GENERAL CANNABIS CORP MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-K)

Management's discussion and analysis ("MD&A") should be read in conjunction with
the consolidated financial statements and accompanying notes included in Item 8
of this Annual Report on Form 10-K (annual report), which include additional
information about our accounting policies, practices, and the transactions
underlying our financial results. The preparation of our consolidated financial
statements in conformity with accounting principles generally accepted in the
United States of America (U.S. GAAP) requires us to make estimates and
assumptions that affect the reported amounts in our consolidated financial
statements and the accompanying notes, including various claims and
contingencies related to lawsuits, taxes, environmental and other matters
arising during the normal course of business. We apply our best judgment, our
knowledge of existing facts, circumstances, and actions that we may undertake in
the future in determining the estimates that affect our consolidated financial
statements. We evaluate our estimates on an ongoing basis using our historical
experience, as well as other factors we believe appropriate under the
circumstances, such as current economic conditions, and adjust or revise our
estimates as circumstances change. As future events and their effects cannot be
determined with precision, actual results may differ from these estimates. Our
MD&A contains forward-looking statements that discuss, among other things,
future expectations and projections regarding future developments, operations,
and financial condition. All forward-looking statements are based on
management's existing beliefs about present and future events outside of
management's control and on assumptions that may prove to be incorrect. If any
underlying assumptions prove incorrect, our actual results may vary materially
from those anticipated, estimated, projected, or intended. We undertake no
obligation to publicly update or revise any forward-looking statements to
reflect actual results, changes in expectations, events or circumstances after
the date of this Report is filed. General Cannabis Corp and its subsidiaries are
referred to collectively as "GCC" "the Company," "we, "us" or "our" in the
following discussion and analysis.

Continuity of exploitation

The consolidated financial statements included elsewhere in this Form 10-K, have
been prepared on a going concern basis, which assumes we will be able to realize
our assets and discharge our liabilities in the normal course of business for
the foreseeable future. Our cash of $2,054,050 as of December 31, 2021 is not
sufficient to absorb our operating losses and retire our debt of $8,913,644 and
other obligations as they come due.  Our ability to continue as a going concern
is dependent upon our generating profitable operations in the future and/or
obtaining the necessary financing to meet our obligations and repay our
liabilities arising from normal business operations when they come due.
Management believes that (a) we will be successful obtaining additional capital
and (b) actions presently being taken to further implement our business plan and
generate additional revenues provide opportunity for the Company to continue as
a

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going concern. While we believe in the viability of our strategy to generate
additional revenues and our ability to raise additional funds, there can be no
assurances to that effect. Accordingly, there is substantial doubt about our
ability to continue as a going concern. The accompanying consolidated financial
statements do not include any adjustments that might be necessary if we are
unable to continue as a going concern.

Operating results

The following tables presented, for the periods indicated, are statements of operating data. The tables and discussion below should be read in conjunction with the accompanying consolidated financial statements and accompanying notes in Section 8 of this report.

Consolidated Results

                                       Year ended December 31,                         Percent
                                        2021             2020            Change        Change
Revenues                            $   5,927,199    $   2,383,704    $   3,543,495        149 %
Costs and expenses                    (8,940,185)      (8,258,346)        (681,839)          8 %
Other expense                         (5,414,165)      (1,553,043)      (3,861,122)        249 %
Net loss from continuing
operations before income taxes        (8,427,151)      (7,427,685)        (999,466)         13 %
Loss from discontinued
operations                              (442,228)        (252,007)        (190,221)         75 %
Loss from operations before
income taxes                        $ (8,869,379)    $ (7,679,692)    $ (1,189,687)         15 %


The following discussion of our results of operations relates to our continuing
operations. See Note 3 to the consolidated financial statements for information
concerning discontinued operations.

Revenue

The addition of our Retail segment and a full year of our Cultivation segment
contributed to the significant increase in revenues for the year ended December
31, 2021. See Segment discussions below for further details.

Costs and expenses

                                              Year ended December 31,                        Percent
                                                2021            2020           Change        Change
Cost of sales                               $   4,439,478    $ 1,388,626    $   3,050,852        220 %
Selling, general and administrative             2,764,780      2,901,931   
    (137,151)        (5) %
Stock-based compensation                          307,963      1,504,389      (1,196,426)       (80) %
Professional fees                                 927,390      2,263,717      (1,336,327)       (59) %
Depreciation and amortization                     500,574        199,683          300,891        151 %
                                            $   8,940,185    $ 8,258,346    $     681,839          8 %


Cost of sales increased year over year due to the addition of our Retail Segment
and a full year of expenses in relation to our Cultivation Segment. See Segment
discussions below for further details.

Selling, general and administrative expense decreased by $0.1 million to $2.8
million for the year ended December 31, 2021 from $2.9 million for the year
ended December 31, 2020, primarily due to management's emphasis on cost controls
and decreases in salary expense due to the discontinuation of certain business
operations.

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Stock-based compensation included the following:

                       Year ended December 31,                        Percent
                         2021            2020           Change        Change
Employee awards      $    307,963     $ 1,411,442    $ (1,103,479)       (78) %
Consulting awards               -          92,947         (92,947)      (100) %
                     $    307,963     $ 1,504,389    $ (1,196,426)       (80) %

Employee awards are issued under our 2020 Omnibus Incentive Plan, which was
approved by shareholders on November 23, 2020 and our 2014 Equity Incentive
Plan, which was approved by shareholders on June 26, 2015. Expense varies
primarily due to the number of stock options granted and the share price on the
date of grant. The decrease in expense for the year ended December 31, 2021 as
compared to December 31, 2020 is due to the decrease in the number of options we
grant on a quarterly basis and an increase in forfeitures in 2021 due to the
departure of our Chief Executive Officer in May 2021, the departure of our Chief
Financial Officer in September 2021 and a reduction in workforce in 2020 and
2021. Consulting awards are granted to third parties in lieu of cash for
services provided.

Professional fees consist primarily of accounting and legal fees and decreased from 2020 due to the addition of in-house legal counsel.

Depreciation and amortization expense increased in 2021 due to the acquisition
of TREES Englewood, TREES Portland and TREES Waterfront. We also recognized a
full year of depreciation and amortization expense in 2021, in relation to our
acquisition of SevenFive Farm in May of 2020.

Other Expense

                                              Year ended December 31,                        Percent
                                                2021            2020           Change        Change
Amortization of debt discount               $     689,348    $   295,256    $     394,092        133 %
Interest expense                                  622,469        453,522          168,947         37 %
Loss on extinguishment of debt                    233,374      1,638,009      (1,404,635)       (86) %
Loss on impairment of assets                    3,010,420              -        3,010,420        100 %
Loss (gain) on derivative liability               990,066      (735,796)   
    1,725,862      (235) %
Other expense (income), net                     (131,512)      (139,187)            7,675        (6) %
Loss on investment                                      -         41,239         (41,239)        100 %
                                            $   5,414,165    $ 1,553,043    $   3,861,122        249 %

Amortization of debt discount increased during the year ended December 31, 2021
as compared to December 31, 2020 due to the senior convertible promissory notes
with warrants ("10% Notes") issued in December 2020, February 2021 and April
2021. Interest expense increased during the year ended December 31, 2021 as
compared to December 31, 2020 due to the addition of the 10% Notes with an
interest rate of 10%. The loss on warrant derivative liability reflects the
change in the fair value of the 2019 Warrants. The loss on extinguishment of
debt for the year ended December 31, 2021 was due to the modification of
warrants that occurred on the 15% Warrants during the third quarter. The loss on
extinguishment of debt during 2020 is due to the conversion and extension of the
SBI debt, and the exchange of the 12% Notes into the 15% Notes that occurred
during the first quarter of 2020. See Note 13 of the accompanying audited
consolidated financial statements for further information. The loss on
impairment of assets is due to a goodwill impairment and intangible impairment
adjustment on our Cultivation Segment. The other expense (income) in 2020
relates to the gain on the sale of the building we recognized as a result of the
sale of our corporate office building in March 2020.

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Retail

                               Year ended December 31,                         Percent
                                    2021             2020        Change        Change
Revenues                    $          3,515,761     $   -    $   3,515,761        100 %
Costs and expenses                   (3,112,595)         -      (3,112,595)        100 %
Segment operating income    $            403,166     $   -    $     403,166        100 %


With the addition of the TREES Englewood dispensary on September 2, 2021 and the
addition of TREES Portland and TREES Waterfront on December 30, 2021, we have
established our retail footprint in the Colorado and Oregon markets and have
become a vertically integrated company. The Retail Segment will provide
consistent positive cash flows which will significantly contribute to our
working capital position.

Cultivation

                         Year ended December 31,                         Percent
                          2021             2020            Change        Change
Revenues              $   2,722,059    $   2,279,867    $     442,192         19 %
Costs and expenses      (6,273,162)      (1,865,399)      (4,407,763)        236 %
                      $ (3,551,103)    $     414,468    $ (3,965,571)      (957) %

This increase in revenues for the year ended December 31, 2021 as compared to
December 31, 2020, is due to owning SevenFive Farm for a full year. We also
started selling premium cannabis blunts that command a higher price than the
traditional wholesale cannabis. The decrease in gross margin is due to lower
yields caused by several environmental factors. The additional increase in costs
and expenses is due to a goodwill impairment and intangible impairment
adjustment.

Non-GAAP Financial Measures

Adjusted EBITDA is a non-GAAP financial measure. We define Adjusted EBITDA
as net income (loss) attributable to common stockholders calculated in
accordance with GAAP, adjusted for the impact of stock-based compensation
expense, acquisition related expenses, non-recurring professional fees in
relation to litigation and other non-recurring expenses, depreciation and
amortization, amortization of debt discounts and equity issuance costs, loss on
extinguishment of debt, interest expense, income taxes and certain other
non-cash items. Below we have provided a reconciliation of Adjusted EBITDA per
share to the most directly comparable GAAP measure, which is net income (loss)
per share.

We believe that the disclosure of Adjusted EBITDA provides investors with a
better comparison of our period-to-period operating results. We exclude the
effects of certain items when we evaluate key measures of our performance
internally and in assessing the impact of known trends and uncertainties on our
business. We also believe that excluding the effects of these items provides a
more comparable view of the underlying dynamics of our operations. We believe
such information provides additional meaningful methods of evaluating certain
aspects of our operating performance from

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period to period on a basis that may not be otherwise apparent on a GAAP basis.
This supplemental financial information should be considered in addition to, not
in lieu of, our consolidated financial statements.

                                                              Year ended 

the 31st of December,

                                                               2021         

2020

Loss from operations before income taxes                   $ (8,427,151)    $ (8,510,186)
Adjustment for loss from discontinued operations                 442,228   

252,007

Net loss from continuing operations before income taxes (7,984,923)

  (8,258,179)
Adjustments:
Deemed dividend                                                        -          830,494
Stock-based compensation                                         307,963        1,504,389
Depreciation and amortization                                    500,574   

199,683

Amortization of debt discount and share issue costs 689,348

295 256

Loss on extinguishment of debt                                   233,374   
    1,638,009
Loss on impairment of assets                                   3,010,420                -
Interest expense                                                 622,469          453,522
Gain on sale of assets                                         (131,512)        (139,187)
Loss on investment                                                     -           41,239
(Gain) loss on derivative liability                              990,066   
    (735,796)
Severance                                                         40,962          103,302
Acquisition related expenses                                     264,312          326,095
Nonrecurring professional services                               115,054   
    1,348,598
Total adjustments                                              6,643,030        5,865,604
Adjusted EBITDA                                            $ (1,341,893)    $ (2,392,575)


Liquidity

Sources of liquidity

Our sources of liquidity include cash generated from operations, the cash
exercise of common stock options and warrants, debt, and the issuance of common
stock or other equity-based instruments. We anticipate our more significant uses
of resources will include funding operations, developing infrastructure, and
business acquisitions.

In September 2021we received $1,180,000 in cash by issuing 1,180 shares of our preferred stock and 354,000 warrants to purchase common stock.

In February and April 2021we received $3,960,000 cash in a private placement to certain accredited investors pursuant to which we issued and sold 10% senior convertible promissory notes.

Sources and uses of cash

We had about $2,054,050 and $750,218respectively, on
December 31, 2021 and 2020. Our cash flows from operating, investing and financing activities were as follows:

                                                Year ended December 31,
                                                 2021             2020

Net cash used in operating activities ($2,651,889) $(5,000,388)
Net cash provided by investing activities ($978,739) $1,107,163
Net cash provided by financing activities $4,928,909 $4,424,000

Net cash used in operating activities decreased in 2021 due to an increase in
revenue as well as the acquisition of three dispensaries which provides positive
operating cash flows.

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Net cash used by investing activities for the year ended December 31, 2021
consisted of $1,439,027 from the purchase of the three dispensaries and purchase
of equipment of $331,834. This is offset by the sale of our investment for
$208,761, the sale of Next Big Crop in the amount of $150,000 and collection of
notes receivables in the amount of $591,717.

Net cash provided by financing activities are primarily related to the sale of
common stock and warrants and proceeds from notes payable. This is offset by
paying off debt.

Capital Resources
We have no material commitments for capital expenditures as of December 31,
2021. Part of our growth strategy, however, is to acquire businesses. We would
anticipate funding such activity through cash on hand, the issuance of debt,
common stock, warrants for our common stock or a combination thereof.

Off-balance sheet arrangements

We currently have no off-balance sheet arrangements.

Critical accounting policies

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the
amounts of revenues and expenses. Critical accounting policies are those that
require the application of management's most difficult, subjective, or complex
judgments, often because of the need to make estimates about the effect of
matters that are inherently uncertain and that may change in subsequent periods.
In applying these critical accounting policies, our management uses its judgment
to determine the appropriate assumptions to be used in making certain estimates.
Actual results may differ from these estimates.

We define critical accounting policies as those that are reflective of
significant judgments and uncertainties, and which may potentially result in
materially different results under different assumptions and conditions. In
applying these critical accounting policies, our management uses its judgment to
determine the appropriate assumptions to be used in making certain estimates.
These estimates are subject to an inherent degree of uncertainty.

Business combinations

Amounts paid for acquisitions are allocated to the assets acquired and
liabilities assumed based on their estimated fair value at the date of
acquisition. The fair value of identifiable intangible assets is based on
detailed valuations that use information and assumptions provided by management,
including expected future cash flows. We allocate any excess purchase price over
the fair value of the net assets and liabilities acquired to goodwill.
Identifiable intangible assets with finite lives are amortized over their useful
lives. Acquisition-related costs, including advisory, legal, accounting,
valuation, and other costs, are expensed in the periods in which the costs are
incurred. The results of operations of acquired businesses are included in the
consolidated financial statements from the acquisition date.

Good will and intangible

Goodwill represents the excess of purchase price over the fair value of
identifiable net assets acquired in a business combination. Goodwill and
long-lived intangible assets are tested for impairment at least annually in
accordance with the provisions of ASC No. 350, Intangibles-Goodwill and Other
("ASC No. 350"). ASC No. 350 requires that goodwill be tested for impairment at
the reporting unit level (operating segment or on level below an operating
segment) on an annual basis and between annual tests if an event occurs or
circumstances change that would more likely than not reduce the fair value of a
reporting unit below its carry value. Application of the goodwill impairment
test requires judgement, including the identification of reporting units,
assignment of assets and liabilities to reporting units, assignment of goodwill
to reporting units, and determination of the fair value of each reporting unit.
We test goodwill annually in

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December, unless an event occurs that would cause the us to believe the value is
impaired at an interim date. See Notes 1 and 9 to our consolidated financial
statements for a description of our goodwill and intangible asset valuation and
impairment policies and associated impacts for the reported periods.

Intangible assets with finite useful lives are amortized over their respective
estimated useful lives and reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable.

Impairment of long-lived assets

We periodically evaluate whether the carrying value of property and equipment
has been impaired when circumstances indicate the carrying value of those assets
may not be recoverable. The carrying amount is not recoverable if it exceeds the
sum of the undiscounted cash flows expected to result from the use and eventual
disposition of the asset. If the carrying value is not recoverable, the
impairment loss is measured as the excess of the asset's carrying value over its
fair value.

Our impairment analyses require management to apply judgment in estimating
future cash flows as well as asset fair values, including forecasting useful
lives of the assets, assessing the probability of different outcomes, and
selecting the discount rate that reflects the risk inherent in future cash
flows. If the carrying value is not recoverable, we assess the fair value of
long-lived assets using commonly accepted techniques, and may use more than one
method, including, but not limited to, recent third-party comparable sales and
undiscounted cash flow models. If actual results are not consistent with our
assumptions and estimates, or our assumptions and estimates change due to new
information, we may be exposed to an impairment charge in the future.

Accounting for discontinued operations

We regularly review underperforming assets to determine if a sale or disposal
might be a better way to monetize the assets. When an asset group is considered
for sale or disposal, we review the transaction to determine if or when the
entity qualifies as a discontinued operation in accordance with the criteria of
FASB ASC Topic 205-20, Discontinued Operations. The FASB has issued
authoritative guidance that raises the threshold for disposals to qualify as
discontinued operations. Under this guidance, a discontinued operation is (1) a
component of an entity or group of components that have been disposed of or are
classified as held for sale and represent a strategic shift that has or will
have a major effect on an entity's operations and financial results, or (2) an
acquired business that is classified as held for sale on the acquisition date.

Debt with features related to equity

We may issue debt securities that have separate warrants, conversion features or no equity-linked attributes.

Debt with warrants - When we issue debt with warrants, we treat the warrants as
a debt discount, record as a contra-liability against the debt, and amortize the
balance over the life of the underlying debt as amortization of debt discount
expense in the consolidated statements of operations. The offset to the
contra-liability is recorded as additional paid in capital in our consolidated
balance sheets. If the debt is retired early, the associated debt discount is
then recognized immediately as amortization of debt discount expense in the
consolidated statement of operations. The debt is treated as conventional debt.

We determine the value of non-complex warrants using the Black-Scholes (“Black-Scholes”) option pricing model using the share price on the date of issue, the risk-free interest associated with the life of the debt, and the volatility of our shares. For warrants with complex terms, we use the binomial lattice model to estimate their fair value.

Modification of Debt - When we change the terms of existing notes payable, we
evaluate the amendments under ASC 470-50, Debt Modification and Extinguishment
to determine whether the change should be treated as a modification or as a debt
extinguishment. This evaluation includes analyzing whether there are significant
and consequential changes to

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the economic substance of the note. If the change is deemed insignificant, the change is considered as a modification of the debt, while if the change is substantial, the change is reflected as an extinguishment of the debt.

Convertible Debt - When we issue debt with a conversion feature, we must first
assess whether the conversion feature meets the requirements to be treated as a
derivative. If the conversion feature within convertible debt meets the
requirements to be treated as a derivative, we estimate the fair value of the
convertible debt derivative using Black-Scholes upon the date of issuance, using
the stock price on the date of issuance, the risk-free interest rate associated
with the life of the debt, and the estimated volatility of our stock. If the
conversion feature is not treated as a derivative, we assess whether it is a
beneficial conversion feature ("BCF"). A BCF exists if the effective conversion
price of the convertible debt instrument is less than the stock price on the
commitment date. This typically occurs when the effective conversion price is
less than the fair value of the stock on the date the instrument was issued. The
value of a BCF is equal to the intrinsic value of the feature, the difference
between the effective conversion price and the fair value of the common stock
into which it is convertible.

Share-based payments

We estimate the fair value of equity-based instruments issued to employees or to
third parties for services or goods using Black-Scholes or the Binomial Model,
which requires us to estimate the volatility of our stock and forfeiture rate.

Revenue recognition

On January 1, 2018, we adopted ASC Topic 606, "Revenue from Contracts with
Customers" ("ASC 606"). The core principle of ASC 606 requires that an entity
recognize revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the company
expects to be entitled in exchange for those goods or services. ASC 606 defines
a five-step process to achieve this core principle and, in doing so, it is
possible more judgment and estimates may be required within the revenue
recognition process than required under existing U.S. GAAP including identifying
performance obligations in the contract, estimating the amount of variable
consideration to include in the transaction price and allocating the transaction
price to each separate performance obligation.

The following five steps are applied to achieve this fundamental principle:

? Step 1: Identify the contract with the customer;

? Step 2: Identify performance obligations in the contract;

? Step 3: Determine the price of the transaction;

? Step 4: Assign the transaction price to the performance obligations in the

Contract; and

? Step 5: Recognize revenue when the business meets a performance obligation.

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