TREES Corp (Colorado) 10-K for FY2020

TREES Corp (Colorado) (CANN)

10-K 2021-04-01 For: 2020-12-31

Added on April 06, 2026

About this 10-K

TREES Corp (Colorado) filed this 10-K on April 1, 2021, covering the fiscal year ended December 31, 2020 (FY2020).

Headline figures

Fiscal year ended December 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $7.12M; up 94.2% from $3.67M a year earlier
Net loss: $7.68M; compared with a net loss of $15.48M a year earlier

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COLORADO		90-1072649
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


Title of each class	Name of each exchange on which registered	Ticker symbol
N/A	N/A	N/A


Large accelerated filer	◻	Accelerated filer	◻	Non-accelerated filer	⌧
Smaller reporting company	☒	Emerging growth company	☐


PART I

Item 1.	Business	4
Item 1A.	Risk Factors	11
Item 1B.	Unresolved Staff Comments	24
Item 2.	Properties	24
Item 3.	Legal Proceedings	24
Item 4.	Mine Safety Disclosures	24

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	25
Item 6.	Selected Financial Data	25
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	32
Item 8.	Financial Statements and Supplementary Data	33
Item 9.	Changes In and Disagreements With Accountants On Accounting and Financial Disclosure	70
Item 9A.	Controls and Procedures	71
Item 9B.	Other Information	72

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	73
Item 11.	Executive Compensation	73
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	73
Item 13.	Certain Relationships and Related Transactions and Director Independence	73
Item 14.	Principal Accounting Fees and Services	73

PART IV

Item 15.	Exhibits and Financial Statement Schedules	74
	Signatures	77


Name	Age	Positions
Steven D. Gutterman	51	Chief Executive Officer and Director
Diane Jones	56	Chief Financial Officer


	Year ended December 31,						Percent
	2020		2019		Change		Change
Revenues	$	7,120,040	$	3,666,346	$	3,453,694	94	%
Costs and expenses		(13,185,819)		(12,528,035)		(657,784)	5	%
Other expense		(1,553,043)		(4,946,569)		3,393,526	(69)	%
Net loss from continuing operations		(7,618,822)		(13,808,258)		6,189,436	(45)	%
Loss from discontinued operations		(60,870)		(1,675,539)		1,614,669	(96)	%
Net loss	$	(7,679,692)	$	(15,483,797)	$	7,804,105	(50)	%



	December 31,
		2020	2019
Assets
Current assets
Cash and cash equivalents	$	750,218	$	122,390
Accounts receivable, net of allowance of $27,000 and $111,000 as of December 31, 2020 and 2019, respectively		327,790		85,204
Current portion of notes receivable, net of allowance of $125,000 and $0 as of December 31, 2020 and 2019, respectively		350,000		375,000
Inventories, net		371,799		—
Prepaid expenses and other current assets		744,396		546,970
Assets of discontinued operations		5,551		422,671
Total current assets		2,549,754		1,552,235

Note receivable, net		—		93,333
Right-of-use operating lease asset		1,836,455		—
Property and equipment, net		455,222		1,507,327
Investment, held for sale		208,761		250,000
Intangible assets, net		984,375		—
Goodwill		2,484,200		—
Assets of discontinued operations		—		99,109
Total assets	$	8,518,767	$	3,502,004

Liabilities and Stockholders' Equity

Current liabilities
Accounts payable and accrued expenses	$	1,513,761	$	1,221,195
Interest payable		16,790		93,375
Customer deposits		517,931		562,803
Operating lease liability, current		370,800		—
Accrued stock payable		94,861		80,657
Current portion of notes payable (net of discount)		—		2,269,977
Related party note payable (net of discount)		—		60,374
Warrant derivative liability		561,368		4,620,593
Liabilities of discontinued operations		54,641		357,242
Total current liabilities		3,130,152		9,266,216

Operating lease liability, non-current		1,499,280		—
Long-term notes payable		2,598,965		—
Related party long-term notes payable (net of discount)		289,579		—
Total liabilities		7,517,976		9,266,216
Commitments and contingencies (Note 15)		—		—

Stockholders’ equity (deficit)
Preferred stock, no par value; 5,000,000 shares authorized; no shares issued and outstanding as of December 31, 2020 and 2019		—		—
Common stock, $0.001 par value; 200,000,000 and 100,000,000 shares authorized; 60,813,673 shares and 39,497,480 shares issued and outstanding on December 31, 2020 and 2019, respectively		60,813		39,498
Additional paid-in capital		75,891,414		61,468,034
Accumulated deficit		(74,951,436)		(67,271,744)
Total stockholders’ equity (deficit)		1,000,791		(5,764,212)
Total liabilities & stockholders’ equity (deficit)	$	8,518,767	$	3,502,004


				Additional
	Common Stock			Paid-in		Accumulated
	Shares	Amount		Capital		Deficit		Total
January 1, 2019	36,222,752	$	36,223	$	56,303,061	$	(51,787,947)	$	4,551,337
Sale of common stock, net of issuance costs	3,000,000		3,000		503,614		—		506,614
Warrants issued with the 12% Notes	—		—		392,000		—		392,000
Warrants issued with the 15% Notes	—		—		158,100		—		158,100
Warrants issued with the SBI Note	—		—		28,800		—		28,800
Common stock issued for property and equipment	5,000		5		7,995		—		8,000
Common stock issued upon exercise of stock options	269,728		270		188,500		—		188,770
Stock options granted to employees and consultants	—		—		3,885,964		—		3,885,964
Net loss	—		—		—		(15,483,797)		(15,483,797)
December 31, 2019	39,497,480		39,498		61,468,034		(67,271,744)		(5,764,212)
Sale of common stock, net of issuance costs	7,532,010		7,532		2,992,468		—		3,000,000
Common stock issued to employees	42,735		43		99,957		—		100,000
Common stock issued upon conversion of debt	2,215,892		2,215		954,841		—		957,056
Common stock issued for acquisition of SevenFive Farm	8,859,117		8,859		3,800,092		—		3,808,951
Stock options granted to employees and consultants	—		—		1,424,146		—		1,424,146
Beneficial conversion feature	—		—		233,500		—		233,500
Warrants exercised	200,000		200		172,041		—		172,241
Warrants issued with the 15% Notes	—		—		835,499		—		835,499
Warrants issued with the 10% Notes	—		—		385,400		—		385,400
Modification of warrants	—		—		320,673		—		320,673
Cashless exercise of warrants	2,466,439		2,466		3,204,763		—		3,207,229
Net loss	—		—		—		(7,679,692)		(7,679,692)
December 31, 2020	60,813,673	$	60,813	$	75,891,414	$	(74,951,436)	$	1,000,791


Inventories	$	185,261
Fixed assets		89,490
Tradename		1,050,000
Goodwill		2,484,200
	$	3,808,951


	Year ended
	December 31,
	2020		2019
Total revenues	$	8,074,268	$	6,462,580
Net loss attributable to common stockholders	$	(8,332,387)	$	(17,204,805)
Net loss per common share:	$	(0.16)	$	(0.37)
Weighted average number of basic and diluted common shares outstanding		50,895,301		46,965,898


	Amount
Balance as of December 31, 2018	$	308,111
Additional deposits received		2,252,416
Less: Deposits recognized as revenue		(1,997,724)
Balance as of December 31, 2019		562,803
Additional deposits received		4,316,761
Less: Deposits recognized as revenue		(4,206,433)
Less: Refunds to customers		(155,200)
Balance as of December 31, 2020	$	517,931


							Estimated
			Accumulated				Life
		Gross	Amortization			Net	(in years)
Tradename	$	1,050,000	$	65,625	$	984,375		10


Year ending December 31,	Amount
2021	$	105,000
2022		105,000
2023		105,000
2024		105,000
2025		105,000
Thereafter		459,375
Total	$	984,375


			Number of
	Amount		Shares
Balance as of December 31, 2019	$	80,657		34,469
Employee stock award accrual		19,343		8,267
Consultant stock award		60,900		100,000
Investor stock award accrual		2,185,000		5,485,814
Warrant cashless exercises		33,961		259,415
Stock issued		(2,285,000)		(5,528,550)
Balance as of December 31, 2020	$	94,861		359,415


Current stock price	$	0.53
Exercise price	$	0.56
Risk-free interest rate		0.38 %
Expected dividend yield		—
Expected term (in years)		5.0
Expected volatility		115%


Current stock price	$	0.45 - 0.67
Exercise price	$	0.45
Risk-free interest rate		0.68 - 1.62 %
Expected dividend yield		—
Expected term (in years)		0.83 - 3.06
Expected volatility		112 - 119 %


Current stock price	$	0.82 - 0.92
Exercise price	$	1.30
Risk-free interest rate		1.63 - 1.68	%
Expected dividend yield		—
Expected term (in years)		1.10
Expected volatility		124	%


Current stock price	$	4.18
Exercise price	$	2.35
Risk-free interest rate		2.46	%
Expected dividend yield		—
Expected term (in years)		2.0
Expected volatility		134	%
Number of iterations		5


	May 31,			December 31,			December 31,
	2019			2019			2020
Number of shares underlying the warrants		3,000,000			8,666,667			1,645,807
Fair market value of stock	$	0.95		$	0.63		$	0.48
Exercise price	$	1.30		$	0.45		$	0.40
Volatility		133	%		124	%		108	%
Risk-free interest rate		1.93	%		1.69	%		0.36	%
Warrant life (years)		5.00			4.41			3.41


				Weighted-
		Weighted-		Average
		Average		Remaining
	Number of	Exercise Price		Contractual	Aggregate
	Shares	per Share		Term (in years)	Intrinsic Value
Outstanding as of December 31, 2019	10,883,780	$	1.28	5.4	$	61,000
Granted	2,084,520		0.45
Exercised	—		—
Forfeited or expired	(5,701,880)		1.29
Outstanding as of December 31, 2020	7,266,420	$	1.03	5.9	$	176,000

Exercisable as of December 31, 2020	5,390,600	$	1.28	5.8	$	57,000


	August 6, 2020
Current stock price	$	0.83
Exercise price	$	0.83
Vesting goal	$	4.51
Risk-free interest rate		1.73	%
Expected term (in years)		10
Expected volatility		123	%


	Pre-Trigger			Post-Trigger
Current stock price	$	0.95		$	0.95
Exercise price	$	2.35		$	1.00
Risk-free interest rate		2.21	%		2.21	%
Expected dividend yield		—			—
Expected term (in years)		0.89			0.89
Expected volatility		123	%		123	%


2020	Operations		Cultivation			Investments		Eliminations	Total
Revenues	$	5,195,000	$	2,279,867	$	103,837	$	(458,664)	$	7,120,040
Costs and expenses		(5,312,427)		(1,865,399)		(125,000)		446,480		(6,856,346)
Segment operating (loss) income	$	(117,427)	$	414,468	$	(21,163)	$	(12,184)		263,694
Corporate expenses										(7,882,516)
Net loss from continuing operations									$	(7,618,822)

Exhibit Number		Exhibit Name
2.1		Articles of Merger (Acquisition of shares in Advanced Cannabis Solutions) (Incorporated by reference to Exhibit 2 to our registration statement on Form S-1, File No. 333-193890)
2.2		Asset Purchase Agreement dated as of January 24, 2020, by and between the Company and Dalton Adventures, LLC (incorporated by reference to Exhibit 2.2 to our Form 10-K filed May 14, 2020)
2.3		Asset Purchase Agreement, dated as of April 7, 2020, between the Company and the Organic Seed, LLC (incorporated by reference to Exhibit 2.3 to our Form 10-K filed May 14, 2020)
3.1		Amended and Restated Articles of Incorporation (Incorporated by reference to Exhibit 3.3 to our registration statement on Form S-1, File No. 333-163342)
3.2		Articles of Amendment (name change) (Incorporated by reference to Exhibit 3.1 to our Form 8-K filed on June 18, 2015)
3.3		Amendment to Amended and Restated Articles of Incorporation effective November 23, 2020 (incorporated by reference to Exhibit 3.1 to our Form 8-K filed on November 25, 2020)
3.4		Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.1 to our Form 8-K filed on February 1, 2017)
4.6**		Description of Company’s Common Stock
10.1		Warrant to Purchase Common Stock (Incorporated by reference to Exhibit 4.2 to our Form 8-K filed on April 6, 2016)
10.2		Form of Common Stock Purchase Warrant (Incorporated by reference to Exhibit 4.1 to our Form 8-K filed June 4, 2019)
10.3†		Executive Chairman of the Board and Director Agreement between the Company and Michael Feinsod dated August 4, 2014 (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed on August 5, 2014)
10.4		Form of Employee Nonstatutory Stock Option Agreement (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed on July 16, 2015)
10.5		Warrant to Purchase Common Stock (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed on August 3, 2015)
10.6		Option for the Company to Purchase Note and Equity Interest (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed on November 9, 2015)
10.7		Form of Amendment to Option to Purchase Note and Equity Interest (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed on June 8, 2016)
10.8		Form of Warrant to Purchase Common Stock (Incorporated by reference to Exhibit 10.2 to our Form 8-K filed on June 8, 2016)
10.9†		Employment Agreement, dated as of December 8, 2017, among the Company and Michael Feinsod (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed on December 14, 2017)
10.10†		Form of Time-Based Options Award (Incorporated by reference to Exhibit 10.2 to our Form 8-K filed on December 14, 2017)
10.11†		Form of Performance-Based Options Award (Incorporated by reference to Exhibit 10.3 to our Form 8-K filed on December 14, 2017)
10.12†		Amended and Restated 2014 Equity Incentive Plan (Incorporated by reference to Exhibit 10.2 to our Form 10-Q filed on November 8, 2018)
10.13		Agreement with Flowhub Holdings, LLC Safe dated November 5, 2018 (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed on November 9, 2018)

Exhibit Number		Exhibit Name
10.14		Form of First Amendment to Secured Promissory Note (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed May 6, 2019)
10.15		Form of Securities Purchase Agreement (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed June 4, 2019)
10.16		Promissory Note Purchase Agreement (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed July 24, 2019)
10.17		Form of Promissory Note (Incorporated by reference to Exhibit 10.2 to our Form 8-K filed July 24, 2019)
10.18†		Amendment to Agreements, dated August 6, 2019 (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed August 6, 2019)
10.19		Form of Securities Exchange Agreement (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed September 17, 2019)
10.20		Form of Securities Purchase Agreement (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed September 26, 2019)
10.21		Contract to Buy and Sell Real Estate (Commercial) (Incorporated by reference to Exhibit 10.5 to our Form 8-K filed November 20, 2019)
10.22		Deed of Trust Note dated December 31, 2019 (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed January 14, 2020)
10.23		Deed of Trust, Assignment of Leases and rents, Security Agreement and Fixture Filing dated January 8, 2020 (Incorporated by reference to Exhibit 10.2 to our Form 8-K filed January 14, 2020)
10.24		Form of Unsecured Promissory Note (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed February 24, 2020)
10.25		Form of 2020 A Warrant to Purchase Shares of Common Stock (Incorporated by reference to Exhibit 10.2 to our Form 8-K filed February 24, 2020)
10.26		Convertible Promissory Note (Incorporated by reference to Exhibit 10.3 to our Form 8-K filed February 24, 2020)
10.27		Promissory Note Exchange Agreement (Incorporated by reference to Exhibit 10.4 to our Form 8-K filed February 24, 2020)
10.28†		Employment Agreement, dated December 13, 2019, between Steve Gutterman and the Company (incorporated by reference to Exhibit 10.28 to our Form 10-K filed May 14, 2020)
10.29†		Amendment to Employment Agreement, dated April 29, 2020, between Steve Gutterman and the Company (incorporated by reference to Exhibit 10.29 to our Form 10-K filed May 14, 2020)
10.30†		Amendment to Employment Agreement, dated April 24, 2020, between Michael Feinsod and the Company (incorporated by reference to Exhibit 10.30 to our Form 10-K filed May 14, 2020)
10.31		Subscription Agreement entered into as of May 31, 2020 by the Company, Hershey Strategic Capital, LP and Shore Ventures III, LP (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed June 1, 2020)
10.32		Form of Warrant (Incorporated by reference to Exhibit 10.2 to our Form 8-K filed June 1, 2020)
10.33		Letter Agreement between General Cannabis Corp and Hershey Strategic Capital, LP and Shore Ventures III, LP, dated September 13, 2020 (incorporated by reference to Exhibit 10.1 to our Form 8-K filed September 14, 2020)
10.34		General Cannabis Corp 2020 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to our Form 8-K filed on November 25, 2020)
10.35		Form of Senior Convertible Promissory Note issued by General Cannabis Corp to certain investors (incorporated by reference to Exhibit 10.1 to our Form 8-K filed December 30, 2020)
10.36		Form of Warrant issued by General Cannabis Corp to certain investors(incorporated by reference to Exhibit 10.2 to our Form 8-K filed December 30, 2020)
10.37		Form of Securities Purchase Agreement between General Cannabis Corp and certain investors (incorporated by reference to Exhibit 10.3 to our Form 8-K filed December 30, 2020)

Exhibit Number		Exhibit Name
10.38		Form of Supplemental Note Exchange Agreement for 15% Note Holders between General Cannabis Corp and certain investors (incorporated by reference to Exhibit 10.4 to our Form 8-K filed December 30, 2020)

14.1		Code of Ethics (Incorporated by reference to Exhibit 14.1 to our Form 10-K filed March 31, 2017)
21.1		Subsidiaries (incorporated by reference to Exhibit 21.1 to our Form 10-K filed May 14, 2020)
23.1**		Consent of Marcum LLP
31.1**		Certification pursuant to Section 302 of the Sarbanes—Oxley Act of 2002 of Principal Executive Officer
31.2**		Certification pursuant to Section 302 of the Sarbanes—Oxley Act of 2002 of Principal Financial and Accounting Officer
32.1**		Certification pursuant to Section 906 of the Sarbanes—Oxley Act of 2002 of the Principal Executive and Financial Officers
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

Signature	Title	Date

/s/ Steven D. Gutterman	Chief Executive Officer	April 1, 2021
Steven D. Gutterman