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Item 1. Business

2023-04-17 compared with 2022-03-25 · 82 added, 69 removed, 156 unchanged (49% of the section changed)

Business Strategy

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 businesses.

Accordingly, we are focused on (1) identifying licensed cannabis assets that we can acquire, (2) focusing on execution, which will allow us to continue to generate cash and meet our financial commitments, and (3) moving with an urgency that reflects our conviction and confidence in our ability to create the customers’ loyalty and advocacy.

Business Summary

TREES Corporation is a cannabis retailer and cultivator in the States of Colorado and Oregon.

We presently operate eight (8) cannabis dispensaries as follows:

● Englewood, Colorado – 5005 S.

Federal Boulevard – Recreational license only

● Two (2) in Denver, Colorado

Federal Boulevard – Recreational license only

o East Hampden Avenue (formerly Green Man) – Recreational license only

● Longmont, Colorado

107 th Street (formerly Green Tree/Ancient Alternatives) – Medical and Recreational licenses

● Berthoud, Colorado

2 nd Street (formerly Green Tree/Natural Alternatives for Life) – Medical and Recreational licenses

● Three (3) in Oregon

o SW Corbett Avenue, Portland, OR – Medical and Recreational licenses

o NE 102 nd Avenue, Portland, OR – Medical and Recreational licenses

o 7050 NE MLK, Portland, OR – Medical and Recreational licenses

We also operate five (5) cultivation facilities in Colorado as follows:

● SevenFive Farm – 3705 N.

75 th Street, Boulder – Retail cultivation license only

Foothills Highway D-300 (formerly Green Tree/Ancient Alternatives) – Medical and Retail cultivation licenses

Foothills Highway C-100 (formerly Green Tree/Mountainside Industries) – Medical and Retail cultivation licenses

Foothills Highway E-100 (formerly Green Tree/Hillside Enterprises) – Retail cultivation license only

2 nd Street (formerly Green Tree/Natural Alternatives for Life) – Medical cultivation license only

Our principal business model is to acquire, integrate and optimize cannabis companies in the retail and cultivation segments utilizing the combined experience of entrepreneurs and synergistic operations of our vertically integrated network.

Business Strategy and Recent Transactions

As the cannabis industry becomes more mature, we focus on (1) identifying licensed cannabis assets that we can acquire, (2) executing our business strategy to continue to generate cash and meet our financial commitments, and (3) moving with an urgency that reflects our conviction and confidence in our ability to create customer loyalty and advocacy.

To that end, during the years ended 2022 and 2021, we implemented the following significant actions in support of our continued growth:

● On December 30, 2021, we completed the acquisition of substantially all the assets of Trees Portland, LLC and Trees Waterfront, LLC, representing a portion of the overall Trees transaction ("Trees Transaction”).

● In February 2023, we completed the acquisition of Station 2, LLC, the assets of which consist of a dispensary located in Denver, CO.

The consideration paid by the Company consists of cash at closing equal to $256,582 plus an additional $385,873 in twenty-four (24) equal monthly payments commencing May 2023.

Brown, one of our Board members, was the sole owner of Station 2 and has and will receive all consideration described above.

● In December 2022, we completed the acquisition of substantially all of the assets of Green Man Cannabis (“Green Man”, the overall transaction is referred to as the “Green Man Acquisition”).

Green Man equity holders received cash equal to $1,225,000 together with an aggregate of 4,494,382 shares of the Common Stock.

An additional $1,500,000 in cash will be paid out in eighteen (18) equal monthly payments equal to $83,333.33 per month commencing on the 12-month anniversary of the closing.

● Also in December 2022, we completed the acquisition of substantially all of the assets of Ancient Alternatives LLC, Natural Alternatives For Life, LLC, Mountainside Industries, LLC, Hillside Enterprises, LLC, and GT Creations, LLC, each a Colorado limited liability company (collectively, the "Green Tree Entities”, the overall transaction is referred to herein as the “Green Tree Acquisition”).

At the closing, the Company delivered to the Green Tree Entities an aggregate of cash equal to $500,000 and delivered to equity holders of the Green Tree Entities an aggregate of 17,977,528 shares of Common Stock.

An additional $3,500,000 in cash will be paid by the Company to the Green Tree Entities in fifteen (15) equal monthly payments commencing on the 9-month anniversary of the closing.

The number of shares is subject to adjustment based upon a formula specified in the definitive purchase agreement.

We assumed certain operating obligations at closing, including certain manufacturing agreements between GT Creations and affiliates of the Green Tree Entities.

Allyson Feiler, a principal owner of the Green Tree Entities, was elected to our Board of Directors of the effective December 12, 2022.

● In September 2022, we completed a private offering in which we issued and sold to accredited investors senior secured convertible notes (the "2022 Notes”) with an aggregate principal amount of $13,500,000 ("Principal Amount”) to such investors ("2022 Note Offering”), in exchange for payment to the Company by certain of the investors of an aggregate amount of $10,587,250 in cash, as well as cancellation of outstanding indebtedness in the aggregate amount of $2,912,750 represented by certain prior promissory notes we issued in December 2020 and April 2020.

In connection with the 2022 Note Offering, Investors received warrants to purchase shares of the Company’s Common Stock equal to 20% coverage of the aggregate principal amount at $0.70 per share, which equals an aggregate of warrants to purchase 3,857,150 shares of the Common Stock.

The lead Investor ("Lead Investor”) received an additional 10% warrant coverage on the aggregate principal amount of Notes for total additional warrants to purchase 1,928,571 shares of Common Stock.

The Lead Investor also will receive a five percent cash fee on the aggregate principal amount of Notes, payable by the Company;

one-half of such fee may be deferred by the Company for up to five months from the closing.

The Notes will bear interest at an annual rate of 12% and will mature on September 16, 2026 (the "Maturity Date”).

Investors have the option to convert up to 50% of the outstanding unpaid principal and accrued interest of the Notes into Common Stock at a fixed conversion price equal to $1.00 per share.

The Warrants are exercisable at an exercise price of $0.70 per Warrant, subject to adjustment as provided in the Warrants, at any time prior to the earlier of the Maturity Date and an Acquisition (as defined in the Warrants).

Payment on the Notes is secured by substantially all of the assets of the Company pursuant to a Security Agreement by and among the Company and the Investors.

● In December 2021, we completed the acquisition of substantially all the assets of Trees Portland, LLC and Trees Waterfront, LLC, representing a portion of the overall Trees transaction ("Trees Transaction”).

The cash paid in connection with the Oregon Closing consisted of $331,581 and stock consideration of 6,423,575 shares of our Common Stock.

Further, cash equal to $497,371 will be paid to sellers in equal monthly installments over a period of 24 months from the Oregon Closing.

● On September 10, 2021, we entered into a Securities Purchase Agreement with various accredited investors, pursuant to which the Company issued and sold Units consisting of Series A Convertible Preferred Stock (“Series A Preferred”) and warrants (“Warrants”) to purchase shares of our common stock with a par value of $0.001 per share (the “Common Stock”).

The total number of Units sold was 1,180.

● In September 2021, we entered into a Securities Purchase Agreement with various accredited investors, pursuant to which the Company issued and sold Units consisting of Series A Convertible Preferred Stock (“Series A Preferred”) and warrants to purchase shares of our Common Stock The total number of Units sold

Each Unit consists of one (1) share of Series A Preferred and 300 Warrants.

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Each share of Series A Preferred is convertible into 1,000 shares of Common Stock upon the consummation of a capital raise of at least $5 million.

● On September 2, 2021, we completed the acquisition of substantially all the assets of TDM, LLC, representing a portion of the overall Trees transaction.

● Also in September 2021, we completed the acquisition of substantially all the assets of TDM, LLC, representing a portion of the overall Trees Transaction.

The cash paid by the Company consisted of $1,155,256.

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Further, cash equal to $1,732,884 will be paid to Seller in equal monthly installments over a period of 24 months.

● On July 16, 2021, we entered into an Asset Purchase Agreement with NBC Holdings LLC and Richard Cardinal (“Buyer”) pursuant to which we agreed to sell substantially all the assets in our cultivation consulting business known as Next Big Crop (“NBC”) to Buyer.

● In July 2021, we entered into an Asset Purchase Agreement with NBC Holdings LLC and Richard Cardinal (“NBC Buyer”) pursuant to which we agreed to sell substantially all the assets in our cultivation consulting business known as Next Big Crop (“NBC”) to Buyer.

The Board of Directors approved the 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 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 Buyer in the states of Michigan, Mississippi and Massachusetts for a period of twelve months from the Closing.

Pursuant to amendment, Buyer paid the additional $75,000 in March 2022, and the 10% profit share described above was eliminated.

● On April 20, 2021, we 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, 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”).

Pursuant to the Plans, we agreed to purchase substantially all the assets of each of the Colorado Sellers and Oregon Sellers.

The assets 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.

We are not assuming any

liabilities of any of the Sellers.

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 the event we consummate a capital raise of $5 million or greater during such 24-month period, such monthly payments will increase to $200,000 per month and the payout period decreases to 15 months from the closing, with a one-time ‘catch-up’ payment such that the total additional cash consideration equals $3 million.

In addition, at the closing, we will issue to the Sellers 38,745,193 shares of the Company’s common stock (“Seller Shares”).

● On April 20, 2021, we completed an offering with accredited investors, pursuant to which the Company issued and sold convertible notes with an aggregate principal amount of $2.3 million to such Investors (“Offering”).

The purchase price for the sale consists of a payment by 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 NBC Buyer in the states of Michigan, Mississippi and Massachusetts for a period of twelve months from the Closing.

Pursuant to amendment, NBC Buyer paid the additional $75,000 in March 2022, and the 10% profit share described above was eliminated.

● In April 2021, we completed an offering with accredited investors, pursuant to which the Company issued and sold convertible notes (“2021 Notes”) with an aggregate principal amount of $2.3 million to such Investors (“2021 Note Offering”).

The notes are part of an over-allotment approved by the existing noteholders in connection with the original convertible note offering (and previous over-allotment) of $4.6 million consummated on December 23, 2020, and February 8, 2021.

In connection with the Offering, 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 warrant coverage to one investor acting as lead investor in the Offering received approximately 35.5% of the aggregate principal amount invested.

In connection with the 2021 Note Offering, 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 warrant coverage to one investor acting as lead investor in the 2021 Note Offering received approximately 35.5% of the aggregate principal amount invested.

The notes bear interest at an annual rate of 10% and will mature on April 20, 2024.

The investors have the option to convert up to 50% of the outstanding unpaid principal and accrued interest of the 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.

● On December 23, 2020, and February 8, 2021, the Company issued and sold senior convertible promissory notes with an aggregate principal amount of $4,600,000 in exchange for payment to the Company by certain investors of an aggregate amount of $3,600,000 in cash, as well as cancellation of outstanding indebtedness in the aggregate amount of $1,000,000 represented by certain of the prior promissory notes issued by the Company in February 2020 to certain other investors.

In connection with the issuance of the notes, the holders received warrants to purchase shares of the Company’s common stock equal to 20% coverage of the aggregate principal amount at $0.56 per share.

The notes bear interest at an annual rate of 10%.

Notes with an aggregate principal amount of $2,940,000 will mature on December 23, 2023, and notes with an aggregate principal amount of $1,660,000 will mature on February 8, 2024.

The investors have the option at any time to convert up to 50% of the outstanding unpaid principal and accrued interest of the notes into the Company’s 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.

● In September 2020, we added to the strength of our Board of Directors by adding Carl Williams as Chairman and Independent Director, Richard Travia as Independent Director and Barker Dalton as Director.

● On May 29, 2020, we entered into a subscription agreement, as amended with Hershey Strategic Capital, LP and Shore Ventures III, LP (collectively the “Hershey Investor”) with respect to the sale of shares of common stock and warrants to purchase common stock.

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 with an exercise price of $0.5565 per share.

In accordance with the terms of the subscription agreement, we issued an additional 1,631,000 warrants in December 2020 to purchase common stock with an exercise price of $0.4917 to the Hershey Investor.

As part of these transactions, Adam Hershey joined our Board of Directors in July 2020.

● 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 (“the MED”).

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 located in Boulder, Colorado.

The purchase price paid by the Company to the Seller was 8,859,117 shares of common stock.

Barker Dalton, the sole member and owner of Dalton Adventures, LLC, joined our Board of Directors in September 2020.

● On May 4, 2020, we received a Suitability Approval from the Colorado Marijuana Enforcement Division (“MED”), becoming one of the first, and to date, one of the only public companies pre-approved to acquire licensed cannabis facilities.

We determined the sale of our operations consulting and products segment represented a strategic shift that had a significant effect on our results of operations and, as a result, we have presented the disposal as discontinued operations in our financial statements.

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History and Corporate Structure

The accompanying consolidated financial statements include the results of GCC and its nine wholly-owned subsidiary companies:

Evans Owner LLC, a Colorado limited liability company formed in 2014;

(b) General Cannabis Capital Corporation, a Colorado corporation formed in 2015;

(d) Standard Cann, Inc., a Colorado corporation formed in 2019;

(e) SevenFive Farm LLC, a Colorado limited liability company formed in 2020;

(f) SevenFive Farm Cultivation LLC, a Colorado limited liability company formed in 2020;

(g) Trees Colorado LLC, a Colorado limited liability company formed in 2021;

(h) Trees Oregon LLC, a Colorado limited liability company formed in 2021;

(i) 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 (Operations, Cultivation, and Investments), we provide products, services, and capital to the regulated cannabis industry and non-cannabis customers, which include the following:

Retail (“Retail Segment”)

Through our acquisition of TDM, LLC (“TREES Englewood”) in September 2021 and our acquisition of Trees Portland, LLC (“TREES Portland”) and Trees Waterfront, LLC (“TREES Waterfront”) in December 2021, we operate a retail dispensary store in Englewood, Colorado, and two retail stores in Portland, Oregon.

Cultivation (“Cultivation Segment”)

Through our acquisition of SevenFive Farm ("SevenFive") in May 2020, we operate a licensed light deprivation greenhouse cultivation facility.

During 2021 and 2020, 31% and 28%, respectively, of SevenFive Farm’s revenue was from two customers.

The accompanying consolidated financial statements include the results of TREES and its wholly-owned subsidiary companies, each a Colorado corporation or limited liability company:

Evans Owner LLC

● GC Capital Corp, LLC

● GC Security LLC

● General Cannabis Capital Corporation

● Standard Cann, Inc.

● SevenFive Farms Cultivation, LLC

● SevenFive Farms, LLC

● Trees Colorado LLC

● Trees Oregon LLC

● Green Tree Colorado LLC

● GT Cultivation LLC

● GT Retail LLC

● Green Man Cannabis, LLC

Competitive Strengths

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There are over one million cannabis plants cultivated for cannabis sales each year, and a typical 15,000 to 20,000 square foot grow facility contains approximately 5,000 to 7,500 plants.

We believe that there is a significant opportunity to identify and acquire additional cultivation assets, which will ultimately supply our own proprietary brands and retail locations.

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.

Cannabis continues to be 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.

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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.

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Recent legislative proposals have been introduced:

● Capital Lending and Investment for Marijuana Businesses Act ( CLIMB Act) – introduced June 2022 – would:

● Permit public agencies to provide financial support to the cannabis industry;

● Provide protection to service providers (investment banks, law firms, accounting firms);

● Provide access to public capital markets by amending the Exchange Act to create a ‘safe harbor’ for the listing of cannabis businesses on a national securities exchange, such as the NYSE and Nasdaq.

● SAFE Banking Act.

This would protect financial institutions that offer services to state-legal cannabis-related business.

● Marijuana Opportunity Reinvestment & Expungement Act (MORE Act).

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This would create a nationwide regulatory structure for legalizing cannabis and removing it from the CSA.

● SAFE Banking Act.

This would protect financial institutions that offer services to state-legal cannabis-related businesses.

● Marijuana Opportunity, Reinvestment, and Expungement Act (MORE Act) .

This would end the criminalization of cannabis at the federal level by removing it from the list of controlled substances in the CSA, as well as eliminating related criminal penalties.

None of the above proposals have been enacted;

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(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;

(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);

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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.

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.

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Human Capital

We are managed and operated by the Board of Directors and executive officers of General Cannabis Corp.

As of December 31, 2021, we had 77 full-time employees.

As of December 31, 2022, we had approximately 150 full-time employees.

Executing our strategic vision requires that we attract and retain the best talent.

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Corporate Contact Information

Our principal executive offices are located at 1901 S Navajo Street, Denver, Colorado 80223;

Our principal executive offices are located at 215 Union Boulevard, Suite 415, Lakewood, Colorado 80228;

Telephone No.:

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business