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Item 1.01.
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Entry into a Material Definitive Agreement.
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Convertible Notes and Warrants offering
On December 23, 2020, General Cannabis Corp (the “Company”), entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with each of certain accredited investors (the “Investors”), pursuant to which the Company issued and sold senior convertible promissory notes (the “Notes”) with an aggregate principal amount of $2,940,000 in exchange for payment to the Company by certain Investors of an aggregate amount of $1,940,000 in cash, as well as cancellation of outstanding indebtedness in the aggregate amount of $1,000,000 represented by certain of the prior promissory notes issued by the Company in February 2020 (the “Original Notes”) to certain other Investors (“Original Investors”).
In connection with the issuance of the Notes, the holders of the Notes received warrants (the “Warrants”) to purchase shares of the Company’s common stock equal to 20% coverage of the aggregate principal amount at $0.56 per share. In the aggregate, this equals 1,050,011 shares of the Company’s common stock with a par value $0.001 per share (the “Common Stock”).
The Notes will bear interest at an annual rate of 10% and will mature on December 23, 2023 (the “Maturity Date”). The Investors have the option at any time to convert up to 50% of the outstanding unpaid principal and accrued interest of the Notes into Common Stock at a variable price of 80% of the market price but no less than $0.65 per share and no more than $1.00 per share. The Warrants are exercisable at an exercise price of $0.56 per Warrant, subject to adjustment as provided in the Warrants, at any time prior to the earlier of the Maturity Date and an Acquisition (as defined in the Warrants).
Note Exchange Agreement
On December 23, 2020, the Company and each of the Original Investors entered into a Supplemental Note Exchange Agreement for 15% Holders (each, an “Exchange Agreement”) pursuant to which the Original Notes (i.e., $1,000,000 in aggregate principal amount) were surrendered and canceled, in exchange for Notes with an aggregate principal amount equal to $1,000,000. As an inducement for the Original Investors to enter into an Exchange Agreement, the 2020 A Warrants previously issued to such Original Investors at the time of their purchase of the Original Notes were extended for up to one year with respect to the exercise of that number of shares of Common Stock equal on a dollar-for-dollar basis to the amount of principal under each of the Original Notes being surrendered and cancelled in exchange for a Note.
The foregoing descriptions of the Notes, Warrants, Securities Purchase Agreement and Exchange Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the agreements, copies of which are attached to this Current Report on Form 8-K as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, and are incorporated herein by reference.
Waiver of Repurchase Obligation in Asset Purchase Agreement
Reference is made to that certain asset purchase agreement dated January 24, 2020 (“Asset Purchase Agreement”) by and among the Company and Dalton Adventures, LLC (“Seller”). On December 23, 2020, the Company and Seller agreed that the post-closing covenant set forth in Section 5.10 of the Asset Purchase Agreement regarding Seller’s right to require the Company to repurchase the option shares is waived. The terms of the acquisition as set forth in the Asset Purchase Agreement between the Company and Seller, dated January 24, 2020, were previously disclosed in the Company’s Form 8-K filed on February 24, 2020, and a copy of the Asset Purchase Agreement was attached as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The foregoing description of the terms of the Asset Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Asset Purchase Agreement filed as an exhibit to the Company’s Form 10-K and is incorporated herein by reference.