General Cannabis Research (CANA)

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General Cannabis Research (CANA)

  1. 1. General Cannabis, Inc. 1300 Dove Street, Suite 100 Newport Beach, CA 92660 Phone: (888) 693-5219 Fax: (888) 844-8949EXECUTIVE INFORMATIONAL OVERVIEW www.generalcannabis.com Technology-Based Company Servicing the Medical Cannabis Sector Snapshot April 14, 2011 General Cannabis, Inc. (“General Cannabis” or “the Company”) is a technology-driven company focused on † developing a significant Internet presence in the medical cannabis industry using various technological platforms, search engine optimization (SEO) strategies, and proprietary software applications. General Cannabis does not grow, harvest, cultivate, possess, or distribute medical cannabis; rather, the Company provides innovative online services that help physicians, dispensaries, and patients within the industry build relationships and manage businesses. In a medical setting, cannabis is used to relieve chronic or neuropathic pain, improve appetite, decrease nausea, and facilitate muscle relaxation. Cannabis is utilized under state law for medical purposes in 15 states and Washington, D.C., representing a portion of the estimated $35 billion to $45 billion cannabis industry in the U.S. Legislation is pending in 12 additional states. As decriminalization of medical cannabis becomes more prevalent, multiple cannabis-related niche markets have emerged, including media, technology, management of medical clinics, merchant processing, and marketing. The Company is one of the first publicly traded companies to support the medical marijuana market through each of these sectors. General Cannabis aims to lead each respective market sector, creating a standard of professionalism that it believes is largely absent in this industry. The Company also seeks vertical integration opportunities within these sectors. General Cannabis began trading on the Over- the-Counter (OTC) Pink Sheets under the ticker “CANA” in late 2010. Recent Financial Data Ticker (Exchange) CANA (OTC.PK) Recent Price (04/14/2011) $4.50 52-week Range $0.02 - $5.60 Shares Outstanding* 83.1 million Market Capitalization ~$374 million Average 3-month Volume 15,232 Insider Owners +5% ~88% Institutional Owners N/A EPS (Year ended 12/31/2010) $0.04 Employees and Contractors 77 * As of March 1, 2011. Key Points  General Cannabis operates WeedMaps.com, a finder site for medical cannabis dispensaries that has over 100,000 registered users, roughly six million monthly page views, and over 1,800 clients who subscribe to its advertising services. In 2010, advertising revenues for the site exceeded $3 million.  In the first 30 days following its launch in February 2011, over 10,000 people subscribed to Daily ® Deals—a Groupon -like service for medical cannabis that is offered through WeedMaps.com. As well, WeedMaps.com’s iPhone® application “LegalMaps” has exceeded 500,000 downloads in 18 months.  General Cannabis also operates CannaCare.com and CannabisCenters.com. Both sites help patients find physicians who support and recommend medical cannabis as well as offer a verification system that can validate an individual’s status as a registered cannabis patient.  The Company manages 14 medical cannabis clinics that generated gross revenues of over $4 million in 2010. Its proprietary SEO strategies result in over 500 calls per day and roughly 4,000 patient visits per month. General Cannabis has plans to manage at least 20 clinics by year-end 2011.  Concerns over the disparities between federal and local laws have limited the financial services available to medical cannabis entities. The Company has begun to offer merchant processing services, initially targeting existing medical cannabis clients (e.g., WeedMaps.com dispensaries and its 14 medical cannabis clinics) and subsequently expecting to enter into other industries.  As of December 31, 2010, General Cannabis reported nearly $1.4 million in cash and cash equivalents, after raising $1.6 million through several private placements in late 2010. As well, the Company reported nearly $7.7 million in sales revenue in 2010. † BOLD WORDS ARE REFERENCED IN THE GLOSSARY ON PAGE 44.
  2. 2. Table of ContentsSnapshot ....................................................................................................................................................... 1Recent Financial Data ................................................................................................................................... 1Key Points ..................................................................................................................................................... 1Executive Overview....................................................................................................................................... 3Growth Strategy ............................................................................................................................................ 8Intellectual Property .................................................................................................................................... 10Company Leadership .................................................................................................................................. 11Core Story ................................................................................................................................................... 14 Medical Cannabis Overview ................................................................................................................. 14 Media (Technology) .............................................................................................................................. 17 Medical Clinic Management ................................................................................................................. 20 Merchant Processing Services ............................................................................................................. 21 Other Corporate Initiatives.................................................................................................................... 23Competition ................................................................................................................................................. 25Potential Milestones .................................................................................................................................... 29Key Points to Consider................................................................................................................................ 30Historical Financial Results ......................................................................................................................... 32Risks............................................................................................................................................................ 35Recent Events ............................................................................................................................................. 42Glossary ...................................................................................................................................................... 44 ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 2
  3. 3. Executive OverviewGeneral Cannabis, Inc. (“General Cannabis” or “the Company”) is a technology-focused company thatprovides various services to the medical cannabis industry, ranging from informational websites that helppatients locate local dispensaries or physicians to credit card processing services for merchants. GeneralCannabis operates key domains in the medical cannabis industry, such as WeedMaps.com, which theCompany believes to be one of the largest finder sites for dispensaries in the world. As legalization ofmedical cannabis (marijuana) becomes more prevalent in the U.S., multiple cannabis-related nichemarkets have emerged, including media, technology, medical clinic management, and merchantopportunities. The Company and its wholly owned subsidiaries (shown in Figure 1) are focused onvertical integration within each of these sectors. Figure 1 General Cannabis, Inc. WHOLLY OWNED SUBSIDIARIES General Cannabis Subsidiaries General Health General Merchant WeedMaps Media, Inc. Solutions, Inc. Solutions, Inc. (Weedmaps.com) (Marijuanamedicine.com) (GeneralCannabis.com) General Marketing CannaCare General Management Solutions, Inc. Management, Inc. Solutions, Inc. (CannabisCenters.com) US Cannabis, Inc.Source: General Cannabis, Inc.Medical Cannabis OverviewFormed from the dried flowers, stems, seeds, and leaves of the Cannabis sativa plant, cannabis containsthe psychoactive ingredient delta-9-tetrahydrocannabinol (THC). One of the primary medical benefitscannabis may provide is the relief of chronic or neuropathic pain. The use of cannabis can also improveappetite, decrease nausea, and facilitate muscle relaxation.Public approval of the use of cannabis in the medical environment in the U.S. has risen over the pastdecade. Based on a random national sample of 1,083 adults in 2010, 81% of adults in the U.S. believedthat physicians should be allowed to prescribe marijuana to treat patients, up from 69% in 1997 (Source:ABC News/Washington Post poll, January 2010). As illustrated in Figure 2 (page 4), 15 states and theDistrict of Columbia (Washington, D.C.) have adopted laws that permit the use of medical cannabis undera physician’s supervision and 12 states have legislation pending (Sources: the National Organization forthe Reform of Marijuana Laws [NORML] and ProCon.org, March 2011). Nevertheless, cannabis remainsclassified by the U.S. Drug Enforcement Agency as a Schedule I drug, indicating that it is not currentlyaccepted for medical use. While physicians in the U.S. cannot legally prescribe cannabis to patients, theycan recommend its use under the First Amendment. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 3
  4. 4. Figure 2 STATES/AREAS THAT PERMIT THE USE OF MEDICAL CANNABIS (OR HAVE LEGISLATION PENDING)* WA NH MT VT ME OR ID NY MA MI RI IA CT NV NJ IL DE CA CO WV KS MD Washington, D.C. AZ NM OK Permits the use of medical cannabis AK Legislation pending to permit the use of medical cannabis HI* As of March 2011.Sources: General Cannabis, Inc., ProCon.org, and Crystal Research Associates, LLC.Overall, the cannabis industry is highly fragmented, lacking any major regional or national companies.CNBC estimates the U.S. cannabis market to be between $35 billion and $45 billion. Presently, medicalcannabis represents only a small portion of this market. Specifically, the U.S. market for medical cannabisis approximated at $1.7 billion, with expectations to reach $8.9 billion by 2016, fueled by improvedregulatory clarity and an increasing number of eligible patients as more states adopt legislation permittingmedical marijuana use (Source: See Change Strategy LLC’s The State of the Medical Marijuana Markets2011, March 2011). While an estimated 730,000 patients have received medical recommendations to usecannabis in the U.S. to date, an estimated 24.8 million patients may be eligible under current state laws(Source: The State of the Medical Marijuana Markets 2011). Colorado and California are believed to betwo of the largest markets for medical cannabis in the U.S. There are an estimated 300,000 to 400,000medical marijuana patients in California (Source: Insurance Journal, September 14, 2009).General Process for Obtaining Medical Marijuana in States That Permit Its UsePatients must follow a specific process in order to obtain a Letter of Recommendation for medicalcannabis. Also called a medical marijuana card or license, a Letter of Recommendation allows anindividual to purchase and use medical cannabis legally within a state or district. First, many patients visita general physician who determines if the individual has an ailment that can be treated with medicalcannabis. Qualifying medical diagnoses for cannabis use are determined by state, but may include AIDS,anorexia, arthritis, muscle spasms, seizures, cancer, chronic pain, migraines, and glaucoma, among otherconditions detailed in Table 6 (page 17). If the physician determines that the patient qualifies based on anevaluation and medical records, the physician may then issue a signed Letter of Recommendation formedical marijuana as well as discuss the dosage and proper use of the cannabis. Once a Letter ofRecommendation is received, the patient may then visit a medical marijuana dispensary, which verifiesthe Letter of Recommendation prior to purchasing the medicine. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 4
  5. 5. Media (Technology)General Cannabis is a technology-based company as each aspect of its business plan is dependent onthe utilization of the Internet and other technologies. WeedMaps Media, Inc. is a wholly owned subsidiaryof General Cannabis that focuses on connecting patients, dispensaries, and physicians via the Web.General Cannabis formed WeedMaps Media after acquiring Weedmaps, LLC in November 2010 for acombination of cash and stock with additional earn-out potential for Weedmaps LLC’s two co-founders,Mr. Justin Hartfield and Mr. Keith Hoerling (biographies on pages 11 and 12), who now serve as GeneralCannabis’ chief web officer and chief technology officer, respectively.WeedMaps Media’s primary operation is WeedMaps.com Figure 3(Figure 3), an online service that allows patients to find local General Cannabis, Inc.medical marijuana dispensaries and connect with other patients. WEEDMAPS.COMWeedMaps.com specializes in search engine optimization(SEO), ranking first through third for widely used industry searchterms, including “dispensary.” As a result, WeedMaps.com hasbecome one of the largest finder sites for dispensaries in theU.S., with over 100,000 registered users and an estimated sixmillion page views per month. In January 2011, the Companyreported an increase in traffic volume for WeedMaps.com, whichit attributed to a newly launched tool that allows users to searchby medical marijuana strain type, price, popularity, andlocation. WeedMaps.com presently tracks the availability of over Source: General Cannabis, Inc.62,000 products.WeedMaps.com provides its services to patients and allows dispensaries to be listed on the site at nocost. The Company generates revenue by charging monthly fees for various advertising services,including featured listings. As of March 2011, over 1,800 dispensaries were paid subscribers toWeedMaps.com, up from 1,200 dispensaries in January 2011. In early 2011, the Company launched adaily coupon application to encourage repeat visitors by promoting daily discounts and coupons onWeedMaps.com. Within the first 30 days of launch, over 10,000 patients subscribed to the Groupon®-likeservice. Advertising revenues for the site, which was launched in January 2010, have increased roughly15% per month and exceeded $3 million for 2010.WeedMaps Media also recently re-launched WeedFreebies.com—a website where patients can winprizes daily—which immediately created opportunities to produce additional advertising revenue. As well,the development team is focused on further expanding WeedMaps.com to include areas for physicians,lawyers, and skate and surf shops in the second quarter 2011.As well, WeedMaps.com is focused on developing a mobile presence, with two high-ranking applicationsfor both iPhone® and Android™ platforms. Recently, Apple Inc. (AAPL-NASDAQ) approved version 3.0 ofthe WeedMaps.com iPhone® application, “LegalMaps,” which integrates Daily Deals and enables patientsto login to their WeedMaps.com account and post reviews via their phone, without ever having to visit thewebsite. The LegalMaps application has exceeded 500,000 downloads since its release in late 2009.Medical Clinic ManagementGeneral Cannabis’ wholly owned subsidiary, General Health Solutions, Inc. (DBA CannaCare andCannaCare.com), specializes in the turnkey management of medical marijuana clinics through acontractual arrangement with a professional medical corporation. General Health Solutions is responsiblefor all business activities, including billing, collections, administrative functions, and marketing.Consequently, this allows physicians to focus on treating patients. In December 2010, General HealthSolutions acquired substantially all of the assets and management contracts of Synergistic Resources,LLC (DBA Marijuana Medical Evaluation Centers [MMEC])—an entity specializing in the management ofphysician-owned healthcare facilities throughout California—for a combination of cash and stock, whichincluded 10 medical marijuana clinics. The Company changed the name from MMEC to CannaCare inMarch 2011. The medical management model adopted from Synergistic Resources has been developedover the past four years and includes assisting with site location, staffing, administration, and human ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 5
  6. 6. resources. Since the acquisition of Synergistic Resources, General Health Solutions has increased thetotal number of medical clinics under its management to 14. The Company has plans to open or manageat least 20 clinics by year-end 2011.General Cannabis believes that General Health Solutions has become one of the largest aggregators ofcannabis data in the U.S., which can be a useful tool in evaluating potential locations for medicalcannabis health facilities. Presently, General Health Solutions’ database includes over 25,000 individuals.The Company’s call center receives between 600 to 800 phone calls daily from individuals interested inlearning about obtaining a Letter of Recommendation or scheduling an appointment at one of its 14medical cannabis clinics under management, with roughly 200 appointments set per day on average.General Health Solutions may scale its marketing strategy to double the volume of calls andappointments in 2011. The scalability of Synergistic Resources’ business model was crucial in GeneralCannabis’ decision to acquire the company. General Cannabis believes that it can also easily scale itsstrategy to provide leads for clinics not currently managed by the Company.In addition, General Cannabis is developing a new suite of websites centered around CannaCare.com.The Company’s goal is to create a leading web portal for the 35 to 65 (and up) age group. These sites aredesigned to objectively and clearly answer questions regarding medical cannabis. As part of this initiative,Dr. Bonni Goldstein, a director of General Cannabis (biography on pgs. 12-13), answers patients’questions as they relate to dosage, quality, quantity, and application as well as provides testimonials.Beginning in June 2011, General Cannabis plans to create daily videos with Dr. Goldstein using theCompany’s in-house studio. General Cannabis aims to monetize the CannaCare.com family of websitesthrough several techniques: (1) selling advertising space (e.g., to physicians and attorneys); (2) sellingbusiness services; (3) selling proprietary office management software; and (4) providing marketingservices for physicians (where legally permitted).Merchant Processing ServicesIn the medical marijuana industry, differences between federal and local laws have limited the merchantprocessing services that are available to dispensaries and other medical cannabis-related companies(Source: CreditCards.com, Medical Marijuana Sellers Can’t Take Their Money to the Bank, February 8,2011). Merchant processing services allow businesses to accept payments by debit or credit cards. Manybanks have ceased offering accounts or are hesitant to begin offering financial services to medicalmarijuana dispensaries due to the complex, inconsistent legal environment associated with the industry.In the U.S., roughly 2,000 companies provided credit card processing services in 2010 with combinedannual revenues of more than $40 billion (Source: First Research, Inc., a market analysis company,Credit Card Processing, February 2011).General Cannabis has identified a significant need for merchant processing services in the medicalcannabis industry as well as to the automotive, restaurant, and furniture industries. General Cannabis’wholly owned subsidiary, General Merchant Solutions, Inc. (DBA Cannapay Merchant Services), offersmerchant processing services to medical cannabis-related entities, including WeedMaps.com subscribersas well as to the 14 medical marijuana healthcare facilities managed by General Health Solutions.Through WeedMaps.com, the Company has established relationships with over 1,800 dispensariesthroughout the U.S. General Cannabis’ frequent communication with these dispensaries allows ampleopportunity to discuss quality merchant processing services with existing clients—potentially benefittingboth parties. General Merchant Solutions processed more than $2.2 million in merchant volume in March2011, up from over $700,000 in December 2010—its first full month of operation.Marketing in the Medical Marijuana IndustryGeneral Marketing Solutions, Inc. is a wholly owned subsidiary of General Cannabis. Its primaryoperation is CannabisCenters.com, which was acquired in early 2011 together with SafeaccessMD.comand substantially all of the assets of Revyv, LLC—a technology company specializing in the onlineinterface, marketing, and optimization of healthcare facilities in the medical cannabis industry. TheCompany believes that the acquisition may strengthen its position in the market by increasing itsmarketing capabilities in states where it does not yet have a healthcare presence. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 6
  7. 7. CannabisCenters.com helps patients find physicians in the U.S. that support and recommend medicalcannabis. As well, the website includes a patient verification system that serves as an internal controlsystem, validating a patient’s status to law enforcement, dispensaries, and other interested parties.CannabisCenters.com is also being developed as a social media platform for medical cannabis patients.Other Corporate InitiativesBeyond its four core sectors, General Cannabis is also focused on continuing research and development(R&D), offering assistance to communities seeking information regarding medical cannabis rules andregulations, and providing educational support seminars presented by physicians explaining the benefitsof medical cannabis to the public.Corporate History, Headquarters, and EmployeesGeneral Cannabis, Inc. was formed on July 14, 2003, in the State of Nevada as Tora Technologies, Inc.The Company has changed its corporate name several times, including to Makeup.com Limited inNovember 2006, to LC Luxuries Limited in January 2010, and ultimately to General Cannabis, Inc. inNovember 2010. The Company recently relocated its corporate headquarters from Costa Mesa,California, to Newport Beach, California. General Cannabis began trading on the Over-the-Counter (OTC)Pink Sheets under the ticker “CANA” in late 2010. The Company is one of the first publicly tradedcompanies to support the medical marijuana market through media, technology, medical management,merchant processing services, and marketing. General Cannabis hopes to become a fully reportingcompany during 2011.General Cannabis offers services through the following wholly owned subsidiaries: (1) WeedMaps Media,Inc.; (2) General Health Solutions, Inc.; (3) General Marketing Solutions, Inc.; (4) General MerchantSolutions, Inc.; and (5) General Management Solutions, Inc., which provides human resources services toemployees. As well, the Company has two additional wholly owned subsidiaries—US Cannabis, Inc. andCannaCare Management, Inc.—that are relatively inactive at this time. As of April 2011, GeneralCannabis had 77 employees and contractors, including three executive officers, 52 individuals focused onmarketing, publishing, and development, and 22 administrative workers. General Cannabis intends tooutsource certain functions and hire additional personnel in order to manage its anticipated growth.In August 2010, General Cannabis settled more than $1.6 million in debt with its primary creditors. Asconsideration for the settlement of debt, the creditors have agreed to accept restricted Common Shares inthe capital of the Company at a settlement price of $0.03 per share. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 7
  8. 8. Growth StrategyGeneral Cannabis believes that it has become one of the leaders in the medical cannabis industry. As aresult, the Company has been presented with a range of novel business models and ideas. GeneralCannabis’ objective is to evaluate each model’s growth and profitability potential as well as the costs andrisks associated with incorporating that model into the Company’s present strategy.Through its wholly owned subsidiaries, General Cannabis provides services to four sectors of the medicalcannabis industry: (1) media; (2) technology; (3) medical clinics; and (4) merchants. In early 2011,General Cannabis signed a commercial lease for over 21,000 square feet in Newport Beach, California,that allows the Company to expand its sales, call center, marketing, and technology divisions. GeneralCannabis may also evaluate the financial viability of creating, entering, or expanding into the marketswithin the medical cannabis industry listed in Table 1. Table 1 General Cannabis, Inc. POTENTIAL MARKETS WITHIN THE MEDICAL CANNABIS INDUSTRY▪ Cannabis Universal (worldwide cannabis support, ▪ Industrial hemp industry service, and management) ▪ Security consultants▪ Seed and genetics company ▪ Clothing and apparel▪ Cannabis testing and grading ▪ Education/university▪ Branded growing nutrients and supplies ▪ Themed hotels and destinations▪ Branded grow equipment ▪ Cannabis-themed restaurants▪ Magazine/lifestyle company ▪ Cannabis tourism▪ Banking ▪ Veterinary applications▪ Insurance ▪ Gadgets and devices▪ Real estate and relocation ▪ Venues and eventsSource: General Cannabis, Inc.Media and TechnologyGeneral Cannabis is expanding its proprietary medical cannabis finder site, WeedMaps.com (operated bythe Company’s WeedMaps Media subsidiary), to include information about physicians, lawyers, and skateand surf shops in the second quarter 2011. As well, the Company is developing CannabisCenters.com toreach middle-aged individuals or the baby boomer generation who are more likely to seek quantitativeevidence regarding cannabis and its effects based on professional medical and legal opinions. GeneralCannabis plans to monetize these markets using a similar technique to that of WeedMaps.com. Further,General Cannabis aims to duplicate the technology and concepts behind these websites, applying thesetechniques to other areas of the medical cannabis market as well as to other industries. The Companyhas added 11 individuals to its WeedMaps Media sales team since January 2011 to support an increasingnumber of dispensaries opening in states that have approved the medical use of cannabis as well as agrowing variety of products and services offered to these dispensaries by WeedMaps Media, includingnew dispensary video tour packages.Medical Clinic ManagementThrough its wholly owned subsidiary, General Health Solutions, the Company manages 14 medicalcannabis clinics throughout California. At present, the clinics average 500 calls daily and accommodateroughly 4,000 patients per month. General Health Solutions aims to double its volume of calls and setappointments in 2011. As well, the Company has plans to manage at least 20 clinics by year-end 2011 instates that have approved the use of medical cannabis. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 8
  9. 9. Merchant Credit Card ProcessingGeneral Cannabis’ subsidiary, General Merchant Solutions, offers credit card processing services tomerchants. The Company’s first full month of operations was December 2010, during which it generatedover $700,000 in merchant processing volume, followed by $1.2 million and $1.6 million in January 2011and February 2011, respectively. In March 2011, General Merchant Solutions had over 170 clients andreported $2.2 million in processing volume. The Company plans to continue expanding its customer base,with the goal of securing approximately 50 new clients per month, which process roughly $15,000 amonth in credit card transactions on average. Lead time for clients to reach $15,000 per month is 90days. General Merchant Solutions aims to obtain over 500 clients by year-end 2011. As well, during thesecond quarter 2011, the Company plans to increase its sales personnel to 10 individuals (up from four atpresent), enabling General Merchant Solutions to continue expanding its credit card processing servicesto companies outside the cannabis sector. In addition to the medical cannabis industry, the companycurrently provides credit card processing services to the automotive, restaurant, and furniture industries. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 9
  10. 10. Intellectual PropertyGeneral Cannabis uses a combination of trademark, copyright, trade secret, and confidentialityagreements to protect its intellectual property. The Company’s trade secrets are largely technology-based, primarily due to the know-how and expertise obtained as a result of the WeedMaps.com andSynergistic Resources, LLC acquisitions (summarized on page 20). General Cannabis presently ownsmore than 250 Internet domain names related to the cannabis industry.Intrinsic value in General Cannabis’ technology department has been developed through various customdevelopment projects, including the types of medical cannabis available through advertised dispensaries.General Cannabis has created a custom menu that interfaces with its content management system totrack the movement of strains, advertised prices, dispensaries, and inventory, allowing the Company toaccurately present what is available to patients in real-time. The Company has over 1,800 dispensaries inthe U.S., which are able to update their inventory through WeedMaps.com on a daily basis. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 10
  11. 11. Company LeadershipManagementGeneral Cannabis’ management team has expertise in technology, finance, management, andoperations. Table 2 summarizes the Company’s key management, followed by detailed biographies. Table 2 General Cannabis, Inc. MANAGEMENTJames Pakulis Chairman, Chief Executive Officer, and DirectorDouglas Francis President, Chief Operating Officer, and DirectorJustin Hartfield Chief Web OfficerKeith Hoerling Chief Technology OfficerMunjit Johal, MBA Chief Financial Officer, Treasurer, Corporate Secretary, and DirectorSource: General Cannabis, Inc.James Pakulis, Chairman, Chief Executive Officer, and DirectorMr. Pakulis has been a director of General Cannabis since August 2010 and the chief executive officer(CEO) since November 2010. Mr. Pakulis has also served as chairman of the Board for the Companysince January 2011. He served as General Cannabis’ chairman of the Board, president, and chiefoperating officer (COO) from August 2010 to November 2010. Mr. Pakulis was an advisor to SynergisticResources from January 2010 until General Cannabis acquired its assets in December 2010. Since June1995, Mr. Pakulis has also owned or served as a consultant to startup companies in various industries,including Internet, finance, real estate, and insurance. From 1990 to 1995, Mr. Pakulis oversaw allmergers and acquisitions in the western U.S. for the former CliniCorp, Inc., which specialized inhealthcare clinic management and operations. From 1987 to 1990, Mr. Pakulis was involved in thehealthcare industry, overseeing day-to-day operations for several closely held multi-disciplinary clinics inthe Los Angeles area. Mr. Pakulis received a B.A. in English from Ohio State University in 1987.Douglas Francis, President, Chief Operating Officer, and DirectorMr. Francis has been a director since August 2010, president since November 2010, CEO from August2010 to November 2010, and chairman of the Board from November 2010 to January 2011. In November2009, Mr. Francis also became COO of WeedMaps, LLC. From 2008 until the acquisition of its assets inDecember 2010, Mr. Francis was the CEO of Synergistic Resources. From January 2001 to October2007, Mr. Francis served in a senior management position at two financing-related firms in SouthernCalifornia. Mr. Francis received a B.S. in finance from Chapman University in 2001.Justin Hartfield, Chief Web OfficerMr. Hartfield has served as the chief web officer of General Cannabis since November 2010. He is alsothe co-founder and CEO of WeedMaps. Mr. Hartfield serves on multiple Boards, including the NationalCannabis Industry Association and the Prometheus Institute, a nonprofit organization focusing onincreasing civic engagement through technology. Mr. Hartfield is an authority on SEO strategies and hasheld numerous positions in the Internet technology field. Mr. Hartfield received a B.S. in information andcomputer science from the University of California Irvine (UC Irvine) and is currently enrolled in the PaulMerage School of Business MBA program at UC Irvine. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 11
  12. 12. Keith Hoerling, Chief Technology OfficerMr. Hoerling has served as the chief technology officer (CTO) of General Cannabis since November2010. He is also CTO of the Prometheus Institute. As an experienced developer, Mr. Hoerling has beenrecruited by Fortune 100 technology companies internationally and has consulted with leading Internetfirms in California, such as Internet Brands, Inc. (INET-NASDAQ). Mr. Hoerling received a B.S. ininformation technology from Chapman University in 2003.Munjit Johal, MBA, Chief Financial Officer, Treasurer, Corporate Secretary, and DirectorMr. Johal has been a director and chief financial officer (CFO) of General Cannabis since October 2006.He has over 28 years of broad experience in banking, accounting, finance, and management in theprivate and public sectors. Mr. Johal has worked primarily with troubled companies in turnaroundsituations. Since 1996, he has served as a financial officer of various companies. From 1990 to 1995, Mr.Johal was the executive vice president for Pacific Heritage Bank in Torrance, California. Mr. Johal earnedan MBA from the University of San Francisco in 1980. He received a B.S. in history from the University ofCalifornia, Los Angeles in 1978.Board of DirectorsGeneral Cannabis’ Board of Directors oversees the conduct of and supervises the Company’smanagement. Table 3 provides a summary of Board members, followed by detailed biographies. Table 3 General Cannabis, Inc. BOARD OF DIRECTORSJames Pakulis Chairman, Chief Executive Officer, and DirectorDouglas Francis President, Chief Operating Officer, and DirectorMunjit Johal, MBA Chief Financial Officer, Treasurer, Corporate Secretary, and DirectorBonni Goldstein, M.D. DirectorSource: General Cannabis, Inc.James Pakulis, Chairman, Chief Executive Officer, and DirectorBiography provided on page 11.Douglas Francis, President, Chief Operating Officer, and DirectorBiography provided on page 11.Munjit Johal, MBA, Chief Financial Officer, Treasurer, Corporate Secretary, and DirectorBiography provided above.Bonni Goldstein, M.D., DirectorDr. Goldstein is a California-licensed, Board-certified medical doctor who has practiced medicine for morethan 20 years. Dr. Goldstein has expertise in both medicine and business. Dr. Goldstein has been apracticing medical doctor since 1993. In 1990, she obtained an M.D. from the Robert Wood JohnsonMedical School in Camden, New Jersey. After an internship and residency at Children’s Hospital LosAngeles, she was selected to be the chief resident of the program. She worked in the Community HealthCenter, evaluating low-income pediatric patients while also acting as clinical instructor for the University ofSouthern California’s Keck School of Medicine. She became an attending physician in the Los AngelesCounty + University of Southern California (LAC+USC) Pediatric Emergency Department, handlingcomplex emergencies and instructing medical students and residents in the art of assessing pediatricillness. Dr. Goldstein is also a published medical author, creating questions for Exam Master®, a Board ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 12
  13. 13. preparation program. She worked in the field of private medicine as an attending physician at LittleCompany of Mary Hospital in Torrance. Dr. Goldstein started a children’s educational program calledBrainiacs Science Discovery Center, where young children were educated on hands-on life, physical, andearth sciences. Most recently, Dr. Goldstein joined CannaCare (formerly Marijuana Medicine EvaluationCenters [MMEC]) as medical director and as a physician evaluating ill patients for use of medicalcannabis. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 13
  14. 14. Core StoryAs legalization of medical cannabis (marijuana) becomes more prevalent in the U.S., multiple cannabis-related niche markets are emerging. General Cannabis, Inc. (“General Cannabis” or “the Company”) aimsto capture significant market share among four core sectors: (1) media; (2) technology; (3) medical clinics;and (4) merchants. Each of these sectors provides ancillary services that support the medical cannabisindustry. General Cannabis aims to create a standard of professionalism that the Company believes isabsent throughout much of the medical cannabis industry.General Cannabis is conducting its business through its wholly owned subsidiaries, as listed in Table 4.Each of General Cannabis’ wholly owned subsidiaries support, supply, and further the success anddemand of the others. Collectively, General Cannabis and its subsidiaries aim to provide quality andeffective healthcare by employing cutting-edge technology, media, and management services. Table 4 General Cannabis, Inc. WHOLLY OWNED SUBSIDIARIES▪ WeedMaps Media, Inc. (WeedMaps.com) ▪ CannaCare Management, Inc. (CannaCare.com)▪ General Health Solutions, Inc. (MarijuanaMedicine.com) ▪ General Management Solutions, Inc.▪ General Merchant Solutions, Inc. (GeneralCannabis.com) ▪ US Cannabis, Inc.▪ General Marketing Solutions, Inc. (CannabisCenters.com)Source: General Cannabis, Inc.It is important to note that General Cannabis does not grow, harvest, cultivate, possess, or distributemedical cannabis; rather, the Company provides services that help physicians, dispensaries, and end-users within the industry build relationships and manage businesses. The Company developsrelationships with businesses and patients using various technological platforms, search engineoptimization (SEO) marketing advancements, and proprietary software applications.MEDICAL CANNABIS OVERVIEWCannabis is formed using the dried flowers, stems, seeds, and leaves of a plant called Cannabis sativa.The active ingredient in cannabis is delta-9-tetrahydrocannabinol (THC). Cannabis for medical purposesis designed to apply the beneficial effects of the agent—such as pain relief, improved appetite, decreasednausea, or muscle relaxation—to a patient.One of the principal medical benefits cannabis may provide is the relief of chronic or neuropathic pain. Astudy examining the effect of medical marijuana in HIV patients experiencing neuropathic pain showedthat 46% of patients administered medical marijuana experienced at least a 30% reduction in pain versus18% of those receiving placebo (Source: Neuropsychopharmacology 2008 34[3]:672-80). Inhalingmedical marijuana may also be beneficial to patients who have difficulty completing everyday tasks due tofrequent muscle tightness or twitching. Additional ways to ingest medical cannabis include capsules, pills,edibles (cannabis food products), and oral strips as well as vaporizing, which is believed to be a safermethod than traditional smoking as it avoids respiratory toxins found in cannabis smoke (Source: Journalof Cannabis Therapeutics 2001, 1[3-4]:153-170).As well, medical cannabis therapy can improve the appetite of patients who are experiencing decreasedappetite due to a range of illnesses, including cancer and HIV. The loss of appetite in an ill patient mayinhibit the body’s ability to combat infection or heal damaged tissues or cells. Medical marijuana maystimulate a patient’s metabolism, thus causing an increase in appetite.Further, many serious diseases as well as the treatments for these illnesses (e.g., chemotherapy) maycause nausea or vomiting. THC has been shown to reduce these symptoms in a percentage of cancerpatients. To this extent, dronabinol (tetrahydrocannabinol)—a synthetic form of THC—has been approved ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 14
  15. 15. in the U.S. for more than 25 years to treat chemotherapy-induced nausea and vomiting (emesis) inpatients who failed to respond to other anti-emetic drugs (Source: the World Health Organization [WHO]).Market OpportunityCannabis is classified by the U.S. Drug Enforcement Agency as a Schedule I drug, indicating that it is notcurrently accepted for medical use. While physicians in the U.S. cannot legally prescribe cannabis topatients, they can recommend its use under the First Amendment. Accordingly, the use of cannabis in themedical environment has gradually become more accepted in the U.S. As summarized in Table 5, 15states and the District of Columbia (Washington, D.C.) have adopted laws that exempt patients who usemedical cannabis under a physician’s supervision from criminal penalties under state law. This isgenerally referred to as “decriminalization” as it removes criminal penalties for adults who possess anduse medical cannabis, including cultivation for personal use and nonprofit transfers of small amounts.Most recently, Arizona, New Jersey, and Washington, D.C. approved medical marijuana laws in 2010.Further, 12 additional states (listed in Table 5) have legislation pending to approve medical cannabis use. Table 5 General Cannabis, Inc. DECRIMINALIZATION OF MEDICAL CANNABIS IN THE U.S. U.S. States/Areas That Permit Medical Cannabis Use▪ Alaska ▪ Hawaii ▪ Nevada ▪ Rhode Island▪ Arizona ▪ Maine ▪ New Jersey ▪ Vermont▪ California ▪ Michigan ▪ New Mexico ▪ Washington▪ Colorado ▪ Montana ▪ Oregon ▪ Washington, D.C. U.S. States That Have Legislation Pending to Approve Medical Cannabis Use▪ Connecticut ▪ Illinois ▪ Maryland ▪ New York▪ Delaware ▪ Iowa ▪ Massachusetts ▪ Oklahoma▪ Idaho ▪ Kansas ▪ New Hampshire ▪ West VirginiaSource: the National Organization for the Reform of Marijuana Laws (NORML), March 2011.As well, in June 2010, the U.S. Department of Veterans Affairs clarified that the use of medical cannabisis not grounds for denying veterans services or prescription pain medications (Source: New York Times,July 23, 2010). Traditionally, veterans can be denied pain medications if they test positive for illegaldrugs. Prior to this announcement, many patients who used medical cannabis within the states thatpermit its use feared that they could lose access to their pain medication because there was no writtenexception to this rule for medical marijuana.The cannabis industry is highly fragmented, lacking any major regional or national companies. WhileCNBC estimates the U.S. marijuana market to be between $35 billion and $45 billion (as illustrated inFigure 4 [page 16]), medical cannabis at present only represents a portion of this market, as it is limited touse within 15 states and Washington, D.C. The U.S. market for medical cannabis is estimated at $1.7billion in 2011, expected to reach $8.9 billion by 2016 as more states decriminalize medical cannabis useand regulations surrounding the industry become more clear (Source: See Change Strategy LLC’s TheState of the Medical Marijuana Markets 2011, March 2011).While an estimated 730,000 patients have received medical recommendations to use cannabis in theU.S. to date, an estimated 24.8 million additional patients may be eligible under current state laws(Source: The State of the Medical Marijuana Markets 2011). Colorado and California are believed to betwo of the largest markets for medical cannabis in the U.S. In California, there are an estimated 300,000to 400,000 medical marijuana users (Source: Insurance Journal, September 14, 2009). In Colorado, theDepartment of Public Health and Environment reported that nearly 95,500 patients had valid registryidentification cards for the medical use of marijuana as of June 30, 2010. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 15
  16. 16. Figure 4 U.S. MARIJUANA MARKET SIZE: MODEL COMPARISON TOBACCO ALCOHOL ($75 B) ($188 B) MARIJUANA (Likely range $35 B-$45 B) Lower Higher Prices/ 0 Prices/ Volume Volume $0 $50 $100 $150 $200 RANGES OF MARKET SIZE ($ BILLION)Source: "Marijuana & Money," a CNBC Special Report (April 2010), citing Standard & Poors Industries Report.As well, acceptance of medical cannabis in the U.S. has risen over the past decade. Based on a randomnational sample of 1,083 adults in 2010, 81% of adults in the U.S. believed that physicians should beallowed to prescribe marijuana to treat patients, up from 69% in 1997 (as shown in Figure 5). Figure 5 ABC NEWS/WASHINGTON POST POLL: SUPPORT FOR LEGALIZING MEDICAL MARIJUANA 90% 81% 80% 69% 70% 60% 50% Yes 40% 27% No 30% 18% 20% 10% 0% 1997 2010Source: ABC News/Washington Post Poll, January 2010.General Process for Medical Marijuana UsePatients must follow a specific process in order to obtain a Letter of Recommendation for medicalcannabis (also called a medical marijuana card or license), which allows an individual to purchase anduse medical cannabis legally within approved states and municipalities in the U.S. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 16
  17. 17. First, patients must visit a physician, who determines whether the individual has an ailment that can betreated with medical cannabis. Qualifying medical diagnoses for cannabis use are determined by state.For example, the ailments that qualify in California are listed in California’s Proposition 215 (also calledthe Compassionate Use Act of 1996) and summarized in Table 6. Table 6 General Cannabis, Inc. SERIOUS MEDICAL CONDITIONS THAT QUALIFY FOR MEDICAL USE OF CANNABIS AS IDENTIFIED IN CALIFORNIAS PROPOSITION 215▪ Acquired immune deficiency syndrome (AIDS) ▪ Cancer▪ Anorexia ▪ Chronic pain▪ Arthritis ▪ Glaucoma▪ Cachexia ▪ Migraines▪ Persistent muscle spasms, including spasms associated with multiple sclerosis▪ Seizures, including seizures associated with epilepsy▪ Severe nausea▪ Any other chronic or persistent medical symptom that either: ▫ Substantially limits the ability of the person to conduct one or more major life activities as defined in the Americans with Disabilities Act of 1990 (Public Law 101-336) ▫ If not alleviated, may cause serious harm to the patients safety or physical or mental healthSource: California Senate Bill 420 (http://info.sen.ca.gov).In order to obtain a Letter of Recommendation for medical marijuana, the individual must first beexamined by a physician or healthcare specialist, depending on the state. It is requested of the patient tobring medical records or other documentation that confirm the medical condition. The physician thenperforms a physical examination of the patient focusing on the medical condition for which the patient isrequesting to use medical marijuana. If the medical marijuana physician determines that the patientqualifies based on the physical evaluation and medical records, he/she may then issue a signed Letter ofRecommendation for medical marijuana use as well as discuss dosage and proper use of the cannabis.Once a Letter of Recommendation is received, the patient may then visit a dispensary, which verifies theLetter of Recommendation prior to purchasing the medicine.MEDIA (TECHNOLOGY)General Cannabis considers itself to be a technology-based company as each aspect of its business planis dependent on the utilization of the Internet and other technologies. General Cannabis presently ownsmore than 250 Internet domain names related to the cannabis industry.WeedMaps Media, Inc. is a wholly owned subsidiary of General Cannabis. Its primary operation isWeedMaps.com (shown in Figure 6 [page 18]), an online service that allows patients to find localdispensaries and to connect with other patients. General Cannabis believes that WeedMaps.com hasbecome the largest finder site for medical dispensaries in the U.S. since it was founded in 2008, with over100,000 registered patients and an estimated six million page views per month. Roughly one third of thevisits to the WeedMaps.com site are unique. In January 2011, the Company reported an increase intraffic volume for WeedMaps.com, which it attributed to a newly launched tool called Medical MarijuanaStock Exchange that allows users to search by strain type, price, popularity, and location.WeedMaps.com presently tracks the availability of over 62,000 products sold by more than 1,800dispensaries. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 17
  18. 18. Figure 6 General Cannabis, Inc. WEEDMAPS.COMSource: General Cannabis, Inc.WeedMaps.com provides its services to patients and allows dispensaries to be listed on the site at nocost. The Company generates revenue by charging a monthly fee for advertisements based on theplacement as well as the language and content used. As of March 2011, over 1,800 dispensaries werepaid subscribers to WeedMaps.com, up from 1,200 dispensaries in January 2011. Revenues for the site,which was launched in January 2010, have increased roughly 15% per month and exceeded $3 millionfor 2010. In March 2010, WeedMaps Media’s gross income exceeded $780,000.General Cannabis formed WeedMaps Media after acquiring Weedmaps, LLC in November 2010 for acombination of cash and stock, with additional earn-out potential for Weedmaps’ two co-founders, JustinHartfield and Keith Hoerling. Under the agreement, General Cannabis acquired Weedmaps as well as itsdomain name “WeedMaps.com” as part of the Company’s goal of developing a significant Internetpresence in the medical cannabis industry and its focus on innovation. Mr. Hartfield and Mr. Hoerlingimmediately assumed the roles of chief web officer and chief technology officer, respectively, entering intolong-term employment contracts with General Cannabis as part of the transaction. The WeedMaps.comacquisition allows General Cannabis to offer quality service to its end users while creating multiple verticaloperational and B2B services that simultaneously capture significant market share and facilitate thecreation of ancillary businesses.WeedMaps.com has specialized in search engine optimization (SEO) since 2009. General Cannabisreports that, as of March 2011, the site ranked first through third for widely used industry search terms,including “dispensary.” As well, WeedMaps.com is focused on developing a mobile presence, with twohigh-ranking applications for both iPhone® and Android™ platforms (as illustrated in Figure 7 [page 19]). ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 18
  19. 19. Figure 7 General Cannabis, Inc. ® WEEDMAPS.COM APPLICATION FOR IPHONE AND ANDROID™ PLATFORMS iPhone® Android™Source: General Cannabis, Inc.In early 2011, the Company launched a daily coupon application called Daily Deals to encourage repeatvisitors by promoting daily discounts and coupons on WeedMaps.com. Over 10,000 patients subscribedwithin the first 30 days of launch. WeedMaps Media also recently re-launched WeedFreebies.com—awebsite where patients can win prizes daily—which immediately created opportunities to produceadditional advertising revenue. In March 2011, WeedFreebies.com generated more than 400,000 pageviews, up from over 300,000 page views in February 2011. The Company reports that the success ofWeedFreebies.com has resulted in expansion into other similar areas by its development team. As well,the WeedMaps.com development team is focused on further expanding WeedMaps.com to include areasfor physicians, lawyers, and skate and surf shops in the second quarter 2011.CannaCare.comCannaCare.com is a medical cannabis portal that specializes in medical marijuana evaluations andfacilitates interaction between patients, physicians, and legal experts. The website helps patients throughevery step of the medical evaluation process, from setting up an appointment via a call center or online toproviding 24/7 patient verification and legal services in the event that a medical cannabisrecommendation is called into question by law enforcement. During 2011, the Company plans to targetCannaCare.com to the baby boomer generation and begin generating revenue streams throughadvertisements and sponsors.Assembling a Solid and Experienced Technology TeamGeneral Cannabis has recently hired four technology specialists, including David Johnson and JamesJohnson, the co-founders of technology firm Revyv, LLC. Mr. David Johnson has more than 10 years ofcombined experience in advanced user interface engineering, web development, and graphic design.James Johnson, a media content and product development specialist focused on the healthcare sector, isexperienced in domain monetization, social media, and online coupons. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 19
  20. 20. MEDICAL CLINIC MANAGEMENTGeneral Health Solutions, Inc. (DBA CannaCare and CannaCare.com), a wholly owned subsidiary ofGeneral Cannabis, specializes in the turnkey management of medical marijuana clinics. Through itsmanagement contract, General Health Solutions requires all medical doctors to be licensed and in goodstanding with the state’s Medical Board. General Cannabis believes that General Health Solutions is oneof the largest aggregators of cannabis data in the U.S., which can be a useful tool in evaluating potentiallocations for medical cannabis health facilities. General Health Solutions’ database presently includesover 25,000 individuals.Acquisition of Synergistic Resources, LLC (DBA Marijuana Medical Evaluation Centers [MMEC])In December 2010, General Health Solutions acquired substantially all of the assets and managementcontracts of Synergistic Resources, LLC (DBA Marijuana Medical Evaluation Centers [MMEC]), for acombination of cash and stock. Synergistic Resources’ medical management model was developed overthe past four years and includes assisting with site location, staffing, administration, and humanresources. As well, General Cannabis acquired Synergistic Resources’ Internet marketing and advertisingtemplate, which includes SEO processes and implementation strategies that generate approximately 500calls daily to General Health Solutions’ call center and over 4,000 patient visits per month from individualsseeking to learn about the process of obtaining a Letter of Recommendation for the medical use ofcannabis under physician supervision. As an added benefit to customers, the Company also provides24/7 verification processing services to third parties seeking to verify the validity of a patient’s Letter ofRecommendation.On average, these calls translate to between 100 and 200 appointments set per day. General HealthSolutions may scale its marketing strategy to double the volume of calls and set appointments in 2011.The scalability of Synergistic Resources’ business model was crucial in General Cannabis’ decision toacquire the company.The Company believes that combining General Cannabis’ SEO and Internet expertise with SynergisticResources’ established management template could facilitate growth. As well, Synergistic Resources’founder, Brent Inzer, assumed a position as manager, business development for General HealthSolutions.Under the terms of the acquisition agreement, General Cannabis assumed all marketing and advertisingresponsibilities for 10 medical marijuana clinics in California, which service over 4,000 patients per month,roughly 60% of which are first-time visitors. The medical clinics generated approximately $4 million ingross sales in 2010. The physicians working at these medical offices are California-licensed and have nopreexisting reprimands or suspensions. This division of General Health Solutions has recently beenrenamed CannaCare from MMEC.Continuing ExpansionThe Company is focused on the continued expansion of its General Health Solutions subsidiary. GeneralCannabis believes that General Health Solutions is one of the largest management companies inCalifornia specializing in medical cannabis clinics. Since the acquisition of Synergistic Resources,General Health Solutions has increased the total number of medical clinics under its management to 14.The Company is performing due diligence in anticipation of opening medical healthcare facilities in statesbeyond California that permit the utilization of medical cannabis. The Company plans to open or manageat least 20 clinics by year-end 2011. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 20
  21. 21. MERCHANT PROCESSING SERVICESMerchant processing services allow businesses to accept payments by debit or credit cards. The FederalReserve estimated that the merchant processing industry performed roughly $3.4 trillion in credit anddebit card transactions in 2010 (Source: the Federal Reserve System’s 2010 Federal Reserve PaymentsStudy: Noncash Payment Trends in the United States: 2006-2009, December 8, 2010). Given consumerdemand to use both credit and debit cards, the merchant processing industry is also highly profitable. Tothis extent, roughly 2,000 companies provided credit card processing services in the U.S. in 2010 forcombined annual revenues of more than $40 billion (Source: First Research, Inc., a market analysiscompany, Credit Card Processing, February 2011).Differences between federal and local laws have limited the merchant processing services that areavailable to dispensaries and other medical cannabis-related entities (Source: CreditCards.com, MedicalMarijuana Sellers Can’t Take Their Money to the Bank, February 8, 2011). Many banks have ceasedoffering accounts or are hesitant to begin offering financial services to medical marijuana dispensariesdue to the complex and inconsistent legal environment associated with the industry. While 15 states andWashington, D.C. have legalized marijuana for medical use and an additional 12 states have legislationpending, cannabis remains classified as a Schedule I drug by the U.S. Drug Enforcement Agency—indicating that it is not currently acceptable for medical use—and thus is illegal under federal law.General Merchant Solutions, Inc. (DBA Cannapay Merchant Services)General Cannabis has identified a significant unmet need to provide merchant processing services to allmedical cannabis-related entities (e.g., dispensaries) as well as to an increasing number of non-cannabis-related companies, including those in the automotive, restaurant, and furniture industries. GeneralCannabis’ wholly owned subsidiary, General Merchant Solutions, offers merchant processing services tomedical cannabis-related entities, including WeedMaps.com subscribers as well as to the 14 medicalmarijuana healthcare facilities managed by General Health Solutions.The Company has invested significant time locating several unique resources to finance the operationand provide credit card swipe and processing services. General Merchant Solutions began acceptingapplications on November 15, 2010, and approved 64 applications by year-end 2010. At the end of thefirst quarter 2011, the Company had approved 170 applications.The Company believes that its relationships and frequent communication with over 1,800 dispensaries inthe U.S. through WeedMaps.com provides a live audience to which General Merchant Solutions cansimply cross-sell merchant services, potentially benefitting both parties. As shown in Figure 8, GeneralMerchant Solutions processed more than $2.2 million in merchant volume in March 2011, up from over$700,000 in December 2010—its first full month of operation. The Company believes that its merchantprocessing services are synergistic with General Cannabis’ highly trained sales force and theWeedMaps.com initiative. General Merchant Solutions has also engaged new niches outside of cannabis. Figure 8 General Cannabis, Inc. GENERAL MERCHANT SOLUTIONS CREDIT CARD PROCESSING VOLUME (DEC. 2010 TO MAR. 2011) $2,500,000 $2,200,000 $2,000,000 $1,600,000 Volume $1,500,000 $1,200,000 $1,000,000 $700,000 $500,000 $0 Dec. 2010 Jan. 2011 Feb. 2011 Mar. 2011Source: General Cannabis, Inc. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 21
  22. 22. General Cannabis anticipates that the merchant division could provide significant growth and profits in2011. General Merchant Solutions aims to secure 50 new clients per month in 2011, each processingroughly $15,000 a month in credit card transactions. Lead time for clients to reach $15,000 per month is90 days. General Merchant Solutions has stated that it aims to obtain over 500 clients by year-end 2011.As well, it expects to gross 75 basis points (or roughly 0.75%) per transaction.The Company has hired merchant processing and sales experts as well as regional sales staff to overseegrowth in this segment. During the second quarter 2011, the Company plans to increase its salespersonnel to 10 individuals (up from four), enabling General Merchant Solutions to continue expanding itscredit card processing services to companies outside the medical cannabis industry. The Company alsocurrently provides services to the automotive, restaurant, and furniture industries.Marketing in the Medical Marijuana IndustryGeneral Marketing Solutions, Inc. is a wholly owned subsidiary of General Cannabis whose primaryoperation is CannabisCenters.com, a website that helps prospective patients find physicians who supportand recommend medical cannabis.Acquisition of Technology Firm Revyv, LLCIn early 2011, General Cannabis acquired substantially all of the assets of Revyv, LLC—a technologycompany specializing in the online interface, marketing, and optimization of healthcare facilities in themedical cannabis industry. The Company believes that the acquisition may create significant synergiesand cost savings for its General Heath Solutions subsidiary as well as strengthen its position in themarket by increasing its marketing capabilities in states where it does not yet have a healthcarepresence. Per the terms of the agreement, the Company also acquired several key domain names,including CannabisCenters.com and SafeaccessMD.com. As well, General Cannabis added Revyv’s co-founders James Johnson and David Johnson to General Health Solutions’ management team as seniorproject manager and lead user interface engineer, respectively.In addition to obtaining key domains, General Cannabis also acquired Revyv’s proprietary managementand verification systems designed specifically for the medical marijuana industry, including a technology-based verification system that allows dispensaries and law enforcement officials to verify an individual’sstatus as a medical marijuana patient.CannabisCenters.comCannabisCenters.com helps prospective patients find medical cannabis physicians and attorneyprotection services. The website includes a verification system that validates the status of medicalcannabis patients to dispensaries and other interested parties as well as a social media platform forpatients. General Cannabis intends to use CannabisCenters.com as one of several company-ownedmedical information and education portals. CannabisCenters.com has established relationships withphysicians who support and recommend medical marijuana. Illustrated in Figure 9 (page 23), theCompany is positioning CannabisCenters.com as a site where cannabis physicians can connect withpatients. Moreover, there are plans to expand the site to include appointment-setting services andproprietary management software for physicians as well as a social network for patients to discussmedical cannabis issues and topics. As well, the site may include professional, objective medical data,physician editorials, and relevant patient-friendly links. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 22
  23. 23. Figure 9 General Cannabis, Inc. CANNABISCENTERS.COM: A MEDICAL CANNABIS NETWORKSource: CannabisCenters.com.General Cannabis’ goal is to use CannabisCenters.com as a counterpart to WeedMaps.com, capturing adifferent segment of the medical marijuana market.OTHER CORPORATE INITIATIVESBeyond its four core sectors, General Cannabis is also focused on continued research and development(R&D), offering assistance to communities seeking information regarding medical cannabis rules andregulations, and providing educational support seminars presented by physicians explaining the benefitsof medical cannabis to the public.Research and Development (R&D)General Cannabis aims to provide patients with safer and more effective options for medical cannabis.The Company is working with medical professionals and various members of the scientific community todevelop novel delivery methods, such as oral strips or next-generation vaporizers.Philanthropy FoundationGeneral Cannabis intends to spend significant time helping and funding select causes through aphilanthropy foundation, such as those listed below. Disabled Vet Program. The Company may hire and retain disabled veterans through its wholly owned subsidiaries. Patient Defense Fund. General Cannabis plans to help defend patients who are law-abiding yet are harassed by law enforcement. Compassion Program (Cancer). The Company aims to establish a program for hospice workers to provide free medical cannabis and assistance. Community Reinvestment. General Cannabis may work with local governments to create jobs within and outside of the cannabis industry. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 23
  24. 24. Lobbying and Public Policy OrganizationThe Company intends to create a lobbying and public policy organization to serve as an independent,nonpartisan membership organization, think tank, and resource for members, government officials,executives, journalists, and educators, among others. General Cannabis aims to demonstrate to thegovernment that cannabis can be mutually beneficial when responsibly implemented as policy. TheCompany plans to work with various groups to educate individuals about cannabis and its taxability. Inaddition, General Cannabis intends to support studies and foster independent research, articles, andbooks as well as other memorialized policy recommendations, such as Cannabis Affairs, a journaldiscussing cannabis affairs and policy. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 24
  25. 25. CompetitionCompetition within the medical cannabis industry is intense. The industry is highly fragmented, lackingany major regional or national companies. General Cannabis believes that one of its key competitiveadvantages is vertical integration within the industry. Further, the Company capitalizes on its frequentcommunication and relationships with existing clients—including dispensaries that advertise onWeedMaps.com as well as the 14 medical cannabis clinics under management—when promoting newlyadded products and services. General Cannabis estimates that a portion of its competition, which tend tobe smaller entities, fail to operate in accordance with state and local laws, statutes, and guidelines. Thecompanies summarized below and on pages 26-28 are not an exhaustive list of competitors; rather, theseentities are believed to be representative of the type of competition General Cannabis may face in certainsectors of the medical cannabis industry.TechnologyIn the technology sector, the following websites offer similar services to General Cannabis’ dispensaryfinder site, WeedMaps.com, and may be considered direct competitors to the Company. GeneralCannabis estimates that WeedMaps.com controls approximately 70% of the dispensary finder site marketin the U.S., reporting over $3 million in advertising revenue in 2010. The Company’s experiencedWeedMaps.com sales force is supporting further growth by continuously marketing services todispensaries as it monitors changes and trends within the industry.CannaGenhttp://cannagen.comCannaGen helps visitors find cannabis dispensaries and physicians. The company supports a forumwhere members can discuss information about medical marijuana. The site educates visitors about thevarious types of marijuana and effective methods to grow each strain. CannaGen also offers aninteractive guide that helps visitors diagnose problems with a marijuana plant. After diagnosing the issue,the site directs the visitor to a store that sells the necessary supplies to help the plant recover.Dailybudshttp://www.dailybuds.comDailybuds is an online medical cannabis community sponsored by Kush Magazine that connects patients,dispensaries, and caregivers. The website offers medical marijuana dispensary listings and maps to helppatients find local cannabis dispensaries and clubs. The website includes social networking tools, such asa chat application and group forums where patients can discuss medical marijuana topics. Additionalfeatures of the site include cannabis-related shopping, coupons, music, videos, pictures, events, blogs,and games. The website also has classified listings where visitors can buy and sell products and servicesas well as seek employment. Dailybuds has over 129,000 registered users.GPS 420http://www.gps420.comGPS 420 enables patients to search for local dispensaries, physicians, and head shops. The websiteallows dispensaries to communicate with patients by listing each location’s hours, website, menu, prices,and news. Patients can search for a dispensary by name, rating, or strain, and can limit results to onlyshow locations that are currently open, provide delivery services, or have a menu posted online.Herban Trackerhttp://herbantracker.comHerban Tracker is a medical dispensary locator that incorporates customer reviews. The website alsoprovides current news and laws related to the medical cannabis industry. Additional features of the siteinclude marijuana music videos and a do-it-yourself section with recipes and information to help patientsgrow their own cannabis. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 25
  26. 26. KushPageshttp://kushpages.comKushPages is a directory that enables visitors to find local cannabis- and hemp-related businesses, suchas dispensaries, delivery services, evaluation centers, and smoke shops, among others. The website alsofeatures cannabis-themed clothing, dining/foods, education, and entertainment products and services.The website offers three levels of advertising services, which range in price from $299 per year for a basicad to $1,199 per year for a campaign that includes a top and side banner.LA Weed Mapshttp://caweedmaps.comLA Weed Maps allows visitors to find the closest dispensaries, evaluation centers, and head shops.Dispensary owners and medical marijuana doctors can list services at no cost, with additional fees forfeatured listings and banner ads. This site also collects information and reviews relating to the potencyand grade of the medical marijuana sold at each dispensary. Medical cannabis patients can register touse the community section of the website, where users can view profiles, add new friends, share photosand videos, review dispensaries and products, and create or join a group.Leaflyhttp://www.leafly.comLeafly is designed to facilitate patients throughout the medical cannabis purchasing process. The websiteprovides in-depth information about various strains of medical marijuana that are offered by dispensaries,including the medicinal effects of each strain. As well, Leafly helps patients find local dispensaries.Individuals who register to the site can also rate different strains, add strains to a “shopping list,” getrecommendations based on a user’s past ratings, and keep a private journal of favorite strains or theeffects of each strain in order to use as a guide for future purchases. Dispensaries that register with thewebsite obtain access to the Leafly community as well as dispensary storefronts and menu and statusupdates at no cost. Paid services include adding a logo, photos, analytics, custom map markers, textmessaging, and premium ad placements. Leafly is also developing an iPhone® app that provides reviewsand strain information as well as helps patients find the nearest dispensary location.Los Angeles Cannabis Clubs™http://www.losangelescannabisclubs.comLos Angeles Cannabis Clubs™ helps visitors find dispensaries, physicians, and lawyers who specialize inmedical cannabis. As well, the company operates a toll-free hotline that provides this information throughan automated system. The website’s dispensary directory includes locations in specific counties inCalifornia. Additional features of the site include reviews, forums, industry news, and newsletters. LosAngeles Cannabis Clubs™ also issues rewards annually to top-rated dispensaries.PotLocatorhttp://www.potlocator.comPotLocator is a website designed to help patients find dispensaries, physicians, lawyers, or deliverycompanies, and supplies links to various resources, including related news, employment opportunities,coupons, and educational materials. As well, patients can participate in community groups or forums,review medical cannabis strains, or play games. Dispensaries pay a monthly fee of $44.20 to be listed onthe site for a year or a $99 fee for a month-to-month pricing plan. The monthly fees include geo-targetedcoupons, backlinks, menus, and other tools. PotLocator’s iPhone® app includes features that helppatients quickly find dispensaries, physicians, lawyers, and delivery services. In April 2010, PotLocatorpartnered with Marijuanadoctors.com to incorporate an exclusive directory that helps patients find qualitymedical marijuana physicians. The companies merged in February 2011. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 26
  27. 27. STICKYGuidehttp://www.stickyguide.comSTICKYGuide is a medical cannabis website that collects ratings and reviews of dispensaries and strainsand helps visitors find local dispensaries. The website is also developing an application to help patientsfind cannabis physicians. STICKYGuide focuses on providing a visual experience to visitors, includingimages of products and facilities. Additionally, the site offers a coupon application that provides discountsfor local dispensaries. As well, registered users can create a personal profile and participate in forumspertaining to cannabis-related topics.THC Finderhttp://www.thcfinder.comTHC Finder allows patients to locate medical marijuana dispensaries, seed banks, evaluation centers,smoke shops, and other medical marijuana-related organizations. As well, the site offers information ondifferent types of medical marijuana and the effects that each strain provides. The Community sectionallows registered members to create a profile and discuss cannabis, cultivation techniques, and relatedproducts. The website also offers a text messaging service where patients can opt-in to receive exclusivelocal specials.WeedTRACKERhttp://weedtracker.comWeedTRACKER is a finder site for cannabis dispensaries and collectives. The site includes an onlineforum where patients can discuss cannabis-related topics and read and write reviews. As well, this siteprovides a directory of local cannabis physicians and lawyers. The site also provides information oncultivating marijuana. Each registered dispensary, collective, and other cannabis-related entity maintainsa company forum that facilitates interaction between the business and current and potential customers.The no-cost forum can be supplemented with a paid advertising campaign that includes premiumbanners, sponsored links, or coupons. Visitors select their location to receive geographically targetedadvertisements.MedicalOn the medical side, there are a number of physicians operating medical cannabis clinics; however, theCompany estimates that the majority of these individuals are sole practitioners operating one location andwho may also be generalists, offering other healthcare services. To the Company’s knowledge, onlyseveral have established a large managed care platform with eight or more locations. General Cannabisbelieves that General Health Solutions is one of the largest management companies in Californiaspecializing in medical cannabis clinics. The Company’s proprietary SEO processes result in over 500calls per day from individuals seeking to learn about the process of obtaining a Letter ofRecommendation. Though it is illegal in California for anyone other than a physician who is permittedunder state law (with certain exceptions) to prescribe marijuana as medicine, some nurse practitioners orphysicians assistants also write Letters of Recommendation for patients and thus compete for GeneralCannabis’ customers. Through its management contract, General Health Solutions requires all medicaldoctors to be licensed in the State of California and be in good standing with the Medical Board. As anadded benefit to customers, the Company also provides 24/7 verification processing services to thirdparties seeking to verify the validity of a patient’s Letter of Recommendation. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 27
  28. 28. Merchant ProcessingThe Company competes with other providers who offer merchant processing services and targetcompanies within the medical cannabis industry, including the companies listed below.Cannabis Medical Solutions, Inc. (CMSI-OTC)Headquartered in Miami, Florida, Cannabis Medical Solutions specializes in providing secure merchantservices to medical cannabis dispensaries and healthcare companies, including merchant credit cardaccounts, debit and credit card transaction processing, gift/loyalty card programs, and point-of-sale (POS)terminals. Cannabis Medical Solutions advertises a 24-hour application turnaround and a 98% approvalrate. The company does not require a long-term contract and provides a free credit card terminal for newcustomers. Beyond the cannabis and healthcare industries, Cannabis Medical Solutions offers merchantprocessing services to other high-risk sectors, including mail-order websites, travel businesses, legalgaming, offshore/international credit card processing, the adult industry, and online dating websites,among others.Greenlight Payments, Inc. (Closely held)With headquarters in San Ramon, California, Greenlight Payments provides merchant services to smalland large businesses, including nonprofit cannabis collectives through www.cannabismerchant.com. Thecompany’s primary services include processing credit, debit, and fuel/fleet cards as well as electronicchecks. Greenlight Payments’ advertised value-added services include gift card processing, protectionagainst returned checks, and cash advances. The company has partnered with various sales agents,banks, and POS vendors to support its service offerings.The Transaction Group (Closely held)Headquartered in Jacksonville Beach, Florida, The Transaction Group (TTG) helps merchants selecteffective processing solutions for their business. The company recommends certain full-serviceorganizations that can support various payment methods for in-store, e-commerce, and mobiletransactions. TTG has partnered with merchant service providers that support credit card processing fornew and existing cannabis dispensaries. The company reports that it offers competitive rates for theindustry and does not require long-term contracts for cannabis-related companies. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 28
  29. 29. Potential MilestonesDuring the next 12 to 24 months, General Cannabis aims to achieve the following corporate milestonesthrough the operations of its wholly owned subsidiaries.Media (Technology) Continue emphasizing General Cannabis’ technological advantage over other companies within the medical cannabis industry through WeedMaps.com and CannabisCenters.com Launch additional WeedMaps.com verticals in the second quarter 2011 that include information about physicians, lawyers, and skate and surf shops Create an informative, definitive medical site that is similar to WeedMaps.com that targets the middle aged or baby boomer generation Position CannabisCenters.com as a site where cannabis physicians can connect with patients, including appointment-setting services and proprietary management software for physicians as well as a social network for patients to discuss medical cannabis issues and topicsMedical Clinic Management Manage at least 20 new clinics by year-end 2011, up from 14 currentlyMerchant Processing Services Secure 50 new medical cannabis clients per month for credit card processing services, potentially servicing over 500 merchants by year-end 2011 Increase sales staff to offer services in non-cannabis industries with the aim of securing more than 20 non-cannabis accounts per month ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 29

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