UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended December 31, 20152021

or

For the transitional period from _____________ to ______________

��

Commission file number 333-189731

3435 Ocean Park Blvd.6160 Plumas Street, #107-610, Santa Monica, CA 90405Suite 100, Reno, NV89519

(Address of principal executive offices) including zip code)(Zip Code)

(516) 900-3799

(Registrant’s telephone number, including area code: (516) 900-3799code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to section 12(g) of the Act:None

Common Shares, par value $0.00001 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] ☐ No [X] ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act: Yes [  ] ☐ No [X] ☒

Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 day. Yes [  ] ☒ No [X]☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] ☒ No [  ]☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” anda “smaller reporting company”company,” and emerging growth company in Rule 12b-2 if the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [  ] ☐ No [X] ☒

There was no active public trading market as

As of June 30, 2021, the last business day of the Company’s second fiscal quarter, so there was no aggregate market value of the shares of the registrant’s common equity held by non-affiliates was approximately $7,039,615, using the June 30, 2021 closing price of the Registrant’s common stock of $0.036/share. Shares of the registrant’s common stock held by non-affiliates.each executive officer and director and by each person who beneficially owns 10 percent or more of the registrant’s outstanding common stock have been excluded in that such persons may be deemed to be “affiliates” of the registrant for purposes of the above calculation. This determination of affiliate status is not a conclusive determination for other purposes.

As of April 18, 2016,8, 2022, the registrant had 41,572,082260,661,121 shares issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

None.

TABLE OF CONTENTS

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K (the “Annual Report”) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “anticipate,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.

We cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Annual Report on Form 10-K and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of the Annual Report on Form 10-K. All subsequent written and oral forward-looking statements concerning other matters addressed in this Annual Report on Form 10-K and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Annual Report on Form 10-K.

Unless otherwise provided in this Annual Report, references to the “Company,” “Diego,” “we,” “us” and “our” refer to Diego Pellicer Worldwide, Inc.

PART I

Item 1. Business

Business Overview of the Market

The cannabis market has a multi-billion dollar potential. The industry is still in a development stage, and is being rapidly propelled towards its potential by the state legalization and the rush by suppliers to meet the pent-up demand. Most suppliers are small, unsophisticated but capable operators. The federal legal constraints provide an opportunity to those companies early to the market to gain a first mover advantage and to the successful ones, an opportunity to be a consolidator in the industry.

What is Diego’s Strategy, Phases One and Two?

Diego is a real estate and a consumer retail development company that is focused on high quality recurring revenues resulting from leasing real estate to licensed cannabis operators, and the management of operations for these and other third party cannabis operators deriving income from management and royalty fees. Diego provides a competitive advantage to these operators by developing “Diego Pellicer” as the world’s first “premium”premium marijuana brand and by adhering toestablishing the highest quality and standards for its facilities along with both cannabis and non-cannabis products.

The Company’s initial focusfirst phase strategy is to acquirelease and develop legally compliantthe most prominent and convenient real estate locations for the purposes of leasing them to state licensed companiesoperators in the cannabis industry. Diego does not grow or sell marijuana or marijuana infused products in the early stages of this plan.

Diego’s initialfirst phase revenues deriveresult from leasing real estate and selling non-cannabis related products; however, when it is federally legalaccessories to do so, Diego will be properly positioned to take advantage of pre-negotiated acquisition contracts with selected Diego tenants in marijuana retail and production facilities throughout the country. Diego’s business model will allow it to become a nationally branded marijuana retailer and producer, instantaneously, with the change of federal law.our tenants. The Company will not implement this business model until it becomes legal under federal law to sellhas developed a brand name strategy, providing training, design services, branded accessories, systems and produce marijuana.

To operate within the constraints set forth by the US government, the purpose of this business plan is to describe Diego; however, to better describe the future growth plan for the Company, we will also describe the grow and retail operations of other entities with which Diego has pre-negotiated acquisition contracts or plans to have pre-negotiated acquisition contracts in the future. At this time, we only have one pre-negotiated acquisition contract in place with Diego Pellicer, Inc. a Washington Corporation. These external operations are presented as DP Grow and DP Retail, and the results of these operations as presented will not directly benefit Diego until after Federal legalization.

Merger and Share Exchange Agreement

On March 13, 2015 (the “Closing Date”), Diego Pellicer Worldwide, Inc. (f/k/a Type 1 Media, Inc.) (the “Company” or “PubCo”) closed on a merger and share exchange agreement (the “Merger Agreement”) by and among (i) the Company, and (ii) Diego Pellicer World-wide 1, Inc., a Delaware corporation, (“Diego”), and (iii) Jonathan White, the majority shareholder of the Company (the “Majority Shareholder”). Pursuant to the terms of the Merger Agreement, Diego shall be merged with and into the Company, with the Company to continue as the surviving corporation (the “Surviving Corporation”) in the Merger, and the Company succeeding to and assuming all the rights, assets, liabilities, debts, and obligations of Diego (the “Merger”).

In connection with the closing of the Merger, on the Closing Date, Jonathan White and Thomas Baxter submitted to the Company a resignation letter pursuant to which they resigned from their positions as officers and members of the Board of Directors of the Company. Messrs. White and Baxter’s resignations were not a result of any disagreements relating to the Company’s operations, policies or practices. On the Closing Date, the board of directors of the Company (the “Board”) and the majority stockholders of the Company (the “Shareholders”) accepted the resignations of Messrs. White and Baxter and, contemporaneously appointed: (i) Philip Gay to serve as the Chief Executive Officer and member of the Board of Directors, (ii) Ron Throgmartin to act as Chief Operating Officer, (iii) Nick Roberts to act as Chief Financial Officer; and (iv) Alan Valdes, Douglas Anderson, and Stephen Norris to serve as members of the Board of Directors.

Subsequent to the Merger and Share Exchange Agreement, on May 22, 2015, Philip Gay resigned as the Chief Executive Officer and as a member of the board of directors, and Nick Roberts resigned as Chief Financial Officer. Mr. Gay and Mr. Roberts resignations were not the result of any disagreement with the Company on any matter relating to its operation, policies (including accounting or financial policies), or practices. The board of directors of the Company appointed Ron Throgmartin, the Company’s Chief Operating Officer as the Chief Executive Officer and David R. Wells as the Company’s Interim Chief Financial Officer.

On January 29, 2016, the Board of Directors accepted the resignation of David R. Wells as Chief Financial Officer of the Company. On January 29, 2016, the Board appointed Christopher Strachan, as the Company’s new Chief Financial Officer.

Our Corporate History and Background

Diego Pellicer Inc. was formed in the state of Washington of December 5, 2012, with the intent to produce and sell cannabis in the state of Washington. The Company determined that in order to be successful and avoid any potential violation of federal law, it would form a new corporation that would not produce or sell cannabis directly. Therefore, Diego Pellicer Worldwide, Inc. was formed as a Delaware corporation, on August 26, 2013. The Company was developed to position itself in such a way that if the cannabis industry were to federally legalize, then it would be in an advantageous position to quickly become one of the first luxury integrated brands in the industry. Currently, the Company’s focus is to acquire and develop legally compliant real estate locations for the purposes of leasing them to state licensed companies in the cannabis industry. Diego does not grow or sell marijuana or marijuana infused products at this time.

Mission

At this time, Diego Pellicer is a development stage company and is only in the early stages of implementing its business plan. In states where recreational and/or medical marijuana sales and cultivation is legal under State law, the Company plans to lease property to tenants who will grow and/or sell the highest quality of marijuana. As a tenant of Diego, these operators will have access to Diego’s world class management team with expertise in real estate, retail management, agriculture and USDA experts, legal, marketing and branding, product development and creative teams.

When the US and countries around the world legalize commerce of marijuana on a national and international platform, Diego hopes to be in a position to dominate the marijuana marketplace. Diego will accomplish this by positioning the Company, through its business model, to be the first fully integrated marijuana retail operation and premium brand, known for its beautifully designed user friendly retail stores offering the finest quality products at competitive prices, when the USsystems training, locational selection, and other countries legalize the sale of marijuana.

Philosophy

We believe that legalizing marijuana, regulating it and taxing it, will cause less harm and do more good than the prohibition environment. We believe marijuana should be elevatedadvisory services to its proper place among other legal recreational intoxicants such as fine wines, liquors, beers, cigars, etc. There is an overwhelming amount of scientific evidence that supports our philosophy, as well as a growing number of supporters ranging from high-ranking US and foreign politicians to prominent figures in the entertainment industry. In addition, we believe that legalization will help unlock the phenomenal power of cannabis as a medicinal treatment for numerous ailments from headaches to cancer.

Brand History

Diego Pellicer was a Spanish colonial vice governor of Cebu, a major island in the Philippine archipelago. He grew to become the largest grower of hemp in the world and is our name sake. He serves as an inspiration to our executive team, as well as distinctive brand befitting the quality of Diego Pellicer Worldwide.

Vision

Our vision is to continue to develop Diego Pellicer as a premium brand that is valued and positioned to appeal to a broad customer base.

In addition, Diego believes that in the very near future, the US and other countries will embrace the will of the people, and legalize the responsible adult use of marijuana. Legalizing national and international commerce of marijuana, will allow Diego to take its brand and unmatched quality standards to markets all around the globe.

Value Proposition

The initial value proposition of Diego consists of a standardized approach to the build-outs of real estate holdings, customized for premium marijuana grow and retail operations. The build-out model is optimized to maximize resources while minimizing costs and overhead. With each build-out, Diego pre-negotiates with select tenants, acquisition contracts with licensed DP Grow and DP Retail tenants, which, upon changes to federal law, introduces our second value proposition—ownership of operations from seed to sale in an industry that is projected to exceed $8 billion by 2018 and we hope will soon rival that of traditional markets such as tobacco and alcohol.

Market Size

The US state-sanctioned medical and recreational marijuana market generated a total revenue of $5.4 billion in 2015, boosted by an incredible growth in the recreational sector of sales, from $351M to $998M, an estimated increase of 184% over 2014. By comparison, the marijuana market is less than 3% of the US tobacco market, a $144 billion market that has no medicinal value, and less than 3% of the alcohol market, which valued at $113.5 billion in 2014 (Marijuana Business Daily 2016;2016 Statistic Brain Research Institute). As states legalize marijuana, and international markets develop, the emerging legalized marijuana industry will begin to rival that of tobacco and alcohol and could see $45B in revenues by 2020.

Target Geographies

Diego has entered a rapid growth and expansion stage in its evolution toward becoming an internationally recognized brand. The target geographies for Diego are all US states in which recreational or medicinal marijuana is legalized. This is a phased implementation that carefully pre-stages funding and materials to be first to market, as each state rules on legalization. In certain scenarios, Diego may choose to allow weak competitors to fail, making available prime real estate that otherwise would be inaccessible.

Target Consumers

There are an estimated 1.5 million medical marijuana patients in the US and more than 4,500 retailers. California and Washington have the largest number of marijuana patients at more than 775,000 for each state, followed by Michigan at 344,000 and Colorado with 107,534. (Marijuana Business Daily 2016).

The demographics for consumers that have tried marijuana at least once, range between ages 18 to 49, with the greatest numbers between the ages 26 and 34. These consumers are predominantly male and college educated.

Alaska has the fastest growing population of potential consumers, followed by Washington DC, Colorado, New Mexico and Hawaii, with Washington just a few points below. In 2012, Montana, Colorado, California, and Washington had the greatest increase in disposable income, thus increasing the breadth of target consumers.

Material Agreements

On April 19, 2014, the Company entered into a commercial agreement and merger agreement with Diego Pellicer, Inc., a Washington corporation (“Diego Washington”). Diego Washington agreed to making a capital contribution from its current investors of not less than $350,000 in the Company and that the Company agreed to offer to the holders of Series A Preferred Stock of Diego Washington and to current holders of convertible promissory notes convertible for shares of Diego Washington, the right to exchange that same number of shares to shares the Company.

On September 19, 2013, the Company entered into a Lease Agreement with M-P Properties whereby the Company agreed to lease the property located at 2215 4^thAvenue, Seattle, Washington, for a term of five years with an option to renew. The Company agreed to pay $78,000 per year.

On March 1, 2014, the Company entered into a Sublease Agreement with Diego Pellicer, Inc., a Washington entity whereby the Company agreed to sublease the property located at 2215 4^thAvenue, Seattle, Washington, for a term of four years.

On June 12, 2014, the Company entered into a Lease Agreement with Shamira, LLC whereby the Company agreed to lease the property located at 4242 Elizabeth Street, Denver, Colorado, for five years with an option to renew. The Company agreed to pay $360,000 per year for the first year of the agreement, with an increase of 3% for year subsequent year.

On August 14, 2014, the Company entered into a Commercial Sublease Agreement with DPCO, Inc., a Colorado corporation, whereby the Company subleased the property located at 4242 Elizabeth Street, Denver, Colorado for a term of five years.

On July 14, 2014, the Company entered into a Lease Agreement with 2949 W. Alameda Ave LLC whereby the Company agreed to lease the property located at 2949 W. Alameda Avenue, Denver, Colorado, for five years with an option to renew. The Company agreed to pay $20,000 per month in rent.

On August 14, 2014, the Company entered into a Sublease Agreement with DPCO, Inc., a Colorado corporation, whereby the Company agreed to sublease the property located at 2949 W. Alameda Avenue, Denver Colorado for a year of five years.

On August 13, 2014, the Company entered into a Sublease Agreement with M and S LLC whereby the Company agreed to lease the property located at 755 South Jason Street, Denver, Colorado, for four years. The Company agreed to pay $25,000 per month in rent.

On August 14, 2014, the Company entered into a Sublease Agreement with DPCO, Inc. a Colorado corporation, whereby the Company subleased the property located at 755 South Jason Street, Denver, Colorado for a term of four years.

Our Industry

their tenants. We are in a burgeoning industry, centered on the production and sales of medical and recreational marijuana. Diego Pellicer is focused on providing legally compliant retail and production facilities to State licensed operators. In addition, Diego Pellicer offers branding opportunities to state licensed producers and retailers that meet our stringent qualifications.

In addition to providing fully branded and built real estate to qualified tenants, Diego Pellicer offers non-cannabis infused products, apparel, and other tangible products at a wholesale rate. To become a qualified tenant, Diego requires its tenants to strictly adhere to testing and labeling requirements along with all state laws and federal guidelines to assure quality and consistency of marijuana products, ensuring safe sale and consumption. Table 7 provides a list of our current property portfolio.

Our Business Strategy

Market Definition and Roles

The marijuana market consists of medical and recreational regulators, producers, testers, processors, wholesalers, retailers, collectives, consumers and real estate holders. Since data pertaining to specific aspects of marijuana sales, such as processor revenues, is virtually non-existent for the marijuana market, the market is valued according to retail sales data provided by state and federal governing bodies. Below is a brief summary of each role:

Market Strategy

Our short-term strategy is to profit only from the lease payments of our real estate holdings and from the sale of branded, non-cannabis products. Diego will have pre-negotiated acquisition contracts with selected tenants that trigger only when it is legal, or not illegal, to conduct interstate commerce in marijuana. We intend to enter into branding agreements with our tenants going forward that will require our tenants to have certain quality controls and procedures to ensure our they comply with the law, safety and quality.tenants. In addition, part of the vetting process in finding the proper tenant is selecting a tenant that shares the Company’s values and strictly complies with respective state laws, follows strict safety and testing requirements and provides consistent, high-quality products. If the tenants do not comply, they will not be allowed to use the brand. At this time, we have one pre-negotiated acquisition contract in place with

The second phase of our strategy is to secure options to purchase the tenant’s operations. When mutually advantageous for Diego Pellicer Worldwide Washington and are in the process of negotiating additional pre-negotiatedtenant, Diego will negotiate acquisition contracts with selected Diego operators/tenants. When it becomes federally legal to do so, Diego will execute the acquisition contracts, consolidate our selected tenants and become a nationally branded marijuana retailer and producer concurrent with the change of federal law.

Diego Pellicer Management Company, a wholly owned subsidiary, will license the upscale Diego Pellicer (“DP”) brand to qualified operators and receive royalty payments, while providing expertise in retail, product and manufacturing from Diego’s management team.

Value Proposition

Value Proposition 1:

By providing branding, management experience, training, unique accessories, purchasing services, locational experience, standardized design, and experienced construction supervision, the tenant reduces his startup time, reduces cash drain, increases his efficiency, and builds his gross margin. Diego provides the capital for preopening lease costs and tenant improvements. This results in a turnkey retail location for the tenant. Thus, Diego’s real estate, management, consulting and accessory sales are positioned to deliver a premium return on our investment.

Value Proposition 2:

With each lease, Diego negotiates an acquisition contract with selected licensed tenants to acquire their operations. This contract will be executed at Diego’s option, and upon changes to federal law, introduces our second value proposition-ownership of operations.

Revenue Generation and Growth

Diego generates current revenue and stages future revenue streams through the following processes:

Why We Believe this is a Winning Strategy

Should the United States and countries around the world legalize the commerce of marijuana, Diego is positioning itself to be a dominate player in the marijuana marketplace. Diego will accomplish this by being a fully integrated marijuana retail operation and premium brand, capitalizing on the beautifully designed retail stores offering the finest quality products at competitive prices.

Most industries evolve through the same business cycle. Many small independent companies initially operate in fragmented markets in the early stages. Then there is a consolidation of the industry, with the consolidators thriving and the independent companies dwindling. The larger companies have access to cheaper capital, lower costs, better merchandising, brand name recognition, and more efficient operations. This is what we offer our tenants when negotiating the lease: an agreement to acquire them when marijuana is legalized. This gives the tenant the ultimate opportunity to participate in the rapid consolidation that we believe will happen when marijuana is legalized. This consolidation will result in companies that have been unable to participate in the rapidly growing industry to be scrambling to enter the space. Diego and its tenants will already be established and consolidated. As an exit strategy, we want to position Diego to be a likely candidate for acquisition or a major player in the marketplace.

Recent Developments

2021 was a time of continued growth and a change of focus for the Company. An effective and experienced team was assembled from within our operators to develop our management company, and to complement the current executives with knowledge and experience in real estate operations, banking, site selection, branding, marketing, facility design, corporate finance, investor relations, store management, and grow expertise, Additional capital needed to be raised in order to have sufficient capital to help support our operators expand within their markets, and to begin the expansion into different markets in the US. Much of the Company’s debt is being renegotiated, and additional commitments were formalized for the expansion in the Colorado market. New markets had to be explored, new alliances forged, and opportunities prioritized.

New markets were explored. Three facilities continued to see solid revenues, which lead to rental revenue cash-flow to the Company. In 2021, Diego focused on our Colorado operations in Denver. Diego received revenues from the Colorado facilities and received revenues from a divested leased property in 2020. Diego now has two facilities generating rent in 2021 and we have actively been expanding in the Colorado markets with potential acquisitions for our tenants, and our management company. Although our tenants continue to strengthen their presence in the marketplace, post COVID-19 sales have tapered off slightly as the general workforce returns to work. Diego worked with these tenants, partially forbearing on their rent so as to allow these operators to strengthen their position and become capable of paying full rents. The properties generating rents in 2021 are as follows:

Table 1: Property Portfolio

Diego’s Denver Colorado tenant opened our first grow store in Seattle in October 2016. On October 21 2020, the Company entered into an agreement with a third party, to which the Company sold the Elizabeth Street leased location operation securing all the future premium rents due under the extended lease agreement The Colorado tenant opened the Diego Denver branded grow facility in February 2017. The retail facilities have shown steady growth in sales since their opening. The three Colorado properties were subleased to a single entity. The Company is currently exploring the acquisition of other tenants.entities to increase cash flow and value for the company.

Diego Pellicer Denver

Diego will continue this strategy in states where recreational or medical marijuana sales and cultivation is legal under state law. Our business model is recurring lease revenue, royalties, management fees, and is entirely scalable. Our success will dependent upon continuing to raise capital for expansion, continual improvement of our business model, standardizing store design, controlling costs, new store management opportunities, and continuing to develop the brand.

On February 8, 2022, the Company entered into an Equity Purchase Agreement (the “Purchase Agreement”), with Hemp Choice Distribution, LLC, a Colorado limited liability company (“HCD”), its owners (the “Sellers”), and Gabriela Vergara (the “Sellers’ Representative”), pursuant to which we have agreed to acquire all of the issued and outstanding equity interests of HCD (“Membership Interests”). The closing of the transaction is expected to occur within 90 days from the date of the Purchase Agreement (the “Closing”).

The purchase price for the Membership Interests shall be the aggregate amount of $4,400,000 payable at the Closing as follows: (i) $250,000 in cash by wire transfer of immediately available funds; (ii) the number of restricted shares of the Company’s common stock that is equal to $250,000 divided by the current market price at the time of Closing, but such price shall not be greater than $.05 per share or less than $.02 per share: and (iii) three pillarsmillion nine hundred thousand dollars ($3,900,000) in the form of 390,000 shares of redeemable preferred stock (with a stated value of $10.00 per share) of the Company. The terms of the redeemable preferred shares shall be specifically and fully set forth in a Certificate of Designations to be filed with the State of Delaware at the time of Closing. After the Closing, the Purchaser agrees to provide HCD with a line of credit or assist it in obtaining a line of credit from a third party of up to $1,000,000. In addition, the business of HCD shall continue to be managed by Sellers’ Representative subject to the conditions of an employment agreement to be entered into by the Company and Sellers’ Representative prior to the Closing.

What does our strategy are:premium branding accomplish?

A very important aspect of our marketing plan is to build Diego Pellicer as a luxury brand. This not only enables us to establish further and exploit Diego Pellicer as a premium brand, but also to generate significant revenues off of non-cannabisfrom non- cannabis products.

Market Size

The USCompany is establishing several levels of branding and will use these to appeal to the various segments of the marketplace depending upon the location, competition, legal constraints, and budget. Standard store templates are being developed, complimentary accessories selectively designed, and customer preferences and segments analyzed.

Our Denver stores have been met with enthusiastic demand and quickly growing revenues. This is proving the initial Diego concept.

The Industry: Retail Sales Continue to Rise

Legalization of marijuana is a very recent movement. California was the first to legalize in 1996 when medical marijuana was approved. Eleven states and the District of Columbia have legalized the drug for recreational purposes, according to the National Conference of State Legislatures. More than half the states (36) – plus the District of Columbia, Guam and Puerto Rico – have legalized it for medical purposes. The list of states that have legalized marijuana could expand this November. Marijuana remains illegal under U.S. federal law.

Source: 2021 Marijuana Business Daily, a division of Anne Holland Ventures Inc.

Source: 2021 Marijuana Business Daily, a division of Anne Holland Ventures Inc, National Institutes of Health, 

New Leaf Data Services, LLC, Cigar Association of America, Inc.

The growth in public support for legal marijuana and hemp derived CBD comes as a growing number of states have legalized the drug for medical or recreational purposes in recent years.

About 7-in-10 Americans (74%) say the use of marijuana should be legalized, reflecting a steady increase over the past decade, according to a new Pew Research Center survey. The share of U.S. adults who support marijuana legalization has changed from about 2 years ago – when 62% favored it – but it is more than double what it was in 2000 (31%).

As in the past, there are wide generational and partisan differences in views of marijuana legalization. Majorities of Millennials (74%), Gen Xers (63%) and Baby Boomers (54%) say the use of marijuana should be legal. Members of the Silent Generation continue to be the least supportive of legalization (39%), but they have become more supportive in the past year.

Source: Pew Research Center

Annual cannabis retail sales continue to grow year-over-year as new markets emerge and more states legalize medical and recreational marijuana. Sales in 2024 are projected to increase to over $30 billion

By 2024, annual retail marijuana sales in the United States could top $40 billion, which would represent more than a 30% increase from 2019.

Source: 2021 Marijuana Business Daily, a division of Anne Holland Ventures Inc.

The retail and medical marijuana industry brought in an estimated $59.2 - $70 billion of economic impact in 2020 just in the USA. By 2025, we expect the potential for the industry to surpass $135 billion in annual economic benefit.

Estimates for economic impact are based on an impact multiplier of 3.5. This means that for every $1 consumers spend at dispensaries or recreational stores, another $2.50 in economic benefit will be created in the cities, states and ultimately the nation.

Here are some of the factors in this overall economic impact:

The marijuana labor market has experienced rapid, chaoticincreased about 38% over last year with marijuana industry supporting about 240,000-295,000 employees. A majority of this growth has come from other states legalizing marijuana use over the last few years including California, which is the next market Diego is focusing its attention on for acquisitions, and branding agreements. In 2019, marijuana employment surpassed that of the technology industry of web developers and is fast approaching the number of clergy in the USA.

The continued growth in recent years, whichthe cannabis market, including legalizing the growing and retailing of hemp based products, has boosted the rapid growth in employees and retail sales. The industry is setexpected to add more than 430,000 full-time jobs between now and 2024 with compounding annual growth rates of 22% and should lead to over 575,000 jobs by 2024.

Outside of California, however, sales are expected to continue beyondclimbing, bolstered by ongoing growth in mature markets like New Mexico and Arizona, increased patient access in Florida and new Medical Marijuana (MMJ) programs coming online in Maryland and Pennsylvania. The transition to fully regulated, state-licensed MMJ sales in Michigan has caused some short-term instability, but it remains one of the forecast targetlargest medical markets in the country and will likely continue to form the foundation of 2019 due primarilythe MMJ industry for years to regulatory misalignment between state and federal governments.come.

The marijuana secondary and tertiary markets have not yet been analyzed as sources of revenue; however, emerging secondary markets such as marijuana tourism could become a significant source of income for recreational legal states. As a point of comparison, Holland earns $48.55 billion per year in tourist dollars. Of the 10 million tourists, 5.5 million or 55% of tourists visit bars and cafes, generating a total of nearly $27 billion and 220,000 jobs (NBTC, 2009). This equals roughly 30% of all business revenue generated in Washington state in 2012 (Washington State Department of Revenue, 2014).

The US state-sanctionedmore states continue to legalize medical and recreational marijuana market generated a total revenuesales, an ever increasing number of $5.4adults are introduced, or re-introduced to the product. Continued research into the benefits of Cannabidiol (CBD) derived from both the Marijuana and hemp plants, has catapulted the cannabis industry into the mainstream media. Legal sales of recreational and medical marijuana reached about $25.2 billion in 2015, boosted by an incredible growthsales for 2021, about half that spent on tobacco cigarettes. It is estimated that total demand for cannabis including legally produced product is in excess of $50 - $60 billion

By 2025, we project total retail and medical marijuana sales in the recreational sectorUnited States will reach approximately $38.4-45.9 billion annually - more than a threefold increase from estimated annual sales in 2017. Our estimates account for the fact that more states will likely legalize medical or adult-use marijuana in the coming years - though it’s difficult to predict when that will happen and how big those markets will be. Using a range of estimates that incorporate several factors - such as the likelihood of a given state passing a legalization measure, the size of the customer/patient base and time frame for the launch of sales from $351M- helps account for this uncertainty. Our approach is refined over time as more information becomes available.

It’s important to $998M.=, an estimated increase of 184% over 2014. By comparison,point out that the marijuana market is less than 3%industry has a big and growing impact on the economy at large as the revenue it generates ripples across a community, city and/ or state - as well as the nation. To understand an industry’s economic impact, traditional macroeconomic multipliers can range anywhere from 10 to 20 times the original dollar spent. Based on new data from other industries, we’ve settled on a standard multiplier of 3.5 for the US tobacco market, a $144 billion market that has no medicinal value, and less than 3% of the alcohol market, which valued at $113.5 billion in 2014 (2016 Statistic Brain Research Institute). As states legalize marijuana, and international markets develop, the emerging legalized marijuana industry - a slight revision from last year’s multiplier of four.

In other words, for every $1 consumers/patients spend at dispensaries and rec stores, an additional $2.50 of economic value will begin to rival thatbe injected into the economy - much of tobacco and alcohol and could see $45B in revenues by 2020.it at the local level.

Marijuana has become a major issue in state elections as voters are seeking politicians that support legalization (Gutwillig, 2014). As states legalize marijuana, and international markets develop, the emerging legalized marijuana industry will begin to rival that of tobacco and alcohol. Table 1 summarizes 2016 estimated revenues generated by marijuana retail sales based on a number of sources, including state marijuana program reports.

Table 1: Projected US Marijuana Retail Sales, 2016

Source: (Marijuana Business Daily 2016; Illinois Cannabis Patients Association, 2010; Leal, 2014;2021 Marijuana Business Daily, 2013)a division of Anne Holland Ventures Inc. (Note that our goal is to provide conservative, realistic financial forecasts that reflect the high degree of uncertainty in the industry. Total cannabis sales in any given calendar year are highly dependent upon progress made - or not made - in each individual state. California is currently the big wild card, as the slow rollout of its statewide regulatory system makes it difficult to get a handle on the exact size of this enormous market. As more information comes to light over time, it could change our estimates for California and, therefore, the industry at large.)

Figure 2 illustratesWhere are the Greatest Market Opportunities?

All eyes are on California.

That’s the reality for nearly everyone involved in the global marijuana market. Companies around the world - from Europe to Canada to Israel and beyond - want a piece of the California market. But there are plenty of practical ramifications. No other state or federal government in the world has tried to implement such a wide-ranging regulatory system that affects tens of thousands of existing black- and gray-market businesses.

The bottom line: The sheer immensity of the California cannabis market structureis topped only by its complexity. And that complexity has led to major struggles and big wait times for entrepreneurs looking to tap the California market potential. California’s Marijuana (MJ) regulatory system covers a population of 40 million and includes incentives for existing businesses to transition to the licit tax-paying industry.

There are plenty of other hurdles for existing and future businesses as well, including local license caps from towns and counties that are hesitant to grant permits to any type of cannabis companies. As of early October 2018, only a fraction of local governments had opted to allow recreational use companies to set up shop within their borders, and state business permits are dependent on a company first obtaining local authorization of some sort. Plenty of companies are striving to play by the rules, but they’re often unable to stay in business while doing so because they haven’t been able to find locations that fit all the legal parameters for licensing.

The same is true for thousands of small-scale growers in California, as well as edibles makers, concentrate producers and estimated retail sales revenuesother plant-touching businesses. One option for 2016. Ofsuch companies, at least for now, is to focus on the 24 statesmedical marijuana market instead of recreational. Far more local governments allow limited medical companies than adult-use businesses. Obtaining such permits could be a stopgap move because, as time goes on, it’s likely that more and more local governments will decide to permit recreational use. Another option could be to pivot into an alternate cannabis sector, such as distribution or testing labs, given that there’s a dearth of both key business types in whichthe state.

Hemp and CBD

Hemp was once prized for making rope. Two hundred years later, the plant still has us tied in knots. From a patchwork of state hemp rules to confusion among cannabis entrepreneurs about the definition of hemp, uncertainty reigns in the hemp industry. Hemp has long been bedeviled by its conflation with marijuana, is legal, Colorado is expected to generatedand the most revenue at $51,100M, followed by California at $1,000M and Washington at $775M. Most States operatingControlled Substances Act banned its production for decades. That changed in 2014, experienced doublewhen the U.S. Farm Bill opened the door for a hemp revival in states willing to experiment (and control) the crop’s return to legal production. The federal government defines hemp as cannabis sativa with a THC content at or below 0.3%.

The Farm Bill set off an explosion of hemp production and triple digit growth into 2015, with the exceptionexperimentation and has given cannabis entrepreneurs new opportunities to California, which has leveled out.

Figure 1 Estimated US Marijuana Retail Sales, 2016

Various industry reports estimate thatgrow, sell and buy cannabis in a nonintoxicating form. The Farm Bill allows limited interstate commerce for hemp - something still off-limits to marijuana sales could generate as much as $8.7 billion in stateentrepreneurs. Hemp businesses report fewer banking and federal taxes; however, data to support that estimate is not yet available. (Marijuana Business Daily 2016)

Market Growthregulatory headaches.

The performanceU.S. hemp experiment is still unfolding. Market conditions vary widely. Though the laws vary from state to state, it is more or less legal to produce hemp in most American states. America is finally getting its staple agriculture back. This can greatly benefit America as it will revolutionize several of its key industries – textiles, biomass, natural gas, building materials among others.

Not all U.S. states use the federal THC guidelines to define hemp, and the 0.3% THC threshold has little basis in science, meaning that scientists don’t agree about how much THC a plant needs to produce a high when heated and consumed. Cannabis plants have more than 100 cannabinoids, of which THC is only one, and hemp products with no detectable THC can still be considered psychoactive if they contain cannabinoids that relieve anxiety or depression. At least one state, Iowa, explicitly dictates that cannabidiol is legal but high THC marijuana is not legal - then goes on to say it accepts cannabidiol with a THC limit 10 times higher than the federal threshold for legal hemp.

Still, the 0.3% THC threshold is a useful metric for dividing marijuana from hemp, and it is the standard used in the industry.

Longtime hemp prohibition in the United States has left the industry frozen in time. There is little modern agricultural equipment appropriate for hemp harvesting and processing, and the crop likely won’t match the market share it enjoyed before the Industrial Revolution, when hemp fibers were commonly used in commercial fabrics. Today, hemp’s value comes mostly from its flower, rich in cannabinoids beyond THC. The most valuable as of this report is forecastCBD, a cannabinoid with established therapeutic uses including pain relief and reducing muscle spasms associated with epilepsy or muscular sclerosis.

Hemp Industry Daily estimates that the U.S. market for hemp-derived CBD will hit approximately $4.7 billion in 2021, with the potential to accelerate, with an anticipated growth of an average of 27% overeclipse $6 billion annually by 2024 - a substantial increase in just a few years.

Expect hemp-derived cannabinoid products low in THC to take increasing market share (and media attention) in the next four years to an expected market value greater than $45 billion by the end of 2020. Table 2 and Figure 3 provide estimated market growth from 2011 to 2018. This growth assumes that no additional states legalize. If additional states legalize, growth estimates will likely increase significantly.overall cannabis industry.

Table 2: US Industry Estimates, 2013 to 2018

Billions of Dollars, US

Source: (Brown and Resnick, 2013; California Department of Public Health, 2014b; CannaBusiness Media, 2014; Colorado Office of Research and Analysis, 2013a, 2013b, 2013d, 2013e, 2014; Fairchild, 2013a, 2013b; Galvin, 2013; Illinois Cannabis Patients Association, 2010; Leal, 2014;2021 Marijuana Business Daily, 2013; Officea division of Financial Management, 2012)Anne Holland Ventures Inc.

Figure 3: US Industry Estimates, 2011 to 2018

Market Distribution

Market distribution must be measured indirectly with registered medical consumers and dispensaries. As expected, California has the largest numberStatus of marijuana patients at more than 775,000, followed by Michigan at 179,000 and Colorado with 107,000. Washington is at 125,000 registered patients as listed in Table 3 and illustrated in Figure 4. There are currently an estimated 1.5 million medical marijuana patients in the US.

Table 3: Registered Medical Marijuana Patients 2015

Source: (Marijuana Business Daily 2016; Illinois Cannabis Patients Association, 2010; Leal, 2014; Marijuana Business Daily, 2013)

Figure 4: Registered Medical Marijuana Patients

Another indirect measure of market distribution is the number of medical marijuana dispensaries. Table 4 and Figure 5 provide the distribution of dispensaries across the US. The number of patients and dispensaries are mostly aligned; however, certain states such as Michigan have much higher ratio of patients to dispensaries than other states. This could be the result of inaccurate data.

Table 4: Registered Medical Marijuana Dispensaries

Source: (Marijuana Business Daily 2016; Illinois Cannabis Patients Association, 2010; Leal, 2014; Marijuana Business Daily, 2013)

Figure 5: Registered Medical Marijuana Dispensaries

Competitive Analysis and Benchmarking

Diego was one of the first to the market with a real estate holding and branding business model; however, other companies have since adopted similar strategies. Key differentiators between Diego and its competitors are superior branding, optimized build-out and turnkey grow and retail development, and, most importantly, pre-negotiated acquisition contracts. As with other marijuana-related financial data, collecting benchmark data on Diego competitors was especially challenging in that many of these companies fail to report or are unable to report the fundamentals of financial information. Table 5 provides a financial benchmark of Diego’s nearest competitors.

Table 5: 2013 Real Estate Holding and Branding Financial Benchmark-$000

U.S. Federal Law

While marijuana is legal under the laws of several U.S. States, (with vastly differing restrictions), at the present time the concept of “medical marijuana” and “retail marijuana” do not exist under U.S. federal law. The United StatesFederal Controlled SubstancesSubstance Actclassifies “marijuana”marijuana as a Schedule I drug. UnderAs defined under U.S. federal law, a Schedule I drug or substance has a high potential for abuse, no accepted medical use in the United States, and a lack of safety for the use of the drug under medical supervision.

The United States Supreme Court has ruled in a number ofseveral cases that the federal government does not violate the federal constitution by regulating and criminalizing cannabis, even for medical purposes. Therefore, federal law criminalizing the use of marijuana pre-empts state laws that legalizes its use for medicinal and recreational purposes.

In a memorandum dated August 29, 2013 addressed

Attorney General Jeff Sessions’ January 2018 decision to “All United States Attorneys” from James M.rescind the Cole Memo raised some concerns in the marijuana industry that federal officials may try to interfere with legal cannabis. Those concerns, for the most part, haven’t materialized, but the scare did get many marijuana businesses thinking about the possibility of federal interference and what could be done about it.

The memo was drafted during the Obama administration by former U.S. Deputy Attorney General (“James Cole Memo”),in 2013 as a way to minimize the threat of federal crackdowns against legal marijuana businesses. The document essentially instructed federal law enforcement not to interfere with state-licensed marijuana businesses complying with state laws and certain conditions, such as not selling product to minors or into the black market.

While the Cole Memo clearly expressed an Obama administration policy of leaving legal marijuana businesses alone, it was not a legal change - which only Congress can do. Therefore, the Cole Memo technically allowed U.S. attorneys to go after marijuana businesses if they wanted. With the sending of the Cole Memo to the proverbial shredder, U.S. attorneys no longer have guidelines on how to deal with state-licensed marijuana businesses. But in an April 2018 conversation with Republican U.S. Sen. Cory Gardner, President Donald Trump pledged to keep the Department of Justice acknowledged that certain U.S. States had enactedfrom interfering with state cannabis laws relatingand, perhaps more significantly, support legislation protecting state-legal marijuana businesses. White House officials later confirmed the president’s policy stance.

As the Biden administration continues to dive deeper into its policy agenda, cannabis is a topic to watch. Though the administration has been focused on tackling immediate priorities, marijuana is likely to rise to the surface in the near term.

Several bills have been introduced to Congress seeking to reform federal marijuana laws in different ways, including the removal of cannabis from the list of controlled substances, allowing MJ companies to access traditional banking services and amending the IRS code to more fairly tax cannabis businesses. Similar bills have been introduced in previous sessions of Congress, but none have gained significant traction. This time, however, may be different, as marijuana reform has become a bipartisan issue that has the support of many prominent Democrats and Republicans.

The Current Landscape

President Biden’s views on marijuana legalization—as well as the Democratic Party’s—have evolved over time, as reflected in the 2020 Democratic Party Platform. In it, the party stated it would “decriminalize marijuana use and reschedule it through executive action on the federal level. [It would] support legalization of medical marijuana, and outlinedbelieve[d] states should be able to make their own decisions about recreational use.” Medical marijuana is legal in 36 states and, since February 2021, when New Jersey passed its own legalization bill, recreational cannabis is legal in 15 states. Additionally, some states such as Mississippi, where recreational use is not legal, have agreed to lessen the U.S.penalties for possession, while other states like Illinois are expunging arrests related to marijuana possession. New York Governor Andrew M. Cuomo has signed legislation (S.854-A/A.1248-A) legalizing adult-use cannabis, fulfilling a key component of his 2021 State of the State agenda

With Democrats controlling Congress and the White House, and with the cannabis industry growing ever larger, many expect Congress to soon take up the issue of cannabis in earnest. “Ending the federal government’s enforcement prioritiesmarijuana prohibition is necessary to right the wrongs of this failed [War on Drugs] and end decades of harm inflicted on communities of color across the country,” said Senate Majority Leader Chuck Schumer (D-NY), along with Cory Booker (D-NJ) and Ron Wyden (D-OR), in a February 2021 joint statement.

Bipartisan support is swelling. A December 2020 poll found that two-thirds of all Americans, including 51 percent of Republicans, supported a December 2020 bill to federally legalize marijuana. Although the House omitted marijuana legalization in its most recent COVID relief bill, there are three marijuana-related pieces of major legislation that could pass during this congressional term:

The SAFE Banking Act, which provides a path for the financial system with respect to cannabis.
The MORE Act, which addresses some of the societal injustices created by the War on Drugs.
The STATES Act, which protects individuals who comply with state laws regulating marijuana.
All three bills are expected to be re-addressed during this congressional term.

The Biden administration has yet to formally weigh in on or issue an executive order concerning marijuana notwithstandingreform. However, when asked at his confirmation hearing if he thought 2014 Financial Crimes Enforcement Network (FinCEN) guidance should be updated to “set expectation for financial institutions that provide services to cannabis-related industries” and what steps he would take, Deputy Secretary of Treasury nominee Adewale Adeyamo said that he planned to address the fact that certainissue if confirmed.

What This Means for Business

Organizations of all types should be mindful of the current landscape as it relates to cannabis, given the impact the pending legislation will have on law and rulemaking in the workplace. However, two sectors should pay particularly close attention to action in this space: the investment community and the financial services industry.

Investment Community

Descheduling and decriminalizing marijuana, as well as legalizing it to any degree, would open a larger window of opportunity to list cannabis-related stocks on U.S. Statesexchanges. While providing more legal oversight of the industry would offer the potential for more jobs and revenue by supplying incentive for more people and entities to dive into the industry, it would also open the door for fraud risk. New market entrants should be vetted, as the risk of counterfeit products is high. As they do when deciding to fund any new product or venture, investors should assess their safeguards and risk mitigation framework before diving in.

Financial Services Industry

Banks in particular have legalizedlong had a complicated relationship with marijuana-related businesses (MRBs). For the most part, MRBs do not have access to the banking industry. They are unable to accept credit cards, deposit revenues, access loans, or decriminalizedwrite checks to meet payroll or pay taxes, which makes them vulnerable. However, until cannabis is federally legal, financial services will continue to be handled by local providers, such as credit unions, which presents both opportunities and risks. Since regulations vary from state to state, bringing on a MRB client is complex and does not always align with prescribed risk. However, as the use, sale and manufacture of marijuana:$56 billion industry continues to grow, banks must continue to evaluate whether it makes financial sense to consider banking this contradictory industry.

ThereEven if the current administration makes banking MRBs more feasible, financial institutions should still evaluate clients on a case-by-case basis, ensuring compliance is no guaranteestrong at the core. Banks will need to ensure that MRBs—like other high-risk clients—are equipped with the right technology, ample compliance staff training, and clear parameters on risks and red flags. As compliance teams increasingly find their mandates growing and their resources stagnating or shrinking, looking to outsourced financial crimes risk management solutions can also provide some reprieve and support for managing this risk.

Despite movement on the federal marijuana front, organizations of all types should be mindful that the current presidential administration willlaw has not changed yet—and if change its stated policy regardingdoes occur at the low-priority enforcement of U.S. federal laws that conflictlevel, consulting with state laws. Additionally,legal counsel and third-party risk experts before engaging in any new U.S. federal government administration that follows could change this policy and decide to enforce the U.S. federal laws vigorously. Any such change in the U.S. federal government’s enforcement of current U.S. federal laws could cause adverse financial impact to the Company’s business. See“Risk Factors.”sector or product remains advisable. 

In February 2014, FinCEN issued guidelines allowing banks to legally provide financial services to Licensed Operators that hold a valid License (“FinCEN Memo”). The rules re-iterated the guidance provided by the Cole Memo, stating that banks can do business with Licensed Operators and “may not” be prosecuted. The guidelines provide that “it is possible [for the banks] to provide financial services” to Licensed Operators and while remaining in compliance with federal anti-money laundering laws. The guidance falls short of the explicit legal authorization that banking industry officials anticipated and the outcome of the banks relying on this guidance in transacting with Licensed Operators is currently unclear. See“Risk Factors.”Source: K2 Integrity New York, NY

Employees

We presently have 5 full-time employees and 0 part-time employees. We consider our relationship with our employees to be excellent. We also had independent consultants under contract to provide financial management services, business development services, and sales management services. In addition to the diverse technical, intellectual property, legal, financial, marketing and business expertise of our professional team, from time to time we rely on advice from outside specialists to fulfill unique technology and other needs.

Item 1A.Risk Factors

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

Item 1B.Unresolved Staff Commentsitems

None.

Item 2. Properties

Our principal executive office is located at 3435 Ocean Park Blvd.6160 Plumas St. Suite 100, Reno NV 89519.

The Company leases real estate to licensed marijuana operators.

The properties generating rents in 2021 and 2020 are as follows:

The Company’s three properties in Denver, CO (one terminated in October 2020) are leased to Royal Asset Management, LLC (“RAM”). RAM opened the Diego Denver branded flagship store in February 2017. This store is known as “Diego Colorado”. The retail facilities have shown steady growth in sales since opening. For the other two properties subleased (one terminated in October 2020), #107-610, Santa Monica, CA 90405,RAM uses these properties for its cultivation facilities in Denver, CO. Production at these facilities began in late 2016. The Company is currently in litigation with RAM regarding outstanding amounts due on the leases.

In October 2020, the master lease and sublease associated with the 18,600 sq. cultivation warehouse in Denver were terminated.

Our premises are suitable for our telephone number is (516) 900-3799.current operations.

Item 3. Legal Proceedings

On May 10, 2021, a lawsuit was filed against the Company, along with other defendants, by plaintiff Erin Turoff in the District Court, City and County of Denver, State of Colorado. The specific allegations against the Company include civil theft and civil conspiracy and the plaintiff is seeking actual and compensatory damages. No specific monetary amount was demanded in the lawsuit. On July 8, 2021, the Company filed an answer to the complaint, denying the allegations. The Company believes that the suit is without merit and that the Company will ultimately prevail in any litigation.

From time to time,

Other than as listed above. we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims against the Company that we believe will have a material adverse effect on our business, financial condition or operating results.

Item 4. Mine Safety Disclosures

Not applicable.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The table below sets forth the range of quarterly high and low closing sales prices for its common stock for 2021 and 2020. The quotations below reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions:

There is no established public trading market for our Common Stock. As of the date of this Report, there are outstanding options and warrants to purchase 3,425,798 shares of Common Stock of the Registrant.

Record Holders

As of April 19, 2016,8, 2022, there were approximately 143205 shareholders of record holding a total of 41,572,082260,661,121 shares of Common Stock.common stock, including shares held in “street name” by banks, brokerage clearing houses, depositories or otherwise in unregistered form. The Company does not know the beneficial owners of such shares, or the number of beneficial holders of the Common Stock are entitled to one vote for each share held of record on all matters submitted to a vote of shareholders. Holders of the Common Stock have no preemptive rights and no right to convert their Common Stock into any other securities. There are no redemption or sinking fund provisions applicable to the Common Stock.such shares.

DividendsDividend Distributions

The RegistrantCompany has not declared any cash dividends since inception and does not anticipate paying any dividends in the foreseeable future. The payment of dividends is within the discretion of the Board of Directors and will depend on the Company’s earnings, capital requirements, financial condition, and other relevant factors. There are no restrictions thatWe currently limitexpect to use all available funds to finance the Registrant’s ability to payfuture development and expansion of our business and do not anticipate paying dividends on its Commonour common Stock in the foreseeable future.

Penny Stock

Our common stock is considered “penny stock” under the rules the Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ Stock Market System, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or quotation system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the Commission, that:

The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with:

In addition, the penny stock rules that require that prior to a transaction in a penny stock not otherwise exempt from those generally imposed by applicable state law.rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgement of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitably statement.

These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock.

Unregistered Sale

Related Stockholder Matters

None.

Issuer Purchases of Equity Securities

In November 2015,We made no share repurchases during the Companyyear ended December 31, 2021.

Unregistered Sales of Equity Securities and Use of Proceeds

During 2021, we issued 1,100,0005,026,413 shares of common stock upon the conversion of $100,000 of notes and $6,256 of accrued interest.

During 2021, we issued 1,167,826 shares of common stock, valued at $17,915, for services.

During 2021, we issued 7,635,992 shares of common stock, valued at $172,283, for related party services.

On September 2, 2021, we issued 976,526 shares of common stock in exchange for 20,000 shares of Series C Convertible Preferred Shares to Geneva.

On September 8, 2021, we issued 2,512,077 shares of common stock in exchange for 50,000 shares of Series C Convertible Preferred Shares to Geneva.

On September 14, 2021, we issued 1,890,909 shares of common stock in exchange for 30,000 shares of Series C Convertible Preferred Shares to Geneva.

On September 22, 2021, we issued 2,915,888 shares of common stock in exchange for 30,000 shares of Series C Convertible Preferred Shares to Geneva.

On September 30, 2021, we issued 5,400,418 shares of common stock in exchange for 49,850 shares of Series C Convertible Preferred Shares to Geneva.

On October 7, 2021, we issued 4,378,947 shares of common stock in exchange for 40,000 shares of Series C Convertible Preferred Shares to Geneva.

On October 18, 2021, we issued 4,378,947 shares of common stock in exchange for 40,000 shares of Series C Convertible Preferred Shares to Geneva.

On October 19, 2021, we issued 3,705,684 shares of common stock in exchange for 33,850 shares of Series C Convertible Preferred Shares to Geneva.

In connection with the issuances of the foregoing securities, the Company relied on the exemptions from registration provided by Section 4(a) (2) of, and Rule 506 of Regulation D promulgated under, the Securities Act of 1933, as amended, for transactions not involving a public offering.

Item 6. [Reserved]

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the results of operations and financial condition for the years ended December 31, 2021 and 2020 should be read in conjunction with our consolidated financial statements and the notes to those consolidated financial statements that are included elsewhere in this Annual Report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. See “Forward-Looking Statements.”

COVID-19

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency in response to a new strain of a coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. Management is actively monitoring the global situation and its effects on the Company’s industry, financial condition, liquidity, and operations. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2022. However, if the pandemic continues, it may have a material adverse effect on the Company’s results of future operations, financial position, and liquidity in fiscal year 2022.

Overview

Diego Pellicer Worldwide, Inc. was established on August 26, 2013 to take advantage of growing market for legalized cannabis being made possible by the escalating legislation allowing for the legalization of cannabis operations in the majority of states:

The industry is operating under stringent regulations within the various state jurisdictions. The Company’s primary business plan is twofold: First to lease various properties to licensed operators in these jurisdictions to grow, process and sell cannabis and related products, and the second the Diego Pellicer Management Company, will license the upscale Diego Pellicer brand to qualified operators and receive royalty payments, while providing expertise in retail, product and manufacturing from Diego’s management team. The Company will also provide educational training, compliance consultation, branding, and related accessories to their tenants. These leases and management agreements are expected to provide substantial streams of income. We believe that as laws evolve, it is possible that we will have the opportunity to participate directly in these operations. Accordingly, the Company will selectively negotiate an option on our tenants’ operating company.

Source: Headset & 2020 Marijuana Business Daily, a division of Anne Holland Ventures Inc.

The legalization taking place in other states such as California and Florida present opportunities many times that of Washington and Colorado. The Company is exploring opportunities in Oregon, California and Florida and is getting inquiries from other potential operators in other jurisdictions.

Summary

The Company’s primary business objective is to lease various properties to licensed operators to grow, process and retail cannabis and related products. By developing a premium brand name, building upscale facilities, and providing quality accessories to a market where financing is difficult to obtain, these subleases are designed to provide a substantial stream of income. We believe that as laws evolve, it is possible that we will have the opportunity to participate directly in these operations as well.

2019 was a time of continued growth and a change of focus for the Company. An effective and experienced team was assembled from within our operators to develop our newly formed management company, and to complement the current executives with knowledge and experience in real estate operations, banking, site selection, branding, facility design, corporate finance, investor relations, store management, and grow expertise, Additional capital needed to be raised in order to have sufficient capital to help support our operators expand within their markets, and to begin the expansion into different markets in the US. Much of the Company’s debt was renegotiated, and additional commitments were formalized for the expansion in the Colorado market. New markets had to be explored, new alliances forged, and opportunities prioritized. 2020 was a year of strategic alliances and developing a strong operating structure that would be used to compliment any new acquisition, and guiding our branded tenants. An effective and experienced team was developed from within our operators to develop our management company. The Company has been working diligently to renegotiate our debt and lower our convertible debt in anticipation of the merger and acquisition phase of the Company. The Company divested itself from a poor performing lease and secured all the potential future premium rents from our branded tenant, at the same time as securitizing deferred rents from this tenant in the form of a note with specific short term repayment functions. The Company has started numerous introductory discussions with potential acquisitions that would follow one of the key requirements at being additive to our consolidated financial statements.

2021 was a year where the Company took advantage of the changes in the continued advancement of cannabis legalization in the USA, and the growth in the hemp industry to mid year pivot the main focus of the Company to expand its branding and management businesses. The company actively searched for viable acquisitions in both the legal cannabis and hemp industries, that would be additive to our consolidated financial statements. The Company opened negotiations with a company in the hemp and CBD industry to acquire all their operations for a combination of company stock and cash.

Plans of Operation

Diego is currently exploring opportunities in California, Colorado, Nevada, Florida, Washington and other states. The Company will continue to raise capital to finance that expansion. This should result in increased revenues for the future and increased opportunities into new markets.

Recent Developments

On February 8, 2022, the Company entered into an Equity Purchase Agreement (the “Purchase Agreement”), with Hemp Choice Distribution, LLC, a Colorado limited liability company (“HCD”), its owners (the “Sellers”), and Gabriela Vergara (the “Sellers’ Representative”), pursuant to which the Company has agreed to acquire all of the issued and outstanding equity interests of HCD (“Membership Interests”). The closing of the transaction is expected to occur within 90 days from the date of the Purchase Agreement (the “Closing”).

The purchase price for the Membership Interests shall be the aggregate amount of $4,400,000 payable at the Closing as follows: (i) $250,000 in cash by wire transfer of immediately available funds; (ii) the number of restricted shares of the Company’s common stock that is equal to $250,000 divided by the current market price at the time of Closing, but such price shall not be greater than $.05 per share or less than $.02 per share: and (iii) three million nine hundred thousand dollars ($3,900,000) in the form of 390,000 shares of redeemable preferred stock (with a stated value of $10.00 per share) of the Company. The terms of the redeemable preferred shares shall be specifically and fully set forth in a Certificate of Designations to be filed with the State of Delaware at the time of Closing. After the Closing, the Company agrees to provide HCD with a line of credit or assist it in obtaining a line of credit from a third party for service renderedof up to $1,000,000. In addition, the business of HCD shall continue to be managed by Sellers’ Representative subject to the conditions of an employment agreement to be entered into by the Company and 3,381,251 sharesof common stock for cash received in amount of 1,014,374.Sellers’ Representative prior to the Closing.

RESULTS OF OPERATIONS

Year ended December 31, 2021 compared to year ended December 31, 2020

After rental expense the gross margins on the lease were as follows:

Revenues. For the year ended December 31, 2021 the Company leased two facilities to licensees in Colorado. For the year ended December 31, 2020, the company leased three facilities until October 2020. The year ended December 31, 2021 is the beginning of the fourth year of operations for these licensees. Diego, is no longer forbearing the premium rents contractually due from the tenant as a result of the cost of leasehold improvements, but is still forbearing the deferral of preopening rents. These will become recorded as revenue when the Company considers all the premium rents collectible considering the relative success of the tenant’s operations. In October 2020 one of the leases and the related sublease was terminated. As a result, total revenue for the year ended December 31, 2021 was $768,516, as compared to $1,265,137 for the year ended December 31, 2020, a decrease of $496,621. The cultivation warehouse lease was extended during 2021 through July 31, 2024.

Gross profit. Rental revenue for the period ended December 31, 2021 decreased over the prior year ended December 31, 2020, resulting in a gross profit of $143,897, a decrease of $114,659 from 2020 gross profit of $258,556.

General and administrative expense.  Our general and administrative expenses for the year ended December 31, 2021 were $857,260, compared to $1,029,185 for the year ended December 31, 2020. The decrease of $171,925 was largely attributable to a reduction in stock based executive compensation and a decrease in professional fees.

Selling expense.  Our selling expenses for the year ended December 31, 2021 were $35,486, compared to $32,940 for the year ended December 31, 2020. The increase of $2,546 was due to increased services used related to selling and marketing.

The increase in net other income resulted primarily from the effects that the changes in market value of the Company’s stock had on the derivative liability associated with our convertible debt and preferred stock, plus a decrease in interest expense and financing costs of debt incurred by the Company.

LIQUIDITY AND CAPITAL RESOURCES  

Item 6. Selected Financial Data

Operating Activities. For the year ended December 31, 2021, the net cash used of $232,915 was a decrease over the same period of the prior year of $113,533. The loss from operations after non-cash adjustments increased by $124,079 from the prior year.

Investing Activities. There were no investing activities for the years ended December 31, 2021 and 2020.

Financing Activities. During the year ended December 31, 2021, we loaned an aggregate of $124,000 to an entity and received repayments of principal of $11,200. We received $267,000 from the sale of preferred stock. Payments of convertible notes payable was $200,000. During the year ended December 31, 2020, we received $306,444 in proceeds from notes payable and convertible notes payable and $100,000 from the sale of preferred stock. Payments of convertible notes payable was $49,578.

Going Concern Qualification

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred losses since inception, its current liabilities exceed its current assets by $8,372,169 at December 31, 2021, and it has an accumulated deficit of $52,137,982 at December 31, 2021. These factors raise substantial doubt about its ability to continue as a going concern over the next twelve months. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Although the Company has been successful raising additional capital, there is no assurance that the company will sell additional shares of stock or borrow additional funds. The Company’s inability to raise additional cash could have a material adverse effect on its financial position, results of operations, and its ability to continue in existence. These financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management believes that the Company’s future success is dependent upon its ability to achieve profitable operations, generate cash from operating activities and obtain additional financing. There is no assurance that the Company will be able to generate sufficient cash from operations, sell additional shares of stock or borrow additional funds. However, cash generated from lease revenues is currently exceeding lease costs, but is insufficient to cover operating expenses.

Critical Accounting Policies

Our critical accounting policies are included in Note 2 – “Summary of Significant Accounting Policies” of Notes to Consolidated Financial Statements included in this Annual Report.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Recently Issued Accounting Standards

Our recently issued accounting standards are included in Note 2 – “Summary of Significant Accounting Policies” of Notes to Consolidated Financial Statements included in this Annual Report.

Item 7A. Quantitative and Qualitative Disclosure about Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

Item 8. Financial Statements and Supplementary Data.

Diego Pellicer Worldwide, Inc.

December 31, 20152021 and 20142020

Index to the Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The

Report of Independent Registered Public Accounting Firm

Board of Directors and StockholdersShareholders 

Diego Pellicer Worldwide, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Diego Pellicer Worldwide, Inc. (the “Company”) as of December 31, 2021 and 2020 and the related consolidated statements of operations, redeemable convertible preferred stock and stockholders’ deficit and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Consolidated Balance Sheets

The Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the accompanying consolidated financial statements, the Company has suffered recurring losses from operations, generated negative cash flows from operating activities, and has an accumulated deficit that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on the entity’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

See accompanying notesValuation of derivative liabilities

Description of the Matter

As disclosed in Note 8 to the consolidated financial statements, The Company has issued several convertible notes which are outstanding. The note holders have the right to convert principal and accrued interest outstanding into shares of common stock at a discounted price to the market price of our common stock. The conversion feature is recognized as an embedded derivative and is valued using a Binomial Option Pricing Model. In addition, as disclosed in Note 9, the Company has issued shares of Series C Convertible Preferred Shares, with an annual accruing dividend, for cash. The preferred shares provide the holder with the opportunity to redeem the shares at various dates. The holders may convert the Series C Shares into Registrant’s common shares, commencing on the 6-month anniversary of the closing at a discount to the public market price. The Company values such liability based on the Binomial Option Pricing Model. Auditing the Company’s valuation of its derivatives is challenging as the Company uses complex valuation methodologies that incorporate significant assumptions which include the discount rate and forecasted volatility of the Company’s common stock price. The valuation includes assumptions about economic and market conditions with uncertain future outcomes.

Diego Pellicer Worldwide, Inc.How We Addressed the Matter in Our Audit

To test the valuation of the derivative liability, our audit procedures included, among others, evaluating the methodologies used in the valuation model and testing the significant assumptions. For example, we compared the forecasted volatility of the Company’s common stock price to its historical volatility. We also assessed the completeness and accuracy of the underlying data. We involved our external valuation specialists to assist in our evaluation of the significant assumptions and methodologies used by the Company. We also evaluated the Company’s financial statement disclosures related to these matters included in Note 8 and 9 to the Consolidated StatementsFinancial Statements.

Collectability of Comprehensive LossAmounts Due from Lessees

See accompanying notesDescription of the Matter

As described in Note 4 to the consolidated financial statements, At December 31, 2021, the Company had amounts outstanding from its sublessee, and the Company subleases two properties in Colorado to Royal Asset Management at December 31, 2021. At December 31, 2021, the outstanding receivables from the subleases approximated $1,200,000 and during the year ended December 31, 2021, the Company’s subleases with RAM accounted for 100% of the Company’s revenues. ASC 842 requires the Company to assess the probability of collecting substantially all of the contractual lease payments. If collectability of substantially all of the lease payments through maturity is not probable, all or a portion of the straight-line rent receivable and other lease receivables may be written off, and the rental income recorded during the period would be limited to lesser of the income that would have been recognized if collection were probable, and the lease payments received. Auditing the Company's collectability assessment is complex due to the judgment involved in the Company’s determination of the collectability of future lease payments from its operators. The determination involves consideration of experience with the lessee, including the lessee’s payment history, if any, an assessment of the financial strength of the lessees, future contractual rents, and the timing of expected payments.

How We Addressed the Matter in Our Audit

To test the rental income recognized, we performed audit procedures that include, among others, confirming the amounts receivable balance, evaluating the data and assumptions used in determining whether substantially all of the future lease payments were probable based on the lessee’s payment history, underlying collateral and status of repayment. In addition, we tested the completeness and accuracy of the data used in management’s collectability analysis.

Macias Gini & O’Connell LLP

April 15, 2022 

We have served as the Company’s auditor since 2019 

Irvine, CA

Diego Pellicer Worldwide, Inc.

Consolidated Statement of Stockholders’ DeficitBalance Sheets

For the Year Ended December 31, 2015 and 2014

See Accompanying Notes to Consolidated Financial Statements.