general cannabis research (cana)

†BOLD WORDS ARE REFERENCED IN THE GLOSSARY ON PAGE 44.

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

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.

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

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General Cannabis, Inc.

1300 Dove Street, Suite 100 Newport Beach, CA 92660

Phone: (888) 693-5219 Fax: (888) 844-8949

www.generalcannabis.com

* As of March 1, 2011.

CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW® PAGE 2

Table of Contents

Snapshot ....................................................................................................................................................... 1

Recent Financial Data ................................................................................................................................... 1

Key Points ..................................................................................................................................................... 1

Executive Overview ....................................................................................................................................... 3

Growth Strategy ............................................................................................................................................ 8

Intellectual Property .................................................................................................................................... 10

Company Leadership .................................................................................................................................. 11

Core Story ................................................................................................................................................... 14

Medical Cannabis Overview ................................................................................................................. 14

Media (Technology) .............................................................................................................................. 17

Medical Clinic Management ................................................................................................................. 20

Merchant Processing Services ............................................................................................................. 21

Other Corporate Initiatives .................................................................................................................... 23

Competition ................................................................................................................................................. 25

Potential Milestones .................................................................................................................................... 29

Key Points to Consider ................................................................................................................................ 30

Historical Financial Results ......................................................................................................................... 32

Risks ............................................................................................................................................................ 35

Recent Events ............................................................................................................................................. 42

Glossary ...................................................................................................................................................... 44


Executive Overview General Cannabis, Inc. (“General Cannabis” or “the Company”) is a technology-focused company that provides various services to the medical cannabis industry, ranging from informational websites that help patients locate local dispensaries or physicians to credit card processing services for merchants. General Cannabis operates key domains in the medical cannabis industry, such as WeedMaps.com, which the Company believes to be one of the largest finder sites for dispensaries in the world. As legalization of medical cannabis (marijuana) becomes more prevalent in the U.S., multiple cannabis-related niche markets have emerged, including media, technology, medical clinic management, and merchant opportunities. The Company and its wholly owned subsidiaries (shown in Figure 1) are focused on vertical integration within each of these sectors.

Medical Cannabis Overview Formed from the dried flowers, stems, seeds, and leaves of the Cannabis sativa plant, cannabis contains the psychoactive ingredient delta-9-tetrahydrocannabinol (THC). One of the primary medical benefits cannabis may provide is the relief of chronic or neuropathic pain. The use of cannabis can also improve appetite, 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 past decade. Based on a random national sample of 1,083 adults in 2010, 81% of adults in the U.S. believed that 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 the District of Columbia (Washington, D.C.) have adopted laws that permit the use of medical cannabis under a physician’s supervision and 12 states have legislation pending (Sources: the National Organization for the Reform of Marijuana Laws [NORML] and ProCon.org, March 2011). Nevertheless, cannabis remains classified by the U.S. Drug Enforcement Agency as a Schedule I drug, indicating that it is not currently accepted for medical use. While physicians in the U.S. cannot legally prescribe cannabis to patients, they can recommend its use under the First Amendment.

WHOLLY OWNED SUBSIDIARIES


Figure 1

Source: General Cannabis, Inc.

General Cannabis' Subsidiaries

WeedMaps Media, Inc. (Weedmaps.com)

General Health Solutions, Inc.

(Marijuanamedicine.com)

General Merchant Solutions, Inc.

(GeneralCannabis.com)

General Marketing Solutions, Inc.

(CannabisCenters.com)

General Management Solutions, Inc.

US Cannabis, Inc.

CannaCare Management, Inc.


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, medical cannabis represents only a small portion of this market. Specifically, the U.S. market for medical cannabis is approximated at $1.7 billion, with expectations to reach $8.9 billion by 2016, fueled by improved regulatory clarity and an increasing number of eligible patients as more states adopt legislation permitting medical marijuana use (Source: See Change Strategy LLC’s The State of the Medical Marijuana Markets 2011, March 2011). While an estimated 730,000 patients have received medical recommendations to use cannabis 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 be two of the largest markets for medical cannabis in the U.S. There are an estimated 300,000 to 400,000 medical marijuana patients in California (Source: Insurance Journal, September 14, 2009). General Process for Obtaining Medical Marijuana in States That Permit Its Use Patients must follow a specific process in order to obtain a Letter of Recommendation for medical cannabis. Also called a medical marijuana card or license, a Letter of Recommendation allows an individual to purchase and use medical cannabis legally within a state or district. First, many patients visit a general physician who determines if the individual has an ailment that can be treated with medical cannabis. 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 other conditions detailed in Table 6 (page 17). If the physician determines that the patient qualifies based on an evaluation and medical records, the physician may then issue a signed Letter of Recommendation for medical marijuana as well as discuss the dosage and proper use of the cannabis. Once a Letter of Recommendation is received, the patient may then visit a medical marijuana dispensary, which verifies the Letter of Recommendation prior to purchasing the medicine.

* As of March 2011.

STATES/AREAS THAT PERMIT THE USE OF MEDICAL CANNABIS (OR HAVE LEGISLATION PENDING)*

Figure 2

Sources: General Cannabis, Inc., ProCon.org, and Crystal Research Associates, LLC.

Permits the use of medical cannabis

WA

OR

CA

AZ

NV

MT

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NM

MI

MEVT

RI

NJ

Washington, D.C.

AK

HI

Legislation pending to permit the use of medical cannabis

ID

KS

OK

ILWV

NY

NH

MA

CT

DEMD

IA


Media (Technology) General Cannabis is a technology-based company as each aspect of its business plan is dependent on the utilization of the Internet and other technologies. WeedMaps Media, Inc. is a wholly owned subsidiary of 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 a combination 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 General Cannabis’ chief web officer and chief technology officer, respectively. WeedMaps Media’s primary operation is WeedMaps.com (Figure 3), an online service that allows patients to find local medical marijuana dispensaries and connect with other patients. WeedMaps.com specializes in search engine optimization (SEO), ranking first through third for widely used industry search terms, including “dispensary.” As a result, WeedMaps.com has become one of the largest finder sites for dispensaries in the U.S., with over 100,000 registered users and an estimated six million page views per month. In January 2011, the Company reported an increase in traffic volume for WeedMaps.com, which it attributed to a newly launched tool that allows users to search by medical marijuana strain type, price, popularity, and location. WeedMaps.com presently tracks the availability of over 62,000 products. WeedMaps.com provides its services to patients and allows dispensaries to be listed on the site at no cost. 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 to WeedMaps.com, up from 1,200 dispensaries in January 2011. In early 2011, the Company launched a daily coupon application to encourage repeat visitors by promoting daily discounts and coupons on WeedMaps.com. Within the first 30 days of launch, over 10,000 patients subscribed to the Groupon®-like service. Advertising revenues for the site, which was launched in January 2010, have increased roughly 15% per month and exceeded $3 million for 2010. WeedMaps Media also recently re-launched WeedFreebies.com—a website where patients can win prizes 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 applications for both iPhone® and Android™ platforms. Recently, Apple Inc. (AAPL-NASDAQ) approved version 3.0 of the WeedMaps.com iPhone® application, “LegalMaps,” which integrates Daily Deals and enables patients to login to their WeedMaps.com account and post reviews via their phone, without ever having to visit the website. The LegalMaps application has exceeded 500,000 downloads since its release in late 2009. Medical Clinic Management General Cannabis’ wholly owned subsidiary, General Health Solutions, Inc. (DBA CannaCare and CannaCare.com), specializes in the turnkey management of medical marijuana clinics through a contractual arrangement with a professional medical corporation. General Health Solutions is responsible for all business activities, including billing, collections, administrative functions, and marketing. Consequently, this allows physicians to focus on treating patients. In December 2010, General Health Solutions 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 of physician-owned healthcare facilities throughout California—for a combination of cash and stock, which included 10 medical marijuana clinics. The Company changed the name from MMEC to CannaCare in March 2011. The medical management model adopted from Synergistic Resources has been developed over the past four years and includes assisting with site location, staffing, administration, and human

WEEDMAPS.COM


Figure 3



resources. Since the acquisition of Synergistic Resources, General Health Solutions has increased the total number of medical clinics under its management to 14. The Company has plans to open or manage at least 20 clinics by year-end 2011. General Cannabis believes that General Health Solutions has become one of the largest aggregators of cannabis data in the U.S., which can be a useful tool in evaluating potential locations for medical cannabis 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 in learning about obtaining a Letter of Recommendation or scheduling an appointment at one of its 14 medical 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 and appointments in 2011. The scalability of Synergistic Resources’ business model was crucial in General Cannabis’ decision to acquire the company. General Cannabis believes that it can also easily scale its strategy 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 are designed 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 the Company’s in-house studio. General Cannabis aims to monetize the CannaCare.com family of websites through several techniques: (1) selling advertising space (e.g., to physicians and attorneys); (2) selling business services; (3) selling proprietary office management software; and (4) providing marketing services for physicians (where legally permitted). Merchant Processing Services In the medical marijuana industry, differences between federal and local laws have limited the merchant processing 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. Many banks have ceased offering accounts or are hesitant to begin offering financial services to medical marijuana 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 combined annual 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 medical cannabis industry as well as to the automotive, restaurant, and furniture industries. General Cannabis’ wholly owned subsidiary, General Merchant Solutions, Inc. (DBA Cannapay Merchant Services), offers merchant processing services to medical cannabis-related entities, including WeedMaps.com subscribers as 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 dispensaries throughout the U.S. General Cannabis’ frequent communication with these dispensaries allows ample opportunity to discuss quality merchant processing services with existing clients—potentially benefitting both parties. 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. Marketing in the Medical Marijuana Industry General Marketing Solutions, Inc. is a wholly owned subsidiary of General Cannabis. Its primary operation is CannabisCenters.com, which was acquired in early 2011 together with SafeaccessMD.com and substantially all of the assets of Revyv, LLC—a technology company specializing in the online interface, marketing, and optimization of healthcare facilities in the medical cannabis industry. The Company believes that the acquisition may strengthen its position in the market by increasing its marketing capabilities in states where it does not yet have a healthcare presence.


CannabisCenters.com helps patients find physicians in the U.S. that support and recommend medical cannabis. As well, the website includes a patient verification system that serves as an internal control system, 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 Initiatives Beyond 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 and regulations, and providing educational support seminars presented by physicians explaining the benefits of medical cannabis to the public. Corporate History, Headquarters, and Employees General 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 in November 2006, to LC Luxuries Limited in January 2010, and ultimately to General Cannabis, Inc. in November 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 traded companies to support the medical marijuana market through media, technology, medical management, merchant processing services, and marketing. General Cannabis hopes to become a fully reporting company 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 Merchant Solutions, Inc.; and (5) General Management Solutions, Inc., which provides human resources services to employees. As well, the Company has two additional wholly owned subsidiaries—US Cannabis, Inc. and CannaCare Management, Inc.—that are relatively inactive at this time. As of April 2011, General Cannabis had 77 employees and contractors, including three executive officers, 52 individuals focused on marketing, publishing, and development, and 22 administrative workers. General Cannabis intends to outsource 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. As consideration for the settlement of debt, the creditors have agreed to accept restricted Common Shares in the capital of the Company at a settlement price of $0.03 per share.


Growth Strategy General Cannabis believes that it has become one of the leaders in the medical cannabis industry. As a result, the Company has been presented with a range of novel business models and ideas. General Cannabis’ objective is to evaluate each model’s growth and profitability potential as well as the costs and risks 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 medical cannabis 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. General Cannabis may also evaluate the financial viability of creating, entering, or expanding into the markets within the medical cannabis industry listed in Table 1.

Media and Technology General Cannabis is expanding its proprietary medical cannabis finder site, WeedMaps.com (operated by the Company’s WeedMaps Media subsidiary), to include information about physicians, lawyers, and skate and surf shops in the second quarter 2011. As well, the Company is developing CannabisCenters.com to reach middle-aged individuals or the baby boomer generation who are more likely to seek quantitative evidence regarding cannabis and its effects based on professional medical and legal opinions. General Cannabis 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 these techniques to other areas of the medical cannabis market as well as to other industries. The Company has added 11 individuals to its WeedMaps Media sales team since January 2011 to support an increasing number of dispensaries opening in states that have approved the medical use of cannabis as well as a growing variety of products and services offered to these dispensaries by WeedMaps Media, including new dispensary video tour packages. Medical Clinic Management Through its wholly owned subsidiary, General Health Solutions, the Company manages 14 medical cannabis clinics throughout California. At present, the clinics average 500 calls daily and accommodate roughly 4,000 patients per month. General Health Solutions aims to double its volume of calls and set appointments in 2011. As well, the Company has plans to manage at least 20 clinics by year-end 2011 in states that have approved the use of medical cannabis.

▪ 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 events

POTENTIAL MARKETS WITHIN THE MEDICAL CANNABIS INDUSTRY


Table 1



Merchant Credit Card Processing General Cannabis’ subsidiary, General Merchant Solutions, offers credit card processing services to merchants. The Company’s first full month of operations was December 2010, during which it generated over $700,000 in merchant processing volume, followed by $1.2 million and $1.6 million in January 2011 and February 2011, respectively. In March 2011, General Merchant Solutions had over 170 clients and reported $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 a month in credit card transactions on average. Lead time for clients to reach $15,000 per month is 90 days. General Merchant Solutions aims to obtain over 500 clients by year-end 2011. As well, during the second quarter 2011, the Company plans to increase its sales personnel to 10 individuals (up from four at present), enabling General Merchant Solutions to continue expanding its credit card processing services to companies outside the cannabis sector. In addition to the medical cannabis industry, the company currently provides credit card processing services to the automotive, restaurant, and furniture industries.


Intellectual Property General Cannabis uses a combination of trademark, copyright, trade secret, and confidentiality agreements 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 and Synergistic Resources, LLC acquisitions (summarized on page 20). General Cannabis presently owns more than 250 Internet domain names related to the cannabis industry. Intrinsic value in General Cannabis’ technology department has been developed through various custom development 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 to track the movement of strains, advertised prices, dispensaries, and inventory, allowing the Company to accurately present what is available to patients in real-time. The Company has over 1,800 dispensaries in the U.S., which are able to update their inventory through WeedMaps.com on a daily basis.


Company Leadership Management General Cannabis’ management team has expertise in technology, finance, management, and operations. Table 2 summarizes the Company’s key management, followed by detailed biographies.

James Pakulis, Chairman, Chief Executive Officer, and Director Mr. 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 Company since January 2011. He served as General Cannabis’ chairman of the Board, president, and chief operating officer (COO) from August 2010 to November 2010. Mr. Pakulis was an advisor to Synergistic Resources from January 2010 until General Cannabis acquired its assets in December 2010. Since June 1995, 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 all mergers and acquisitions in the western U.S. for the former CliniCorp, Inc., which specialized in healthcare clinic management and operations. From 1987 to 1990, Mr. Pakulis was involved in the healthcare industry, overseeing day-to-day operations for several closely held multi-disciplinary clinics in the Los Angeles area. Mr. Pakulis received a B.A. in English from Ohio State University in 1987. Douglas Francis, President, Chief Operating Officer, and Director Mr. Francis has been a director since August 2010, president since November 2010, CEO from August 2010 to November 2010, and chairman of the Board from November 2010 to January 2011. In November 2009, Mr. Francis also became COO of WeedMaps, LLC. From 2008 until the acquisition of its assets in December 2010, Mr. Francis was the CEO of Synergistic Resources. From January 2001 to October 2007, Mr. Francis served in a senior management position at two financing-related firms in Southern California. Mr. Francis received a B.S. in finance from Chapman University in 2001. Justin Hartfield, Chief Web Officer Mr. Hartfield has served as the chief web officer of General Cannabis since November 2010. He is also the co-founder and CEO of WeedMaps. Mr. Hartfield serves on multiple Boards, including the National Cannabis Industry Association and the Prometheus Institute, a nonprofit organization focusing on increasing civic engagement through technology. Mr. Hartfield is an authority on SEO strategies and has held numerous positions in the Internet technology field. Mr. Hartfield received a B.S. in information and computer science from the University of California Irvine (UC Irvine) and is currently enrolled in the Paul Merage School of Business MBA program at UC Irvine.

James Pakulis Chairman, Chief Executive Officer, and Director

Douglas Francis President, Chief Operating Officer, and Director

Justin Hartfield Chief Web Officer

Keith Hoerling Chief Technology Officer

Munjit Johal, MBA Chief Financial Officer, Treasurer, Corporate Secretary, and Director

MANAGEMENT


Table 2



Keith Hoerling, Chief Technology Officer Mr. Hoerling has served as the chief technology officer (CTO) of General Cannabis since November 2010. He is also CTO of the Prometheus Institute. As an experienced developer, Mr. Hoerling has been recruited by Fortune 100 technology companies internationally and has consulted with leading Internet firms in California, such as Internet Brands, Inc. (INET -NASDAQ). Mr. Hoerling received a B.S. in information technology from Chapman University in 2003. Munjit Johal, MBA, Chief Financial Officer, Treasurer, Corporate Secretary, and Director Mr. 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 the private and public sectors. Mr. Johal has worked primarily with troubled companies in turnaround situations. 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 earned an MBA from the University of San Francisco in 1980. He received a B.S. in history from the University of California, Los Angeles in 1978. Board of Directors General Cannabis’ Board of Directors oversees the conduct of and supervises the Company’s management. Table 3 provides a summary of Board members, followed by detailed biographies.

James Pakulis, Chairman, Chief Executive Officer, and Director Biography provided on page 11. Douglas Francis, President, Chief Operating Officer, and Director Biography provided on page 11. Munjit Johal, MBA, Chief Financial Officer, Treasurer, Corporate Secretary, and Director Biography provided above. Bonni Goldstein, M.D., Director Dr. Goldstein is a California-licensed, Board-certified medical doctor who has practiced medicine for more than 20 years. Dr. Goldstein has expertise in both medicine and business. Dr. Goldstein has been a practicing medical doctor since 1993. In 1990, she obtained an M.D. from the Robert Wood Johnson Medical School in Camden, New Jersey. After an internship and residency at Children’s Hospital Los Angeles, she was selected to be the chief resident of the program. She worked in the Community Health Center, evaluating low-income pediatric patients while also acting as clinical instructor for the University of Southern California’s Keck School of Medicine. She became an attending physician in the Los Angeles County + University of Southern California (LAC+USC) Pediatric Emergency Department, handling complex emergencies and instructing medical students and residents in the art of assessing pediatric illness. Dr. Goldstein is also a published medical author, creating questions for Exam Master®, a Board

James Pakulis Chairman, Chief Executive Officer, and Director

Douglas Francis President, Chief Operating Officer, and Director

Munjit Johal, MBA Chief Financial Officer, Treasurer, Corporate Secretary, and Director

Bonni Goldstein, M.D. Director

BOARD OF DIRECTORS


Table 3



preparation program. She worked in the field of private medicine as an attending physician at Little Company of Mary Hospital in Torrance. Dr. Goldstein started a children’s educational program called Brainiacs Science Discovery Center, where young children were educated on hands-on life, physical, and earth sciences. Most recently, Dr. Goldstein joined CannaCare (formerly Marijuana Medicine Evaluation Centers [MMEC]) as medical director and as a physician evaluating ill patients for use of medical cannabis.


Core Story As 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”) aims to 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 cannabis industry. General Cannabis aims to create a standard of professionalism that the Company believes is absent 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 and demand of the others. Collectively, General Cannabis and its subsidiaries aim to provide quality and effective healthcare by employing cutting-edge technology, media, and management services.

It is important to note that General Cannabis does not grow, harvest, cultivate, possess, or distribute medical cannabis; rather, the Company provides services that help physicians, dispensaries, and end-users within the industry build relationships and manage businesses. The Company develops relationships with businesses and patients using various technological platforms, search engine optimization (SEO) marketing advancements, and proprietary software applications. MEDICAL CANNABIS OVERVIEW Cannabis 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 purposes is designed to apply the beneficial effects of the agent—such as pain relief, improved appetite, decreased nausea, or muscle relaxation—to a patient. One of the principal medical benefits cannabis may provide is the relief of chronic or neuropathic pain. A study examining the effect of medical marijuana in HIV patients experiencing neuropathic pain showed that 46% of patients administered medical marijuana experienced at least a 30% reduction in pain versus 18% of those receiving placebo (Source: Neuropsychopharmacology 2008 34[3]:672-80). Inhaling medical marijuana may also be beneficial to patients who have difficulty completing everyday tasks due to frequent 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 safer method than traditional smoking as it avoids respiratory toxins found in cannabis smoke (Source: Journal of Cannabis Therapeutics 2001, 1[3-4]:153-170). As well, medical cannabis therapy can improve the appetite of patients who are experiencing decreased appetite due to a range of illnesses, including cancer and HIV. The loss of appetite in an ill patient may inhibit the body’s ability to combat infection or heal damaged tissues or cells. Medical marijuana may stimulate 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) may cause nausea or vomiting. THC has been shown to reduce these symptoms in a percentage of cancer patients. To this extent, dronabinol (tetrahydrocannabinol)—a synthetic form of THC—has been approved

▪ General Management Solutions, Inc.

▪ CannaCare Management, Inc. (CannaCare.com)


Table 4


WHOLLY OWNED SUBSIDIARIES

▪ General Marketing Solutions, Inc. (CannabisCenters.com)

▪ General Merchant Solutions, Inc. (GeneralCannabis.com)

▪ General Health Solutions, Inc. (MarijuanaMedicine.com)

▪ WeedMaps Media, Inc. (WeedMaps.com)

▪ US Cannabis, Inc.


in the U.S. for more than 25 years to treat chemotherapy-induced nausea and vomiting (emesis) in patients who failed to respond to other anti-emetic drugs (Source: the World Health Organization [WHO]). Market Opportunity Cannabis is classified by the U.S. Drug Enforcement Agency as a Schedule I drug, indicating that it is not currently accepted for medical use. While physicians in the U.S. cannot legally prescribe cannabis to patients, they can recommend its use under the First Amendment. Accordingly, the use of cannabis in the medical environment has gradually become more accepted in the U.S. As summarized in Table 5, 15 states and the District of Columbia (Washington, D.C.) have adopted laws that exempt patients who use medical cannabis under a physician’s supervision from criminal penalties under state law. This is generally referred to as “decriminalization” as it removes criminal penalties for adults who possess and use 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.

As well, in June 2010, the U.S. Department of Veterans Affairs clarified that the use of medical cannabis is 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 illegal drugs. Prior to this announcement, many patients who used medical cannabis within the states that permit its use feared that they could lose access to their pain medication because there was no written exception to this rule for medical marijuana. The cannabis industry is highly fragmented, lacking any major regional or national companies. While CNBC estimates the U.S. marijuana market to be between $35 billion and $45 billion (as illustrated in Figure 4 [page 16]), medical cannabis at present only represents a portion of this market, as it is limited to use within 15 states and Washington, D.C. The U.S. market for medical cannabis is estimated at $1.7 billion in 2011, expected to reach $8.9 billion by 2016 as more states decriminalize medical cannabis use and regulations surrounding the industry become more clear (Source: See Change Strategy LLC’s The State of the Medical Marijuana Markets 2011, March 2011). While an estimated 730,000 patients have received medical recommendations to use cannabis in the U.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 be two of the largest markets for medical cannabis in the U.S. In California, there are an estimated 300,000 to 400,000 medical marijuana users (Source: Insurance Journal, September 14, 2009). In Colorado, the Department of Public Health and Environment reported that nearly 95,500 patients had valid registry identification cards for the medical use of marijuana as of June 30, 2010.

▪ Alaska ▪ Hawaii ▪ Nevada ▪ Rhode Island

▪ Arizona ▪ Maine ▪ New Jersey ▪ Vermont

▪ California ▪ Michigan ▪ New Mexico ▪ Washington

▪ Colorado ▪ Montana ▪ Oregon ▪ Washington, D.C.

▪ Connecticut ▪ Illinois ▪ Maryland ▪ New York

▪ Delaware ▪ Iowa ▪ Massachusetts ▪ Oklahoma

▪ Idaho ▪ Kansas ▪ New Hampshire ▪ West Virginia

DECRIMINALIZATION OF MEDICAL CANNABIS IN THE U.S.


Table 5

Source: the National Organization for the Reform of Marijuana Laws (NORML), March 2011.

U.S. States/Areas That Permit Medical Cannabis Use

U.S. States That Have Legislation Pending to Approve Medical Cannabis Use


As well, acceptance of medical cannabis in the U.S. has risen over the past decade. Based on a random national sample of 1,083 adults in 2010, 81% of adults in the U.S. believed that physicians should be allowed to prescribe marijuana to treat patients, up from 69% in 1997 (as shown in Figure 5).

General Process for Medical Marijuana Use Patients must follow a specific process in order to obtain a Letter of Recommendation for medical cannabis (also called a medical marijuana card or license), which allows an individual to purchase and use medical cannabis legally within approved states and municipalities in the U.S.

ABC NEWS/WASHINGTON POST POLL: SUPPORT FOR LEGALIZING MEDICAL MARIJUANA

Figure 5

Source: ABC News/Washington Post Poll, January 2010.

69%

81%

27%18%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1997 2010

Yes

No

U.S. MARIJUANA MARKET SIZE: MODEL COMPARISON

Figure 4

Source: "Marijuana & Money," a CNBC Special Report (April 2010), citing Standard & Poor's Industries Report.

ALCOHOL($188 B)

TOBACCO($75 B)

0HigherPrices/

Volume

MARIJUANA(Likely range $35 B-$45 B)

LowerPrices/Volume

$0 $50 $100 $150 $200RANGES OF MARKET SIZE ($ BILLION)


First, patients must visit a physician, who determines whether the individual has an ailment that can be treated 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 called the Compassionate Use Act of 1996) and summarized in Table 6.

In order to obtain a Letter of Recommendation for medical marijuana, the individual must first be examined by a physician or healthcare specialist, depending on the state. It is requested of the patient to bring medical records or other documentation that confirm the medical condition. The physician then performs a physical examination of the patient focusing on the medical condition for which the patient is requesting to use medical marijuana. If the medical marijuana physician determines that the patient qualifies based on the physical evaluation and medical records, he/she may then issue a signed Letter of Recommendation 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 the Letter 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 plan is dependent on the utilization of the Internet and other technologies. General Cannabis presently owns more than 250 Internet domain names related to the cannabis industry. WeedMaps Media, Inc. is a wholly owned subsidiary of General Cannabis. Its primary operation is WeedMaps.com (shown in Figure 6 [page 18]), an online service that allows patients to find local dispensaries and to connect with other patients. General Cannabis believes that WeedMaps.com has become the largest finder site for medical dispensaries in the U.S. since it was founded in 2008, with over 100,000 registered patients and an estimated six million page views per month. Roughly one third of the visits to the WeedMaps.com site are unique. In January 2011, the Company reported an increase in traffic volume for WeedMaps.com, which it attributed to a newly launched tool called Medical Marijuana Stock 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 1,800 dispensaries.

▪ 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 patient's safety or physical or mental health


Table 6

SERIOUS MEDICAL CONDITIONS THAT QUALIFY FOR MEDICAL USE OF CANNABIS AS IDENTIFIED IN CALIFORNIA'S PROPOSITION 215

Source: California Senate Bill 420 (http://info.sen.ca.gov).


WeedMaps.com provides its services to patients and allows dispensaries to be listed on the site at no cost. The Company generates revenue by charging a monthly fee for advertisements based on the placement as well as the language and content used. As of March 2011, over 1,800 dispensaries were paid 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 million for 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 a combination of cash and stock, with additional earn-out potential for Weedmaps’ two co-founders, Justin Hartfield and Keith Hoerling. Under the agreement, General Cannabis acquired Weedmaps as well as its domain name “WeedMaps.com” as part of the Company’s goal of developing a significant Internet presence in the medical cannabis industry and its focus on innovation. Mr. Hartfield and Mr. Hoerling immediately assumed the roles of chief web officer and chief technology officer, respectively, entering into long-term employment contracts with General Cannabis as part of the transaction. The WeedMaps.com acquisition allows General Cannabis to offer quality service to its end users while creating multiple vertical operational and B2B services that simultaneously capture significant market share and facilitate the creation of ancillary businesses. WeedMaps.com has specialized in search engine optimization (SEO) since 2009. General Cannabis reports 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 two high-ranking applications for both iPhone® and Android™ platforms (as illustrated in Figure 7 [page 19]).

WEEDMAPS.COM


Figure 6



In early 2011, the Company launched a daily coupon application called Daily Deals to encourage repeat visitors by promoting daily discounts and coupons on WeedMaps.com. Over 10,000 patients subscribed within the first 30 days of launch. WeedMaps Media also recently re-launched WeedFreebies.com—a website where patients can win prizes daily—which immediately created opportunities to produce additional advertising revenue. In March 2011, WeedFreebies.com generated more than 400,000 page views, up from over 300,000 page views in February 2011. The Company reports that the success of WeedFreebies.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 areas for physicians, lawyers, and skate and surf shops in the second quarter 2011. CannaCare.com CannaCare.com is a medical cannabis portal that specializes in medical marijuana evaluations and facilitates interaction between patients, physicians, and legal experts. The website helps patients through every step of the medical evaluation process, from setting up an appointment via a call center or online to providing 24/7 patient verification and legal services in the event that a medical cannabis recommendation is called into question by law enforcement. During 2011, the Company plans to target CannaCare.com to the baby boomer generation and begin generating revenue streams through advertisements and sponsors. Assembling a Solid and Experienced Technology Team General Cannabis has recently hired four technology specialists, including David Johnson and James Johnson, the co-founders of technology firm Revyv, LLC. Mr. David Johnson has more than 10 years of combined 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, is experienced in domain monetization, social media, and online coupons.


WEEDMAPS.COM APPLICATION FOR IPHONE® AND ANDROID™ PLATFORMS


Figure 7

Android™iPhone®


MEDICAL CLINIC MANAGEMENT General Health Solutions, Inc. (DBA CannaCare and CannaCare.com), a wholly owned subsidiary of General Cannabis, specializes in the turnkey management of medical marijuana clinics. Through its management contract, General Health Solutions requires all medical doctors to be licensed and in good standing with the state’s Medical Board. General Cannabis believes that General Health Solutions is one of the largest aggregators of cannabis data in the U.S., which can be a useful tool in evaluating potential locations for medical cannabis health facilities. General Health Solutions’ database presently includes over 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 management contracts of Synergistic Resources, LLC (DBA Marijuana Medical Evaluation Centers [MMEC]), for a combination of cash and stock. Synergistic Resources’ medical management model was developed over the past four years and includes assisting with site location, staffing, administration, and human resources. As well, General Cannabis acquired Synergistic Resources’ Internet marketing and advertising template, which includes SEO processes and implementation strategies that generate approximately 500 calls daily to General Health Solutions’ call center and over 4,000 patient visits per month from individuals seeking to learn about the process of obtaining a Letter of Recommendation for the medical use of cannabis under physician supervision. As an added benefit to customers, the Company also provides 24/7 verification processing services to third parties seeking to verify the validity of a patient’s Letter of Recommendation. On average, these calls translate to between 100 and 200 appointments set per day. General Health Solutions 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 to acquire the company. The Company believes that combining General Cannabis’ SEO and Internet expertise with Synergistic Resources’ established management template could facilitate growth. As well, Synergistic Resources’ founder, Brent Inzer, assumed a position as manager, business development for General Health Solutions. Under the terms of the acquisition agreement, General Cannabis assumed all marketing and advertising responsibilities 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 in gross sales in 2010. The physicians working at these medical offices are California-licensed and have no preexisting reprimands or suspensions. This division of General Health Solutions has recently been renamed CannaCare from MMEC. Continuing Expansion The Company is focused on the continued expansion of its General Health Solutions subsidiary. General Cannabis believes that General Health Solutions is one of the largest management companies in California 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 states beyond California that permit the utilization of medical cannabis. The Company plans to open or manage at least 20 clinics by year-end 2011.


MERCHANT PROCESSING SERVICES Merchant processing services allow businesses to accept payments by debit or credit cards. The Federal Reserve estimated that the merchant processing industry performed roughly $3.4 trillion in credit and debit card transactions in 2010 (Source: the Federal Reserve System’s 2010 Federal Reserve Payments Study: Noncash Payment Trends in the United States: 2006-2009, December 8, 2010). Given consumer demand to use both credit and debit cards, the merchant processing industry is also highly profitable. To this extent, roughly 2,000 companies provided credit card processing services in the U.S. in 2010 for combined annual revenues of more than $40 billion (Source: First Research, Inc., a market analysis company, Credit Card Processing, February 2011). Differences between federal and local laws have limited the merchant processing services that are available to dispensaries and other medical cannabis-related entities (Source: CreditCards.com, Medical Marijuana Sellers Can’t Take Their Money to the Bank, February 8, 2011). Many banks have ceased offering accounts or are hesitant to begin offering financial services to medical marijuana dispensaries due to the complex and inconsistent legal environment associated with the industry. While 15 states and Washington, D.C. have legalized marijuana for medical use and an additional 12 states have legislation pending, 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 all medical 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. General Cannabis’ wholly owned subsidiary, General Merchant Solutions, offers merchant processing services to medical cannabis-related entities, including WeedMaps.com subscribers as well as to the 14 medical marijuana healthcare facilities managed by General Health Solutions. The Company has invested significant time locating several unique resources to finance the operation and provide credit card swipe and processing services. General Merchant Solutions began accepting applications on November 15, 2010, and approved 64 applications by year-end 2010. At the end of the first quarter 2011, the Company had approved 170 applications. The Company believes that its relationships and frequent communication with over 1,800 dispensaries in the U.S. through WeedMaps.com provides a live audience to which General Merchant Solutions can simply cross-sell merchant services, potentially benefitting both parties. As shown in Figure 8, 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. The Company believes that its merchant processing services are synergistic with General Cannabis’ highly trained sales force and the WeedMaps.com initiative. General Merchant Solutions has also engaged new niches outside of cannabis.

GENERAL MERCHANT SOLUTIONS' CREDIT CARD PROCESSING VOLUME (DEC. 2010 TO MAR. 2011)

Figure 8



$700,000

$1,200,000

$1,600,000

$2,200,000

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

Dec. 2010 Jan. 2011 Feb. 2011 Mar. 2011

Vo

lum

e


General Cannabis anticipates that the merchant division could provide significant growth and profits in 2011. General Merchant Solutions aims to secure 50 new clients per month in 2011, each processing roughly $15,000 a month in credit card transactions. Lead time for clients to reach $15,000 per month is 90 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 oversee growth in this segment. During the second quarter 2011, the Company plans to increase its sales personnel to 10 individuals (up from four), enabling General Merchant Solutions to continue expanding its credit card processing services to companies outside the medical cannabis industry. The Company also currently provides services to the automotive, restaurant, and furniture industries. Marketing in the Medical Marijuana Industry General Marketing Solutions, Inc. is a wholly owned subsidiary of General Cannabis whose primary operation is CannabisCenters.com, a website that helps prospective patients find physicians who support and recommend medical cannabis. Acquisition of Technology Firm Revyv, LLC In early 2011, General Cannabis acquired substantially all of the assets of Revyv, LLC—a technology company specializing in the online interface, marketing, and optimization of healthcare facilities in the medical cannabis industry. The Company believes that the acquisition may create significant synergies and cost savings for its General Heath Solutions subsidiary as well as strengthen its position in the market by increasing its marketing capabilities in states where it does not yet have a healthcare presence. 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 senior project manager and lead user interface engineer, respectively. In addition to obtaining key domains, General Cannabis also acquired Revyv’s proprietary management and 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’s status as a medical marijuana patient. CannabisCenters.com CannabisCenters.com helps prospective patients find medical cannabis physicians and attorney protection services. The website includes a verification system that validates the status of medical cannabis patients to dispensaries and other interested parties as well as a social media platform for patients. General Cannabis intends to use CannabisCenters.com as one of several company-owned medical information and education portals. CannabisCenters.com has established relationships with physicians who support and recommend medical marijuana. Illustrated in Figure 9 (page 23), the Company is positioning CannabisCenters.com as a site where cannabis physicians can connect with patients. Moreover, there are plans to expand the site to include appointment-setting services and proprietary management software for physicians as well as a social network for patients to discuss medical cannabis issues and topics. As well, the site may include professional, objective medical data, physician editorials, and relevant patient-friendly links.


General Cannabis’ goal is to use CannabisCenters.com as a counterpart to WeedMaps.com, capturing a different segment of the medical marijuana market. OTHER CORPORATE INITIATIVES Beyond 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 and regulations, and providing educational support seminars presented by physicians explaining the benefits of 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 to develop novel delivery methods, such as oral strips or next-generation vaporizers. Philanthropy Foundation General Cannabis intends to spend significant time helping and funding select causes through a philanthropy 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.

CANNABISCENTERS.COM: A MEDICAL CANNABIS NETWORK


Figure 9

Source: CannabisCenters.com.


Lobbying and Public Policy Organization The 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 the government that cannabis can be mutually beneficial when responsibly implemented as policy. The Company plans to work with various groups to educate individuals about cannabis and its taxability. In addition, General Cannabis intends to support studies and foster independent research, articles, and books as well as other memorialized policy recommendations, such as Cannabis Affairs, a journal discussing cannabis affairs and policy.


Competition Competition within the medical cannabis industry is intense. The industry is highly fragmented, lacking any major regional or national companies. General Cannabis believes that one of its key competitive advantages is vertical integration within the industry. Further, the Company capitalizes on its frequent communication and relationships with existing clients—including dispensaries that advertise on WeedMaps.com as well as the 14 medical cannabis clinics under management—when promoting newly added products and services. General Cannabis estimates that a portion of its competition, which tend to be smaller entities, fail to operate in accordance with state and local laws, statutes, and guidelines. The companies summarized below and on pages 26-28 are not an exhaustive list of competitors; rather, these entities are believed to be representative of the type of competition General Cannabis may face in certain sectors of the medical cannabis industry. Technology In the technology sector, the following websites offer similar services to General Cannabis’ dispensary finder site, WeedMaps.com, and may be considered direct competitors to the Company. General Cannabis estimates that WeedMaps.com controls approximately 70% of the dispensary finder site market in the U.S., reporting over $3 million in advertising revenue in 2010. The Company’s experienced WeedMaps.com sales force is supporting further growth by continuously marketing services to dispensaries as it monitors changes and trends within the industry. CannaGen http://cannagen.com CannaGen helps visitors find cannabis dispensaries and physicians. The company supports a forum where members can discuss information about medical marijuana. The site educates visitors about the various types of marijuana and effective methods to grow each strain. CannaGen also offers an interactive 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. Dailybuds http://www.dailybuds.com Dailybuds 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 help patients find local cannabis dispensaries and clubs. The website includes social networking tools, such as a chat application and group forums where patients can discuss medical marijuana topics. Additional features 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 services as well as seek employment. Dailybuds has over 129,000 registered users. GPS 420 http://www.gps420.com GPS 420 enables patients to search for local dispensaries, physicians, and head shops. The website allows 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 only show locations that are currently open, provide delivery services, or have a menu posted online. Herban Tracker http://herbantracker.com Herban Tracker is a medical dispensary locator that incorporates customer reviews. The website also provides current news and laws related to the medical cannabis industry. Additional features of the site include marijuana music videos and a do-it-yourself section with recipes and information to help patients grow their own cannabis.


KushPages http://kushpages.com KushPages is a directory that enables visitors to find local cannabis- and hemp-related businesses, such as dispensaries, delivery services, evaluation centers, and smoke shops, among others. The website also features 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 basic ad to $1,199 per year for a campaign that includes a top and side banner. LA Weed Maps http://caweedmaps.com LA 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 for featured listings and banner ads. This site also collects information and reviews relating to the potency and grade of the medical marijuana sold at each dispensary. Medical cannabis patients can register to use the community section of the website, where users can view profiles, add new friends, share photos and videos, review dispensaries and products, and create or join a group. Leafly http://www.leafly.com Leafly is designed to facilitate patients throughout the medical cannabis purchasing process. The website provides 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,” get recommendations based on a user’s past ratings, and keep a private journal of favorite strains or the effects of each strain in order to use as a guide for future purchases. Dispensaries that register with the website obtain access to the Leafly community as well as dispensary storefronts and menu and status updates at no cost. Paid services include adding a logo, photos, analytics, custom map markers, text messaging, and premium ad placements. Leafly is also developing an iPhone® app that provides reviews and strain information as well as helps patients find the nearest dispensary location. Los Angeles Cannabis Clubs™ http://www.losangelescannabisclubs.com Los Angeles Cannabis Clubs™ helps visitors find dispensaries, physicians, and lawyers who specialize in medical cannabis. As well, the company operates a toll-free hotline that provides this information through an automated system. The website’s dispensary directory includes locations in specific counties in California. Additional features of the site include reviews, forums, industry news, and newsletters. Los Angeles Cannabis Clubs™ also issues rewards annually to top-rated dispensaries. PotLocator http://www.potlocator.com PotLocator is a website designed to help patients find dispensaries, physicians, lawyers, or delivery companies, 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 on the site for a year or a $99 fee for a month-to-month pricing plan. The monthly fees include geo-targeted coupons, backlinks, menus, and other tools. PotLocator’s iPhone® app includes features that help patients quickly find dispensaries, physicians, lawyers, and delivery services. In April 2010, PotLocator partnered with Marijuanadoctors.com to incorporate an exclusive directory that helps patients find quality medical marijuana physicians. The companies merged in February 2011.


STICKYGuide http://www.stickyguide.com STICKYGuide is a medical cannabis website that collects ratings and reviews of dispensaries and strains and helps visitors find local dispensaries. The website is also developing an application to help patients find cannabis physicians. STICKYGuide focuses on providing a visual experience to visitors, including images of products and facilities. Additionally, the site offers a coupon application that provides discounts for local dispensaries. As well, registered users can create a personal profile and participate in forums pertaining to cannabis-related topics. THC Finder http://www.thcfinder.com THC 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 on different types of medical marijuana and the effects that each strain provides. The Community section allows registered members to create a profile and discuss cannabis, cultivation techniques, and related products. The website also offers a text messaging service where patients can opt-in to receive exclusive local specials. WeedTRACKER http://weedtracker.com WeedTRACKER is a finder site for cannabis dispensaries and collectives. The site includes an online forum where patients can discuss cannabis-related topics and read and write reviews. As well, this site provides a directory of local cannabis physicians and lawyers. The site also provides information on cultivating marijuana. Each registered dispensary, collective, and other cannabis-related entity maintains a 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 premium banners, sponsored links, or coupons. Visitors select their location to receive geographically targeted advertisements. Medical On the medical side, there are a number of physicians operating medical cannabis clinics; however, the Company estimates that the majority of these individuals are sole practitioners operating one location and who may also be generalists, offering other healthcare services. To the Company’s knowledge, only several have established a large managed care platform with eight or more locations. General Cannabis believes that General Health Solutions is one of the largest management companies in California specializing in medical cannabis clinics. The Company’s proprietary SEO processes result in over 500 calls per day from individuals seeking to learn about the process of obtaining a Letter of Recommendation. Though it is illegal in California for anyone other than a physician who is permitted under state law (with certain exceptions) to prescribe marijuana as medicine, some nurse practitioners or physicians assistants also write Letters of Recommendation for patients and thus compete for General Cannabis’ customers. Through its management contract, General Health Solutions requires all medical doctors to be licensed in the State of California and be in good standing with the Medical Board. As an added benefit to customers, the Company also provides 24/7 verification processing services to third parties seeking to verify the validity of a patient’s Letter of Recommendation.


Merchant Processing The Company competes with other providers who offer merchant processing services and target companies 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 merchant services to medical cannabis dispensaries and healthcare companies, including merchant credit card accounts, 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% approval rate. The company does not require a long-term contract and provides a free credit card terminal for new customers. Beyond the cannabis and healthcare industries, Cannabis Medical Solutions offers merchant processing services to other high-risk sectors, including mail-order websites, travel businesses, legal gaming, 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 small and large businesses, including nonprofit cannabis collectives through www.cannabismerchant.com. The company’s primary services include processing credit, debit, and fuel/fleet cards as well as electronic checks. Greenlight Payments’ advertised value-added services include gift card processing, protection against 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 select effective processing solutions for their business. The company recommends certain full-service organizations that can support various payment methods for in-store, e-commerce, and mobile transactions. TTG has partnered with merchant service providers that support credit card processing for new and existing cannabis dispensaries. The company reports that it offers competitive rates for the industry and does not require long-term contracts for cannabis-related companies.


Potential Milestones During the next 12 to 24 months, General Cannabis aims to achieve the following corporate milestones through 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 topics

Medical Clinic Management Manage at least 20 new clinics by year-end 2011, up from 14 currently Merchant 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


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.


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.


Historical Financial Results Tables 7, 8, and 9 provide a summary of General Cannabis’ key historical financial statements: its audited and consolidated Statements of Operations, Balance Sheets, and Statements of Cash Flows.

December 31, December 31,

2010 2009

REVENUE

Sales 7,699,634$ 2,670,721$

Total revenue 7,699,634 2,670,721

OPERATING EXPENSES

Selling, general, and administrative expenses 7,750,862 3,098,981

Total operating expenses 7,750,862 3,098,981

Operating 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)

Years Ended


CONSOLIDATED STATEMENTS OF OPERATIONS (AUDITED)


Table 7


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 9,444,582 333,334

Trademarks 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$ 543,598$

CONSOLIDATED BALANCE SHEETS (AUDITED)


Table 8



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 — 72,331

Purchases 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) 165,000

Proceeds from Convertible Notes (419,392) 28,274

Proceeds from Convertible Note related party (211,489) 594,199

Proceeds 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$ 48,131$

Non-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$ $ —


Years Ended

CONSOLIDATED STATEMENTS OF CASH FLOWS (AUDITED)


Table 9


Risks Some of the information in this Executive Informational Overview® (EIO®) relates to future events or future business and financial performance. Such statements can only be predictions and the actual events or results may differ from those described due to the risks presented in General Cannabis’ statements on Form S-1, 10-K, 10-Q, and 8-K, as well as other forms filed from time to time. The content of this report with respect to General Cannabis has been compiled primarily from information available to the public released 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 not been independently verified by the Company. Certain summaries of activities have been condensed to aid the reader in gaining a general understanding. Investors should carefully consider the risks and information about General Cannabis’ business described below and should not interpret the order in which these considerations are presented as an indication of their relative importance. The risks and uncertainties described below are not the only risks that the Company faces. Additional risks and uncertainties not presently known to General Cannabis or that the Company currently believes to be immaterial may also adversely affect its business. If any of the following risks and uncertainties develops into actual events, General Cannabis’ business, financial condition, and results of operations could be materially and adversely affected. RISK FACTORS RELATED TO THE BUSINESS OF THE COMPANY General Cannabis has a limited operating history and limited historical financial information upon which investors may evaluate the Company’s performance. Investors should consider, among other factors, General Cannabis’ prospects for success in light of the risks and uncertainties encountered by companies that, like the Company, are in their early stages of operations. General Cannabis may not successfully address all of the risks and uncertainties or successfully implement its existing and new products and services. If the Company fails to do so, it could materially harm its business and impair the value of its Common Stock, resulting in a loss to shareholders. Even if General Cannabis accomplishes these objectives, the Company may not generate the anticipated positive cash flows or profits. Although General Cannabis was incorporated in Nevada in 2003, 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 business and 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 any of 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 be successful in its operations and operate profitably. If General Cannabis is unable to meet its future capital needs, the Company may be required to reduce or curtail operations, or shut down completely. To date, General Cannabis has relied on cash flows from operations and funding from a small group of individual investors, including James Pakulis, General Cannabis’ chief executive officer, to fund operations. The Company has limited cash liquidity and capital resources. General Cannabis’ cash on hand 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 million attributed to discontinued operations. General Cannabis’ future capital requirements depend on many factors, including its ability to market products successfully, cash flows from operations, locating and retaining talent, and competing market developments. The Company’s business model requires spending money (primarily on advertising and marketing) in order to generate revenue. Based on the Company’s current financial situation, General


Cannabis may have difficulty continuing operations at the current level, or at all, if it does not raise additional financing in the near future. Additionally, the Company aims to continue to acquire assets and operating businesses, which will likely require additional cash. Although General Cannabis currently has no specific plans or arrangements for acquisitions or financing, the Company intends to raise funds through private placements, public offerings, or other financings. Any equity financings may result in dilution 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, General Cannabis may be required to reduce, curtail, or discontinue operations. There is no assurance that the Company’s existing cash flow will be adequate to satisfy its existing operating expenses and capital requirements. The Company’s independent registered public accounting firm has expressed doubts about General Cannabis’ ability to continue as a going concern. The Company must increase revenues in 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 its independent registered public accounting firm for its financial statements for the year ended December 31, 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 must effectively balance many factors and increase revenues beyond its current pace to a point where it can fund operations from sales and revenues. If General Cannabis is not able to do this, the Company may not 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 its revenues 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 the Company’s existing operating expenses and capital requirements. Because General Cannabis faces intense competition, the Company may not be able to operate profitably in the cannabis industry. The market for the services that General Cannabis offers is highly competitive. The competition will most likely increase as more states permit the use of medical cannabis. The increased competition may hinder the Company’s ability to successfully market its products and services. General Cannabis may not have the resources, expertise, or other competitive factors to compete successfully in the future. The Company expects to face additional competition from existing entities and new market entrants in the future. Some of General Cannabis’ competitors will have greater resources than the Company. As a result, these competitors 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 currently allow it reverse their position, General Cannabis may not be able to continue its growth or the market 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 the number 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 not reverse their position and disallow it. If either of these things happens, then not only will the growth of General Cannabis’ business be materially impacted, the Company may experience declining revenue as the market for its products and services declines.


If General Cannabis is unable to attract and retain key personnel, the Company may not be able to compete 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 and president as well as the Company’s technical experts and sales and marketing personnel. General Cannabis attempts to enhance its management and technical expertise by recruiting qualified individuals who possess desired skills and experience in certain targeted areas. The Company has also employed management from companies that it has acquired. General Cannabis’ inability to retain employees and attract and retain sufficient additional employees as well as information technology, engineering, and technical support resources, could have a material adverse effect on the Company’s business, financial condition, 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 the Company’s outstanding Common Stock. As a result, they have the ability to influence matters affecting General Cannabis’ shareholders, including the election of directors, the acquisition or disposition of assets, and the future issuance of shares. Because they control such shares, investors may find it difficult to replace the Company’s directors and management if they disagree with the way the business is being operated. Because the influence by these insiders could result in management making decisions that are in the best interest of those insiders and not in the best interest of investors, investors may lose some or all 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 could materially and adversely affect the business. General Cannabis has, and may in the future, experience rapid growth and development in a relatively short period of time by aggressively marketing its products and services. The management of this growth will require, among other things, continued development of the Company’s financial and management controls 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 to manage the Company’s expected growth and expansion. Failure to successfully manage General Cannabis’ possible growth and development could have a material adverse effect on the Company’s business and the value of its Common Stock. Some of the business activities of a selection of the Company’s customers, while believed to be compliant with applicable state law, are illegal under federal law. If General Cannabis’ customers are closed by law enforcement authorities, it will materially and adversely affect the Company’s business. The medical cannabis industry is currently conducted in the 15 states, plus the District of Columbia, that have 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 some cases state, law enforcement authorities have frequently closed down dispensaries and investigated or closed physician offices that provide medical cannabis recommendations. To the extent that an affected dispensary 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 medical cannabis industry, it would materially affect General Cannabis’ business and operations.


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 services that it provides to those customers. As a result, the Company may be subject to actions by law enforcement authorities, which would materially and adversely affect the business. Under U.S. federal law, the possession, use, cultivation, and transfer of cannabis is illegal. General Cannabis provides services to customers that are engaged in those businesses. As a result, law enforcement authorities may seek to bring an action or actions against the Company, including, but not limited to, a claim of aiding and abetting another’s criminal activities. Such an action would have a material effect on General Cannabis’ business and operations. In states where medical cannabis is permitted, local laws and regulations could adversely affect General Cannabis’ clients, including causing some of them to close, which would materially and adversely affect the Company. Even in areas where the medical use of cannabis is legal under state law, there are also local laws and regulations that affect General Cannabis’ clients. For example, in some cities or counties a medical cannabis 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, impacting revenue and having a material effect on General Cannabis’ business and operations. In addition, the enforcement of identical rules or regulations as it pertains to medical cannabis may vary from municipality to municipality or city to city. General Cannabis’ websites are visible in jurisdictions where medical use of cannabis is not permitted, and as a result the Company may be found to be violating the laws of those jurisdictions. Internet websites are visible by people everywhere, not just in jurisdictions where the activities described therein are considered legal. As a result, General Cannabis may face legal action from a state or other jurisdiction 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 cause General Cannabis to lose key relationships and intensify competition. The medical cannabis industry is undergoing rapid growth and substantial change, which has resulted in increasing consolidation and the formation of strategic relationships. The Company expects this consolidation and strategic partnering to continue. Acquisitions or other consolidating transactions could harm 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 the Company to lose customers, revenue, and market share. Consolidation could also force General Cannabis to expend greater resources to meet new or additional competitive threats, which could also harm the Company’s operating results.


General Cannabis is dependent on the continued reliable operation of third parties’ systems and networks and, if these systems and networks fail to operate or operate poorly, the Company’s business and operating results will be harmed. General Cannabis’ operations are in part dependent upon the continued reliable operation of the information 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 operating results could be harmed. The Internet and General Cannabis’ network are subject to security risks that could harm the Company’s business and reputation and expose it to litigation or liability. Online commerce and communications depend on the ability to transmit confidential information and licensed intellectual property securely over private and public networks. Any compromise of General Cannabis’ ability to transmit and store such information and data securely and any costs associated with preventing or eliminating such problems could damage its business, hurt the Company’s ability to distribute products and services and collect revenue, threaten the proprietary or confidential nature of General Cannabis’ technology, harm its reputation, and expose it to litigation or liability. The Company also may be required to expend significant capital or other resources to protect against the threat of security breaches or hacker attacks or to alleviate problems caused by such breaches or attacks. Any successful attack or breach of General Cannabis’ security could hurt consumer demand for its products and 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 its intellectual property and technology, including both internally developed technology and technology licensed from third parties. To the extent General Cannabis is able to do so, in order to protect its proprietary 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 defend against 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 its trade secrets, or to determine the validity and scope of other parties’ proprietary rights. Any such litigation could 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.


Further, because the content of much of the Company’s intellectual property concerns cannabis and other activities that are not legal in some state jurisdictions, General Cannabis may face additional difficulties in defending its intellectual property rights. Interpretation of existing laws that did not originally contemplate the Internet could harm General Cannabis’ business and operating results. The application of existing laws governing issues, such as property ownership, copyright, and other intellectual property issues to the Internet is not clear. Many of these laws were adopted before the advent of the Internet and do not address the unique issues associated with the Internet and related technologies. 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 to change 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 criminal penalties for distributing material harmful to minors (e.g., obscene material) over the Internet to children under the age of 17 or collecting personal information from a child under the age of 13. General Cannabis does not knowingly distribute harmful materials to minors or collect personal information from children under the age of 13. The manner in which these Acts may be interpreted and enforced cannot be fully determined, and future legislation similar to these Acts could subject the Company to potential liability if it was 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 data collection capabilities of its products and services. Many of the Company’s products are interactive Internet applications that by their very nature require communication between a client and server to operate. To provide better consumer experiences and to operate effectively, General Cannabis’ products send information to its servers. Many of the services the Company provides also require that a user provide certain information. General Cannabis posts an extensive privacy policy concerning the collection, use, and disclosure of user data involved in interactions between the Company’s client and server products. Because General Cannabis is in the cannabis industry, the Company may have a difficult time obtaining the various insurances that are desired to operate the business, which may expose General Cannabis to additional risk and financial liabilities. Insurance that is otherwise readily available, such as workers compensation, general liability, and directors and officers insurance, is more difficult for the Company to find and more costly because General Cannabis is engaged in the medical cannabis industry. Thus far, the Company has been successful in finding such policies; however, it is at a cost that is higher than other businesses. There are no guarantees that General Cannabis will be able to find such insurances in the future or that the cost will be affordable. If General Cannabis is forced to go without such insurances, it may prevent the Company from entering into certain business sectors, inhibit growth, and expose General Cannabis to additional risk and financial liabilities. RISKS RELATED TO GENERAL CANNABIS’ COMMON STOCK General 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 OTC Markets Group, Inc., which may make it more difficult for investors to resell their shares due to suitability requirements. The Company’s Common Stock is currently listed on the Pink Sheets Current Information tier of the marketplace maintained by OTC Markets Group, Inc. General Cannabis intends to apply to list its Common Stock for trading on the OTCQX tier. Broker-dealers often decline to trade Over-the-Counter stocks given the market for such securities is often limited, the stocks are more volatile, and the risk to investors is greater. These factors may reduce the potential market for General Cannabis’ Common Stock


by reducing the number of potential investors. This may make it more difficult for investors in the Company’s Common Stock to sell shares to third parties or to otherwise dispose of shares. This could cause 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 be forced to discontinue operations. The Company expects to have significant costs associated with being a public reporting company, which may raise substantial doubt about its ability to commence and continue trading on the OTCQX or continue 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 to rely on outside consultants. Accounting controls, in particular, are difficult and can be costly to comply with. The Company’s ability to commence and continue trading on the OTCQX or continue as a going concern will depend on positive cash flow, if any, from future operations and on General Cannabis’ ability to raise additional funds through equity or debt financing. If the Company is unable to achieve the necessary product sales or raise or obtain needed funding to cover the costs of operating as a public reporting company, General Cannabis’ Common Stock may be deleted from the OTCQX and the Company may be forced 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 not plan on making any cash distributions in the manner of a dividend or otherwise. The Company’s Board presently intends to follow a policy of retaining earnings, if any. General Cannabis has the right to issue additional Common Stock and Preferred Stock without consent of stockholders. This would have the effect of diluting investors’ ownership and could decrease the value of their investment. The Company has additional authorized but unissued shares of its Common Stock that may be issued by General Cannabis for any purpose without the consent or vote of its stockholders, which would dilute stockholders’ percentage ownership of the Company. In addition, General Cannabis’ Certificate of Incorporation authorizes the issuance of shares of Preferred Stock, the rights, preferences, designations, and limitations of which may be set by the Board of Directors. The Company’s certificate of incorporation has authorized issuance of up to 20 million shares of Preferred Stock in the discretion of General Cannabis’ Board. The shares of authorized but undesignated Preferred Stock may be issued upon filing of an amended Certificate of Incorporation and the 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 Board and 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 and Penny Stock Reform Act of 1990. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 requires additional disclosure relating to the market for penny stocks in connection with trades in any stock defined as a penny stock. The commission has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. Such exceptions include any equity security listed on NASDAQ and any equity security issued by an issuer that meets one of the following criteria: (1) net tangible assets of at least $2 million, if such issuer has been in continuous operation for three years; (2) net tangible assets of at least $5 million, if such issuer has been in continuous operation for less than three years; or (3) average annual revenue of at least $6 million, if such 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 disclosure schedule explaining the penny stock market and the associated risks.


Recent Events 04/14/2011—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 1,800 dispensaries. As well, the Company reported that it had added 11 employees to the WeedMaps Media sales 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 than 21,000 square feet of Class A office space in Newport Beach, California, during March 2011, allowing for further growth of its technology and sales departments. General Cannabis also reported that General Merchant 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 launched the new CannaCare and CannaCare.com name, logo, and website in early April 2011, which replaced the Marijuana Medical Evaluation Centers (MMEC) name and logo that was included in the acquisition of Synergistic Resources. Moreover, during the first quarter 2011, General Cannabis updated and reconfigured its software and platform, creating a scalable and multifaceted system. 04/04/2011—Announced that revenues for its wholly owned subsidiary, WeedMaps Media, increased for the 16th consecutive month, with the first quarter 2011 being the most successful three-month period in its history. In addition, the Company reported that WeedMaps.com surpassed 10,000 subscribers for its Daily Deals coupon program in less than 30 days after its initial launch and the iPhone® application for WeedMaps.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, and General 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 in January 2011, up from $700,000 in December 2010. General Cannabis also reported that it finalized the asset purchase from Revyv, LLC, a technology firm specializing in the online interfacing, marketing, and optimizing of healthcare facilities in the medical cannabis industry, including the CannabisCenters.com website. 01/27/2011—Announced that it signed a commercial lease in Newport Beach, California, that offers significantly larger office space than the prior Costa Mesa headquarters, allowing expansion of the Company’s sales, call center, and marketing divisions as well as the Company’s rapidly growing technology division. The Company also reported the hiring of technology specialists David Johnson and James 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, General Cannabis 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 assets of Revyv, LLC. 01/12/2011—Announced that the medical clinics managed by General Health Solutions exceeded $4 million in gross sales in 2010.


01/07/2011—Announced that General Merchant Solutions exceeded $700,000 in merchant processing volume during in December 2010—its first full month of operation. General Merchant Solutions commenced 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, up from 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 medicine evaluation clinic in Victorville, California. 12/14/2010—Announced that it formally acquired the assets of Synergistic Resources, LLC, including a management contract to operate 10 medical marijuana evaluation facilities in California. The assets of the acquisition now operate under General Health Solutions. The purchase was a combination of cash and stock. 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 of Synergistic Resources. 11/19/2010—Announced that it purchased Weedmaps, LLC for a combination of cash and stock with additional 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 and assumed 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 on November 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 Public Accountants, 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 through the management of medical clinics in California. 08/26/2010—Announced the appointment of Bonni Goldstein, M.D. as an additional director of the Company, 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 its primary creditors. The Company and its creditor agreed to settle the $1.6 million in debt and, as consideration for the settlement of debt, the creditors have agreed to accept restricted Common Shares in the capital of the Company at a settlement price of $0.03 per share. As a result of the debt settlement and after the issuance of the shares for debt, there was a change in control in the voting shares of the Company. James Pakulis, General Cannabis’ chief executive officer, and Douglas Francis, the Company’s chairman and president, each were the beneficial owner of 46.3% of the issued and outstanding Common Shares in the capital of the Company. Biographies for Mr. Pakulis and Mr. Francis are provided on page 11.


Glossary Collectives—Groups formed in accordance with California Health and Safety Code §11362.775, which allows qualified patients, persons with valid identification cards, and the designated primary caregivers of qualified patients and persons with identification cards to collectively or cooperatively cultivate marijuana for medical purposes. Members of medical marijuana collectives contribute labor, funds, or materials and receive 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 regulated permits 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 page to 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 purchase and 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 or credit 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 abuse risk and no safe, accepted medical use. Search Engine Optimization (SEO)—A set of practices that attempts to make a website more attractive to 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.


Intentionally Blank.


Jeffrey J. Kraws and Karen B. Goldfarb

Phone: (609) 306-2274 Fax: (609) 395-9339

Email: [email protected] Web: www.crystalra.com

Legal 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 information provided by the Company. CRA has not independently verified such information. In addition, CRA has been compensated by the Company in cash of seventy-two thousand, five hundred dollars and two hundred and fifty thousand warrants for its services in creating the base report, for quarterly updates, a video interview, and for printing costs. Some of the information in this report relates to future events or future business and financial performance. Such statements constitute forward-looking information within the meaning of the Private Securities Litigation Act of 1995. Such statements can be only predictions and the actual events or results may differ from those discussed due to, among other things, the risks described in General Cannabis’ reports on its Form S-1, 10-K, 10-Q, press releases, and other forms filed from time to time. The content of this report with respect to General Cannabis has been compiled primarily from information available to the public released by General Cannabis. The Company is solely responsible for the accuracy of that information. Information as to other companies has been prepared from publicly available information and has not been independently verified by General Cannabis or CRA. Certain summaries 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 at www.generalcannabis.com. This report is published solely for information purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy any security in any state. Past performance does not guarantee future performance. Additional information about General Cannabis and its public filings, as well as copies of this report, can be obtained in either a paper or electronic format by calling (888) 693-5219.

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