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Item 1.01 | | Entry into a Material Definitive Agreement. |
Series A Convertible Preferred Stock
On September 10, 2021, General Cannabis Corp. (the “Company”), entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with various accredited investors (the “Investors”), pursuant to which the Company issued and sold Units consisting of Series A Convertible Preferred Stock (“Series A Preferred”) and warrants (“Warrants”) to purchase shares of the Company’s common stock with a par value $0.001 per share (the “Common Stock”). The total number of Units sold was 1,180. Each Unit consists of one (1) share of Series A Preferred and 300 Warrants. The purchase price of each Unit was $1,000, for an aggregate amount sold of $1,180,000. Each share of Series A Preferred is convertible into 1,000 shares of Common Stock upon the consummation of a capital raise by the Company of not less than $5 million.
Warrants
Warrants have a five-year term and an exercise price per Warrant share of $1.05. The Warrants contain an anti-dilution provision pursuant to which upon a future capital raise by the Company at less than $1.00 per share, each Investor will be granted additional Warrants on a ‘full-ratchet’ basis.
Certificate of Designations
The Certificate of Designations of the Series A Convertible Preferred Stock (“Certificate of Designations”) was filed with the Secretary of State of the State of Colorado on September 14, 2021. The Certificate of Designations establishes the new preferred series entitled “Series A Convertible Preferred Stock” with no par value per share, and sets forth the rights, restrictions, preferences and privileges of the Series A Preferred, summarized as follows:
| ● | Authorized Number of Shares. 5,000 |
| ● | Dividends. 6% per annum, ‘paid in kind’ in shares of Series A Preferred |
| ● | Conversion. Each share of Series A Preferred is mandatorily convertible into 1,000 shares of Common Stock upon a minimum capital raise of $5 million; sale, merger or business combination of the Company; or the Company listing on an exchange |
| ● | Redemption. No rights of redemption by Investor, nor mandatory redemption |
The foregoing descriptions of the Certificate of Designations, Securities Purchase Agreement and Warrants do not purport to be complete and are qualified in their entirety by reference to the full text of such documents, copies of which are attached to as Exhibits 4.1, 10.1 and 10.2, respectively, and are incorporated herein by reference.
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Item 3.02 | | Unregistered Sales of Equity Securities. |
The information set forth in Item 1.01 of this Current Report on Form 8-K regarding the Series A Preferred and Warrants is incorporated herein by reference. The Series A Preferred, Warrants, and any shares of Common Stock issued upon exercise of the Series A Preferred and/or Warrants, if applicable, will be issued to the Investors in reliance on the exemption from the registration requirements of the Securities Act of 1933, as amended, by virtue of Section 4(a)(2) thereof.
