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,” “our,” or “GCC”) (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® Venture Market. As of June 30, 2020, our operations are segregated into the following three segments:
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 the 6 months ended June 30, 2020 and 2019,
75% and 76% of NBC’s revenue was with four and three customers, 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.
Cultivation (“Cultivation Segment”)
Through our new acquisition of SevenFive Farm (“SevenFive”),
we operate a licensed indoor cultivation facility. We believe our production capability is sufficient to meet the diverse needs
of our recreational consumers in Colorado, from cost-effective, high-yield inputs to sophisticated and dried cannabis flower.
Capital Investments (“Investments
Segment”)
As a publicly traded company, we believe that 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 investing in businesses using cash
or shares of our common stock.
Basis of Presentation
These unaudited condensed consolidated financial statements
have been prepared following the requirements of the Securities and Exchange Commission (“SEC”), 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, 2019 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, 2019 which were included
in the annual report on Form 10-K/A filed by the Company on July 7, 2020.
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, 2020
are not necessarily indicative of the operating results for the year ending December 31, 2020, or any other interim or future
periods.
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.
Going Concern
The condensed 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 at least the twelve months from the date these condensed consolidated financial statements are issued. As
of June 30, 2020, our cash balance of approximately $1.2 million is not sufficient to absorb our operating losses and repay our
notes payable of $2.3 million, of which $1.7 million is short-term. The warrants associated with this debt, if exercised
in cash, would provide sufficient funds to retire the debt; however, there is no guarantee that these warrants will be exercised
in cash or at all. 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 that we will be successful in such efforts. Accordingly,
there is substantial doubt about our ability to continue as a going concern. The accompanying condensed consolidated financial
statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
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 – Former Board member, resigned July 9, 2020.
|
|
·
|
Infinity
Capital, LLC and Infinity Capital West, LLC (together “Infinity Capital”)
– Investment management companies that were founded and controlled by Michael Feinsod.
|
|
·
|
Peter
Boockvar – Audit committee chairman.
|
|
·
|
Mark Green – Board member.
|
|
·
|
Seth
Oster – Board member.
|
|
·
|
Adam
Hershey – Board member.
|
|
·
|
Dalton Adventures, LLC – An LLC in which the sole
owner is a principal shareholder of the Company.
|
Summary of Significant Accounting
Policies
See our Annual Report on Form 10-K for the year ended
December 31, 2019, as amended, for discussion of the Company’s significant accounting policies. Since the date of the
Annual Report, there have been no material changes to the Company’s significant accounting policies.
Recently Issued Accounting Standards
FASB ASU 2019-12 – “Income Taxes (Topic
740)” – In December 2019, the Financial Accounting Standards Board (“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 2018-13 – “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. We adopted ASU 2018-13 as
of January 1, 2020. There was no material impact to our financial statements or disclosures.
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 had 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 us to the Seller was 8,859,117 shares of common stock. The shares issued
have not been registered and are restricted shares under applicable U.S. federal and state securities laws and their resale may
be made only pursuant to registration under the Securities Act or an available exemption from registration. Accordingly, a downward
adjustment of 15% is applied to the fair value of consideration due to a lack of marketability. The closing price of General Cannabis’
common stock on May 13th, 2020, the date of license transfer, was $0.38 per share, as such, fair value of consideration
is $2,861,495. Dalton Adventures, LLC may require us to repurchase in cash 25% of the shares issued to the owner of Dalton Adventures,
LLC for a period up to one year or May 25, 2021, at a repurchase price equal to the same volume weighted average price (“VWAP”)
used to determine the number of shares issued to the owner of Dalton Adventures, LLC at closing. In accordance with the agreement,
we would be required to repurchase 2,214,779 shares at a price of $0.43 per share. The Company has recorded a stock put liability
for the possibility of the buyback of these shares in the amount of $958,114.
We have not completed the allocation of the purchase price.
As of June 30, 2020, the condensed consolidated balance sheet includes a preliminary allocation of fixed assets, inventory,
intangible assets and goodwill. Management anticipates completing the purchase price allocation as soon as possible, but no later
than one year from the acquisition date.
The preliminary purchase price allocation is as follows:
Inventory
|
|
$
|
185,261
|
|
Fixed assets
|
|
|
89,490
|
|
Cultivation license
|
|
|
20,000
|
|
Tradename
|
|
|
5,000
|
|
Goodwill
|
|
|
2,561,744
|
|
|
|
$
|
2,861,495
|
|
The accompanying 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, 2019, are as follows:
|
|
Three months ended
June 30,
|
|
|
Six months ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Total revenues
|
|
$
|
2,042,510
|
|
|
$
|
2,287,855
|
|
|
$
|
4,354,741
|
|
|
$
|
2,762,626
|
|
Net loss attributable to common stockholders
|
|
|
(1,993,049
|
)
|
|
|
(3,075,464
|
)
|
|
|
(3,807,368
|
)
|
|
|
(8,263,064
|
)
|
Net loss per common share:
|
|
|
(0.04
|
)
|
|
|
(0.07
|
)
|
|
|
(0.09
|
)
|
|
|
(0.18
|
)
|
Basic and diluted
|
|
|
46,013,634
|
|
|
|
46,124,647
|
|
|
|
42,841,140
|
|
|
|
45,603,258
|
|
The unaudited pro-forma results of operations are presented
for information purposes only. The unaudited pro-forma results are not intended to present actual results that would have been
attained had the acquisition been completed as of January 1, 2019, or to project potential operating results as of any future date
or for any future periods.
NOTE 3. DISCONTINUED OPERATIONS
Security Segment
On December 26, 2019, our 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, in
exchange for which 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 as of June 30, 2020 and December 31, 2019 and as discontinued operations
as of June 30, 2020 and the operating results for the six months ended June 30, 2020 and 2019, respectively, are presented as
discontinued operations.
Assets and liabilities of discontinued operations for the security
segment included the following:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Cash and cash equivalents
|
|
$
|
27,581
|
|
|
$
|
77,380
|
|
Accounts receivable, net
|
|
|
20,440
|
|
|
|
280,058
|
|
Prepaid expenses and other current
assets
|
|
|
--
|
|
|
|
17,780
|
|
Current assets discontinued
operations
|
|
$
|
48,021
|
|
|
$
|
375,218
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
--
|
|
|
$
|
15,584
|
|
Noncurrent assets discontinued
operations
|
|
$
|
--
|
|
|
$
|
15,584
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
958
|
|
|
$
|
88,309
|
|
Customer deposits
|
|
|
--
|
|
|
|
60,940
|
|
Current liabilities discontinued
operations
|
|
$
|
958
|
|
|
$
|
149,249
|
|
A breakdown of the discontinued operations is presented as
follows:
|
|
Three
months ended
June
30,
|
|
|
Six
months ended
June
30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Service revenues
|
|
$
|
--
|
|
|
$
|
507,556
|
|
|
$
|
119,891
|
|
|
$
|
1,072,148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of service revenues
|
|
|
--
|
|
|
|
379,900
|
|
|
|
88,599
|
|
|
|
829,837
|
|
Selling, general and administrative
|
|
|
(1,654
|
)
|
|
|
189,704
|
|
|
|
146,107
|
|
|
|
396,671
|
|
Depreciation and amortization
|
|
|
--
|
|
|
|
21,944
|
|
|
|
2,174
|
|
|
|
43,576
|
|
Professional fees
|
|
|
--
|
|
|
|
1,804
|
|
|
|
--
|
|
|
|
1,804
|
|
Total costs and expenses
|
|
|
(1,654
|
)
|
|
|
593,352
|
|
|
|
236,880
|
|
|
|
1,271,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME (LOSS)
|
|
|
1,654
|
|
|
|
(85,796
|
)
|
|
|
(116,989
|
)
|
|
|
(199,740
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
--
|
|
|
|
984
|
|
|
|
984
|
|
|
|
1,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS
|
|
$
|
1,654
|
|
|
$
|
(86,780
|
)
|
|
$
|
(117,973
|
)
|
|
$
|
(201,194
|
)
|
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 three and six months ended June 30, 2020 and 2019, respectively.
|
|
Six
months ended
June
30,
|
|
|
|
2020
|
|
|
2019
|
|
Receivables
|
|
$
|
259,618
|
|
|
$
|
104,691
|
|
Prepaids and other
|
|
|
17,780
|
|
|
|
(3,101
|
)
|
Depreciation and amortization
|
|
|
2,174
|
|
|
|
4,413
|
|
Capital expenditures
|
|
|
--
|
|
|
|
(1,331
|
)
|
Accounts payable and accrued expenses
|
|
|
(87,351
|
)
|
|
|
(53,036
|
)
|
Customer deposits
|
|
|
(60,940
|
)
|
|
|
(43,036
|
)
|
Consumer Goods Segment
On December 26, 2019, our board of directors and management
made the strategic move to cease operations of Chiefton. On December 26, 2019, our 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 of the STOA retail front. The assets and liabilities classified as discontinued operations
for the consumer goods segment are presented separately in the balance sheet as of June 30, 2020 and December 31, 2019 and the
operating results for the three and six months ended June 30, 2020 and 2019, respectively, are presented as discontinued operations.
Assets and liabilities of discontinued operations included
the following:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Cash and cash equivalents
|
|
$
|
--
|
|
|
$
|
25,223
|
|
Accounts receivable, net
|
|
|
--
|
|
|
|
7,836
|
|
Prepaid expenses and other current
assets
|
|
|
--
|
|
|
|
14,394
|
|
Current assets
discontinued operations
|
|
$
|
--
|
|
|
$
|
47,453
|
|
|
|
|
|
|
|
|
|
|
Right to use asset
|
|
$
|
--
|
|
|
$
|
83,525
|
|
Noncurrent
assets discontinued operations
|
|
$
|
--
|
|
|
$
|
83,525
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
100,230
|
|
|
$
|
124,468
|
|
Operating lease liability –
current portion
|
|
|
--
|
|
|
|
83,525
|
|
Current liabilities
discontinued operations
|
|
$
|
100,230
|
|
|
$
|
207,993
|
|
A breakdown of the discontinued operations is presented as
follows:
|
|
Three
months ended
June 30,
|
|
|
Six
months ended
June
30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Product Revenues
|
|
$
|
--
|
|
|
$
|
28,892
|
|
|
$
|
33
|
|
|
$
|
58,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of service revenues
|
|
|
--
|
|
|
|
35,717
|
|
|
|
--
|
|
|
|
59,739
|
|
Cost of goods sold
|
|
|
--
|
|
|
|
35,387
|
|
|
|
--
|
|
|
|
59,296
|
|
Selling, general and administrative
|
|
|
(3,579
|
)
|
|
|
262,765
|
|
|
|
29,685
|
|
|
|
438,883
|
|
Professional fees
|
|
|
--
|
|
|
|
49,554
|
|
|
|
--
|
|
|
|
84,660
|
|
Depreciation and amortization
|
|
|
--
|
|
|
|
5,265
|
|
|
|
--
|
|
|
|
7,164
|
|
Total costs and
expenses
|
|
|
(3,579
|
)
|
|
|
388,688
|
|
|
|
29,685
|
|
|
|
649,742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME (LOSS)
|
|
|
(3,579
|
)
|
|
|
359,796
|
|
|
|
29,652
|
|
|
|
591,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS
|
|
$
|
(3,579
|
)
|
|
$
|
359,796
|
|
|
$
|
29,652
|
|
|
$
|
591,075
|
|
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 three and six months ended June 30, 2020 and 2019.
|
|
Six
months ended
June
30,
|
|
|
|
2020
|
|
|
2019
|
|
Receivables
|
|
$
|
7,836
|
|
|
$
|
24,638
|
|
Prepaids and other
|
|
|
14,394
|
|
|
|
(45,478
|
)
|
Inventory
|
|
|
--
|
|
|
|
(28,501
|
)
|
Depreciation and amortization
|
|
|
--
|
|
|
|
7,164
|
|
Capital expenditures
|
|
|
--
|
|
|
|
(66,937
|
)
|
Accounts payable and accrued expenses
|
|
|
(24,238
|
)
|
|
|
(51,933
|
)
|
Customer deposits
|
|
|
--
|
|
|
|
(23,807
|
)
|
NOTE 4. ACCOUNTS RECEIVABLE AND CUSTOMER
DEPOSITS
Our accounts receivable consisted of the following:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Accounts receivable
|
|
$
|
464,511
|
|
|
$
|
196,204
|
|
Less: Allowance for doubtful accounts
|
|
|
(115,000
|
)
|
|
|
(111,000
|
)
|
Total
|
|
$
|
349,511
|
|
|
$
|
85,204
|
|
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 $2,000 and $71,262,
respectively, during the three months ended June 30, 2020 and 2019 and $53,571 and $103,182, respectively, during the six months
ended June 30, 2020 and 2019.
Our deferred revenue and customer deposit liability had the
following activity:
|
|
Amount
|
|
January 1, 2020
|
|
$
|
562,803
|
|
Additional deposits received
|
|
|
2,442,129
|
|
Less: Deposits recognized as revenue
|
|
|
(2,584,551
|
)
|
Less: Refunds to customers
|
|
|
(80,600
|
)
|
June 30, 2020
|
|
$
|
339,781
|
|
NOTE 5. INVENTORY
As of June 30, 2020, and December 31, 2019, the Company had
$152,469 and $0, respectively, of total inventory. Approximately $142,469 represents work-in-process and $10,000 represents raw
materials. The Company records inventory at the lower of net realizable value or cost which is determined by the FIFO inventory
valuation method. As of June 30, 2020, the Company did not recognize any impairment for obsolescence within its inventory.
NOTE 6. NOTES RECEIVABLE
As of June 30, 2020, our notes receivable consisted of the
following:
CCR Note
|
|
$
|
375,000
|
|
BB Note
|
|
|
100,000
|
|
Total principal
|
|
|
475,000
|
|
Allowance for doubtful accounts
|
|
|
(125,000
|
)
|
Unamortized loan origination fee
|
|
|
(1,694
|
)
|
|
|
|
348,306
|
|
Less: Current portion
|
|
|
(348,306
|
)
|
Long-term portion
|
|
$
|
--
|
|
In March 2019, we agreed to loan an aggregate of up to $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 substantially all of the assets of CCR and subject to a maturity date of September
2020. As of May 30, 2019, we had loaned the entire available amount of $375,000 to CCR pursuant to the CCR Note. CCR is a vertically
integrated medical cannabis company located in San Juan, Puerto Rico. As of June 30, 2020, the outstanding amount of the loan was
$375,000. The CCR Note included a loan origination fee of $15,000, which is being recognized as interest income over the term of
the agreement. As of June 30, 2020, this loan is in default. A notice of default was sent to the borrower in April 2020. As we
have a first priority security interest in substantially all of the assets of CCR, and since the CCR Note is in default we have
recognized an allowance in the amount of $125,000 for the quarter ended June 30, 2020.
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 an
initial 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 final maturity date of the BB Note to January 3, 2021.
NOTE 7. OPERATING LEASE RIGHT-OF-USE ASSET / OPERATING LEASE
LIABILITY
On May 13, 2020, we entered into a commercial real estate
lease with a related party (see Note 13) 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 $30,000 per month with 1.5% annual
escalations, as well as our portion of real estate taxes. We determined the present value of the future lease payments using
a discount rate of 12% over a 15 year term, our incremental borrowing rate based on outstanding debt, resulting in an initial right-of-use asset
and lease liability of $2,721,069 which are being applied ratably over the term of the lease. As of June 30, 2020, the
balance of the right-of-use asset and lease liability was $2,697,802 and $2,703,130, respectively. Future remaining minimum
lease payments were as follows:
Year ending December 31,
|
|
Amount
|
|
2020
|
|
$
|
180,000
|
|
2021
|
|
|
365,400
|
|
2022
|
|
|
370,881
|
|
2023
|
|
|
376,444
|
|
2024
|
|
|
382,091
|
|
Thereafter
|
|
|
4,319,535
|
|
Total
|
|
|
5,994,351
|
|
Less: Present value adjustment
|
|
|
(3,291,221
|
)
|
Operating lease liability
|
|
$
|
2,703,130
|
|
NOTE 8. ACCRUED STOCK PAYABLE
The following tables summarize the changes in accrued common
stock payable:
|
|
Amount
|
|
|
Number
of Shares
|
|
December 31, 2019
|
|
$
|
80,657
|
|
|
|
34,469
|
|
Employee stock award -- accrual
|
|
|
19,343
|
|
|
|
--
|
|
Consultant stock award
|
|
|
60,900
|
|
|
|
100,000
|
|
Investor stock award – accrual
|
|
|
2,185,000
|
|
|
|
5,485,814
|
|
Stock issued
|
|
|
(100,000
|
)
|
|
|
(34,469
|
)
|
June 30, 2020
|
|
$
|
2,245,900
|
|
|
|
5,585,814
|
|
On February 18, 2020 we granted a consultant 100,000 fully
vested shares for consulting services. Based on a stock price of $0.61 on the date of grant, the consultant will receive
$60,900 worth of our common stock. As of June 30, 2020, none of the stock had been issued.
On May 29, 2020, we entered into a subscription agreement with
Hershey Strategic Capital, LP and Shore Ventures III, LP (collectively, the “Investor”) with respect to the sale of
shares of common stock. The first closing occurred on May 29, 2020, in which 2,008,536 shares of common stock were granted. On
June 3, 2020, the second closing occurred in which we granted 3,477,278 shares of common stock. As of June 30, 2020, none of the
stock had been issued. We issued the stock in July 2020. We have included this accrued stock in our earnings per share calculations
in the condensed consolidated statement of operations. See Note 12 for further details of the stock transaction.
NOTE 9. NOTES PAYABLE
Our notes payable consisted of the following:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
2019 12% Notes
|
|
$
|
--
|
|
|
$
|
1,506,000
|
|
SBI Note
|
|
|
--
|
|
|
|
750,000
|
|
15% Notes
|
|
|
2,231,000
|
|
|
|
200,000
|
|
Related party note payable
|
|
|
100,000
|
|
|
|
100,000
|
|
Unamortized debt discount
|
|
|
(153,475
|
)
|
|
|
(225,649
|
)
|
|
|
|
2,177,525
|
|
|
|
2,330,351
|
|
Less: Current portion
|
|
|
(1,577,525
|
)
|
|
|
(2,330,351
|
)
|
Long-term portion
|
|
$
|
600,000
|
|
|
$
|
--
|
|
SBI Debt
In July 2019, we completed a $855,000 private placement pursuant
to a promissory note (“SBI Note”) with SBI Investments LLC, 2014-1 (“SBI”), bearing interest at 10% with
principal due on October 18, 2019. On October 18, 2019, SBI agreed to an extension of the maturity date of the SBI Note
to November 1, 2019. On November 1, 2019, SBI agreed to another extension of the maturity date to November 15, 2019. On
November 15, 2019, SBI agreed to another extension of the maturity date 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 maturity date 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 SBI Note.
On February 18, 2020, we entered
into a promissory note exchange agreement with SBI 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. If at any time, the borrower issues or sells any shares of common stock for a consideration
per share less than the conversion price in effect on the date of such issuance, the holder shall have the right to utilize the
price per share of the dilutive issuance as the conversion price for such conversion. On May 29, 2020, we issued shares at $0.40
per share, and as such, the conversion price was decreased to a floor of $0.40 per share. The exchange of the SBI Note for
the Convertible Note is treated as a debt extinguishment. The additional $184,000 of principal was treated as a debt extinguishment
and included in our condensed consolidated statement of operations. We determined that the Convertible Note should be accounted
for in accordance with FASB ASC 470-20 which addresses “Accounting for Convertible Securities with Beneficial Conversion
Features”. The beneficial conversion feature is calculated at its intrinsic value (that is, the difference between
the 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 $0.61, 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 $233,500 as additional paid in capital and as a debt extinguishment and included in our condensed consolidated statement
of operations. During the six months ended June 30, 2020, SBI converted $934,000 aggregate principal amount of the Convertible
Note and approximately $23,000 of accrued interest into 2,215,892 shares of our common stock.
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 holders of $1,506,000 aggregate principal amount 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 mature on
January 31, 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 have 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, as of June 30, 2020, the Company has 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 $0.40 per share, resulting in a $98,000 deemed dividend as of
June 30, 2020.
We received $300,000 of cash in December 2019 and an additional
$525,000 of cash during 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.
For the three months ended June 30, 2020, amortization of debt discount expense was $72,516, from the 15% Notes. For the
six months ended June 30, 2020, amortization of debt discount expense was $138,837, from the 15% notes. The 15% Notes are
otherwise treated as conventional debt.
In May 2020, three of the note
holders agreed to extend the terms of their notes to a new maturity date of January 31, 2022. The amount of these notes totaled
$600,000. The extension of the note terms resulted in a debt extinguishment of the remaining note discount in the amount of $48,908.
In addition, if the majority of the note holders extend the maturity date to January 31, 2022, then the expiration dates for the
note holders warrants will each be extended by one year. If the majority of the note holders do not extend, the expiration date
for the warrants for the note holders that did extend will be changed to December 31, 2023. Further, the subscription
agreement between the Company and Hershey Strategic Capital, LP and Shore Ventures III, LP (the “Investor”)
provides that the Company shall, during the 90-day period ending September 1, 2020 endeavor
to cause the existing holders of such promissory notes to extend the maturity date of such notes to a date that is not earlier
than January 31, 2022. If, at the end of such 90-day period, all of the existing notes have not been amended to extend the
maturity dates thereof, then, in the absence of a waiver from the Investor to the contrary, the Company shall issue to the Investor
additional warrants to purchase shares of common stock. See Note 12, “2020 Capital Raise”.
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 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)
|
|
0.84 – 3.06
|
Expected volatility
|
|
112 - 119%
|
NOTE 10. 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 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 2019, the exercise price of the 2019 Warrants had decreased to $0.45 per share and the number of shares subject to the 2019
Warrants had 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 $0.40 per share and the
number of shares subject to the 2019 Warrants increased to 9,591,614 shares of common stock.
In February 2020, one of the warrant holders exercised 200,000
warrants. We received $90,000 in cash for the exercise and booked an adjustment to the derivative liability of $82,241 as a result
of the transaction. During the three months ended June 30, 2020, one of the warrants holders exercised 2,137,726 warrants into
373,340 shares of our common stock through cashless exercises. We booked an adjustment to the derivative liability of $821,538
as a result. As of June 30, 2020, there were 7,453,888 of these warrants outstanding.
The following are the key assumptions
that were used to determine the fair value of the 2019 Warrants:
|
|
May 31,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2020
|
|
Number of shares underlying the warrants
|
|
|
3,000,000
|
|
|
|
7,453,888
|
|
Fair market value of stock
|
|
$
|
0.95
|
|
|
$
|
0.40
|
|
Exercise price
|
|
$
|
1.30
|
|
|
$
|
0.40
|
|
Volatility
|
|
|
133
|
%
|
|
|
110
|
%
|
Risk-free interest rate
|
|
|
1.93
|
%
|
|
|
0.29
|
%
|
Warrant life (years)
|
|
|
5.00
|
|
|
|
3.92
|
|
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:
|
|
Three
months ended June 30,
|
|
|
Six
months ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Beginning balance
|
|
$
|
3,162,733
|
|
|
$
|
--
|
|
|
$
|
4,620,593
|
|
|
$
|
--
|
|
Recognition of warrant derivative liability on May 31, 2019
|
|
|
--
|
|
|
|
2,416,422
|
|
|
|
--
|
|
|
|
2,416,422
|
|
Warrant exercise
|
|
|
(821,538
|
)
|
|
|
--
|
|
|
|
(903,779
|
)
|
|
|
--
|
|
Change in fair value of warrants derivative liability
|
|
|
4,541
|
|
|
|
(401,862
|
)
|
|
|
(1,371,078
|
)
|
|
|
(401,862
|
)
|
Ending balance
|
|
$
|
2,345,736
|
|
|
$
|
2,014,560
|
|
|
$
|
2,345,736
|
|
|
$
|
2,014,560
|
|
NOTE 11. COMMITMENTS AND CONTINGENCIES
Legal
Michael Feinsod recently 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 entitlements under his
employment agreement, as well as 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.
On August 18, 2020, two investors of certain promissory notes and common stock purchase warrants of General Cannabis Corp. (the “Company”),
filed a lawsuit against the Company and its current Board of Directors seeking, principally, rescission rights and the associated return
of their outstanding investment of $145,000. Based upon our preliminary evaluation of the matter, we have concluded that the Company remains
in compliance with the terms of the notes that are not otherwise due until January 2021, and that the lawsuit has no merit. The Company
intends to vigorously defend the matter. Nevertheless, due to the early stage of the proceeding, we are unable to express an opinion as
to the likely outcome of the matter.
NOTE 12. STOCKHOLDERS’ EQUITY
2020 Capital Raise
On May 29, 2020, we entered into a subscription agreement with
Hershey Strategic Capital, LP and Shore Ventures III, LP (collectively, the “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 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 Investor, the 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 Investor at an exercise
price per share equal to $0.5565. The warrants have a term of five years. The subscription agreement provides for the sale
of securities in three closings. At the first closing, which occurred on May 29, 2020, we sold $800,000 of securities to
the Investor, representing 2,008,536 shares of common stock and warrants to purchase 1,506,402 shares of common stock at a purchase
price of $0.56 per share. At the second closing, which occurred on June 3, 2020, we sold to the Investor $1,385,000, representing
3,447,278 shares of common stock and warrants to purchase 2,607,958 shares of common stock for a purchase price of $0.56 per share.
Subsequent to June 30, 2020, the third closing occurred, in which there was a sale of $815,000 of the securities. This represented
2,076,196 shares of common stock and warrants to purchase 1,534,647 shares of common stock for a purchase price of $0.56 per share.
The warrants were recorded as equity and equity issuance costs in the amount of $1,738,032. Notwithstanding the foregoing, the subscription agreement provides that the Investor’s investment
shall not exceed 20% or more of the common stock (or securities convertible into or exercisable for common stock) or the voting
power of the Company on a post-transaction basis.
The subscription agreement
also provides the Investor with certain participation rights in future financings of the Company until the one-year anniversary
of the second closing. The subscription agreement further provides that the Company shall, during the 90-day period immediately
following the second closing, which ends on September 1, 2020 (the “negotiation period”), 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 June 30, 2020, $600,000 of the $2,331,000 outstanding notes have extended the maturity date. If,
at the end of such 90-day negotiation period, all of the existing notes have not been amended to extend the maturity dates thereof,
then the Company shall issue to the 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 (as of the first
closing) 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.
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 to purchase shares of our common stock in a registered
direct offering for $1.00 per 2019 Unit. The 2019 Warrants had an exercise price of $1.30 per share at issuance and are exercisable
for five years from the date of issuance. The number of shares issuable pursuant to the warrants granted under the 2019 Warrants,
as well as the exercise price of those 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 2019 Warrants. As a result of such subsequent issuances
of securities by the Company during the fourth quarter of 2019, the exercise price of the 2019 Warrants had decreased to $0.45
per share and the number of shares subject to the 2019 Warrants had 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 $0.40 per share and the number of shares subject to the 2019 Warrants increased to 9,591,614 shares
of common stock. This down round adjustment is recorded through the mark to market adjustment made as of June 30, 2020 and is recorded
as a gain/loss on warrant derivative liability on the condensed consolidated statement of operations. As of June 30, 2020, there
were 7,453,888 of these warrants outstanding.
We received cash of $2,604,355, which is net of $395,645 of
issuance costs. Of the gross proceeds, we recorded $2,416,422 as a warrant derivative liability, as discussed in Note 10.
Share-based compensation
We use the fair value method to account for stock-based compensation.
We recorded $434,367 and $752,467 in compensation expense, for the three months ended June 30, 2020 and 2019, respectively, and
$926,698 and $2,244,963, for the six months ended June 30, 2020 and 2019, 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. The fair value of these instruments was calculated using the Black-Scholes option pricing method.
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, 2019
|
|
|
10,883,780
|
|
|
$
|
1.28
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,377,020
|
|
|
|
0.54
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
(1,820,548
|
)
|
|
|
1.68
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2020
|
|
|
10,440,252
|
|
|
|
1.11
|
|
|
|
5.2
|
|
|
$
|
--
|
|
Exercisable at June 30, 2020
|
|
|
7,072,932
|
|
|
$
|
1.41
|
|
|
|
5.6
|
|
|
$
|
--
|
|
As of June 30, 2020, there was approximately $404,262 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 13. RELATED PARTY TRANSACTIONS
On June 3, 2020, the
Company entered into a consulting agreement with Adam Hershey, a 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 M&A 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 have spent $8,333 for the three and six months ended June 30, 2020. In addition,
the subscription agreement between the Company and Hershey Strategic Capital, LP
and Shore Ventures III, LP (the “Investor”) provides that the Company shall,
during the 90-day period ending September 1, 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. If, at the end of such
90-day period, all of the existing notes have not been amended to extend the maturity dates thereof, then, in the absence of a
waiver from the Investor to the contrary, the Company shall issue to the Investor additional warrants to purchase shares of common
stock. See Note 12, “2020 Capital Raise”.
We currently have a lease agreement with Dalton Adventures,
LLC in which we rent 17,000 square foot of greenhouse space in Boulder, CO for $33,680 a month, of which $30,000 is base rent and
$3,680 is in relation to property taxes. The owner of Dalton Adventures, LLC is a principal shareholder of the Company. We have spent approximately $81,000 for the three and six months ended June 30, 2020.
We currently have a note payable to one of our board members
in the amount of $100,000. This note is included in the 15% Notes discussed in Note 9. We have paid approximately $4,000 in interest
for the three and six months ended June 30, 2020.
NOTE 14. SEGMENT INFORMATION
Our operations are organized into three segments:
Operations Consulting and Products; Cultivation; and Capital Investments. 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 regarding discontinued operations see Note 3.
Three months ended June 30
2020
|
|
Operations
|
|
|
Cultivation
|
|
|
Investments
|
|
|
Total
|
|
Services
|
|
$
|
54,364
|
|
|
|
--
|
|
|
$
|
--
|
|
|
$
|
54,364
|
|
Cultivation sales
|
|
|
--
|
|
|
|
509,175
|
|
|
|
--
|
|
|
|
509,175
|
|
Interest income
|
|
|
--
|
|
|
|
--
|
|
|
|
45,369
|
|
|
|
45,369
|
|
Product
|
|
|
1,127,417
|
|
|
|
--
|
|
|
|
--
|
|
|
|
1,127,417
|
|
Total revenues
|
|
|
1,181,781
|
|
|
|
509,175
|
|
|
|
45,369
|
|
|
|
1,736,325
|
|
Costs and expenses
|
|
|
(1,304,650
|
)
|
|
|
(456,661
|
)
|
|
|
(125,000
|
)
|
|
|
(1,886,311
|
)
|
|
|
$
|
(122,869
|
)
|
|
$
|
52,514
|
|
|
$
|
(79,631
|
)
|
|
$
|
(149,986
|
)
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,796,154
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
$
|
(1,946,140
|
)
|
2019
|
|
Operations
|
|
|
Cultivation
|
|
|
Investments
|
|
|
Total
|
|
Service
|
|
$
|
366,520
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
366,520
|
|
Interest income
|
|
|
--
|
|
|
|
--
|
|
|
|
27,775
|
|
|
|
27,775
|
|
Product
|
|
|
426,122
|
|
|
|
--
|
|
|
|
--
|
|
|
|
426,122
|
|
Total revenues
|
|
|
792,642
|
|
|
|
--
|
|
|
|
27,775
|
|
|
|
820,417
|
|
Costs and expenses
|
|
|
(859,236
|
)
|
|
|
--
|
|
|
|
(1,648
|
)
|
|
|
(860,884
|
)
|
|
|
$
|
(66,594
|
)
|
|
$
|
--
|
|
|
$
|
26,127
|
|
|
$
|
(40,467
|
)
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,407,759
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
$
|
(2,448,226
|
)
|
Six months ended June 30
2020
|
|
Operations
|
|
|
Cultivation
|
|
|
Investments
|
|
|
Total
|
|
Services
|
|
$
|
362,750
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
362,750
|
|
Cultivation sales
|
|
|
--
|
|
|
|
509,175
|
|
|
|
--
|
|
|
|
509,175
|
|
Interest income
|
|
|
--
|
|
|
|
--
|
|
|
|
62,098
|
|
|
|
62,098
|
|
Product
|
|
|
2,466,490
|
|
|
|
--
|
|
|
|
--
|
|
|
|
2,466,490
|
|
Total revenues
|
|
|
2,829,240
|
|
|
|
509,175
|
|
|
|
62,098
|
|
|
|
3,400,513
|
|
Costs and expenses
|
|
|
(2,921,137
|
)
|
|
|
(456,661
|
)
|
|
|
(125,000
|
)
|
|
|
(3,502,798
|
)
|
|
|
$
|
(91,897
|
)
|
|
$
|
52,514
|
|
|
$
|
(62,902
|
)
|
|
$
|
(102,285
|
)
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,705,176
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
$
|
(3,807,461
|
)
|
2019
|
|
Operations
|
|
|
Cultivation
|
|
|
Investments
|
|
|
Total
|
|
Service
|
|
$
|
614,303
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
614,303
|
|
Interest income
|
|
|
--
|
|
|
|
--
|
|
|
|
42,596
|
|
|
|
42,596
|
|
Product
|
|
|
958,440
|
|
|
|
--
|
|
|
|
--
|
|
|
|
958,440
|
|
Total revenues
|
|
|
1,572,743
|
|
|
|
--
|
|
|
|
42,596
|
|
|
|
1,615,339
|
|
Costs and expenses
|
|
|
(1,536,617
|
)
|
|
|
--
|
|
|
|
(41,723
|
)
|
|
|
(1,578,340
|
)
|
|
|
$
|
36,126
|
|
|
$
|
--
|
|
|
$
|
873
|
|
|
$
|
36,999
|
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(6,653,227
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
$
|
(6,616,228
|
)
|
|
|
June 30,
|
|
|
December 31,
|
|
Total assets
|
|
2020
|
|
|
2019
|
|
Operations
|
|
|
325,949
|
|
|
|
441,841
|
|
Cultivation
|
|
|
2,040,962
|
|
|
|
--
|
|
Investments
|
|
|
442,768
|
|
|
|
402,988
|
|
Corporate
|
|
|
5,557,010
|
|
|
|
2,135,395
|
|
|
|
$
|
8,366,689
|
|
|
$
|
2,980,224
|
|
NOTE 15. SUBSEQUENT EVENTS
On July 9, 2020, Michael Feinsod resigned from our Board of
Directors.
|
|
On July 13, 2020, Adam Hershey was appointed to our Board of
Directors.
|
|
On July 28, 2020, the third and final closing in relation to
the subscription agreement with the Investor occurred. We sold $815,000 of securities to the Investor, representing 2,046,196 shares
of common stock and warrants to purchase 1,534,647 shares of common stock.
|