GENERAL CANNABIS CORP CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the three months ended June 30, 2021 ​ ​ Common Stock ​ Additional ​ Accumulated ​ ​ ​ ​ ​ Shares ​ Amount ​ Paid-in Capital ​ Deficit ​ Total April 1, 2021 62,146,515 $ 62,144 $ 78,632,934 $ ( 77,310,504 ) $ 1,384,574 Common stock issued upon exercise of stock options ​ 119,760 ​ 120 ​ 46,587 ​ — ​ 46,707 Warrants issued with 10 % Notes — ​ — ​ 810,000 ​ — ​ 810,000 Beneficial conversion feature ​ — ​ ​ — ​ ​ 692,500 ​ ​ — ​ ​ 692,500 Stock-based compensation ​ — ​ ​ — ​ ​ ( 41,648 ) ​ ​ — ​ ​ ( 41,648 ) Net loss — ​ — ​ — ​ ( 1,376,253 ) ​ ( 1,376,253 ) June 30, 2021 62,266,275 ​ $ 62,264 ​ $ 80,140,373 ​ $ ( 78,686,757 ) ​ $ 1,515,880 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the three months ended June 30, 2020 ​ ​ Common Stock ​ Additional ​ Accumulated ​ ​ ​ ​ ​ Shares ​ Amount ​ Paid-in Capital ​ Deficit ​ Total April 1, 2020 ​ 40,281,881 $ 40,282 $ 63,550,821 $ ( 69,285,923 ) $ ( 5,694,820 ) Common stock issued for acquisition of SevenFive Farm ​ 8,859,117 ​ 8,859 ​ 1,894,522 ​ — ​ 1,903,381 Common stock issued upon conversion of debt ​ 1,674,226 ​ ​ 1,674 ​ ​ 705,382 ​ ​ — ​ ​ 707,056 Stock-based compensation ​ — ​ ​ — ​ ​ 434,367 ​ ​ — ​ ​ 434,367 Cashless exercise of warrants ​ 373,340 ​ ​ 374 ​ ​ 821,164 ​ ​ — ​ ​ 821,538 Net loss ​ — ​ — ​ — ​ ( 1,940,907 ) ​ ( 1,940,907 ) June 30, 2020 ​ 51,188,564 ​ $ 51,189 ​ $ 67,406,256 ​ $ ( 71,226,830 ) ​ $ ( 3,769,385 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the six months ended June 30, 2021 ​ ​ Common Stock ​ Additional ​ Accumulated ​ ​ ​ ​ Shares Amount Paid-in Capital Deficit Total January 1, 2021 ​ 60,813,673 ​ $ 60,813 ​ $ 75,891,414 ​ $ ( 74,951,436 ) ​ $ 1,000,791 Common stock issued to a consultant ​ 112,359 ​ 112 ​ 99,888 ​ — ​ 100,000 Common stock issued upon exercise of stock options ​ 333,620 ​ 334 ​ 181,375 ​ — ​ 181,709 Warrants issued with 10 % Notes ​ — ​ — ​ 1,239,300 ​ — ​ 1,239,300 Beneficial conversion feature ​ — ​ ​ — ​ ​ 1,110,039 ​ ​ — ​ ​ 1,110,039 Cashless exercise of warrants ​ 1,006,623 ​ ​ 1,005 ​ ​ 1,556,073 ​ ​ — ​ ​ 1,557,078 Stock-based compensation ​ — ​ ​ — ​ ​ 62,284 ​ ​ — ​ ​ 62,284 Net loss ​ — ​ — ​ — ​ ( 3,735,321 ) ​ ( 3,735,321 ) June 30, 2021 ​ 62,266,275 ​ $ 62,264 ​ $ 80,140,373 ​ $ ( 78,686,757 ) ​ $ 1,515,880 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the six months ended June 30, 2020 ​ ​ Common Stock ​ Additional ​ Accumulated ​ ​ ​ ​ ​ Shares Amount Paid-in Capital Deficit Total January 1, 2020 ​ 39,497,480 ​ $ 39,498 ​ $ 61,468,034 ​ $ ( 67,271,744 ) ​ $ ( 5,764,212 ) Sale of common stock, net of issuance costs ​ 42,735 ​ 43 ​ 99,957 ​ — ​ 100,000 Common stock issued upon conversion of debt ​ 2,215,892 ​ ​ 2,215 ​ ​ 954,841 ​ ​ — ​ ​ 957,056 Common stock issued for acquisition of SevenFive Farm ​ 8,859,117 ​ 8,859 ​ 1,894,522 ​ — ​ 1,903,381 Stock-based compensation ​ — ​ — ​ 926,698 ​ — ​ 926,698 Beneficial conversion feature ​ — ​ — ​ 233,500 ​ — ​ 233,500 Warrants exercised ​ 200,000 ​ ​ 200 ​ ​ 172,041 ​ ​ — ​ ​ 172,241 Warrants issued with the 15 % Notes ​ — ​ ​ — ​ ​ 835,499 ​ ​ — ​ ​ 835,499 Cashless exercise of warrants ​ 373,340 ​ ​ 374 ​ ​ 821,164 ​ ​ — ​ ​ 821,538 Net loss ​ — ​ — ​ — ​ ( 3,955,086 ) ​ ( 3,955,086 ) June 30, 2020 ​ 51,188,564 ​ $ 51,189 ​ $ 67,406,256 ​ $ ( 71,226,830 ) ​ $ ( 3,769,385 ) ​ ​ See Notes to condensed consolidated financial statements. ​ ​ ​ 6 Table of Contents GENERAL CANNABIS CORP NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1. NATURE OF OPERATIONS, HISTORY AND PRESENTATION Nature of Operations General Cannabis Corp, a Colorado Corporation (the “Company,” “we,” “us,” or “our,”) (formerly, Advanced Cannabis Solutions, Inc.), was incorporated on June 3, 2013, and provides services and products to the regulated cannabis industry. We currently trade on the OTCQB® Market under the trading symbol CANN. As of June 30, 2021, our operations are segregated into the following segments: Cultivation (“Cultivation Segment”) Through our acquisition of SevenFive Farm ("SevenFive") in May 2020, we operate a 17,000 square foot licensed light deprivation greenhouse cultivation facility. During the three and six months ended June 30, 2021, 11 % of SevenFive’s revenue was with one customer. Discontinued Operations - 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. 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 also provides operational support for our internal cultivation. In June 2021, we began talks with an individual to begin the sale of NBC. On July 16, 2021, we entered into an Asset Purchase Agreement with this individual to sell substantially all of the assets of NBC for a total of $ 150,000 and 10 % of profits generated by the buyer in the states of Michigan, Mississippi, and Massachusetts for a period of twelve months from the closing. On August 2, 2021, the sale of NBC was completed. Basis of Presentation The accompanying condensed consolidated financial statements include all accounts of the Company and its wholly-owned subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation. These unaudited condensed consolidated financial statements have been prepared following the requirements of the Securities and Exchange Commission for interim reporting. As permitted under those rules, certain footnotes and other financial information that are normally required by accounting principles generally accepted in the United States of America ("U.S. GAAP") can be condensed or omitted. The condensed consolidated balance sheet for the year ended December 31, 2020 was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. The information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto of the Company for the year ended December 31, 2020 which were included in the annual report on Form 10-K filed by the Company on April 1, 2021. In the opinion of management, these condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and notes thereto of the Company and include all adjustments, consisting only of normal recurring adjustments, considered necessary for the fair presentation of the Company's financial position and operating results. The results for the three and six months ended June 30, 2021 are not necessarily indicative of the 7 Table of Contents operating results for the year ending December 31, 2021, or any other interim or future periods. Since the date of the Annual Report, there have been no material changes to the Company’s significant accounting policies. Reclassifications Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. Use of Estimates The preparation of our condensed consolidated financial statements in conformity with U.S. GAAP requires management 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. In particular, the COVID-19 pandemic has adversely impacted and is likely to further adversely impact the Company's business and markets. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company's business, results of operations and financial condition, including revenues, expenses, reserves and allowances, fair value measurements and asset impairment charges, will depend on future developments that are highly uncertain and difficult to predict. These developments include, but are not limited to, the duration and spread of the pandemic, its severity in our markets and elsewhere, governmental actions to contain the spread of the pandemic and respond to the reduction in global economic activity, and how quickly and to what extent normal economic and operating conditions can resume. Discontinued Operations In June 2021, we began talks with an individual to begin the sale of NBC. On July 16, 2021, we entered into an Asset Purchase Agreement with this individual to sell substantially all of the assets of NBC for a total of $ 150,000 and 10 % of profits generated by the buyer in the states of Michigan, Mississippi, and Massachusetts for a period of twelve months from the closing. On August 2, 2021, the sale of NBC was completed. The cash flows related to discontinued operations have not been segregated and are included in the consolidated statements of cash flows. As of June 30, 2021, and December 31, 2020, there are $ 5,251 and $ 5,551 , respectively, of cash and cash equivalents included in asset of discontinued operations on the balance sheet. ​ On January 1, 2021, we discontinued our investments segment. As this is not a materially significant segment, we have not shown the effects of the discontinued segment in the financial statements. ​ On December 26, 2019, the board of directors and management made the strategic decision to discontinue the operations for both the Security Segment and the Consumer Goods Segment. The assets and liabilities classified as discontinued operations for the Security Segment and Consumer Goods Segment are presented separately in the balance sheet and the operating results. The cash flows related to discontinued operations have not been segregated and are included in the consolidated statements of cash flows. ​ Going Concern The Company incurred net losses of $ 1.4 million and $ 3.7 million in three and six months ended June 30, 2021, respectively, and $ 1.9 million and $ 4.0 million for the three and six months ended June 30 2020, respectively, and had an accumulated deficit of $ 78.7 million as of June 30, 2021. The Company had cash and cash equivalents of $ 2.3 million and $ 0.8 million as of June 30, 2021 and December 31, 2020, respectively. ​ The accompanying consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets, and the satisfaction of liabilities and commitments in the ordinary course of business. The Company has incurred recurring losses and negative cash flows from operations since inception and has primarily funded its 8 Table of Contents operations with proceeds from the issuance of convertible debt. The Company expects its operating losses to continue into the foreseeable future as it continues to execute its acquisition and growth strategy. ​ The Company believes that its cash and cash equivalents as of June 30, 2021 will be sufficient to fund its operating expenses and capital expenditure requirements for at least twelve months from the date of filing this Quarterly Report on Form 10-Q due to the receipt of an additional $ 2.3 million of cash in April 2021 from the issuance of a convertible note offering and the pending acquisition of three dispensaries (See Note 13 for further information). The Company may need additional funding to support its planned investing activities. If the Company is unable to obtain additional funding, it would be forced to delay, reduce or eliminate some or all of its acquisition efforts, which could adversely affect its business prospects. ​ Summary of Significant Accounting Policies See our Annual Report on Form 10-K for the year ended December 31, 2020, for discussion of the Company's significant accounting policies. Recently Issued Accounting Standards FASB ASU 2020-06 – “Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”- In June 2020, the Financial Accounting Standards Board (“FASB”) issued guidance which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Accounting Standards Updates (“ASU”) also removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and simplifies the diluted earnings per share calculation in certain areas. The amendments in this ASU are effective for annual and interim periods beginning after December 15, 2021, although early adoption is permitted. We are in the process of evaluating the impact of this new guidance on our consolidated financial statements. 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 adopted this ASU in the first quarter of 2021. This ASU did not have a material effect on our condensed consolidated financial statements. ​ NOTE 2. BUSINESS ACQUISITION On May 13, 2020, we received approval of the transaction and transfer of the Dalton Adventures, LLC (“Seller”) license from the Colorado Marijuana Enforcement Division. On May 25, 2020, we finalized the acquisition, pursuant to which we acquired the assets of the Seller that constitute the business of SevenFive Farm, a cultivation facility in Boulder, Colorado, whereby we acquired fixed assets, inventory, a cultivation license and the tradename. The purchase price paid by the Company to the Seller was 8,859,117 shares of common stock. The closing price of General Cannabis Corp’s common stock on May 13, 2020, the date of license transfer, was $ 0.38 per share, as such, fair value of consideration is $ 3,808,951 . The purchase agreement had a provision whereby the Seller may require us to repurchase in cash 25 % of the shares issued to the owner of Dalton Adventures, LLC at a repurchase price equal to the same volume weighted average price used to determine the number of shares issued to the owner of Dalton Adventures, LLC at closing. As a result, we recorded a liability using Black-Scholes in the amount of $ 442,487 and reduced additional paid-in capital. In December 2020, the Seller waived his right to this provision in the purchase agreement and no longer has the possibility of the buyback of the shares. Therefore, no stock put liability is recorded as of December 31, 2020 and the liability was reversed into equity. We completed the allocation of the purchase price in the first quarter of 2021. 9 Table of Contents The table below reflects the Company’s estimates of the acquisition date fair values of the assets acquired: ​ ​ ​ ​ ​ Inventories ​ $ 185,261 Fixed assets ​ 89,490 Tradename ​ 1,050,000 Goodwill ​ 2,484,200 ​ ​ $ 3,808,951 ​ The accompanying condensed consolidated financial statements include the results of SevenFive from the date of acquisition for financial reporting purposes, May 13, 2020. The pro forma effects of the acquisition on the results of operations as if the transaction had been completed on January 1, 2020, are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended Six months ended ​ ​ June 30, ​ June 30, ​ ​ 2020 ​ 2020 Total revenues ​ $ 860,729 ​ $ 1,525,501 Net loss attributable to common stockholders ​ $ ( 2,016,845 ) ​ $ ( 3,875,288 ) Net loss per common share: ​ $ ( 0.04 ) ​ $ ( 0.09 ) Weighted average number of basic and diluted common shares outstanding ​ ​ 46,013,634 ​ ​ 42,841,140 ​ The unaudited proforma results of operations are presented for information purposes only. The unaudited pro-forma results are not intended to present actual results that would have been attained had the acquisition been completed as of January 1, 2020, or to project potential operating results as of any future date or for any future periods. ​ ​ ​ ​ ​ ​ ​ ​ NOTE 3. DISCONTINUED OPERATIONS ​ In June 2021, we began talks with an individual to begin the sale of NBC. On July 16, 2021, we entered into an Asset Purchase Agreement with this individual to sell substantially all of the assets of NBC for a total of $ 150,000 and 10 % of profits generated by the buyer in the states of Michigan, Mississippi, and Massachusetts for a period of twelve months from the closing. On August 2, 2021, the sale of NBC was completed. The condensed consolidated balance sheets include 2019 discontinued operations cash balances of $ 5,251 and $ 5,551 as of June 30, 2021 and December 31, 2020, respectively, and accounts payable balances of $ 53,128 and $ 54,641 as of June 30, 2021 and December 31, 2020, respectively. The below table does not include the 2019 discontinued operations. ​ Assets and liabilities of discontinued operations for the Operations Segment included the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ December 31, ​ 2021 2020 Accounts receivable, net ​ $ 262,453 ​ $ 187,185 Prepaid expenses and other current assets ​ 16,996 ​ 519,274 Current assets discontinued operations ​ ​ 279,449 ​ ​ 706,459 ​ ​ ​ ​ ​ ​ ​ Property and equipment, net ​ ​ 35,178 ​ ​ 43,697 Noncurrent assets discontinued operations ​ ​ 35,178 ​ ​ 43,697 ​ ​ ​ ​ ​ ​ ​ Accounts payable and accrued expenses ​ ​ 34,187 ​ ​ 169,492 Customer deposits ​ ​ 51,146 ​ ​ 517,931 Current liabilities discontinued operations ​ $ 85,333 ​ $ 687,423 ​ A summary of the discontinued operations for the Operations Segment is presented as follows: ​ 10 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ Six months ended ​ ​ ​ June 30, ​ June 30, ​ ​ 2021 2020 2021 2020 ​ Product revenues ​ $ 53,865 ​ $ 1,127,417 ​ $ 614,301 ​ $ 2,466,490 Service revenues ​ ​ 96,129 ​ ​ 54,364 ​ ​ 519,878 ​ ​ 362,750 ​ Total revenues ​ ​ 149,994 ​ ​ 1,181,781 ​ ​ 1,134,179 ​ ​ 2,829,240 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of sales ​ ​ 286,663 ​ ​ 1,030,461 ​ 1,127,555 ​ 2,454,441 ​ Selling, general and administrative ​ ​ 177,947 ​ ​ 264,659 ​ 329,833 ​ 453,357 ​ Professional fees ​ ​ 4,202 ​ ​ 5,670 ​ 4,801 ​ 5,670 ​ Depreciation and amortization ​ ​ 4,259 ​ ​ 3,860 ​ ​ 8,519 ​ ​ 7,669 ​ Total costs and expenses ​ ​ 473,071 ​ ​ 1,304,650 ​ 1,470,708 ​ 2,921,137 ​ Loss from discontinued operations ​ $ ( 323,077 ) ​ $ ( 122,869 ) ​ $ ( 336,529 ) ​ $ ( 91,897 ) ​ ​ The condensed consolidated statement of operations include 2019 discontinued operations gain of $ 5,233 and loss of $ 147,625 for the three and six months ended June 30, 2020, respectively, and are not reflected in the above table. 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 the Operations Segment for the six months ended June 30, 2021 and 2020. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six months ended ​ ​ ​ June 30, ​ ​ 2021 2020 ​ Accounts receivables ​ $ ( 75,268 ) ​ $ 10,350 ​ Prepaid expenses and other current assets ​ ​ 502,278 ​ ​ 100,884 ​ Depreciation and amortization ​ ​ 8,519 ​ ​ 7,669 ​ Capital expenditures ​ ​ — ​ ​ ( 3,011 ) ​ Accounts payable and accrued expenses ​ ​ ( 135,305 ) ​ ​ ( 6,292 ) ​ Customer deposits ​ ​ ( 466,785 ) ​ ​ ( 223,022 ) ​ ​ ​ ​ NOTE 4. INVENTORIES, NET Our inventories consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ December 31, ​ 2021 2020 Raw materials ​ $ 47,183 ​ $ 8,137 Work-in-progress and finished goods ​ ​ 543,800 ​ ​ 363,662 Less: Inventory reserves ​ ​ — ​ ​ — Inventories, net ​ $ 590,983 ​ $ 371,799 ​ 11 Table of Contents ​ NOTE 5. LEASES On May 13, 2020, we entered into a commercial real estate lease with a related party (see Note 11) for 17,000 square feet of greenhouse space in Boulder, CO, with an initial term of five years and, at our option, two additional terms of five years each. Rent is $ 30,900 per month with 1.5 % annual escalations. We also pay our portion of real estate taxes. In December 2020, we amended the lease to include a 3 % rent escalation in 2021 and 2022. No other changes to the lease were made. We accounted for the amendment as a lease modification and remeasured the lease with an incremental borrowing rate of 20 % which resulted in an increase of $ 246,250 to the right-of-use operating lease asset and lease liability from the initial lease valued on May 13, 2020 using an incremental borrowing rate of 22.8 %. We determined the present value of the future lease payments using a discount rate of 20 % over a 15 year term, our incremental borrowing rate based on outstanding debt, resulting in a right-of-use asset and lease liability of $ 1,877,423 which are being applied ratably over the term of the lease. As of June 30, 2021, the balance of the right-of-use asset and lease liability was $ 1,816,632 and $ 1,871,756 , respectively. Future remaining minimum lease payments were as follows: ​ ​ ​ ​ ​ Year ending December 31, Amount 2021 (remaining six months) ​ $ 185,400 2022 ​ 381,924 2023 ​ 387,653 2024 ​ 393,468 2025 ​ 399,370 Thereafter ​ 4,048,779 Total ​ 5,796,594 Less: Present value adjustment ​ ( 3,924,838 ) Operating lease liability ​ $ 1,871,756 ​ ​ ​ NOTE 6. ACCRUED STOCK PAYABLE The following tables summarize the changes in accrued common stock payable: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ Amount Shares Balance as of December 31, 2020 ​ $ 94,861 ​ ​ 359,415 Stock issued ​ ​ ( 33,961 ) ​ ​ ( 259,415 ) Balance as of June 30, 2021 ​ $ 60,900 ​ ​ 100,000 ​ In December 2020, several warrant holders exercised their 2020 A warrants through cashless exercises and we issued 282,213 shares of common stock. 259,415 of those shares issued had not been transferred to the warrant holders as of December 31, 2020 and were included in accrued stock. During January 2021 all shares were issued. See Note 8 for further details of the cashless exercises. ​ 12 Table of Contents NOTE 7. NOTES PAYABLE Our notes payable consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, December 31, ​ ​ 2021 ​ 2020 2020 10% Notes ​ $ 6,580,000 ​ $ 2,600,000 2019 15% Notes ​ ​ — ​ ​ 200,000 Related party note payable ​ ​ 320,000 ​ ​ 340,000 Unamortized debt discount ​ ​ ( 2,347,005 ) ​ ​ ( 251,456 ) ​ ​ ​ 4,552,995 ​ ​ 2,888,544 Less: Current portion ​ ​ — ​ ​ — Long-term portion ​ $ 4,552,995 ​ $ 2,888,544 ​ 10% Notes In December 2020, we entered into a Securities Purchase Agreement (the “Securities Purchase Agreement’) with certain accredited investors (the “ 10 % Investors”), pursuant to which we issued and sold senior convertible promissory notes (the “ 10 % Notes”) with an aggregate principal amount of $ 2,940,000 in exchange for payment to us by certain 10 % Investors of an aggregate amount of $ 1,940,000 in cash, as well as cancellation of outstanding indebtedness of the 15 % Notes (defined below) in the aggregate amount of $ 1,000,000 . In connection with the issuance of the 10 % Notes, the holders of the 10 % Notes received warrants (the “ 10 % Warrants”) to purchase shares of our common stock equal to 20 % coverage of the aggregate principal amount at $ 0.56 per share. In the aggregate, this equals 1,050,011 shares of our common stock. The 10 % Notes bear interest at an annual rate of 10 % and will mature on December 23, 2023. The 10 % Investors have the option at any time to convert up to 50 % of the outstanding unpaid principal and accrued interest of the 10 % Notes into Common Stock at a variable price of 80 % of the market price but no less than $ 0.65 per share and no more than $ 1.00 per share. The 10 % Warrants are exercisable at an exercise price of $ 0.56 per warrant. The relative fair value of the new funding on the 10 % Warrants was recorded as a debt discount and additional paid-in capital of $ 254,400 . The relative fair value of the cancellation of the outstanding indebtedness was recorded as an extinguishment of debt and additional paid-in capital of $ 131,000 . We recorded amortization of debt discount expense from the 10 % Notes of $ 21,630 and $ 0 for the three months ended June 30, 2021 and 2020, respectively, and $ 43,023 and nil during the six months ended June 30, 2021 and 2020, respectively. We determined there was no beneficial conversion feature on the 10 % Notes issued in December 2020. The 10 % Notes are 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 10 % Warrants as of December 23, 2020, were: ​ ​ ​ ​ ​ Current stock price $ 0.53 Exercise price ​ $ 0.56 Risk-free interest rate ​ ​ 0.38 % Expected dividend yield ​ ​ — Expected term (in years) ​ ​ 5.0 Expected volatility ​ ​ 115 % ​ On February 8, 2021, we entered into a Securities Purchase Agreement with an accredited 10 % Investor, pursuant to which we issued and sold 10 % Notes with an aggregate principal amount of $ 1,660,000 to such 10 % Investor. The 10 % Notes are part of an over-allotment option exercised by us in connection with the convertible note offering consummated on December 23, 2020, as discussed above. In connection with the issuance of the 10 % Notes, the holder received warrants to purchase shares of our common stock equal to 20 % coverage of the aggregate principal amount at $ 0.56 per share. In the aggregate, this equals 592,858 shares of our common stock with a par value $ 0.001 per share. The 10 % Notes bear interest at an annual rate of 10 % and will mature on February 8, 2024. The 10 % Investor has the option to convert up to 50 % of the outstanding unpaid principal and accrued interest of the 10 % Notes into Common Stock at a 13 Table of Contents variable price of 80 % of the market price but no less than $ 0.65 per share and no more than $ 1.00 per share. The 10 % Warrants are exercisable at an exercise price of $ 0.56 per warrant. ​ The relative fair value of the new funding on the 10 % Warrants was recorded as a debt discount and additional paid-in capital of $ 429,300 . We determined that this 10 % Note had a beneficial conversion feature and is calculated at its intrinsic value (that is, the difference between the effective conversion price of $ 0.66 at the date of the note issuance and the fair value of the common stock into which the debt is convertible at the commitment date, per share being $ 0.90 , multiplied by the number of shares into which the debt is convertible). The valuation of the beneficial conversion feature recorded cannot be greater than the face value of the note issued. We recorded $ 417,539 as additional paid in capital and a debt discount and included in our consolidated statement of operations. We recorded amortization of debt discount expense from the 10 % Notes issued in February 2021 of $ 70,377 and nil for the three months ended June 30, 2021 and 2020, respectively, and $ 109,818 and nil during the six months ended June 30, 2021 and 2020, respectively. The 10 % Notes are 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 10 % Warrants as of February 8, 2021, were: ​ ​ ​ ​ ​ Current stock price $ 1.12 Exercise price ​ $ 0.56 Risk-free interest rate ​ ​ 0.48 % Expected dividend yield ​ ​ — Expected term (in years) ​ ​ 5.0 Expected volatility ​ ​ 118 % ​ On April 20, 2021, we entered into a Securities Purchase Agreement with accredited 10 % Investors, pursuant to which we issued and sold 10 % Notes with an aggregate principal amount of $ 2,300,000 to such 10 % Investors. The 10 % Notes are part of an over-allotment approved by the existing noteholders in connection with the original convertible note offering of $ 4,600,000 consummated on December 23, 2020 and February 8, 2021. In connection with the issuance of the 10 % Notes, each holder received warrants to purchase shares of our common stock equal to 20 % coverage of the aggregate principal amount at $ 0.56 per share, except that the warrants coverage to one Investor acting as lead investor in the raise received approximately 35.5 % of the aggregate principal amount invested. The 10 % Notes bear interest at an annual rate of 10 % and will mature on April 20, 2024. The 10 % Investors have the option to convert up to 50 % of the outstanding unpaid principal and accrued interest of the 10 % Notes into Common Stock at a variable price of 80 % of the market price but no less than $ 0.65 per share and no more than $ 1.00 per share. The 10 % Warrants are exercisable at an exercise price of $ 0.56 per warrant. The relative fair value of the new funding on the 10 % Warrants was recorded as a debt discount and additional paid-in capital of $ 810,000 . We determined that these 10 % Notes had a beneficial conversion feature and is calculated at its intrinsic value (that is, the difference between the effective conversion price of $ 0.49 at the date of the note issuance and the fair value of the common stock into which the debt is convertible at the commitment date, per share being $ 0.83 , multiplied by the number of shares into which the debt is convertible). The valuation of the beneficial conversion feature recorded cannot be greater than the face value of the note issued. We recorded $ 692,500 as additional paid in capital and a debt discount and included in our consolidated statement of operations. We recorded amortization of debt discount expense from the 10 % Notes issued in April 2021 of $ 100,949 for the three and six months ended June 30, 2021 and nil for the three and six months ended June 30, 2020. The 10 % Notes are treated as conventional debt. ​ 14 Table of Contents For purposes of determining the debt discount, the underlying assumptions used in the binomial lattice model to determine the fair value of the 10 % Warrants as of April 20, 2021, were: ​ ​ ​ ​ ​ Current stock price $ 0.83 Exercise price ​ $ 0.56 Risk-free interest rate ​ ​ 1 % Expected dividend yield ​ ​ — Expected term (in years) ​ ​ 5.0 Expected volatility ​ ​ 115 % ​ 15% Notes In December 2019, we completed a private placement with certain accredited investors pursuant to an unsecured promissory note (the “ 15 % Notes”) with an aggregate principal amount of $ 300,000 . In February and March 2020, we completed private placements with certain accredited investors, including some holders of our 2019 12 % Notes (as defined below), of 15 % Notes with an aggregate principal amount of $ 2,031,000 in exchange for $ 525,000 of new funding and the cancellation of $ 1,506,000 aggregate principal amount of the 2019 12 % Notes. The 15 % Notes have an annual interest rate of 15 % and matured on January 31, 2021. $ 1.0 million of the 15 % Notes were exchanged for the 10 % Notes (see above), $ 2.1 million was paid in full in December 2020 and the remaining $ 200,000 was paid in full in the first quarter 2021. The 15 % Notes provide that they shall be repaid in full out of the proceeds of any new debt or equity capital raise with net proceeds of more than $ 5,000,000 . In connection with the issuance of the 15 % Notes, each holder of 15 % 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, with the number of shares subject to each warrant equal to one share for each $ 1.00 of principal amount of 15 % Notes issued to the noteholder. The 2020 A Warrants had an expiration date of December 31, 2020, the 2020 B Warrants have an expiration date of December 31, 2021, and the 2020 C Warrants have an expiration date of December 31, 2022 (collectively, the “ 15 % Warrants”). By way of example, if an investor was issued a 15 % Note with a principal amount of $ 250,000 , such noteholder would receive a 2020 A Warrant to purchase 250,000 shares of common stock, a 2020 B Warrant to purchase 250,000 shares of common stock and a 2020 C Warrant to purchase 250,000 shares of common stock. Accordingly, the Company issued 15 % Warrants to purchase a total of 6,993,000 shares of common stock to the holders of 15 % Notes. The exercise price of these warrants is subject to adjustment as a result of certain future equity issuances of securities by the Company at a price below the then-effective exercise price of the 15 % Warrants. As a result of such subsequent issuances of securities by the Company during the second quarter of 2020, the exercise price of the 15 % Warrants had decreased to $ 0.3983 per share. As of June 30, 2021, the warrant holders exercised 1,131,000 of the 2020 A Warrants into 282,813 shares of our common stock through cashless exercise. ​ We received $ 300,000 of cash in December 2019 and an additional $ 525,000 of cash January 2020 through March 2020 for issuing the 15 % Notes. The relative fair value of the new funding on the 15 % Warrants was recorded as a debt discount and additional paid-in capital of $ 333,056 . The relative fair value of the cancellation of the outstanding indebtedness was recorded as an extinguishment of debt and additional paid-in capital of $ 668,335 . We recorded amortization of debt discount expense from the 15 % Notes of nil and $ 72,516 for the three months ended June 30, 2021 and 2020, respectively, and nil and $ 138,837 during the six months ended June 30, 2021 and 2020, respectively. 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 March 2020 were: ​ ​ ​ ​ ​ ​ Current stock price $ 0.45 - 0.67 Exercise price ​ $ 0.45 Risk-free interest rate ​ ​ 0.68 - 1.62 % Expected dividend yield ​ ​ — Expected term (in years) ​ ​ 0.83 - 3.06 Expected volatility ​ ​ 112 - 119 % ​ 15 Table of Contents ​ NOTE 8. 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 (“2019 Units”) in a registered direct offering for $ 1.00 per 2019 Unit (collectively defined as 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 original exercise price of the 2019 Warrants was $ 1.30 per share. The 2019 Warrants contain certain anti-dilution adjustment provisions with respect to subsequent issuances of securities by the Company at a price below the exercise price of such warrants. As a result of such subsequent issuances of securities by the Company during the fourth quarter 2019, the exercise price of the 2019 Warrants decreased to $ 0.45 per share and the number of shares subject to the 2019 Warrants increased to 8,666,666 shares of common stock as of December 31, 2019. In May 2020, we issued securities at a price lower than the $ 0.45 per share above. As a result, the exercise price of the 2019 Warrants decreased to $ 0.3983 per share and the number of shares subject to the 2019 Warrants increased to 9,591,614 shares of common stock. During the first quarter of 2021 the warrant holders exercised 1,323,000 warrants into 747,208 shares of our common stock through cashless exercise. We booked an adjustment to the derivative liability of $ 1,523,117 as a result. As of June 30, 2021, there were 322,807 of the 2019 Warrants outstanding. The following are the key assumptions that were used to determine the fair value of the 2019 Warrants ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ May 31, ​ December 31, June 30, ​ ​ 2019 ​ 2020 2021 ​ Number of shares underlying the warrants ​ 3,000,000 ​ 1,645,807 ​ ​ 322,807 ​ ​ Fair market value of stock ​ $ 0.95 ​ $ 0.48 ​ $ 0.59 ​ ​ Exercise price ​ $ 1.30 ​ $ 0.3983 ​ $ 0.3983 ​ ​ Volatility ​ 133 % ​ 108 % ​ 105 % ​ Risk-free interest rate ​ 1.93 % ​ 0.36 % ​ 0.87 % ​ Warrant life (years) ​ 5.00 ​ ​ 3.41 ​ 2.92 ​ ​ ​ 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six months ended June 30, ​ ​ 2021 2020 ​ Beginning balance ​ $ 561,368 ​ $ 4,620,593 ​ Warrant exercise ​ ​ ( 1,523,117 ) ​ ​ ( 82,241 ) ​ Change in fair value of warrants derivative liability ​ ​ 1,095,983 ​ ​ ( 1,375,619 ) ​ Ending balance ​ $ 134,234 ​ $ 3,162,733 ​ ​ ​ NOTE 9. COMMITMENTS AND CONTINGENCIES In June 2020, Michael Feinsod resigned as our Executive Chairman, claiming that his resignation was for "Good Reason" under the terms of his employment agreement. If it is ultimately determined that his resignation was, in fact, for "Good Reason", rather than a voluntary act absent "Good Reason", it could enable certain potential claims for benefits under his employment agreement, including potential claims for severance, for the vesting of his unvested options and/or for the extension of the term within which he can exercise his options in the future. Having reviewed the matter, however, we do not believe that Mr. Feinsod's resignation was for "Good Reason". Accordingly, we believe that Mr. Feinsod's resignation was voluntary, and that any such potential claims, if asserted, would be without foundation. Although the outcome of legal proceedings is subject to uncertainty, the Company will vigorously defend any future claims made by Mr. Feinsod alleging a "Good Reason" resignation. 16 Table of Contents 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 10. STOCKHOLDERS’ EQUITY 2020 Capital Raise On May 29, 2020, we entered into a subscription agreement, as amended with Hershey Strategic Capital, LP and Shore Ventures III, LP (collectively as the “Hershey Investor”) with respect to the sale of shares of common stock and warrants to purchase common stock (collectively, the “securities”). The sales of the securities to the Hershey Investor consists of a minimum of $ 2,185,000 of securities and a maximum of $ 3,000,000 of securities, as described further below. The purchase price of the securities at each closing is as follows: (i) the purchase price of each share of common stock is $ 0.3983 per share, and (ii) for each one dollar invested by the Hershey Investor, the Hershey Investor receives a warrant to purchase a number of shares of common stock equal to 75 % of the number of shares of common stock purchased by the Hershey Investor at an exercise price per share equal to $ 0.5565 . The warrants have a term of five years . During the year ended December 31, 2020, we sold $ 3,000,000 of securities to the Hershey Investor, representing 7,532,010 shares of common stock and warrants to purchase 5,649,007 shares of common stock at an exercise price of $ 0.5565 per share. The warrants were recorded as equity and equity issuance costs in the amount of $ 2,173,074 . Notwithstanding the foregoing, none of the Hershey Investor warrants are exercisable if after giving effect to such exercise the Hershey Investor (together with affiliates) would own in excess of 9.99 % (“Beneficial Ownership Limitation”) of the shares of issued and outstanding Common Stock of the Company. The Beneficial Ownership Limitation may be increased by the Hershey Investor upon not less than 61 days ’ prior notice. The Hershey Subscription Agreement also provides the Hershey Investor with certain participation rights in future financings of the Company until the one-year anniversary of the second closing. The Hershey Subscription Agreement further provides that the Company shall, during a negotiation period ending October 4, 2020, endeavor to cause the existing holders of the promissory notes of the Company having an outstanding balance in the amount of approximately $ 2,331,000 as of June 1, 2020 that are due on or about January 31, 2021, to extend the maturity date of such notes to a date that is not earlier than January 31, 2022. As of October 4, 2020, $ 600,000 of the $ 2,331,000 outstanding notes had extended the maturity date. If, at the end of the negotiation period per the contract, all of the existing notes have not been amended to extend the maturity dates thereof, then the Company shall issue to the Hershey Investor additional warrants to purchase shares of common stock. Any such additional warrants will be for a number of shares of common stock based on the dollar amount of the outstanding balance of the existing notes that were not extended, with each one dollar of existing notes that were not extended representing one share subject to such additional warrant. The exercise price of any such additional warrants will be equal to 100 % of the 30-day volume weighted average price of the Company’s common stock on the last day of the negotiation period, provided that such exercise price shall not be lower than $ 0.45 per share nor higher than $ 0.56 per share. The Hershey Investor extended the negotiation period to December 11, 2020. As of December 11, 2020, no existing holders had extended their promissory notes, therefore, we issued the Hershey Investor additional warrants in accordance with the agreement. On December 14, 2020 we issued an additional 1,631,000 warrants to purchase common stock at an exercise price of $ 0.4917 to the Hershey Investor. These warrants expire on December 11, 2025. The warrants were recorded as a deemed dividend in the amount of $ 732,494 . Stock-based compensation We use the fair value method to account for stock-based compensation. We recorded $( 41,648 ) and $ 434,367 in compensation (income)/expense for the three months ended June 30, 2021 and 2020, respectively, and $ 62,284 and $ 926,698 , for the six months ended June 30, 2021 and 2020, respectively. This includes expense related to options issued in prior years for which the requisite service period for those options includes the current period as well as options issued in the current period. Forfeited options result in a reversal in the period forfeited. The fair value of these instruments was calculated using the Black-Scholes option pricing method. 17 Table of Contents During the six months ended June 30, 2021 we granted options to purchase 983,000 common shares to employees and directors. The options expire five years from the date of grant and vest over a period of one year . Fair value of the awards at the date of grants totaled $ 594,080 . The following summarizes Employee Awards activity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ ​ ​ ​ Weighted- ​ Average ​ ​ ​ ​ ​ ​ ​ Average ​ Remaining ​ ​ ​ ​ ​ Number of ​ Exercise Price ​ Contractual ​ Aggregate ​ Shares per Share Term (in years) Intrinsic Value Outstanding as of December 31, 2020 ​ 7,266,420 ​ $ 1.03 ​ 5.5 ​ $ 167,000 Granted ​ 983,000 ​ ​ 0.91 ​ ​ ​ Exercised ( 333,620 ) ​ 0.54 ​ Forfeited or expired ( 1,006,930 ) ​ 3.95 ​ Outstanding as of June 30, 2021 6,908,870 $ 1.07 5.3 ​ $ 303,000 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Exercisable as of June 30, 2021 5,613,490 ​ $ 1.16 5.3 ​ $ 153,000 ​ As of June 30, 2021, there was approximately $ 393,391 of total unrecognized compensation expense related to unvested employee awards, which is expected to be recognized over a weighted-average period of eleven months . ​ NOTE 11. RELATED PARTY TRANSACTIONS On June 3, 2020, the Company entered into a consulting agreement with Adam Hershey, Interim Chief Executive Officer, board member and investor, pursuant to which he would act as a strategic consultant for the Company, including providing assistance with the sourcing and evaluation of merger and acquisition deals, strategic capital and strategic partnerships or joint ventures. Mr. Hershey is paid an initial monthly rate of $ 8,333 for the services, subject to certain adjustments. We paid $ 24,999 and $ 8,333 for the three months ended June 30, 2021 and 2020, respectively, and $ 49,998 and $ 8,333 for the six months ended June 30, 2021 and 2020, respectively. We currently have a lease agreement with Dalton Adventures, LLC in which we rent 17,000 square feet of greenhouse space in Boulder, Colorado for $ 34,636 a month, of which $ 30,900 is base rent and $ 3,736 is property taxes. The owner of Dalton Adventures, LLC is a principal shareholder and board member of the Company. We incurred approximately $ 115,000 and $ 81,000 for the three months ended June 30, 2021 and 2020, respectively, and $ 230,000 and $ 81,000 for the six months ended June 30, 2021 and 2020. On December 23, 2020, our four current board members of the Company purchased senior convertible promissory notes from the Company for an aggregate amount of $ 320,000 . A board member who resigned in May 2021 purchased $ 30,000 of the senior convertible promissory notes from the Company. These notes are included in the 10 % Notes discussed in Note 7. Accrued interest earned and owed to the board members was $ 17,079 as of June 30, 2021. ​ NOTE 12. SEGMENT INFORMATION Our operations are organized into one segment: Cultivation. 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. 18 Table of Contents Three months ended June 30 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 Cultivation Eliminations ​ Total Revenues ​ $ 698,608 ​ $ — ​ $ 698,608 Costs and expenses ​ ​ ( 677,715 ) ​ ​ 6,094 ​ ​ ( 671,621 ) Segment operating income ​ $ 20,893 ​ $ 6,094 ​ ​ 26,987 Corporate expenses ​ ​ ​ ​ ​ ​ ​ ​ ( 1,080,163 ) Net loss from continuing operations before income taxes ​ ​ ​ ​ ​ ​ $ ( 1,053,176 ) ​ ​ ​ ​ ​ ​ ​ ​ 2020 Cultivation Total Revenues ​ $ 509,175 ​ $ 509,175 Costs and expenses ​ ​ ( 456,661 ) ​ ​ ( 456,661 ) Segment operating income ​ $ 52,514 ​ ​ 52,514 Corporate expenses ​ ​ ​ ( 1,835,250 ) Net loss from continuing operations before income taxes ​ ​ ​ $ ( 1,782,736 ) ​ Six months ended June 30 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 Cultivation Eliminations Total Total revenues ​ $ 1,347,941 ​ $ — ​ $ 1,347,941 Costs and expenses ​ ( 1,475,423 ) ​ 16,870 ​ ( 1,458,553 ) Operating (loss) income ​ $ ( 127,482 ) ​ $ 16,870 ​ ​ ( 110,612 ) Corporate expenses ​ ​ ​ ( 3,288,180 ) Net loss from continuing operations before income taxes ​ ​ ​ ​ ​ ​ ​ $ ( 3,398,792 ) ​ ​ ​ ​ ​ ​ ​ ​ 2020 Cultivation Total Total revenues ​ $ 509,175 ​ $ 509,175 Costs and expenses ​ ( 456,661 ) ​ ( 456,661 ) Operating income ​ $ 52,514 ​ ​ 52,514 Corporate expenses ​ ​ ​ ( 3,727,543 ) Net loss from continuing operations before income taxes ​ ​ ​ ​ $ ( 3,675,029 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ December 31, Total assets 2021 2020 Cultivation ​ $ 6,720,738 ​ $ 6,208,222 Corporate ​ 2,422,760 ​ 1,567,021 Discontinued operations ​ ​ 319,878 ​ ​ 755,707 Total assets - segments ​ ​ 9,463,376 ​ ​ 8,530,950 Intercompany eliminations ​ ​ ( 36,850 ) ​ ​ ( 12,183 ) Total assets - consolidated ​ $ 9,426,526 ​ $ 8,518,767 ​ ​ NOTE 13. SUBSEQUENT EVENTS On April 18, 2021, the Company, entered into an Agreement and Plan of Reorganization and Liquidation among the Company, Trees Acquisition Corp., a newly-formed indirect wholly-owned subsidiary of the Company (“Trees Acquisition”), and TDM, LLC and Station 2, LLC (“Colorado Sellers”), as well as a separate Agreement and Plan of Reorganization and Liquidation among the Company, Trees Acquisition, and Trees Waterfront, LLC, Trees MLK Inc. and Trees Portland, LLC (“Oregon Sellers” and collectively with the Colorado Sellers, the “Sellers”) (collectively, the “Plans”). The transaction will provide the Company with a foundational retail platform from which to expand growth. Pursuant to the Plans, the Company has agreed to purchase substantially all of the assets of each of the Colorado Sellers and Oregon Sellers (“Assets”). The Assets to be transferred to the Company by each of the Colorado Sellers and Oregon Sellers principally consist of the cannabis business licenses, inventory and intellectual property related to the Sellers’ cannabis dispensaries located in Englewood and Denver, Colorado and Portland, Oregon together with substantially all related assets. The Company is not assuming any liabilities of any of the Sellers. The Plan provides that the transaction 19 Table of Contents qualifies as a tax-free reorganization pursuant to Section 368 of the Internal Revenue Code. The purchase price for the transaction consists of a cash payment of $ 2 million at closing and an additional $ 3 million in cash payable in equal monthly amounts of $ 125,000 for a period of 24 months from the closing. In addition, at the closing, the Company will issue to the Sellers 38,745,193 shares of the Company’s common stock. Closing of the transaction is subject to standard closing conditions, including regulatory approval of the transfer of the cannabis licenses by the applicable Colorado and Oregon cannabis regulatory authorities. The Plans allow for the separate closing dates for the Assets depending on regulatory approval. Therefore, the purchase price will be paid out pro-rata based on the closing dates of the Assets. On July 16, 2021, the Company, entered into an Asset Purchase Agreement (the “NBC Agreement”) with NBC Holdings LLC and Richard Cardinal (“NBC Buyer”) pursuant to which the Company has agreed to sell substantially all of the assets in its cultivation consulting business known as Next Big Crop (“NBC”) to the NBC Buyer. The Board of Directors approved the NBC Agreement in furtherance of its previously disclosed plan to identify and acquire licensed cannabis assets that will allow us to continue to generate cash and meet our financial commitments. The purchase price for the sale consists of a payment by the NBC Buyer of $ 75,000 payable upon signing, an additional $ 75,000 payable within one year of the closing, and ten percent ( 10 %) of profits generated by the NBC Buyer in the states of Michigan, Mississippi and Massachusetts for a period of twelve months from the Closing. As part of the NBC Agreement, the Company shall transfer the trade name associated with NBC to the NBC Buyer and discontinued its Operations Consulting and Products Segment. Substantially all of the employees that performed services in NBC resigned from the Company as of the effective date of the NBC Agreement. On August 2, 2021, the sale of NBC was completed. ​