TREES Corp (Colorado) 8-K, filed Jul 14, 2020
TREES Corp (Colorado) (CANN)
About this 8-K
TREES Corp (Colorado) filed this 8-K on July 14, 2020, reporting on events of July 9, 2020.
Items reported
- Item 5.02: Director or officer change, or executive pay
- Item 5.08: Shareholder director nominations
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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Section 5 – Corporate Governance and Management.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Resignation of Director
On July 9, 2020, Michael Feinsod resigned from the Board of Directors of General Cannabis Corp (the “Company”). In his resignation letter, Mr. Feinsod stated he had expressed to the Board of Directors and management several concerns and disagreements with various matters regarding the Company and that such matters had not been adequately addressed to date. Mr. Feinsod did not specifically identify any concerns or disagreements in his resignation letter. Management and the Board of Directors, however, can surmise that his concerns and disagreements relate to unspecified general claims that the Company had deficiencies in its controls and procedures. The Company believes Mr. Feinsod claims are unfounded and strongly disagrees with his assertions, nevertheless, as a matter of responsible governance, it has initiated a review into such matters. In addition, the Company recently discovered and remediated certain issues arising from an accounting error relating to the Company’s accounting for a warrant derivative liability with respect to certain outstanding common stock warrants with the filing of its most recent Form 10-Q and restated Form 10-K, and is currently in the process of hiring a Chief Financial Officer to fill a current vacancy in the position.
During the period covered by the restated 2019 Form 10-K and the first quarter 2020 Form 10-Q, Mr. Feinsod served as an officer and director of the Company; having served as Interim Chief Executive Officer of the Company from January 7, 2019 through August 5, 2019, as Chief Executive Officer from August 5, 2019 to December 13, 2019, and thereafter as Executive Chairman of the Board of Directors until his resignation on June 24, 2020, and as Chairman of the Board of Directors until his removal on June 28, 2020. On the date of his resignation, he did not serve on any committees of the Board of Directors.
Appointment of Director
On July 13, 2020, Adam Hershey was appointed to the Board of Directors of the Company.
Mr. Hershey has over 25 years of investing experience in the public and private markets. He is currently the Founder, Managing Partner and Portfolio Manager of Hershey Strategic Capital, LP, an opportunistic, alternative asset manager focused on active investing in small cap, public companies, since inception in July 2009 to the present. He invests in both public and private companies, covering multiple industries with a typical investment time frame of 3-5 years focused on fundamental, long term absolute returns across the capital structure. He is the Founder and Managing Member of several investment partnerships that focus on providing growth and expansion capital to talented entrepreneurs and executives to build great businesses and ultimately achieve successful liquidity events.
Mr. Hershey was a Partner and Chief Investment Officer (CIO) at SIAR Capital, LLC. a single Family Office specializing in undervalued and emerging growth companies based in New York City from September 2007 through June 2016, and remained a consultant through December 2016. At SIAR Capital he invested in public and private companies, as well as third-party alternative asset managers and multiple Co-Investment transactions. The investment focus was based on a concentrated portfolio of undervalued and emerging companies working closely with management to foster economic value through the development of companies. SIAR Capital broadened its investment mandate to include opportunistic investments across asset classes. Mr. Hershey was also a director of United Energy Corp. from 2008 until his resignation in February 2018. Mr. Hershey graduated from Tulane University A.B. Freeman School of Business with the degree of B.S.M. in 1994.
On May 29, 2020, the Company entered into a subscription agreement with Hershey Strategic Capital, LP and Shore Ventures III, LP (collectively, the “Investor”) with respect to the sale of shares of common stock and warrants to purchase common stock (collectively, the “securities”). At the first closing, which occurred on May 29, 2020, the Company sold $800,000 of securities to the Investor, representing 2,008,536 shares of common stock and warrants to purchase 1,506,402 shares of common stock. At the second closing, which occurred on June 3, 2020, the Company sold to the Investor $1,385,000 of securities, representing 3,477,278 shares of common stock and warrants to purchase 2,607,958 shares of common stock. A third closing will be held with respect to the sale of $815,000 of the securities if Mr. Hershey is “Approved for Suitability” by the State of Colorado’s Marijuana Enforcement Division (“MED”) within one year of the date of the subscription agreement. This is expected to consist of 2,046,196 shares of common stock and warrants to purchase 1,534,647 shares of common stock. Assuming a third closing is held, Mr. Hershey is expected to beneficially own a total of 7,532,010 shares of common stock and warrants to purchase 5,649,007 shares of common stock. Notwithstanding the foregoing, the subscription agreement provides that Mr. Hershey’s investment shall not exceed 20% or more of the common stock (or securities convertible into or exercisable for common stock) or the voting power of the Company on a post-transaction basis, and the warrant agreement provides that, prior to Mr. Hershey being “Approved for Suitability” by the MED, Mr. Hershey shall not have the right to exercise his warrants to the extent that, after giving effect to such issuance after exercise, Mr. Hershey would beneficially own in excess of 9.99% of Company’s common stock outstanding immediately after giving effect to such issuance.
Because Mr. Hershey is a director and a principal shareholder of the Company, the Company is submitting a formal request to the State of Colorado’s MED to determine whether Mr. Hershey is “Approved for Suitability.” In connection with such submission, Mr. Hershey has agreed with the Company, in the event Mr. Hershey is not “Approved for Suitability” by the MED, to take such actions reasonably required by the MED, including possible divestiture of certain of his ownership interests in the Company and/or his resignation from his positions with the Company.
Pursuant to the terms of the subscription agreement with the Investor, the Company’s Board of Director shall nominate Mr. Hershey (or such other director designated by the Investor) for re-election to the Company’s Board of Directors at the Company’s annual shareholder meetings held in 2020, 2021 and 2022, as applicable, provided that as of the date of each such annual meeting the Investor continues to hold in aggregate at least one-half of the shares of Common Stock purchased by them in aggregate pursuant to the subscription agreement (without giving effect to the exercise of the warrants). The right to designate a director for election or re-election to the Company’s Board of Directors shall terminate on the earlier of (i) the date immediately preceding the Company’s annual meeting of shareholders in 2023, or (ii) the date on which the Investor fails to hold in aggregate at least one-half of the shares of common stock purchased by them in aggregate pursuant to the subscription agreement (without giving effect to the exercise of the warrants). The foregoing descriptions of the subscription agreement and warrant agreement do not purport to be complete and are qualified in their entirety by reference to the subscription agreement and warrant agreement attached as Exhibit 10.1 and Exhibit 10.2, respectively, to the Company’s Form 8-K filed June 1, 2020.
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On June 3, 2020, the Company entered into a consulting agreement with Mr. Hershey pursuant to which he would act as a strategic consultant for the Company, including providing assistance with the sourcing and evaluation of M&A deals, strategic capital and strategic partnerships or joint ventures. Mr. Hershey is paid an initial monthly rate of $8,333 for the services, subject to certain adjustments. The foregoing description of the consulting agreement does not purport to be complete and is qualified in its entirety by reference to the Consulting Agreement attached as Exhibit 10.8 to the Company’s Form 10-Q for the quarter ended March 31, 2020.
Pursuant to the Company’s amended and restated bylaws, the Company’s Board of Directors has the power to fill vacancies on the Board of Directors by the affirmative vote of a majority of the directors serving at the time of the increase. On July 9, 2020, Michael Feinsod retired from the Company’s Board of Directors creating a vacancy. The Company’s Board of Directors elected Adam Hershey as a new director to fill that vacancy. Except as described above, there is no arrangement or understanding between Mr. Hershey and any other persons pursuant to which Mr. Hershey was selected as a director of the Company and Mr. Hershey does not have any direct or indirect material interest in any existing or currently proposed transaction to which the Company is or may become a party. A copy of the press release announcing Mr. Hershey’s appointment is furnished and attached hereto as Exhibit 99.2.
Item 5.08. Shareholder Director Nominations.
The Board of Directors of the Company has determined that it plans to hold its Annual Meeting of Shareholders on Wednesday, September 23, 2020 at 9:00 a.m. MT (the “2020 Annual Meeting”). The record date for the determination of shareholders entitled to receive notice of and to vote at the 2020 Annual Meeting shall be the close of business on Monday, August 10, 2020. Because the date of the 2020 Annual Meeting differs by more than thirty days from the anniversary date of the 2019 Annual Meeting of Shareholders, the Company is using this Form 8-K to provide the due date for the submission of any qualified shareholder proposals or qualified shareholder nominations. The location of the 2020 Annual Meeting will be as set forth in the Company’s proxy statement for the 2020 Annual Meeting, to be filed prior to the 2020 Annual Meeting with the Securities and Exchange Commission (“SEC”).
In accordance with Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), any shareholder proposal intended to be considered for inclusion in the Company’s proxy materials for the 2020 Annual Meeting must be delivered to, or mailed to and received at, the Company’s principal executive offices located at 6565 E. Evans Avenue, Denver, Colorado 80224 Attention: Secretary, on or before the close of business on August 7, 2020, which the Company has determined to be a reasonable time before it expects to begin to print and distribute its proxy materials prior to the 2020 Annual Meeting. In addition to complying with this deadline, shareholder proposals intended to be considered for inclusion in the Company’s proxy materials for the 2020 Annual Meeting must also comply with all applicable SEC rules, including Rule 14a-8, as well as the Company’s bylaws.
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Section 9 – Financial Statements and Exhibits
Item 9.01. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
Not Applicable.
(b) Pro Forma Financial Information.
Not Applicable.
(c) Shell Company Transactions.
Not Applicable.
(d) Exhibits.
| Exhibit No. | Description | |
| 99.1 | Letter of Resignation from Michael Feinsod, dated July 9, 2020. | |
| 99.2 | Press Release, dated July 14, 2020. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| GENERAL CANNABIS CORP | ||
| Dated: July 14, 2020 | By | /s/ Steve Gutterman |
| Steve Gutterman | ||
| Its: Chief Executive Officer |
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Exhibit 99.1
July 9, 2020
VIA EMAIL
General Cannabis Corp. 6565 E. Evans Ave Denver, CO 80224
Attention: Board of Directors
| Re: | Resignation from the Board of Directors |
| of General Cannabis Corp. (the "Company") |
Dear Board of Directors:
As you know, I have expressed to the Board and management several concerns and disagreements with regard to various matters involving the Company. My concerns have not been adequately addressed to date. Accordingly, I am resigning from my position as a director of the Company, effective immediately.
| Sincerely, | |
| /s/ Michael Feinsod | |
| Michael Feinsod |
Exhibit 99.2
General Cannabis Corp. Announces Board Changes
FOR IMMEDIATE RELEASE – Denver, CO (July 14, 2020)—General Cannabis Corp. (OTCQB: CANN), a leading publicly traded Colorado cannabis company, announced today that Adam Hershey, the company’s largest strategic investor and the managing member of Hershey Strategic Capital and Shore Ventures III, is joining the Company’s Board of Directors.
Mr. Hershey has over 25 years of investing experience in the public and private markets. He is currently the Founder, Managing Partner and Portfolio Manager of Hershey Strategic Capital, LP an opportunistic, alternative asset manager focused on active investing in small cap, public companies, since inception in July 2009 to the present.
As previously announced by the Company, Mr. Hershey led an equity investment round into General Cannabis in May and June. The Company believes that by adding Mr. Hershey to the Board now, it can leverage his company-building experience as it continues to execute on its business plan.
Mr. Hershey replaces Michael Feinsod on the General Cannabis Board. Mr. Feinsod resigned from the Board on July 9, 2020.
About General Cannabis Corp
General Cannabis Corp offers a comprehensive national resource for the highest quality service providers available to the regulated cannabis industry. The Company is a trusted partner to the cultivation, production and retail sides of the cannabis business. The Company's website address is www.generalcann.com.
Forward-looking Statements
This press release contains “forward-looking statements” within the meaning of applicable securities laws. Forward-looking statements may be identified by the use of words such as “anticipate”, “believe”, “expect”, “estimate”, “plan”, “outlook”, and “project” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. Forward-looking statements are not a guarantee of future performance and is based upon a number of estimates and assumptions of management in light of management’s experience and perception of trends, current conditions and expected developments, as well as other factors relevant in the circumstances. Although General Cannabis believes that the expectations and assumptions on which such forward-looking statements are based are reasonable, caution must be exercised in relying on forward-looking statements because General Cannabis can give no assurance that they will prove to be correct. Actual results and developments may differ materially from those contemplated by these statements. Forward-looking statements are subject to a variety of risks and uncertainties that could cause actual events or results to differ materially from those projected in the forward-looking statements. Such risks and uncertainties include, but are not limited to, current and future market conditions; the impact of the COVID-19 pandemic on General Cannabis, risks related to federal, state, local and foreign government laws, rules and regulations, including changes in the regulation of medical and recreational cannabis use; as well as those risks and uncertainties discussed from time to time in General Cannabis's most recent Annual Report on Form 10-K and most recent Quarterly Reports on Form 10-Q under the heading "Risk Factors" and in subsequent filings with the Securities and Exchange Commission. The statements in this press release are made as of the date of this release. General Cannabis undertakes no duty to update any forward-looking statements made herein.
Contact:
Steve Gutterman
sgutterman@generalcann.com