Your SlideShare is downloading. ×
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
General Cannabis Research (CANA)
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

General Cannabis Research (CANA)

2,681

Published on

Crystal Research Associates Issues Research Report on General Cannabis Inc.

Crystal Research Associates Issues Research Report on General Cannabis Inc.

1 Comment
2 Likes
Statistics
Notes
  • Smoking Cannabis While Pregnant is bad go this website if you want to know more about it http://www.smokingweedwhilepregnant.blogspot.com
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here
No Downloads
Views
Total Views
2,681
On Slideshare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
70
Comments
1
Likes
2
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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
  30. Key Points to Consider General Cannabis is a technology-driven company that provides a range of innovative services to the medical cannabis industry. The Company is focused on developing a significant Internet presence in the medical cannabis industry through the use of various technological platforms, search engine optimization (SEO), and proprietary software applications as well as key domains such as WeedMaps.com and CannabisCenters.com. General Cannabis presently owns more than 250 Internet domain names related to the cannabis industry. General Cannabis does not grow, harvest, cultivate, possess, or distribute medical cannabis; rather, the Company provides a range of services that help support and develop relationships between physicians, dispensaries, and patients within the medical cannabis industry. The medical use of cannabis is permitted in 15 states and Washington, D.C., representing a portion of the estimated $35 billion to $45 billion cannabis industry in the U.S., with legislation pending in 12 additional states. In the medical setting, cannabis is used to relieve chronic or neuropathic pain, improve appetite, decrease nausea, and promote muscle relaxation. As decriminalization of medical cannabis becomes more prevalent in the U.S., multiple cannabis- related niche markets are emerging, including media, technology, clinic management, merchant processing, and marketing. The Company aims to lead each respective market sector, creating a standard of professionalism that it believes is largely absent in the medical cannabis industry. The Company offers services to the medical cannabis industry through four wholly owned subsidiaries that support, supply, and further the success and demand of one another: (1) WeedMaps Media, Inc.; (2) General Health Solutions, Inc. (DBA CannaCare and CannaCare.com); (3) General Marketing Solutions, Inc.; and (4) General Merchant Solutions, Inc. o General Cannabis plans to continue to develop this synergy by focusing on further vertical integration opportunities within the industry. WeedMaps Media’s primary operation is WeedMaps.com, a finder site for medical cannabis dispensaries. The Company’s SEO strategies have enabled the website to become one of the largest dispensary finder sites, with roughly six million page views per month. To date, over 100,000 patients and more than 1,800 dispensaries have registered to use the site’s services. o Since its launch in January 2010, advertising revenue for WeedMaps.com has increased 15% per month, exceeding $3.4 million in 2010. WeedMaps Media recently added a daily coupon application and plans to add search capabilities for finding local physicians, lawyers, and skate and surf shops, which the Company believes could double revenues going forward. o The content management system used in WeedMaps.com monitors and displays a dispensary’s inventory and prices in real-time. WeedMaps.com presently tracks the availability of over 62,000 products sold by more than 1,800 dispensaries that can update inventory daily. o General Cannabis capitalizes on the relationships it has developed through WeedMaps.com— including medical cannabis patients, physicians, and dispensaries throughout the U.S.—which serve as the platform for introducing newly added business services. General Health Solutions specializes in providing turnkey management services to medical cannabis clinics. The Company currently manages 14 medical cannabis clinics throughout California, which produced gross revenues of over $4 million in 2010, with plans to manage at least 20 clinics by year- end 2011. The Company’s proprietary SEO strategies result in over 500 calls per day and roughly 4,000 patient visits per month. o General Cannabis believes that General Health Solutions has become one of the largest aggregators of cannabis data in the U.S., which can be useful in evaluating potential locations for medical cannabis health facilities. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 30
  31.  General Merchant Solutions, Inc. (DBA Cannapay Merchant Services) offers merchant processing services to medical cannabis-related entities. Targeting more than 2,000 dispensaries and medical clinics, the Company aims to service over 500 clients by year-end 2011. o Differences between federal and local laws have limited the merchant processing services that are available to dispensaries and other medical cannabis-related companies. General Cannabis’ frequent communication with dispensaries allows ample opportunity to discuss quality merchant processing services with existing clients—potentially benefitting both parties. o General Merchant 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. General Marketing Solutions operates CannabisCenters.com, a portal for medical cannabis physicians and patients. The website includes a patient verification system that can be used by law enforcement, dispensaries, and other interested parties to validate an individual’s status as a registered cannabis patient. CannabisCenters.com is also being developed as a social media platform for medical cannabis patients. General Cannabis also emphasizes continuing research and development (R&D), assisting communities through a philanthropy foundation, and increasing education regarding the medical benefits of cannabis through a lobbying and public policy organization. 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 December 2010. As well, the Company reported nearly $7.7 million in sales revenue in 2010. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 31
  32. Historical Financial ResultsTables 7, 8, and 9 provide a summary of General Cannabis’ key historical financial statements: its auditedand consolidated Statements of Operations, Balance Sheets, and Statements of Cash Flows. Table 7 General Cannabis, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (AUDITED) Years Ended December 31, December 31, 2010 2009 REVENUESales $ 7,699,634 $ 2,670,721Total revenue 7,699,634 2,670,721 OPERATING EXPENSESSelling, general, and administrative expenses 7,750,862 3,098,981Total operating expenses 7,750,862 3,098,981Operating income (loss) (51,228) (428,260) Other Income (expense)Interest income (expense) (36,540) (8,199) Income (loss) before income taxes (87,768) (436,459)Provision for Income Taxes 62,000 — Income (loss) before discontinued operations and income taxes (149,768) (436,459)Income (loss) from discontinued operations 1,350,400 (839,136) NET INCOME (LOSS) $ 1,200,632 $ (1,275,595) Weighted average shares outstanding, basic 28,748,316 9,733,442 Weighted average shares outstanding, diluted 28,748,316 14,214,612 Per share amounts, basic:Continuing operations (0.01) (0.04)Net income (loss) 0.04 (0.13) Per share amounts, diluted:Continuing operations (0.01) (0.03)Net income (loss) 0.04 (0.09)Source: General Cannabis, Inc. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 32
  33. Table 8 General Cannabis, Inc. CONSOLIDATED BALANCE SHEETS (AUDITED) December 31, December 31, 2010 2009 ASSETS CURRENT ASSETS Cash and cash equivalents $ 1,393,805 $ 48,131 Accounts receivable 4,093 16,650 Other current assets 1,863,476 91,785 TOTAL CURRENT ASSETS 3,261,374 156,566 Property and equipment, net 2,202 53,698 Intangible assets:Contracts & Customer Lists 21,984,576 —Internet Properties & Domain Names 9,444,582 333,334Trademarks 29,322 —Goodwill 27,712,345 — Other Assets 900,000 — TOTAL ASSETS $ 63,334,401 $ 543,598 LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) CURRENT LIABILITIES Accounts payable $ 128,144 $ 497,001 Accrued liabilities 1,071,593 146,302 Convertible Notes - related party — 1,821,193 Convertible Notes — 419,392 Note payable - related party — 437,543 Note payable 125,000 165,000 TOTAL CURRENT LIABILITIES $ 1,324,737 $ 3,486,431 LONG-TERM LIABILITIES Other accrued liabilities 900,000 — Note payable - related party 3,600,000 — TOTAL LONG-TERM LIABILITIES 4,500,000 — TOTAL LIABILITIES $ 5,824,737 $ 3,486,431 STOCKHOLDERS EQUITY (DEFICIT) Preferred Stock, $0.001 par value: 20,000,000 shares authorized;zero shares issued and outstanding at December 31, 2010;zero shares issued and outstanding at December 31, 2009; — — Common Stock, $0.001 par value: 200,000,000 shares authorized;82,640,256 shares issued and outstanding at December 31, 2010;9,733,442 shares issued and outstanding at December 31, 2009; 82,640 9,733 Paid-in capital 62,680,851 3,501,893 Accumulated deficit (5,253,827) (6,454,459)TOTAL STOCKHOLDERS EQUITY (DEFICIT) 57,509,664 (2,942,833)TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) $ 63,334,401 $ 543,598Source: General Cannabis, Inc. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 33
  34. Table 9 General Cannabis, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (AUDITED) Years Ended December 31, December 31, 2010 2009 Cash flows from operating activities:Net income (loss) from continuing operations $ (149,768) $ (436,459)Add back: Net gain (loss) from discontinued operations 1,350,400 (839,136)Adjustments to reconcile net loss to net cash used in operating activities: Interest expense - non-cash — 283,407 Depreciation 115,319 165,481 Amortization — 14,451 Amortization of consulting agreements (51,389) — Stock-based compensation - Warrants 37,777 — Stock-based compensation 50,000 — Changes in operating assets and liabilities: Accounts receivable 12,557 (16,650) Inventories — 230,169 Prepaid expenses and deposits 6,566 106,225 Accounts payable and accrued liabilities (366,066) 132,327 Note payable - related party — (505) Net cash provided (used) in operating activities 1,005,396 (360,690) Cash flows from investing activities:Purchases of property and equipment (166,815) —Sale of property and equipment — 72,331Purchases of intangible assets (327,834) — Net cash provided (used) in investing activities (494,649) 72,331 Cash flows from financing activities:Proceeds from issuance of Common Stock 1,650,000 —Proceeds from Note payable (40,000) 165,000Proceeds from Convertible Notes (419,392) 28,274Proceeds from Convertible Note related party (211,489) 594,199Proceeds from Note payable - related party (437,543) 36,666 Net cash provided by financing activities 541,576 824,139 Net cash used in discontinued operations 293,351 (536,278) Net increase (decrease) in cash and cash equivalents 1,345,674 (498) Cash and cash equivalents at beginning of period 48,131 48,629 Cash and cash equivalents at end of period $ 1,393,805 $ 48,131Non-cash investing and financing activity: Issuance of Warrants to consultants 250,000 — Shares issued pursuant to consulting agreement $ 50,000 $ — Acquisition of intangible assets for stock $ 40,803,056 $ —Source: General Cannabis, Inc. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 34
  35. RisksSome of the information in this Executive Informational Overview® (EIO®) relates to future events or futurebusiness and financial performance. Such statements can only be predictions and the actual events orresults may differ from those described due to the risks presented in General Cannabis’ statements onForm S-1, 10-K, 10-Q, and 8-K, as well as other forms filed from time to time. The content of this reportwith respect to General Cannabis has been compiled primarily from information available to the publicreleased by the Company. General Cannabis is solely responsible for the accuracy of this information.Information as to other companies has been prepared from publicly available information and has notbeen independently verified by the Company. Certain summaries of activities have been condensed toaid the reader in gaining a general understanding.Investors should carefully consider the risks and information about General Cannabis’ business describedbelow and should not interpret the order in which these considerations are presented as an indication oftheir relative importance. The risks and uncertainties described below are not the only risks that theCompany faces. Additional risks and uncertainties not presently known to General Cannabis or that theCompany currently believes to be immaterial may also adversely affect its business. If any of the followingrisks and uncertainties develops into actual events, General Cannabis’ business, financial condition, andresults of operations could be materially and adversely affected.RISK FACTORS RELATED TO THE BUSINESS OF THE COMPANYGeneral Cannabis has a limited operating history and limited historical financial information uponwhich investors may evaluate the Company’s performance.Investors should consider, among other factors, General Cannabis’ prospects for success in light of therisks and uncertainties encountered by companies that, like the Company, are in their early stages ofoperations. General Cannabis may not successfully address all of the risks and uncertainties orsuccessfully implement its existing and new products and services. If the Company fails to do so, it couldmaterially harm its business and impair the value of its Common Stock, resulting in a loss toshareholders. Even if General Cannabis accomplishes these objectives, the Company may not generatethe anticipated positive cash flows or profits. Although General Cannabis was incorporated in Nevada in2003, the vast majority of the business that it conducts now was started or acquired in 2010.Unanticipated problems, expenses, and delays are frequently encountered in establishing a new businessand developing novel products and services. These include, but are not limited to, inadequate funding,lack of consumer acceptance, competition, product development, the inability to employ or retain talent,inadequate sales and marketing, and regulatory concerns. The failure by General Cannabis to meet anyof these conditions could have a materially adverse effect upon the Company and may force it to reduce,curtail, or discontinue operations. No assurance can be given that General Cannabis can or will ever besuccessful in its operations and operate profitably.If General Cannabis is unable to meet its future capital needs, the Company may be required toreduce or curtail operations, or shut down completely.To date, General Cannabis has relied on cash flows from operations and funding from a small group ofindividual investors, including James Pakulis, General Cannabis’ chief executive officer, to fundoperations. The Company has limited cash liquidity and capital resources. General Cannabis’ cash onhand as of December 31, 2010, was approximately $1.39 million. For the year ended December 31,2010, the Company’s total revenue was roughly $7.7 million and its net income was just over $1.2 million,consisting of an approximate $51,000 in operating losses, $37,000 in interest expenses, and $1.35 millionattributed to discontinued operations.General Cannabis’ future capital requirements depend on many factors, including its ability to marketproducts successfully, cash flows from operations, locating and retaining talent, and competing marketdevelopments. The Company’s business model requires spending money (primarily on advertising andmarketing) in order to generate revenue. Based on the Company’s current financial situation, General ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 35
  36. Cannabis may have difficulty continuing operations at the current level, or at all, if it does not raiseadditional financing in the near future. Additionally, the Company aims to continue to acquire assets andoperating businesses, which will likely require additional cash. Although General Cannabis currently hasno specific plans or arrangements for acquisitions or financing, the Company intends to raise fundsthrough private placements, public offerings, or other financings. Any equity financings may result indilution to then-existing stockholders. Sources of debt financing may result in higher interest expense.Any financing, if available, may be on unfavorable terms. If adequate funds are not obtained, GeneralCannabis may be required to reduce, curtail, or discontinue operations. There is no assurance that theCompany’s existing cash flow will be adequate to satisfy its existing operating expenses and capitalrequirements.The Company’s independent registered public accounting firm has expressed doubts aboutGeneral Cannabis’ ability to continue as a going concern. The Company must increase revenuesin order to keep pace with its projected spending and maintain positive cash flows.As a result of General Cannabis’ financial condition, the Company has received a report from itsindependent registered public accounting firm for its financial statements for the year ended December31, 2010, which includes an explanatory paragraph describing the uncertainty as to General Cannabis’ability to continue as a going concern. In order to continue as a going concern, the Company musteffectively balance many factors and increase revenues beyond its current pace to a point where it canfund operations from sales and revenues. If General Cannabis is not able to do this, the Company maynot be able to continue as an operating company. At General Cannabis’ current revenue and burn rate,the Company’s cash on hand will last approximately 8 to 10 months. General Cannabis anticipates that itsrevenues will continue to increase and could exceed the Company’s expenses in less than eight months.However, there is no assurance that General Cannabis’ existing cash flow will be adequate to satisfy theCompany’s existing operating expenses and capital requirements.Because General Cannabis faces intense competition, the Company may not be able to operateprofitably in the cannabis industry.The market for the services that General Cannabis offers is highly competitive. The competition will mostlikely increase as more states permit the use of medical cannabis. The increased competition may hinderthe Company’s ability to successfully market its products and services. General Cannabis may not havethe resources, expertise, or other competitive factors to compete successfully in the future. The Companyexpects to face additional competition from existing entities and new market entrants in the future. Someof General Cannabis’ competitors will have greater resources than the Company. As a result, thesecompetitors may be able to achieve the following: develop and expand their product and service offerings more rapidly; adapt to new or emerging changes in customer requirements more quickly; take advantage of acquisition and other opportunities more readily; and devote greater resources to the marketing and sale of products and adopt more aggressive pricing policies.If no additional states allow the medical use of cannabis, or if one or more states that currentlyallow it reverse their position, General Cannabis may not be able to continue its growth or themarket for its products, and services may decline.Currently, 15 states and the District of Columbia allow the use of medical cannabis. In recent elections,there were additional states that had proposals for its allowance. While the Company believes that thenumber of states allowing the use of medical cannabis will expand, there can be no assurance that it will,and if it does not, there can be no assurance that the 15 existing states or the District of Columbia will notreverse their position and disallow it. If either of these things happens, then not only will the growth ofGeneral Cannabis’ business be materially impacted, the Company may experience declining revenue asthe market for its products and services declines. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 36
  37. If General Cannabis is unable to attract and retain key personnel, the Company may not be able tocompete effectively in its market.General Cannabis’ success depends, in part, on its ability to attract and retain key management—including James Pakulis, the Company’s CEO, and Douglas Francis, General Cannabis’ chairman andpresident as well as the Company’s technical experts and sales and marketing personnel. GeneralCannabis attempts to enhance its management and technical expertise by recruiting qualified individualswho possess desired skills and experience in certain targeted areas. The Company has also employedmanagement from companies that it has acquired. General Cannabis’ inability to retain employees andattract and retain sufficient additional employees as well as information technology, engineering, andtechnical support resources, could have a material adverse effect on the Company’s business, financialcondition, results of operations, and cash flows. The loss of key personnel could limit General Cannabis’ability to develop and market its products.Because the Company’s officers and directors control a large percentage of General Cannabis’Common Stock, they have the ability to influence matters affecting the Company’s shareholders.As of March 1, 2011, General Cannabis’ officers and directors beneficially owned over 69% of theCompany’s outstanding Common Stock. As a result, they have the ability to influence matters affectingGeneral Cannabis’ shareholders, including the election of directors, the acquisition or disposition ofassets, and the future issuance of shares. Because they control such shares, investors may find it difficultto replace the Company’s directors and management if they disagree with the way the business is beingoperated. Because the influence by these insiders could result in management making decisions that arein the best interest of those insiders and not in the best interest of investors, investors may lose some orall of the value of an investment in General Cannabis’ Common Stock.The Company may not be able to effectively manage its growth and operations, which couldmaterially and adversely affect the business.General Cannabis has, and may in the future, experience rapid growth and development in a relativelyshort period of time by aggressively marketing its products and services. The management of this growthwill require, among other things, continued development of the Company’s financial and managementcontrols and management information systems, stringent control of costs, increased marketing activities,the ability to attract and retain qualified management personnel, and the training of new personnel.General Cannabis intends to utilize outsourced resources and hire additional personnel in order tomanage the Company’s expected growth and expansion. Failure to successfully manage GeneralCannabis’ possible growth and development could have a material adverse effect on the Company’sbusiness and the value of its Common Stock.Some of the business activities of a selection of the Company’s customers, while believed to becompliant with applicable state law, are illegal under federal law. If General Cannabis’ customersare closed by law enforcement authorities, it will materially and adversely affect the Company’sbusiness.The medical cannabis industry is currently conducted in the 15 states, plus the District of Columbia, thathave passed laws either decriminalizing or legalizing the medical use of cannabis. However, under U.S.federal law, the possession, use, cultivation, and transfer of cannabis is illegal. The federal, and in somecases state, law enforcement authorities have frequently closed down dispensaries and investigated orclosed physician offices that provide medical cannabis recommendations. To the extent that an affecteddispensary or physician office is a customer of General Cannabis, it will affect the Company’s revenue,and to the extent that it has an impact on new dispensaries and physician offices entering the medicalcannabis industry, it would materially affect General Cannabis’ business and operations. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 37
  38. Because the business activities of some of the Company’s customers is illegal under federal law,General Cannabis may be deemed to be aiding and abetting illegal activities through the servicesthat it provides to those customers. As a result, the Company may be subject to actions by lawenforcement authorities, which would materially and adversely affect the business.Under U.S. federal law, the possession, use, cultivation, and transfer of cannabis is illegal. GeneralCannabis provides services to customers that are engaged in those businesses. As a result, lawenforcement authorities may seek to bring an action or actions against the Company, including, but notlimited to, a claim of aiding and abetting another’s criminal activities. Such an action would have amaterial effect on General Cannabis’ business and operations.In states where medical cannabis is permitted, local laws and regulations could adversely affectGeneral Cannabis’ clients, including causing some of them to close, which would materially andadversely affect the Company.Even in areas where the medical use of cannabis is legal under state law, there are also local laws andregulations that affect General Cannabis’ clients. For example, in some cities or counties a medicalcannabis dispensary is prohibited from being located within a certain distance from schools or churches.These local laws and regulations may cause some of the Company’s customers to close, impactingrevenue and having a material effect on General Cannabis’ business and operations. In addition, theenforcement of identical rules or regulations as it pertains to medical cannabis may vary from municipalityto municipality or city to city.General Cannabis’ websites are visible in jurisdictions where medical use of cannabis is notpermitted, and as a result the Company may be found to be violating the laws of thosejurisdictions.Internet websites are visible by people everywhere, not just in jurisdictions where the activities describedtherein are considered legal. As a result, General Cannabis may face legal action from a state or otherjurisdiction against the Company for engaging in activity illegal in that state or jurisdiction.The medical cannabis industry is experiencing rapid growth and consolidation that may causeGeneral Cannabis to lose key relationships and intensify competition.The medical cannabis industry is undergoing rapid growth and substantial change, which has resulted inincreasing consolidation and the formation of strategic relationships. The Company expects thisconsolidation and strategic partnering to continue. Acquisitions or other consolidating transactions couldharm General Cannabis in the following ways: the Company could lose strategic relationships if its partners are acquired by or enter into agreements with a competitor (which could cause General Cannabis to lose access to distribution, content, technology, and other resources); the relationships between the Company and its strategic partners may deteriorate and cause an adverse effect on the business; General Cannabis could lose customers if competitors or users of competing technologies consolidate with the Company’s current or potential customers; and General Cannabis’ current competitors could become stronger or new competitors could form from consolidations.Any of these events could put General Cannabis at a competitive disadvantage, which could cause theCompany to lose customers, revenue, and market share. Consolidation could also force GeneralCannabis to expend greater resources to meet new or additional competitive threats, which could alsoharm the Company’s operating results. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 38
  39. General Cannabis is dependent on the continued reliable operation of third parties’ systems andnetworks and, if these systems and networks fail to operate or operate poorly, the Company’sbusiness and operating results will be harmed.General Cannabis’ operations are in part dependent upon the continued reliable operation of theinformation systems and networks of third parties. If these third parties do not provide reliable operations,the Company’s ability to service customers will be impaired and its business, reputation, and operatingresults could be harmed.The Internet and General Cannabis’ network are subject to security risks that could harm theCompany’s business and reputation and expose it to litigation or liability.Online commerce and communications depend on the ability to transmit confidential information andlicensed intellectual property securely over private and public networks. Any compromise of GeneralCannabis’ ability to transmit and store such information and data securely and any costs associated withpreventing or eliminating such problems could damage its business, hurt the Company’s ability todistribute products and services and collect revenue, threaten the proprietary or confidential nature ofGeneral Cannabis’ technology, harm its reputation, and expose it to litigation or liability. The Companyalso may be required to expend significant capital or other resources to protect against the threat ofsecurity breaches or hacker attacks or to alleviate problems caused by such breaches or attacks. Anysuccessful attack or breach of General Cannabis’ security could hurt consumer demand for its productsand services, expose the Company to consumer class action lawsuits, and otherwise harm the business.General Cannabis may be unable to adequately protect its proprietary rights.The Company’s ability to compete partially depends on the superiority, uniqueness, and value of itsintellectual property and technology, including both internally developed technology and technologylicensed from third parties. To the extent General Cannabis is able to do so, in order to protect itsproprietary rights, the Company will rely on a combination of trademark, copyright, and trade secret laws,confidentiality agreements with its employees and third parties, and protective contractual provisions.Despite these efforts, any of the following occurrences may reduce the value of General Cannabis’intellectual property: the Company’s applications for trademarks and copyrights relating to its business may not be granted and, if granted, may be challenged or invalidated; issued trademarks and registered copyrights may not provide General Cannabis with any competitive advantages; the Company’s efforts to protect its intellectual property rights may not be effective in preventing misappropriation of its technology; General Cannabis’ efforts may not prevent the development and design by others of products or technologies similar to, competitive with, or superior to those the Company develops; or another party may obtain a blocking patent and General Cannabis would need to either obtain a license or design around the patent in order to continue to offer the contested feature or service in its products.General Cannabis may be forced to litigate to defend its intellectual property rights or to defendagainst claims by third parties relating to intellectual property rights.General Cannabis may be forced to litigate, enforce, or defend its intellectual property rights, to protect itstrade secrets, or to determine the validity and scope of other parties’ proprietary rights. Any such litigationcould be very costly and could distract management from focusing on operating the Company’s business.The existence and/or outcome of any such litigation could harm General Cannabis’ business. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 39
  40. Further, because the content of much of the Company’s intellectual property concerns cannabis and otheractivities that are not legal in some state jurisdictions, General Cannabis may face additional difficulties indefending its intellectual property rights.Interpretation of existing laws that did not originally contemplate the Internet could harm GeneralCannabis’ business and operating results.The application of existing laws governing issues, such as property ownership, copyright, and otherintellectual property issues to the Internet is not clear. Many of these laws were adopted before theadvent of the Internet and do not address the unique issues associated with the Internet and relatedtechnologies. In many cases, the relationship of these laws to the Internet has not yet been interpreted.New interpretations of existing laws may increase General Cannabis’ costs, require the Company tochange business practices, or otherwise harm its business.It is not yet clear how laws designed to protect children that use the Internet may be interpreted,and such laws may apply to General Cannabis’ business in harmful ways.The Child Online Protection Act and the Children’s Online Privacy Protection Act impose civil and criminalpenalties for distributing material harmful to minors (e.g., obscene material) over the Internet to childrenunder the age of 17 or collecting personal information from a child under the age of 13. General Cannabisdoes not knowingly distribute harmful materials to minors or collect personal information from childrenunder the age of 13. The manner in which these Acts may be interpreted and enforced cannot be fullydetermined, and future legislation similar to these Acts could subject the Company to potential liability if itwas deemed to be non-compliant with such rules and regulations, which in turn could harm the business.General Cannabis may be subject to market risk and legal liability in connection with the datacollection capabilities of its products and services.Many of the Company’s products are interactive Internet applications that by their very nature requirecommunication between a client and server to operate. To provide better consumer experiences and tooperate effectively, General Cannabis’ products send information to its servers. Many of the services theCompany provides also require that a user provide certain information. General Cannabis posts anextensive privacy policy concerning the collection, use, and disclosure of user data involved ininteractions between the Company’s client and server products.Because General Cannabis is in the cannabis industry, the Company may have a difficult timeobtaining the various insurances that are desired to operate the business, which may exposeGeneral Cannabis to additional risk and financial liabilities.Insurance that is otherwise readily available, such as workers compensation, general liability, anddirectors and officers insurance, is more difficult for the Company to find and more costly becauseGeneral Cannabis is engaged in the medical cannabis industry. Thus far, the Company has beensuccessful in finding such policies; however, it is at a cost that is higher than other businesses. There areno guarantees that General Cannabis will be able to find such insurances in the future or that the cost willbe affordable. If General Cannabis is forced to go without such insurances, it may prevent the Companyfrom entering into certain business sectors, inhibit growth, and expose General Cannabis to additionalrisk and financial liabilities.RISKS RELATED TO GENERAL CANNABIS’ COMMON STOCKGeneral Cannabis intends to apply to list its Common Stock for trading on the OTCQX(http://www.otcmarkets.com/otcqx/home), the top tier of the OTC market maintained by OTCMarkets Group, Inc., which may make it more difficult for investors to resell their shares due tosuitability requirements.The Company’s Common Stock is currently listed on the Pink Sheets Current Information tier of themarketplace maintained by OTC Markets Group, Inc. General Cannabis intends to apply to list itsCommon Stock for trading on the OTCQX tier. Broker-dealers often decline to trade Over-the-Counterstocks given the market for such securities is often limited, the stocks are more volatile, and the risk toinvestors is greater. These factors may reduce the potential market for General Cannabis’ Common Stock ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 40
  41. by reducing the number of potential investors. This may make it more difficult for investors in theCompany’s Common Stock to sell shares to third parties or to otherwise dispose of shares. This couldcause General Cannabis’ stock price to decline.If the Company is unable to pay the costs associated with being a public reporting company,General Cannabis may not be able to commence and continue trading on the OTCQX or may beforced to discontinue operations.The Company expects to have significant costs associated with being a public reporting company, whichmay raise substantial doubt about its ability to commence and continue trading on the OTCQX orcontinue as a going concern. These costs include compliance with the Sarbanes-Oxley Act of 2002,which will be difficult given the limited size of the Company’s management. General Cannabis will have torely on outside consultants. Accounting controls, in particular, are difficult and can be costly to complywith.The Company’s ability to commence and continue trading on the OTCQX or continue as a going concernwill depend on positive cash flow, if any, from future operations and on General Cannabis’ ability to raiseadditional funds through equity or debt financing. If the Company is unable to achieve the necessaryproduct sales or raise or obtain needed funding to cover the costs of operating as a public reportingcompany, General Cannabis’ Common Stock may be deleted from the OTCQX and the Company may beforced to discontinue operations.General Cannabis does not intend to pay dividends in the foreseeable future.The Company does not intend to pay any dividends in the foreseeable future. General Cannabis does notplan on making any cash distributions in the manner of a dividend or otherwise. The Company’s Boardpresently intends to follow a policy of retaining earnings, if any.General Cannabis has the right to issue additional Common Stock and Preferred Stock withoutconsent of stockholders. This would have the effect of diluting investors’ ownership and coulddecrease the value of their investment.The Company has additional authorized but unissued shares of its Common Stock that may be issued byGeneral Cannabis for any purpose without the consent or vote of its stockholders, which would dilutestockholders’ percentage ownership of the Company.In addition, General Cannabis’ Certificate of Incorporation authorizes the issuance of shares of PreferredStock, the rights, preferences, designations, and limitations of which may be set by the Board ofDirectors. The Company’s certificate of incorporation has authorized issuance of up to 20 million sharesof Preferred Stock in the discretion of General Cannabis’ Board. The shares of authorized butundesignated Preferred Stock may be issued upon filing of an amended Certificate of Incorporation andthe payment of required fees, with no further stockholder action required. If issued, the rights,preferences, designations, and limitations of such Preferred Stock would be set by the Company’s Boardand could operate to the disadvantage of the outstanding Common Stock. Such terms could include,among others, preferences as to dividends and distributions on liquidation.General Cannabis’ Common Stock is governed under the Securities Enforcement Remedies andPenny Stock Reform Act of 1990.The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 requires additionaldisclosure relating to the market for penny stocks in connection with trades in any stock defined as apenny stock. The commission has adopted regulations that generally define a penny stock to be anyequity security that has a market price of less than $5.00 per share, subject to certain exceptions. Suchexceptions include any equity security listed on NASDAQ and any equity security issued by an issuer thatmeets one of the following criteria: (1) net tangible assets of at least $2 million, if such issuer has been incontinuous operation for three years; (2) net tangible assets of at least $5 million, if such issuer has beenin continuous operation for less than three years; or (3) average annual revenue of at least $6 million, ifsuch issuer has been in continuous operation for less than three years. Unless an exception is available,the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosureschedule explaining the penny stock market and the associated risks. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 41
  42. Recent Events04/14/2011—General Cannabis, Inc. announced that its wholly owned subsidiary, WeedMaps Media,Inc., exceeded $780,000 in gross income in March 2011 and increased its client base to over 1,800dispensaries. As well, the Company reported that it had added 11 employees to the WeedMaps Mediasales team since January 2011.04/11/2011—Announced that its subsidiaries, including WeedMaps Media, General Health Solutions, Inc.(DBA CannaCare and CannaCare.com), and General Merchant Solutions, Inc., moved into more than21,000 square feet of Class A office space in Newport Beach, California, during March 2011, allowing forfurther growth of its technology and sales departments. General Cannabis also reported that GeneralMerchant Solutions had over $2.2 million in total credit card processing volume in March 2011, up from$1.7 million in February 2011. As well, the Company announced that General Health Solutions launchedthe new CannaCare and CannaCare.com name, logo, and website in early April 2011, which replaced theMarijuana Medical Evaluation Centers (MMEC) name and logo that was included in the acquisition ofSynergistic Resources. Moreover, during the first quarter 2011, General Cannabis updated andreconfigured its software and platform, creating a scalable and multifaceted system.04/04/2011—Announced that revenues for its wholly owned subsidiary, WeedMaps Media, increased forthe 16th consecutive month, with the first quarter 2011 being the most successful three-month period in itshistory. In addition, the Company reported that WeedMaps.com surpassed 10,000 subscribers for itsDaily Deals coupon program in less than 30 days after its initial launch and the iPhone® application forWeedMaps.com, called “LegalMaps,” recently exceeded 500,000 total downloads.03/01/2011—Filed Form S-1 to register its securities with the U.S. Securities and Exchange Commission(SEC).02/15/2011—Reported that its subsidiaries, including WeedMaps Media, General Health Solutions, andGeneral Merchant Solutions, continued growth and created new revenue streams.02/04/2011—Announced that its wholly owned subsidiaries demonstrated growth in the first quarter 2011.WeedMaps.com improved revenue consistently for 14 consecutive months ending in January 2011.Further, General Merchant Solutions produced over $1.2 million in merchant processing volume inJanuary 2011, up from $700,000 in December 2010. General Cannabis also reported that it finalized theasset purchase from Revyv, LLC, a technology firm specializing in the online interfacing, marketing, andoptimizing of healthcare facilities in the medical cannabis industry, including the CannabisCenters.comwebsite.01/27/2011—Announced that it signed a commercial lease in Newport Beach, California, that offerssignificantly larger office space than the prior Costa Mesa headquarters, allowing expansion of theCompany’s sales, call center, and marketing divisions as well as the Company’s rapidly growingtechnology division. The Company also reported the hiring of technology specialists David Johnson andJames Johnson (overviewed on page 19).01/25/2011—Provided a corporate and industry update. Through a multitude of technological platforms,search engine optimization (SEO) marketing initiatives, and proprietary software applications, GeneralCannabis is developing relationships and creating profit centers for select industry sectors (medical, legal,dispensaries, and credit card processing) that provide ancillary services to the medical cannabis industry.01/20/2011—Announced the signing of final documents for the acquisition of substantially all the assetsof Revyv, LLC.01/12/2011—Announced that the medical clinics managed by General Health Solutions exceeded $4million in gross sales in 2010. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 42
  43. 01/07/2011—Announced that General Merchant Solutions exceeded $700,000 in merchant processingvolume during in December 2010—its first full month of operation. General Merchant Solutionscommenced full-time operations and processed over $500,000 in merchant volume in November 2010.01/05/2011—Announced that WeedMaps Media reported over $3 million in gross revenues in 2010, upfrom roughly $150,000 in 2009, its first year of operation.12/21/2010—Announced that it entered into an agreement to manage its 11th marijuana medicineevaluation clinic in Victorville, California.12/14/2010—Announced that it formally acquired the assets of Synergistic Resources, LLC, including amanagement contract to operate 10 medical marijuana evaluation facilities in California. The assets of theacquisition now operate under General Health Solutions. The purchase was a combination of cash andstock. As well, the founder of Synergistic Resources, Brent Inzer, assumed the position of manager,business development for General Health Solutions, Inc.12/06/2010—Announced that it signed closing documents to purchase substantially all of the assets ofSynergistic Resources.11/19/2010—Announced that it purchased Weedmaps, LLC for a combination of cash and stock withadditional earn-out potential for Weedmaps’ two co-founders, Justin Hartfield and Keith Hoerling. Mr.Hartfield and Mr. Hoerling entered into long-term employment contracts with General Cannabis andassumed the roles of chief web officer and chief technology officer.11/16/2010—Announced that it received formal approval to change its name from “LC Luxuries Limited”to “General Cannabis, Inc.,” with the new stock symbol as “CANA,” effective on the open of trading onNovember 19, 2010.10/24/2010—Announced that, through its subsidiary US Cannabis, Inc., it entered into a Letter of Intent(LOI) with Synergistic Resources.10/08/2010—Announced that it had hired Tarvaran, Askelson & Company LLP, Certified PublicAccountants, to begin the auditing process of Weedmaps, LLC.10/07/2010—Announced that the Company began offering management services to dispensaries,collectives, and associations.09/30/2010—Announced that it entered into an LOI to acquire a majority interest in Weedmaps.08/27/2010—Announced that US Cannabis began supporting the U.S. medical marijuana market throughthe management of medical clinics in California.08/26/2010—Announced the appointment of Bonni Goldstein, M.D. as an additional director of theCompany, effective August 18, 2010. Dr. Goldstein’s biography is provided on pages 12-13.08/24/2010—Announced that, effective August 18, 2010, it settled over $1.6 million of debt with itsprimary creditors. The Company and its creditor agreed to settle the $1.6 million in debt and, 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. As a result of the debt settlement andafter the issuance of the shares for debt, there was a change in control in the voting shares of theCompany. James Pakulis, General Cannabis’ chief executive officer, and Douglas Francis, theCompany’s chairman and president, each were the beneficial owner of 46.3% of the issued andoutstanding Common Shares in the capital of the Company. Biographies for Mr. Pakulis and Mr. Francisare provided on page 11. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 43
  44. GlossaryCollectives—Groups formed in accordance with California Health and Safety Code §11362.775, whichallows qualified patients, persons with valid identification cards, and the designated primary caregivers ofqualified patients and persons with identification cards to collectively or cooperatively cultivate marijuanafor medical purposes. Members of medical marijuana collectives contribute labor, funds, or materials andreceive medicine. Also called a cooperative or “co-op.”Cultivate—The process of growing plants (specifically crops).Decriminalization—The removal of criminal penalties in relation to certain acts, although regulatedpermits or fines might still apply.Delta-9-Tetrahydrocannabinol (THC)—The psychoactive substance present in marijuana.Dispensaries—Clinics where medicine and medical supplies are dispensed.Domain Monetization—The business of purchasing domains and running advertising on a landing pageto earn advertising revenue from traffic.Emesis—Vomiting.First Amendment—An amendment to the U.S. Constitution that guarantees the right of free expression,including freedom of speech.Head Shops—Shops specializing in articles of interest to users of cannabis and other drugs.Letter of Recommendation—A medical marijuana card or license that allows an individual to purchaseand use medical cannabis legally within a state or district.Medical Cannabis—The use of cannabis and its constituent cannabinoids, such as THC, as a physician-recommended form of medicine or herbal therapy.Merchant Processing—Services and equipment that allow businesses to accept payments by debit orcredit cards.Neuropathic—Having to do with damage to a nerve.Schedule I—Drugs that the U.S. Drug Enforcement Administration (DEA) considers to have a high abuserisk and no safe, accepted medical use.Search Engine Optimization (SEO)—A set of practices that attempts to make a website more attractiveto search engines, thereby encouraging higher visitor traffic and rankings.Strain Type—Various types of marijuana that are typically derived from two types of cannabis plants:Indica and Sativa. Breeders often cross strains to alter a plant’s growing properties. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 44
  45. Intentionally Blank. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 45
  46. Intentionally Blank. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 46
  47. Intentionally Blank. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 47
  48. Jeffrey J. Kraws and Karen B. Goldfarb Phone: (609) 306-2274 Fax: (609) 395-9339 Email: eio@crystalra.com Web: www.crystalra.comLegal Notes and Disclosures: This report has been prepared by General Cannabis, Inc. (“General Cannabis” or“the Company”) with the assistance of Crystal Research Associates, LLC (“CRA”) based upon informationprovided by the Company. CRA has not independently verified such information. In addition, CRA has beencompensated by the Company in cash of seventy-two thousand, five hundred dollars and two hundred and fiftythousand warrants for its services in creating the base report, for quarterly updates, a video interview, and forprinting costs.Some of the information in this report relates to future events or future business and financial performance. Suchstatements constitute forward-looking information within the meaning of the Private Securities Litigation Act of1995. Such statements can be only predictions and the actual events or results may differ from those discusseddue to, among other things, the risks described in General Cannabis’ reports on its Form S-1, 10-K, 10-Q, pressreleases, and other forms filed from time to time. The content of this report with respect to General Cannabis hasbeen compiled primarily from information available to the public released by General Cannabis. The Company issolely responsible for the accuracy of that information. Information as to other companies has been prepared frompublicly available information and has not been independently verified by General Cannabis or CRA. Certainsummaries of activities and outcomes have been condensed to aid the reader in gaining a general understanding.For more complete information about General Cannabis, the reader is directed to the Company’s website atwww.generalcannabis.com. This report is published solely for information purposes and is not to be construed asan offer to sell or the solicitation of an offer to buy any security in any state. Past performance does not guaranteefuture performance. Additional information about General Cannabis and its public filings, as well as copies of thisreport, can be obtained in either a paper or electronic format by calling (888) 693-5219. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 48

×