California Operating Licenses

Effective January 1, 2018, the State of California allowed for adult-use cannabis sales. California’s cannabis licensing system is being implemented in two phases. First, beginning on January 1, 2018, the State of California began issuing temporary licenses. Temporary licenses were initially issued for 90 days, but were extended for the entirety of 2018 with final extensions of temporary licenses expiring in spring/summer of 2019. Our temporary licenses were set to expire in the Summer of 2019, however, prior to expiration we were issued provisional licenses for all of our operations which include 3 operating dispensaries (retail), one distribution and one indoor cultivation. All licenses are valid for both adult (recreational) and medical activity. In addition in the spring of 2019 improvements and upgrades were completed on the indoor cultivation facility located on the W. Grand Campus and final approval for all up upgrades, including Fire prevention system were approved by the City. Provisional licenses are valid for a one year time period and require provisional licensees to be on Metrc – California’s track and trace systems. All of our licensed operations are fully Metrc compliant and adhere to operating requirements of state and local officials. The state Bureau of Cannabis Control and California Department of Food and Agriculture continue their respective reviews of our annual license submissions. We remain in regular contact in an effort to provide whatever additional to review prior to the State of California completing its review of our annual license applications. The Company’s prior licenses obtained from the local jurisdictions in which it operated have been continued by such jurisdictions and are necessary to obtain state licensing. Although the Company believes it will receive the necessary licenses from the State of California to conduct its business in a timely fashion, there is no guarantee the Company will be able to do so and any failure to do so may have a negative effect on its business and results of operations.