CORNERSTONE OPERATIONS MANUAL Trade Secrets Proprietary Information

TABLE OF CONTENTS PAGE

1. Executive Summary 1

TRANSPARENCY AND OVERSIGHT 1 SAFE WORKING CONDITIONS 1 GOOD MANUFACTURING PRACTICE FACILITY DESIGN 1 REGULATORY COMPLIANCE 2

2. Personnel Plan: 3

EQUAL OPPORTUNITY EMPLOYER 3 CONFIDENTIAL INFORMATION 3 EMPLOYEE PRACTICES 3 LAW ENFORCEMENT/REGULATORY INTERACTION 4 EMPLOYEE BADGE 4 EMPLOYEE SAFETY 4 FACILITY SAFETY 5 EMPLOYEE RECORDS 5 EMPLOYEE HANDBOOK 5 EMPLOYEE TRAINING 5 2.10.1 Employee Training: Track and Trace Software 6 2.10.2 Employee Training: Transportation 6 2.10.3 Employee Training: Storage 6 2.10.4 Employee Training: Packaging Procedure 6 2.10.5 Employee Training: Disposal 6 2.10.6 Employee Training: Sanitation 6

3. Products and Inventory 8

CANNABIS AND CANNABIS PRODUCT STORAGE 8 CLEANING SUPPLIES STORAGE 9 PURCHASING OF PRODUCTS FROM OUTSIDE SUPPLIERS 9 OPERATIONAL ACTIVITES & PROHIBITIONS 9 3.4.1 Age Restrictions 9 3.4.2 Alcohol Use 9 3.4.3 Onsite Cannabis Consumption 9 3.4.4 Anti‐Loitering 9 3.4.5 No Visibility of Operations from the Street 10 3.4.6 Emergency Contact 10 3.4.7 Restricted Access 10 ODOR CONTROL 10 PACKAGING AND LABELING 10 DISPOSAL 12 NON‐CANNABIS WASTE MANAGEMENT 13 3.8.1 Recycling 13 3.8.2 General Waste 13

4. Track and Trace 14

INFORMATION SECURITY 14 RECORD RETENTION 14 DAILY OPERATIONS RECORDING AND TRACKING 14 PRODUCT INTAKE PROCEDURES 15 BI‐MONTHLY INVENTORIES 15 RETURNS AND DESTRUCTION 15 DISPOSAL / CANNABIS WASTE 15

5. Inventory Control Plan 17

DESIGNATED STAFF 17

6. Distribution Operations Plan 18

OVERVIEW 18 SUPPLIER AGREEMENTS 18 INVENTORY PRACTICES 18 TESTING 19 QUALITY ASSURANCE PRACTICES 20 INSURANCE REQUIREMENTS 20 TAX COLLECTION PRACTICES 20 6.7.1 Cultivation Taxes 21

7. Transportation Plan 22

OVERVIEW 22 LOCAL AND STATE REGULATIONS FOR TRANSPORTATION 22 TRANSPORTATION REQUIREMENTS 23 TRANSPORTATION VEHICLE REQUIREMENTS 24 TRANSPORTATION ROUTE PROCESS 24 SHIPMENT OF PRODUCTS 24

8. Manufacturing Operations 26

OPERATIONS 26 8.1.1 Packaging 26 8.1.2 Sanitation 26 8.1.3 Sanitary Conditions 26 8.1.4 Sanitary Facilities Conditions 26 8.1.5 Equipment and Utensil Requirements 27 8.1.6 Quality Control 27

9. Cultivation Operational Plan 29

PLANT PROCESS 29

HARVEST PROCESS 29 9.2.1 Designation and Handling of Scales and Weights 29 TRACK AND TRACE SPECIFICATIONS 35 9.3.1 Overview 35

1. Executive Summary

This Operations Manual is intended to be an overview of the standard daily operation policies and procedures of CORNERSTONE’s Santa Cruz Micro‐Business.

1. TRANSPARENCY AND OVERSIGHT

To ensure the transparency of the operations through documentation and strict operational measures, CORNERSTONE will enforce several policies regarding facility access, operational conformity, and the utilization of documentation for all interactions throughout the facility. CORNERSTONE will utilize GrowFlow (GrowFlow is a third party track and trace system that has an API for the State Metrc system) track and trace software and security protocols to help ensure that:

 CORNERSTONE or staff verify all shipments coming into the facility via GrowFlow;  Bulk Cannabis products will only be sold to and purchased through other license holders;  Except for security, suppliers, or city/state officials, the only other persons allowed on the property at any given time will be necessary staff.

As required by SCMC Chapter 6.91, a copy of all records shall be kept on site including:

 The emergency contact person name and phone numbers;  Full name, address and telephone number(s), city‐issued work permit and a fully legible copy of a government‐issued form of identification for each  The full name, address, and telephone number(s) of the owner, landlord and/or lessee of the Property;  employee engaged in the management and operations of the manufacturing facility;  Job description and participation of each employee or contractor;  The full name, date of birth, residential address, and telephone number(s) of each baseline employee and supervisor/manager; and  All records described in this section shall be maintained for a period of not less than seven (7) years and will otherwise keep accurate records of all business activity and provide records for inspection consistent with Section 19327 of the California Business and Professions Code as well as any additional rules established by the licensing authority.

2. SAFE WORKING CONDITIONS

CORNERSTONE will implement several policies and procedures necessary to ensure a safe working environment for all staff. CORNERSTONE’s staff will be trained to limit all access to the site to scheduled visitors. Access for visitors will be limited to the door on Ingall’s and no outside vehicles will be allowed through the vehicle gate other than staff. Emergency communication and alarm systems will also be a training requirement for all staff upon hiring.

3. GOOD MANUFACTURING PRACTICE FACILITY DESIGN

CORNERSTONE’s immediate priority for considering Good Manufacturing Practice guidelines is how the design of the facility’s interior is in relation to the overall processes of the operation. They are primarily focused on the flow of processes and control of potential contamination throughout the facility. The primary goal for these practices is that the facility is designed and constructed to facilitate ease of use for maintenance, operations, and compliance. 1

4. 5. REGULATORY COMPLIANCE

CORNERSTONE will maintain the highest level of operational compliance ‐ both at the local level and in conjunction with the State licensing. When CORNERSTONE obtains it Administrative Use Permit and business license from the City of Santa Cruz, they will maintain compliance with local and state taxes as well as renewal of each license. CORNERSTONE will utilize GrowFlow immediately even though the State track and trace system is still non‐operational.

6. CORPORATE STRUCTURE

CORNERSTONE will have a series of managers in key positions responsible for all functions of the operations. The operations manager will play the most significant role in oversight of day to day operations. The operations manager will be responsible for ensuring all aspect of the operations are flowing efficiently. They will be the direct point of contact for all other mangers, oversight of the GrowFlow and scheduling all operations. The logistics manager will be responsible for overseeing all transportation related functions, working directly with retailers, pick ups from other non‐retail businesses and order fulfillment.

2. Personnel Plan:

7. EQUAL OPPORTUNITY EMPLOYER

It is the Company’s policy to extend “Equal Employment Opportunities” to all employees and all future applicants for employment. The internal policy is to employ and promote on the basis of ability, experience, and performance. CORNERSTONE will give preference to local candidates, to the extent permissible by California law. The Company does not discriminate against any person in recruitment, hiring, assignments, training, promotion, transfers, reassignments, lay‐offs, or compensation because of race, religion, color, sex, age, national origin, ancestry, sexual orientation, physical or mental disability, pregnancy, marital status, military veteran status or any other characteristic protected by applicable law. If any employees are caught violating this policy they will be subject to disciplinary action and/or termination.

8. CONFIDENTIAL INFORMATION

As an employee of the Company, certain confidential information will be released including but not limited to methods of production, ratios of ingredients, customer information, process protocols and overall practices implemented by the Company. Under no circumstances shall the information be made public including confidential information regarding the Company’s business, products or internal operations.

Upon accepting employment with the Company, the employees will sign a “Confidentiality, Trade Secrets, Non‐solicitation and Conflicts of Interest Agreement,” which generally provides requirements on how to not improperly disclose or use any confidential information, either during or after employment.

9. EMPLOYEE PRACTICES

Employees must practice personal cleanliness including:

 Outer garments such as work shirts, pants and any uniforms must be clean and appropriate for the assigned tasks;  Nails must be trimmed and clean;  Work shoes must be clean and free of external debris or contaminants; when practical, employees should change into designated work shoes while in the facility;  Store clothing or other personal belongings in areas separate from those where cannabis products are exposed or where equipment or utensils are washed; and  Confining the following activities to areas separate from those where cannabis products may be exposed or where equipment or utensils are washed: eating food, chewing gum, drinking beverages, and/or using tobacco.

Employees must demonstrate proper hand sanitation protocols including:

 Cleaning hands and exposed portions of his or her arms (or, as applicable surrogate prosthetic devices for hands and arms), during the following times and circumstances: – Immediately before working with usable cannabis or other cannabis products prior to packaging; – After touching bare human body parts other than clean hands; 3

– After using the toilet; – After coughing, sneezing, using a handkerchief or disposable tissue, using tobacco, eating or drinking; – After handling soiled equipment; – As often as necessary to remove soil and contamination and to prevent cross‐ contamination when changing tasks;  Disposable protective gloves must be in stock and available.

A written policy must prohibit workers with open and/or infected wounds on exposed parts of the body, or those showing signs of infectious illness, from working with exposed product or in product storage areas. The policies must include:

 Employees excused from work if they show any signs of infections according to operational procedures;  Management to evaluate all situations and take corrective action when any communicable disease is observed and document the corrective action taken;  The facility must have similar procedures to manage patients, customers or suppliers that enter or attempt to enter the facility with signs of infectious illness; and  The facility must establish procedures to cover wounds with bandages and/or gloves to eliminate contamination risk.

10. LAW ENFORCEMENT/REGULATORY INTERACTION

CORNERSTONE must provide training to management and all workers to prepare them for interaction with government regulatory and law enforcement agencies and personnel. Training must include preparation for scheduled and unscheduled regulatory inspections and potential actions that might be taken by law enforcement affecting business operations. All personnel training shall cover regulatory policies as they apply to employees and the operation of the business. All employees must not hinder and give full‐unrestricted access during business hours to regulatory officials – as long as they provide their City of Santa Cruz (or State of California) issued identification badge upon request.

11. EMPLOYEE BADGE

All employees or other persons acting on behalf of CORNERSTONE shall wear a laminated or plastic‐ covered badge while on the premise conducting business activities. The badges shall contain the “doing business as” name and license number, employee’s first name, a specific employee number assigned to that employee, and a color photo at least 1 inch in width and 1.5 inches in height that shows the full face of the employee.

12. EMPLOYEE SAFETY

All employees that work in the Cultivation area of the facility will be required to wear personal protective equipment (PPE) and appropriate protective clothing will be worn/used by all individuals entering the cultivation area. At a minimum, hairnets, safety glasses (UV, IR and glare resistant) sunglasses will be wore when the lights are on in the cultivation area and apron or lab coat if needed in addition to disposable coveralls. Booties, beard nets, gloves, respirators and other PPE are based on regulatory requirements.

All production areas will require employees to have all outer garments clean and appropriate for the assigned tasks and when necessary, they will be disposable. If the outer garments are reusable, they will 4 be cleaned and dried in a proper manner and will be stored separately from personal clothing, production and storage areas. Workers shall wear shoes that are appropriate for the position; open‐sole or open‐toed shoes are not worn in the facility.

13. FACILITY SAFETY

Protective devices and systems such as shields, guards, barriers, detectors, warning alarms, automatic shut offs and access controls will be in place as necessary within the facility. Portable fire extinguishers are installed and maintained as specified by 29 CFR 1910.157 — Portable Fire Suppression Equipment.

All personnel will be trained on fire safety procedures. The facility provides safety training for all production workers that handle glassware and/or use vacuum/pressure, heating and freezing equipment. Lighted exit signs will be installed as required by OSHA standards. Safety Data Sheets (SDS) for all cleaning agents and materials are on file and available to production staff. The facility will designate a worker to implement and maintain the worker health and safety program, and will have the skills, time allotment and defined job description to perform the requirements of the position.

14. EMPLOYEE RECORDS

In accordance with SCMC Chapter 6.91, the owner or operator will maintain on‐site current register of all employees currently employed by the facility and will produce such register to the Chief of Police or his/her designee or any other City of Santa Cruz’ official authorized to enforce the Santa Cruz Municipal Code. The register will include the employees:

 Name;  Address; and  Telephone Number.

15. EMPLOYEE HANDBOOK

A comprehensive Employee Handbook provides information to guide employees’ behavior and relationship with CORNERSTONE. The manual, which is given to all employees upon being hired and prior to their first day of work, addresses all aspects of employee hiring including:

 Company Philosophy;  Employee Attendance;  Company Expectations and Goals;  Notification of Chief Police if change of employment within 10 days; and  How to comply with city inspections and city inspectors, specifically related to not refusing, impeding, obstructing or interfering with the Chief of Police or his/her designee while seeking to obtain entrance for inspection, review, copying and monitoring of records and recordings.

16. EMPLOYEE TRAINING

Employees of CORNERSTONE shall be trained in a manner that ensures the health, safety and welfare of the employees as well as the public, visitors and neighboring properties. The Company shall offer training to all employees to provide and ensure safe production, adequate security, theft prevention, and the maintenance of confidential information. 5

Operations shall include hygiene protocols and training to address: policies which prohibit employees who are showing signs of illness, open wounds, sores, or skin infections from handling cannabis; hygiene training for employees who handle cannabis with specific attention to preventing microbial contamination; hand washing requirements including washing hands with soap and hot water before beginning work, after using the bathroom and after meal breaks; instructive hand‐washing signage shall be in appropriate areas such as bathrooms, kitchens, and lunch areas, and in multiple languages as needed.

2.1.1 Employee Training: Track and Trace Software

In the event, despite all efforts made to ensure that all cannabis is free from harmful chemical residues, that there is a need for a recall of any product after it is sold to the retail, CORNERSTONE will utilize GrowFlow to track the location of all products and utilize the recall protocols embedded in the system’s software. All employees will be trained on these protocols and will utilize the standards in the event of a recall. They will also be trained on how to properly track all plants from seed to sale using the specific unique identifiers that are assigned to each plant.

2.1.2 Employee Training: Transportation

CORNERSTONE shall provide proper training and education to employees on transporting products to and from suppliers. Employees will be shown how to track the incoming and outgoing shipments as well as safe handling of products during transit.

2.1.3 Employee Training: Storage

All employees shall be trained to properly store and handle cannabis. In accordance with MAUCRSA, no dried cannabis or cannabis products shall be stored at the property in structures that are not completely enclosed, in an unlocked vault or safe or a secured room or other enclosure with access limited to authorized employees.

2.1.4 Employee Training: Packaging Procedure

The employees will be trained on a step‐by‐step guidance for providing quality packaging and labeling of cannabis after approved testing is done and prior to distribution to licensed retailers. All cannabis shall be packaged in tamper‐evident packaging and use a unique identifier, such as a batch and lot number, to identify and track the medical cannabis.

2.1.5 Employee Training: Disposal

All employees will be trained on the proper and safe protocol for disposals. All cannabis intended for disposal shall be made unusable and unrecognizable prior to removal from the business. A more detailed outline is included in the waste disposal section for details procedures for unusable medical cannabis disposal.

2.1.6 Employee Training: Sanitation

CORNERSTONE will specify certain employees to come in after hours several days a week and run floor‐ cleaning procedures throughout the location. This will ensure the site is as clean as possible at all times 6 and the obvious state of above‐average cleanliness lends itself to worker pride. Nevertheless, employees shall be cognizant of the importance of workplace sanitation and will be required to assist in such tasks. Floors, corners, building structures, and tabletops should be cleaned weekly, if not more frequently.

3. Products and Inventory

17. CANNABIS AND CANNABIS PRODUCT STORAGE

In accordance with SCMC Chapter 24.12.1340, all cannabis products and raw materials will be stored at the property in doors, in any combination of storage behind an additional layer of security behind the exterior security doors including: a locked vault or safe, an interior room secured with a commercial security door and a non‐residential lock, in any other secured storage structure, or they are kept in a safe or vault that is bolted to the floor of the property. No outdoor storage of cannabis or cannabis products will be allowed. All employees will be trained on how to properly store and handle cannabis and raw materials. CORNERSTONE will give proper training to all employees and management to ensure safe production, adequate security, theft prevention, diversion and the maintenance of confidential information – including production processes.

All cannabis products must be stored in a controlled environment to preserve product potency and quality. CORNERSTONE shall implement written procedures to control storage areas, and provide specific storage procedures for cannabis products. Product storage areas in the facility shall be limited to raw cannabis, bulk extracts, and packaged cannabis products. All areas where cannabis products are stored must be locked and secure with access restricted to authorized personnel only. No additional persons will be allowed on the premise that are not directly tasked with working at the facility.

All cannabis batches, both flower and extract, must be stored separately and distinctly from all other batches on the premise until all laboratory testing has been completed and the products are cleared for distribution to licensed retailers. The area in which cannabis goods are stored shall not be exposed to direct sunlight. Employee break rooms, eating areas, changing facilities, and bathrooms shall be completely separated from the storage areas. CORNERSTONE shall store edible cannabis products properly that require refrigeration at 33 to 42 degrees Fahrenheit and shall store batches of flower in a darkened area with no more than 60% humidity.

CORNERSTONE will have a specified area set aside for quarantined material and products. The area shall be marked with clear signage and access marked or limited by physical barriers. Quarantined containers must bear distinguishing labels and containers must be sealed with tamper‐evident seals or packaging that records the employee who sealed the container and the seal date. All quarantined material should be relocated within 72 hours and recorded in the inventory system. To prevent cross‐contamination, all products must be readily available for testing and moved to another holding area ‐ that is separate and distinct from the rest of the products ‐ until the time that testing results are complaint.

CORNERSTONE will implement environmental controls to protect product from deteriorating including humidity and temperature. The facility shall visually inspect all products prior to sale to evaluate if degradation is occurring. If any signs of degradation or contamination are noted, the products must then be analyzed. CORNERSTONE will implement root cause analysis and corrective measures will be implemented. Adequate ventilation, air filters and scrubbers should be installed where appropriate to control air quality and odors associated with cannabis storage on site.

All storage areas must be clean, well ventilated and free from condensation, sewage, dust, dirt, chemicals or other contaminants. All products and packaging should be stored to protect against contamination and must be clean and free from dust, debris and contaminants. All cleaning materials will have separate and distinct storage areas with precise labeling as to what is currently being stored. Cleaning schedules and logs will be placed throughout the facility and retained for review. Any and all products on site shall be protected or removed during cleaning to protect against contamination.

18. CLEANING SUPPLIES STORAGE

All cleaning supplies utilized in the facility will be kept in a locked, separate storage area from the cannabis products or ancillary products to prevent cross‐contamination. Safety Data Sheets (SDS) explaining the hazards, emergency response and protective measures needed for each material will be stored on‐site in the main office. All chemical products SDS will be evaluated prior to use at the facility.

19. PURCHASING OF PRODUCTS FROM OUTSIDE SUPPLIERS

It is the policy of CORNERSTONE to rely on local vendors whenever possible, unless a demonstrably more suitable vendor is based elsewhere. Per Section 26053(a) of the California Business and Professions Code, products purchased from other suppliers must meet required specifications. The appropriate manager will evaluate and approve their suppliers using the following criteria:

 Established relationships that have Operating Agreements;  Adoption of Good Manufacturing Practices;  Ability to meet stringent product specifications demonstrated through testing;  Ability to meet continuous demand for products;  Competitive pricing;  Seller’s Permit;  Local/State License or Permits;  Quality certifications;  Historical performance; and  Onsite evaluation.

Supplier approval criteria include objective evidence of quality furnished by the supplier, which can include certificates of analysis, test results, audit reports and supplier self‐evaluations.

20. OPERATIONAL ACTIVITES & PROHIBITIONS

3.1.1 Age Restrictions

No person under the age of 21 will be allowed on the property at any time.

3.1.2 Alcohol Use

No selling, dispensing, or consumption of alcoholic beverages on the property or in the surrounding vicinity.

3.1.3 Onsite Cannabis Consumption

No consumption of cannabis products on the premises or in the surrounding vicinity. Each exit of the facility will be posted with a clear and legible notice indicating that smoking, ingesting or otherwise consuming cannabis on the premises or the adjacent areas is prohibited.

3.1.4 Anti‐Loitering

No persons will remain on the premises of the facility unless they are engaged in activity expressly related to the commercial cannabis business. Security and/or law enforcement will be notified immediately of any persons suspected of loitering on the premises.

3.1.5 No Visibility of Operations from the Street

All storage, packaging/labeling, and transporting shall occur only within an enclosed area of the facility and will not be visible from the exterior of the property or building. Transportation vehicles will be loaded/unloaded immediately adjacent to the exterior of the building and no cannabis products or distinctive graphics will be visible on any material being shipped or received.

3.1.6 Emergency Contact

CORNERSTONE will provide the City Chief of Police or his/her designee with the name and telephone number of an on‐site employee or owner which emergency notice can be given.

3.1.7 Restricted Access

CORNERSTONE shall ensure that all person on the licensed premises, except for employees and contractors, are escorted at all times by CORNERSTONE or at least one employee of the facility when in the limited‐access areas of the premises.

21. ODOR CONTROL 22. In accordance with SCMC Chapter 6.91, the overall facility will employ multiple, state‐of‐the‐art methods to prevent the spread of odor beyond the facility walls and combat offensive odors within all production areas as well as storage and packaging areas. The primary means of odor control for the facility will include activated carbon filters for all exhaust air leaving the heating ventilation and air conditioning system. The odor control systems will be detailed as required by the Monterey Bay Air Resources District.

23. PACKAGING AND LABELING

Once the production is complete, CORNERSTONE will get their products batch tested and approved by a state‐ third‐party testing laboratory. The lab will issue (to the distributor portion of CORNERSTONE) a certificate of analysis that will then be returned to supplier, stating that the cannabis batch has passed the testing requirements issued by MAUCRSA.

Prior to the distributor transferring products to a licensed retailer, the final processed products must be packaged in tamper‐proof, child resistance packaging. Cannabis flower and unprocessed cannabis products (trim / fresh frozen / untrimmed whole plants) may be transferred in bulk to another licensed distributor. Packages and labels of products will not be made to be attractive to children.

Once that is complete, the distributor will conduct a final review to ensure the labeling and packaging of the cannabis and cannabis products conform to the requirements of SEC. 74. Section 26120 of the Business and Professions Code prior to transportation to the licensed retailer.

All cannabis and cannabis product labels and inserts will include the following information prominently displayed in a clear and legible writing in accordance with the requirements, including font size, prescribed by the Bureau or the State Department of Public Health as well the labeling should read:

The following statements, in bold print:  For cannabis products:  “GOVERNMENT WARNING: THIS PRODUCT CONTAINS CANNABIS, A SCHEDULE I CONTROLLED SUBSTANCE. KEEP OUT OF REACH OF CHILDREN AND ANIMALS. CANNABIS PRODUCTS MAY ONLY BE POSSESSED OR CONSUMED BY PERSONS 21 YEARS OF AGE OR OLDER UNLESS THE PERSON IS A QUALIFIED PATIENT. THE INTOXICATING EFFECTS OF CANNABIS PRODUCTS MAY BE DELAYED UP TO TWO HOURS. CANNABIS USE WHILE PREGNANT OR BREASTFEEDING MAY BE HARMFUL. CONSUMPTION OF CANNABIS PRODUCTS IMPAIRS YOUR ABILITY TO DRIVE AND OPERATE MACHINERY. PLEASE USE EXTREME CAUTION.”  Identification of the source and date of cultivation, the type of cannabis or cannabis product and the date of manufacturing and packaging.  The appellation of origin, if any.  List of pharmacologically active ingredients, including, but not limited to, tetrahydrocannabinol (THC), cannabidiol (CBD), and other cannabinoid content, the THC and other cannabinoid amount in milligrams per serving, servings per package, and the THC and other cannabinoid amount in milligrams for the package total.  A warning if nuts or other known allergens are used.  Information associated with the unique identifier issued by the Department of Food and Agriculture.  For a medicinal cannabis product sold at a retailer, the statement “FOR MEDICAL USE ONLY.”  Any other requirement set by the bureau or the State Department of Public Health.

For only dried flower, the following is required per MAUCRSA:

 “GOVERNMENT WARNING: THIS PRODUCT CONTAINS CANNABIS, A SCHEDULE I CONTROLLED SUBSTANCE. KEEP OUT OF REACH OF CHILDREN AND ANIMALS. CANNABIS MAY ONLY BE POSSESSED OR CONSUMED BY PERSONS 21 YEARS OF AGE OR OLDER UNLESS THE PERSON IS A QUALIFIED PATIENT. CANNABIS USE WHILE PREGNANT OR BREASTFEEDING MAY BE HARMFUL. CONSUMPTION OF CANNABIS IMPAIRS YOUR ABILITY TO DRIVE AND OPERATE MACHINERY. PLEASE USE EXTREME CAUTION.”  The net weight of cannabis in the package is then required;  The identification of the source and date of cultivation, the type of cannabis or medical cannabis product and the date of packaging;  The appellation of origin, if applicable;  List of pharmacologically active ingredients, including, but not limited to, tetrahydrocannabinol (THC), cannabidiol (CBD), and other cannabinoid content, the THC and other cannabinoid amount in milligrams per serving, servings per package, and the THC and other cannabinoid amount in milligrams for the package total;  Information associated with the unique identifier issued by the Department of Food and Agriculture;  For a medicinal cannabis product sold at a retailer, the statement “FOR MEDICAL USE ONLY;” and  Any other requirement set by the Bureau or the State Department of Public Health

Before cannabis that is intended for external distribution can be dispensed, labeling shall be updated to include specific information about the transaction. When the products are completed, the cannabis needs to be labeled accordingly:

 The amount, strain, control and batch number of medical cannabis,

 The date of manufacture or harvest, and date of sale, and  A list of all chemical additives, including nonorganic pesticides, herbicides, and fertilizers, used in the cultivation and production of the cannabis.

Every cannabis product shall have a universal symbol on the primary label that shall be no smaller in size than half (.5) inch by half (.5) inch and shall be printed legibly and conspicuously.

24. DISPOSAL

CORNERSTONE’s endeavor to reduce, to the greatest extent possible, the generation of any excess cannabis product and cannabis plant debris by repurposing such materials for use in infused products. Any expired products that have surpassed their “buy‐by, sell‐by, use‐by” dates or any other products that due to findings of adulterated specifications in accordance with SEC. 78. Section 26131 of the Business and Professions Code will be part of the disposal protocol. As to the material that must be discarded or destroyed, an inventory record is generated indicating:

 The batch numbers associated with the cannabis destroyed;  The reason it was destroyed;  The manner in which it was destroyed;  The amount destroyed;  The date and time it was destroyed; and  Those present during the destruction

CORNERSTONE will work with the City of Santa Cruz Waste Management Department to receive cannabis plant waste materials and will further identify one or more facilities that receive organic or other waste for energy generation purposes. With waste disposal, CORNERSTONE will be sure to capture all activity in a waste log and on video surveillance.

 Any cannabis or cannabis plant debris that is designated for destruction or disposal will be ground, milled or otherwise processed into a gauge where the particles can be readily combined with another substance so as to render the ground/milled/processed cannabis plant material non‐viable;  Once processed for disposal, the material to be discarded or destroyed will be combined with mulched cardboard, used plant soils or other non‐toxic inert material so as to render unusable the marijuana plant matter contained therein;

In accordance with the current California State Emergency Cannabis Regulations, all cannabis sent for destruction must be removed from its packaging and made unrecognizable. Once the batch is destroyed, CORNERSTONE will inform the other producer(s), if applicable, of the noncompliance or unusable products. The distribution manager will be responsible for overseeing all disposal operations and logging all disposal operations in the track and trace system.

25. NON‐CANNABIS WASTE MANAGEMENT

3.1.8 Recycling

CORNERSTONE will recycle all appropriate materials such as plastic and paper for all operations at the site. Recycle bins are stationed in all appropriate areas and are collected daily or as needed and disposed of in secured recycling bins within the facility boundaries for pickup by Santa Cruz Waste Management. No cannabis material is ever disposed of in recycling bins.

3.1.9 General Waste

CORNERSTONE is committed to lessening the burden on landfills by recycling and reusing materials wherever possible. Generic waste inappropriate for recycling generated at the site is disposed of in appropriate waste containers located inside our facility boundaries for pickup by Santa Cruz Waste Management. No cannabis material or recyclable materials are disposed of in the generic waste bins.

4. Track and Trace

As required by SCMC Chapter 6.91, CORNERSTONE will at all times maintain a track and trace system compatible with the City’s record‐keeping system, with the ability to produce historical transactional data for review by the City of Santa Cruz. The tracking system, which for CORNERSTONE will be GrowFlow, will track and report on all aspects of the operation. Aspects of the business to track and report include but limited to matters such as:

 Sale of cannabis goods;  Seed to Sale tracking of production;  Transportation of cannabis goods to a licensee;  Receipt of cannabis goods;  Return of cannabis goods;  Destruction and disposal of cannabis goods; and  All cannabis and cannabis products currently in storage.

26. INFORMATION SECURITY

CORNERSTONE will limit access to this network. The security personnel and an IT employee or contractor will manage the inventory tracking and software system. All data and information will be secured, encrypted and backed up automatically every night, not only to a private server on site, but also to a secure, off‐site server location, thus safeguarding the data in the event of a power outage or temporary shutdown of software.

27. RECORD RETENTION

CORNERSTONE shall keep and maintain, for at least seven years, the following records:

 Financial Records;  Personnel Records;  Contracts between other Licensees;  Training Records; and  Permits/Licenses.

All records shall be kept both electronically and hard copies so in the event local or state regulators need to examine the books, they are readily available.

28. DAILY OPERATIONS RECORDING AND TRACKING

Daily operations are defined by: opening for business, acquiring, selling, and disposing of inventory, closing for the day, and more. The GrowFlow system will enable documentation of inventory status/flow for each daily operation. Employees involved in handling the inventory must identify themselves to the system with a secure authentication procedure (e.g., a unique employee password or electronically‐ readable ID). Employees will enter the type of transaction and electronic reading of the tracking number that identifies the inventory. The system automatically aggregates inventory by the types of transaction and by time of day. 14

29. PRODUCT INTAKE PROCEDURES

Quality Assurance (QA) evaluates or inspects all aspects of In‐house operations. Independent laboratories release final testing results of all batches of materials, and once approved, all products are either transported in sealed, tamper proof containers or are packaged for retail sales.

Any materials that arrive onsite and are cleared by CORNERSTONE security and inventory control team will then need to go through QA inspections and verification to determine conformity to internal specifications. Inspection checklists may be used to document conformity. The operation maintains records of any intake manifests and product specifications.

30. BI‐MONTHLY INVENTORIES

At intervals, not to exceed 30 days, the account manager will conduct and document an audit of the inventory that is accounted for according to Generally Accepted Accounting Principles. Any unexplained shrinkage will be documented and trigger a review of security and surveillance data. When CORNERSTONE determines where the shrinkage occurred, appropriate corrective measures will be implemented. Law enforcement authorities will be notified immediately if the business ascertains that there has been loss, theft, improper diversion, or any other criminal activity based on standards set by the SCMC and/or Police Chief.

31. RETURNS AND DESTRUCTION

If CORNERSTONE discovers that any product (whether produced at the facility or from an outside supplier) is defective, any vendor may return the cannabis goods to the facility, but only in exchange for a non‐defective version of the same type of cannabis good or they can exchange it for another cannabis good of equal value.

32. DISPOSAL / CANNABIS WASTE

Whenever products are found defective, expired, or returned to the facility, the account manager will process the cannabis and plant by‐products in‐house by degrading them into a wholly unusable form: grinding and soiling cannabis waste with non‐consumable solid wastes. In this form, cannabis waste can be disposed of at a California approved waste facility. Waste must be disposed of in a waste receptacle or in a secured area on the premise. CORNERSTONE can also compost or use a private waste hauler. Whenever cannabis is destroyed on site an inventory record is generated indicating:

 The control numbers associated with the cannabis destroyed;  The reason it was destroyed;  The manner in which it was destroyed;  The amount destroyed;  The date and time it was destroyed; and  Those present during the destruction.

Once the waste is ready for disposal, if CORNERSTONE plans on working with the City Waste Management Department and they will obtain a receipt for all pick ups via their monthly bills.

The employee in charge of disposal must be present for all on‐site destruction and must, along with at least one other employee acting as witness, sign a printed record of disposal, which will be kept as a hard copy or electronically as a scanned facsimile for not less than seven years.

5. Inventory Control Plan

Inventory controls will be completed using the GrowFlow track and trace program. Product tracking will be completed as product is entered into the facility and all shipping and receiving will be completed via manifest generated through GrowFlow. All product generated at the facility, intake to the facility and shipped out from the facility is tracked via GrowFlow and compliance labels for each item are generated through the program also.

The electronic inventory will be reconciled with a physical inventory check every 30 days as mentioned in Section 4.5 above. The physical inventory will be completed by scanning in all items stored on site through the use of the GrowFlow program and a barcode scanner.

33. DESIGNATED STAFF

CORNERSTONE will designate an owner to be the facility personnel responsible for inventory tracking and control. This person will take on the role of account manager, in accordance with DIVISION 42. BUREAU OF CANNABIS CONTROL, Chapter1 Section 5048, and will have operational oversight over and responsibility for CORNERSTONE inventory control system. The account manager is responsible for ensuring that the Inventory Control plan is implemented and operates at its highest capabilities. The account manager is mandated to undergo State‐required training on the Track and Trace system prior to obtaining the State License. If they miss the training prior to receiving the license, they will have up to 5 days after the acquiring the license to complete the training course.

As well, the Account Manager can authorize additional employees as track and trace users so long as they are trained properly on the system prior to its use. Each user will be assigned a unique log‐on, consisting of a username and password. The Account Manager or any additional users shall only use their own log‐on and shall not access anyone else’s account.

The employee takes responsibility for ensuring that the electronic tracking system is operating properly by working with a selected POS/tracking system on training protocols and any refresher courses that are needed for updated system requirements. The employee inspects all daily opening and closing inventories and that manual inventory results conform to electronic records.

They are responsible for performing a full audit of the inventory and inventory records at least once every 30 days and whenever discrepancies are detected. If discrepancies of inventory are suspected due to criminal activity of an employee, the operation shall report the employee to the city and local law enforcement. All staff involved in the handling of cannabis will be trained on proper inventory control techniques that go with their jobs, and in the use of the selected POS/tracking software.

Of course, all aspects of the production process and sale of cannabis, including the inventory processes, occur under video surveillance, ensuring employee accountability.

6. Distribution Operations Plan

34. OVERVIEW

CORNERSTONE will take the responsibility of transporting and distributing cannabis products to licensed distributors and retailers. The distribution facility will intake final product from the cultivation and manufacturing sides and arraign for testing by a licensed outside third‐party testing laboratory. The approved products that have passed testing requirements will be sent back to the distribution area where they will be packaged and labeled and then transferred to retailers for final sale to qualified customers 21 years of age or older.

The distribution manager will be responsible for all distribution functions including interfacing with retail (dispensary operators) clients, arranging all testing and inventorying all products ready for testing. The distribution manager will coordinate all testing with the cure manager and will have access to the cure room inventory. Access to the cure room inventory will be restricted and not editable to the distribution manger. The access will be required so that the distribution manager can properly fulfill orders and provide information to clients about product availability. Distribution manager will report directly to the operation manager.

35. SUPPLIER AGREEMENTS

As required by SCMC Chapter 6.91 Section 6.91.030 and DIVISION 42 BUREAU OF CANNABIS CONTROL Chapter 1 Section 5032, CORNERSTONE will ensure all products that are transported to the final destination will originate from licensed facilities and maintain operations in full compliance with the state and local regulations. CORNERSTONE will keep a record of all current supplier’s written authorization from local jurisdiction to participate in any and all commercial cannabis activity, until the State Metrc system is in use. Once the Metrc system is in use verification of vendors and distribution clients will be completed via the Metrc system.

36. INVENTORY PRACTICES

As required by Business and Professions Code Division 10 Chapter 6.5 Section 26067, CORNERSTONE’s transportation process will follow strict guidelines and procedures in order to ensure full compliance with all state and local regulations. It will also ensure the security of all shipments that come into and leave the facility as well as the safety of all personnel. The following are the inventory guidelines that CORNERSTONE will maintain as a baseline to ensure full compliance:

 Once the Cultivation and/or Manufacturing site has products ready for testing, the Distributor will develop a shipping manifest that will deliver products to the Distributor for state‐mandated testing through a licensed outside third‐party testing laboratory;  The products are then placed into quarantine for 72 hours prior to testing;  The products are placed in a temperature and humidity‐controlled area to eliminate any deterioration;  Once the products are ready for testing, the Distributor will ensure that all samples are properly labeled with the correct batch (record) number to allow for accurate records;  The track and trace system will be updated with the movement of each batch to allow for an accurate snapshot of where all products in the facility are currently located;

 Once a sample is taken for testing, the remaining batch will be moved to a separate location until testing is completed and approved to ensure no cross‐contamination is done (in the event of a failed testing);  Once approved, the proper batch numbers will be reallocated to the “packaging and labeling” section of the facility for final quality assurance checks and proper packaging is conducted; and  After packaging and labeling of products are completed and ready for final shipment, the distributor will arrange for transport to the retailer.

The distribution manager will be responsible for all inventory functions associated with cannabis products once they have been packaged and upon the time they leave the cure room.

37. TESTING

Once the distribution manager schedules the product for testing, the following requirements are needed for tracking:

 The testing laboratory’s name and license number;  The name of the laboratory agent or agents who obtained the samples;  The weights of the samples obtained;  The date the samples were obtained; and  Other information required.

It is CORNERSTONE’s responsibility to arrange for the batch sampling for testing. An employee of CORNERSTONE shall physically be present when the lab employee obtains a sample of cannabis from each batch. They will ensure that the increments are taking from throughout the batch of cannabis to get a proper testing result of the full batch. During this process, video surveillance shall be recorded of the batch sampling with the batch number stated at the beginning of the video along with a valid date and time for the footage. The videos shall be maintained for 90 days. CORNERSTONE staff will observe the sampling they will not touch or assist with the sampling or equipment.

The Laboratory shall develop a Chain of Custody (COC) document and procedure to ensure conformity and compliance with the regulations for testing and sampling. On this form, the following shall, at a minimum, be included:

 Laboratory’s name, physical address, and license number;  Distributor’s name, physical address, and license number;  Unique sample identifier;  Date and time of the sample collection;  Printed and signed name(s) of the distributor(s);  Printed and signed name(s) of the sampler(s); and  Printed and signed name(s) of the testing laboratory employee that received the sample.

After the sample has been selected, both CORNERSTONE staff (distribution manager or their designee) and the Sampler sign and date the COC form.

Once the products have passed testing requirements, CORNERSTONE will arrange for the transportation of products to retailers. All products will be packaged and labeled prior to transportation.

The following requirements are needed for tracking the transportation to retailers:

 Transporter name and license number (associated with the Distribution license);  Driver’s name and driver’s license number;  Amount of medical cannabis goods transported, by weight or count;  Vehicle license plate number used for transportation;  Date of transport; and  Other information required.

38. QUALITY ASSURANCE PRACTICES

CORNERSTONE is responsible for final quality assurance checks prior to testing and once testing is completed to ensure that all proper protocols are in place. The distributor is the final mode of quality assurance prior to the finished product being sold to a retailer for consumer consumption. concern.

CORNERSTONE will rely on quantitative measures from a State certified/verified analytical laboratory to ensure products meet requirements prior to be available to distribute. Prior to distributing any product CORNERSTONE will completed a final quality assurance inspection. CORNERSTONE’s quality assurance program is based upon qualitative measures as determined by visual inspection, feel and olfactory evaluation to assess of degradation or spoilage has occurred. Any items suspected of degradation or spoilage will be removed from the supply chain and destroyed or will be tested by analytical lab.

39. INSURANCE REQUIREMENTS

The distributor shall at all times carry and maintain commercial general liability insurance and commercial umbrella insurance for bodily injury and property damage arising out of the required activities. This insurance shall cover such claims as may be caused by any act, omission, or negligence of the CORNERSTONE or its employees. The insurance shall also cover bodily injury, including disease, illness, and death; property damage associated with CORNERSTONE’s premises or operations; and personal injury. The limits of liability insurance shall not be less than two million dollars ($2,000,000) and in an amount of no less then 1 million ($1,000,000) for each loss.

The insurance shall be from an insurance company that maintains the following:

 A non‐admitted insurer, that meets the requirements of Insurance Code section 1765.1 or 1765.2, and the insurance is placed pursuant to Insurance Code section 1763 and through a surplus line broker licensed under Insurance Code section 1765; or  An insurer qualified to do business in California by the Secretary of State and authorized by the Insurance Commissioner to write the liability and property classes of insurance as defined by Insurance Code sections 102, 103, 107, 114, 108, and 120; or  A registered risk retention group compliant with the California Risk Retention Act of 1991. (See California Insurance Code sections 125‐140.)  Admitted insurers and risk retention groups must show proof of capitalization in the amount of at least $10,000,000.  A distributor licensee shall notify the Bureau in writing within 10 calendar days of a lapse in insurance.

40. TAX COLLECTION PRACTICES

CORNERSTONE will be required to collect a cannabis excise tax at the state level for both cultivators and retailers. Any local tax requirements that are implemented by the City of Santa Cruz will be collected by

20 the distributor once implemented. CORNERSTONE must obtain a separate permit from the State Board of Equalization (now the Tax and Fee Administration) once the excise tax collection begins.

6.1.1 Cultivation Taxes

CORNERSTONE shall collect a cultivation tax on all harvested cannabis that enters the commercial market from the cultivators. The tax is due after the cannabis is harvested and enters the commercial market. The following is the tax fee structure: tax for cannabis flowers shall be nine dollars and twenty‐ five cents ($9.25) per dry‐weight ounce and the tax for cannabis leaves shall be set at two dollars and seventy‐five cents ($2.75) per dry‐weight ounce.

The cultivator’s liability for the tax is not extinguished until the tax has been remitted to CORNERSTONE and an invoice, receipt, or other document refers to the payment of the tax to the distributor. CORNERSTONE shall collect the cultivation tax from a cultivator upon entry into the commercial market and shall not be sold to retailers or purchased by manufacturers until payment is satisfied. All cannabis removed from a cultivator’s premises, except for plant waste, shall be presumed to be sold and thereby taxable under this section.

CORNERSTONE will be responsible for paying taxes on all cannabis transactions per the City of Santa Cruz requirements also. Current City taxes are 8% taxes on gross sales.

7. Transportation Plan

41. OVERVIEW

Prior to CORNERSTONE and their employee’s distributing products to retail clients, the following protocols will be checked for quality assurance and inventory reconciliations:

 Final product will be packaged in such a way that the outside identifies the contents of each package, its origin or batch numbers, the licensee number and any and all additional requirements needed by the City of Santa Cruz and the State of California;  Shipments of products to retailers will ensure all products are entered into the track and trace system to ensure that the plant is being tracked from seed to final sale.  All shipments will be conducted through CORNERSTONE and between licensees that have both local and state licenses. All transportation will be conducted by an employee of the distributor as required by Section 26070 of the Business and Professions Code (c);  When shipments are scheduled for transport, the shipping manifest will only be provided to those personnel from the distribution facility as well as the receiving company to allow for “limited‐access” to the products and transport route to assist with extra security measures; and  CORNERSTONE will aide local and state licensing authorities and agencies with rights to inspect at any time the shipments, and if requested, provide documentation of current inventory logs and transportation manifests.

The distribution manager will be responsible for interfacing with all retail facilities including; managing order fulfillment, scheduling transportation staff, checking transportation staff out for deliveries and verifying any returns or pickup upon check in. The distribution manager will confirm all payments received by transportation staff arrive in tamper evident bank bags and will deliver all payments to the operations manager for verification and logging in the track and trace system.

42. LOCAL AND STATE REGULATIONS FOR TRANSPORTATION

In accordance with Section 26070 of the Business and Professions Code (b), CORNERSTONE will develop a transportation plan to safely and securely transport products and currency. The driver, who is required to be employed by CORNERSTONE is authorized to transport products to the final destination.

All vehicles transporting cannabis and cannabis products for the distribution facility will be required to have a valid motor carrier permit in compliance with Chapter 2 Section 34620 of Division 14.85 of the Vehicle Code. Per the California State Law under MAUCRSA, the Department of the California Highway Patrol will have authority over the safe operation of vehicles, including, but not limited to, requiring all drivers engaged in the transportation of medical cannabis or medical cannabis products to participate in the Basic Inspection of Terminals (BIT) program in compliance with Section 34501.12 of the Vehicle Code.

Prior to transporting cannabis or cannabis products, the distribution manager will:

 Complete an electronic transportation shipping manifest. The shipping manifest will include the unique identifier and will be issued by the Department of Food and Agriculture (once released at the state level) starting from the original cannabis product.

During transportation, the driver shall maintain a physical copy of the shipping manifest and make it available upon request to law enforcement officers and any local or state regulators. The receiver shall also maintain each shipping manifest and make it available upon request to any law enforcement officers.

43. TRANSPORTATION REQUIREMENTS

As currently required by Section 5311, transportation of all products must be conducted in a motor vehicle and all other vehicles are prohibited. The transporter must be an employee of the Distributor. The vehicle type must be either a commercial vehicle or a trailer that is able to securely lock the box that contains the products inside the vehicle.

During transportation, at no time during immediate delivery or overnight shall the vehicle have cannabis products be left unattended. While the products are in the vehicle, it shall be locked and secured with at a minimum an alarm system installed for additional security measures. The only goods allowed to be transported by the driver are cannabis products. The driver may, however carry multiple shipments in their vehicle at one time.

All transportation of products by the driver shall only be travelled between the shipping and receiving premises and the distribution facility. This will allow for extra security measures as well as allow tracking of all shipments when they leave each facility.

CORNERSTONE will designate a qualified person as the Transport Employee to manage the product transport program including:

 Product and document control;  Verification and training of transport agents;  Vehicle security;  Vehicle inspections and sanitation requirements;  Route management; and  Risk assessments.

Transport destinations may include other licensed cannabis facilities both internal and other suppliers as well as disposal locations. CORNERSTONE will document transportation training, policies and procedures, the transporters driver’s licenses, driving records, regulatory updates, assessments and incident reports, and retains records for two years.

CORNERSTONE’s employees and drivers are the only workers trained and authorized to transport cannabis and cannabis products and are listed on documentation for each route they drive. Transporters will receive training specific to their responsibilities and receive refresher training at least once per year or more if procedures or state and local regulations change.

For the safety of the transporter and the products they are transporting, they shouldn’t wear or display any information identifying them as a cannabis transporter (unless transport security uniforms are part of procedure). This will ensure the utmost safety for these drivers from theft or robbery.

Transport employees will obey all traffic laws and the owner will assess each employee’s safe driving performance periodically. Transporters will file a security incident report for any threat, accident or unusual event experienced during the transportation process. All transporters will have valid state and/or local registration documents that clearly identify them as an approved medical cannabis

23 transporter. CORNERSTONE will obtain a current driving record for all new transporters as well as annually for all new and existing transporters. Existing transporters will report all moving violations and motor vehicle accidents (not just work‐related) to their manager.

44. TRANSPORTATION VEHICLE REQUIREMENTS

The transportation vehicles will be registered with the State as required per Section 5311 and Chapter 2 Division 14.85 of the California Vehicle Code. As Stated above the vehicle will be a commercial vehicle and as such will meet all additional motor carrier requirements of the California Motor Vehicle Code.

45. TRANSPORTATION ROUTE PROCESS

The employee responsible for transportation of medical cannabis and medical cannabis products will document the date, time and delivery route of all shipments. They will carry and maintain copies of the manifest for both the origin site and destination locations and will require both the originator and the receiver to sign the manifest and keep copies for their records. All shipments will be inspected twice: incoming into the distribution facility from the suppliers and outgoing from the distribution facility in the transport vehicles to a retailer.

Transport times and routes will be changed on a routine basis to safeguard drivers as well require the distribution facility limit authorized transport times to daylight hours for the safety of the employees. When practical, transporters should call ahead to ensure readiness at destination. All transporters will be required to dial 911 in case of emergencies.

46. SHIPMENT OF PRODUCTS

As required by Business and Professions Code Division 10 Chapter 6.5 Section 26067(B)(1), all shipments will require attachments of a shipping manifest to facilitate the administration of the track and trace program. The shipping manifest will include at a minimum, but not be limited to the following information:

 The variety and quantity or weight of products shipped;  The estimated times of departure and arrival;  The variety and quantity or weight of products received;  The actual time of departure and arrival;  A categorization of the product; and  The license number and the unique identifier pursuant to section 26069 of the Business and Professions Code.

Once the transport is scheduled and in route to the retailer, the following will occur:

 The transporter will notify the retailer of their impending transport 5‐10 minutes prior to arrival to the location;  Transportation employees and vehicle will be logged onto the site as visiting vendors upon each visit;  Transport vehicle will be inspected to ensure that it is empty or contains no other items than those specified for transport;  Products that are transported will be presented by transportation company personnel to the retailer’s personnel for the inspection and sign‐over process; and 24

 The transporter will verify that the paperwork, amounts and manifest are in order prior to leaving the site.

Once delivered, the distribution facility will update the inventory records as well as maintain a physical copy on site.

7.1.1 Product Returns

Product returns may occur for a variety of reason and transportation staff are not able to accept any product returns without approval from the distribution manager. All product return requests shall be directed to the distribution manager. The distribution manager will input the return request into the track and trace and generate a shipping manifest as described above. If the return request is based on product degradation or adulteration the distribution manager will provide all relevant information to the operations manager for further investigation.

The operations manager will be responsible for performing a root cause analysis. The root cause analysis will be used to determine if there are quality control improvements which can be implemented to prevent recurrence of such issues.

The distribution manager will log and complete product disposal requirements as detailed in Section 3.7 above.

8. Manufacturing Operations

47. OPERATIONS CORNERSTONE’s immediate manufacturing functions will be limited to packaging of extracted materials. The extracted materials will be produced from licensed extractors mainly in the Santa Cruz area.

8.1.1 Packaging

CORNERSTONE’s packaging operations will include cannabis and cannabis products. All packaging operations will be completed following disease control and staff cleanliness protocols. All cannabis and cannabis products will be packaged in child resistant containers with tamper evident seals as required by all three of the State cannabis regulatory bodies.

8.1.2 Sanitation

When taking into account the type of sanitation requirements needed for the operation, CORNERSTONE will consider the structural layout and counter‐space sanitation requirements that the food manufacturing activity will need in regards to: what activity will be conducted (i.e. tincture syrup, extracting, freezing, etc.), the type of product that is to be prepared (i.e. vape cartridges, tinctures, beverages, etc.), and the extent of food preparation that is to be conducted.

8.1.3 Sanitary Conditions

Sanitary working conditions will be implemented, not only for the equipment they use but the fixtures, countertops, non‐cannabis working surfaces, etc. All surfaces, utensils, fixtures, and non‐cannabis surfaces shall be conducted and maintained in a manner that prevents cross‐contamination and undesirable microorganisms.

8.1.4 Sanitary Facilities Conditions

The facility will maintain adequate facility conditions in terms of the following:

 Plumbing;  Water Supply;  Sewage Disposal;  Toilet Facilities;  Hand‐washing Facilities; and  Rubbish Disposal. All sanitation should be in terms of maintaining upmost health and safety of the property and end user human consumption. The water supply shall be adequate enough for the use of cleaning surfaces, any cannabis contact, or packaging materials. All running water shall be at a suitable temperature and used for specific areas such as employee facility areas.

Plumbing shall be of adequate design and installed to do the following:  Carry adequate quantities of water throughout the facility;  Transport any sewage or liquid disposable properly for the facility;  Avoid the build‐up or creation of any unsanitary conditions;  Install or maintain proper floor drainage for any areas where water could flood; and

 Maintain that there is no backflow in the piping systems that carry any water.

All manufacturing facilities shall have a toilet area for an employee that maintains any and all sanitary conditions so that it does not pose a threat to cannabis products. All running water in the facilities shall be kept at 100 degrees F, at a minimum. All rubbish shall be disposed of in a manner that doesn’t promote a breeding ground for pests. Performing daily disposal runs and frequently cleaning the pipes and drains will help to assist in preventing contamination.

8.1.4.1 Cleaning and Sanitizing of Equipment and Utensils

Prior to the first run of packaging, the employees will make sure all equipment, material‐contact surfaces, and utensils are washed to remove or loosen all contaminated materials (i.e. dust, dirt, liquid, spills, etc.) are cleaned by way of application of detergents containing wetting agents and emulsifiers, acid, alkaline, or abrasive cleaners, hot water, brushes, scouring pads, high pressure sprays, or ultrasonic devices.

CORNERSTONE will make sure that prior to any purchasing of equipment and utensils that their intended use is designed and constructed to be durable enough to retain their characteristic qualities under normal use conditions. IAll new and replacement electrical appliances will meet applicable Underwriters Laboratories standards for electrical equipment as determined by an ANSI accredited certification program.

8.1.5 Equipment and Utensil Requirements

CORNERSTONE will ensure that all cannabis manufacturing equipment and utensils used in manufacturing process are adequately cleanable, and will be amply maintained to protect against allergen cross‐contact and contamination. All equipment, utensils and production surfaces will be corrosion‐resistant, made of nontoxic materials, designed to withstand the environment of their intended use, and cleaning compounds, sanitizing agents, and cleaning procedures.

CORNERSTONE will establish and implement procedures to ensure that all equipment and machinery they plan to use in production is suitable for its intended use prior to operation. These procedures include:  Verifying all equipment has design specifications, operating procedures, and performance characteristics appropriate for its intended use;  Verify the procedures and protocols are in place for validating that all equipment is built and installed in conformity with design specification, including: built according to design specs with proper materials, capacity, and functions, and properly connected and calibrated; and  Creating a schedule for routine re‐verification of all equipment and machinery.

CORNERSTONE will maintain certification records for all equipment and machinery, which contain:  Documenting the successful verification of all pieces of equipment that will be used and is to be dated and signed by the employee conducting the verification;  Documentation of successful re‐verifications of each piece of equipment and machinery upon any modification of the equipment, its intended use, or standard operating procedures; and  A log detailing and documenting the verification and re‐verification of all production equipment in operation on the facility.

8.1.6 Quality Control

The Company will ensure that all manufactured cannabis passes quality control testing for consistency and dosage. The Company shall implement a quality control (QC) program to ensure products are continually produced to meet State requirements. The QC program will include a mixture of one on one training including; methods, tools and training and quality improvement programs to ensure employees follow protocols at all times. The QC program will determine the following objectives from the manufacturing process:

 If the appropriate sources of product and quality issues have been identified;  Verify that there is controls in place for preventing distribution of non‐conforming products; and  Verify that the actions for product and quality problems have been implemented and documented.

9. Cultivation Operational Plan

48. PLANT PROCESS  Clones are produced by taking cuttings from “Mother Stock” plants.  Each cutting is plugged into a hydrated cube and placed in a fifty (50) cube tray. A dome is affixed to the fifty (50) cube tray for ten (10) days. The cuttings do not require further hydration during this period.  When cuttings have taken root and appear viable they are transferred to a four (4) inch pot and planted in Pro‐Mix potting soil. At this point cuttings transition to clones.  Clones are hydrated every two (2) days and remain in four‐inch pots for two (2) weeks.  After two (2) weeks each plant is transferred to a two (2) gallon pot. This is the “Veg” stage, plants are treated with the following schedule for six (6) weeks:  Monday: plants are treated with sulfur to fight powdery mildew.  Wednesday: plants may be treated with Azamax to fight spider mites and other contaminants.  Friday: plants are treated with Plant Therapy to fight all contaminants.  When plants have reached desired potential; determined by visual inspection focusing on:  Height and circumference of plants  Vigor, health, color and texture of leaves and beginning flowers  Overall visual appearance  At this point if plants have passed visual inspection they are transplanted into seven (7) gallon pots.  Tomato cages are installed on each plant to support stocks, branches and provide air circulation required for health and vigor of the plant. Plants remain caged for eight (8) weeks.  Plants are treated with the same, following schedule until week three (3):  Monday‐Sulfur  Wednesday‐Green Clean  Friday‐Plant Therapy  After week three (3), plants are no longer treated with Sulfur, Green Clean and Plant Therapy. Plants are treated solely with nutrients during watering cycles throughout their lifecycle.

49. HARVEST PROCESS

 Remove tomato cages from plants.  Plants are cut into 16” pieces and are transferred to the dry room.  Plants are visually inspected for quality control.  Plants are put on hangers at for the drying process, the dry room is kept at sixty (60) percent humidity for ten (10) to twelve (12) days.  Flowers are removed from stocks and transferred to trim room.  Sample of each harvest batch is taken for testing to SC Labs.  Flowers are trimmed and manicured for sale.  Visual inspection of flowers for safety and quality.  Cannabis Product is sealed in tamper resistant Mylar bags and labeled with the producer’s name, strain, weight and testing results. Please see item 14 f Packaging and Labeling.  Finished cannabis is securely stored for no more than twenty‐four (24) hours before it is distributed.

9.1.1 Designation and Handling of Scales and Weights

CORNERSTONE cultivates cannabis with minimal use of approved chemicals to ensure the quality and safety of our cannabis products. CORNERSTONE avoids extensive use of chemicals in the cultivation process by carefully attending to plants, maintaining a healthy environment for their growth and daily visual inspections of all plants. CORNERSTONE uses a mix of predatory insects in the cultivation process to further lessen the use of approved applications.

CORNERSTONE uses the following approved applications:

9.1.2 Pesticides, Fungicides and Insecticides known as “Beneficial’s”

 A mixture of Beneficial’s is used in operations.  Goals of the current mixture of beneficial’s is to have a mix of FIFRA 25(b) pesticides – FIFRA 25(b) pesticides are exempt from EPA listing because of their non‐hazardous properties  Chemical Beneficial’s are applied throughout the vegetative stage of growth and up to the third week in the flowering cycle and include the following chemical products: – Nukem (OMRI listed insecticide / FIFRA 25(b) exempt product) . Active Ingredients: Citric Acid . Inert Ingredients: Water, Yeast (Enzymes), Potassium Salts of Fatty Acids, Sodium Benzoate, Potassium Sorbate – Azamax (OMRI listed broad spectrum botanical insecticide) . Active Ingredients: Azadirachtin . Inert Ingredients: Unknown – Green Cleaner (Miticide) . Active Ingredients: Soybean Oil, Sodium Citrate, Citric Acid . Inactive Ingredients: Isoprpyl Alcohol, Sodium Lauryl Sulfate, Water – Venerate (OMRI listed Bioinsecticide) . Active Ingredients: Heat‐killed Burkholderia sp. strain A396 . Inactive Ingredients: Unknown – Defgaurd (Biofungicide / Bacteriacide) . Active Ingredient: Bacillus amyloliquefaciens strain D747 . Inactive ingredients: Unknown – Plant Therapy (FIFRA 25(b) exempt product) . Active Ingredients: Citric Acid, Soy Oil, Peppermint Oil . Inert Ingredients: Soap (proprietary blend), alcohol, sodium citrate, water. – Water Soluble Sulfur . Active Ingredients: Elemental Sulfur . Inert Ingredients: Unknown  Biological Beneficial’s are applied throughout all stages of growth and include the following biologic controls: – Lady bugs – Predatory mites (Phytoseiulus persimilis)

9.1.3 Micro and Macro Nutrients /Fertilizers and Soil

 PRO‐MIX Potting Soil  Clade 9 Nutrients: A and B, Bloom, Swell, CalMag, Big Time Enzyme

9.1.4 Usage: Six (6) Week “Veg” Schedule

 Monday plants are treated with sulfur  Wednesday plants are treated with Green Clean  Friday plants are treated with Plant Therapy  Nutrients are applied with each watering

9.1.5 Usage Three (3) Week Flowering Schedule

Plants are transferred to from Veg pots to seven (7) gallon pots and treated with the same Monday, Wednesday, Friday schedule for three (3) weeks. After this point, the plants are no longer treated with Sulfur, Green Clean or Plant Therapy.

Nutrients are applied with each watering cycle throughout the plant’s lifecycle. Nutrients are safe and appropriate to apply throughout the plant’s lifecycle.

9.1.6 Handling, Storage and Disposal of Application Materials

CORNERSTONE follows all manufacturers guidelines and recommendations for the safe application, handling, storage and disposal of applications.

 Cultivators wear Tyvek suits, disposable gloves, eye protection and masks when applying chemicals.  Cultivators wash hands after application.  All chemical applications are stored in a cool, dry, secure area outside the cultivation room.  Disposal of empty containers is done at the Waste Management Facility. Empty containers are declared and appropriately recycled.

9.1.7 Environmental Controls

Disease requires three (3) key factors to exist and thrive known as the “disease triangle”:

 The Host: Cannabis Plant  The Pathogens & Pests: Powdery Mildew, Botrytis, Aphids, Fungus Gnats and other pathogens, pests or contaminants.  The Environment: Excess moisture and humidity, poor ventilation, broad swings in temperature and humidity.

Comprehensive understanding of the disease triangle and knowledge of how to control the environment is key to reducing or eliminating the need to treat plants with even the safest cannabis and environmentally friendly remedies. As experienced cannabis cultivators, the CORNERSTONE cultivation team produces pathogen and pest‐free cannabis. CORNERSTONE cultivation operations are maintained in strict compliance with Department of Pesticide Regulation’s approved list of pesticides and fungicides.

CORNERSTONE utilizes biological control agents such as “beneficial insects” as an alternative to pesticide and fungicide use. The introduction of beneficial insects such as mites and nematodes offer a safer, more effective and environmentally friendly alternative to the use of approved pesticides and fungicides in disease and pest prevention and control.

50. ENVIRONMENTAL SUSTAINABILITY PLAN

9.1.8 HVAC Efficiency

 The facility integrates the energy‐efficient heating, ventilation and air conditioning (HVAC) systems for indoor operations.  An HVAC contractor will calibrate cooling systems and clean the ventilation systems.

9.1.9 Minimization of Energy Intensity

 The facility will minimize energy used per unit of product by tracking the amount of energy required in the production process and/or increasing the output while maintaining the same level of energy input.  Performed in conjunction with tracking of production yields and energy use over several production cycles.

9.1.10 Water Usage

CORNERSTONE recycles all of the A/C and dehumidifier run off and recirculates through a hydrologic water filtration system, which will ensure a 0 ppm prior to the next crop beginning to confirm the perfect mixture of nutrients needed.

9.1.11 Electrical Usage

While electrical usage can be a hard control point to concisely state, CORNERSTONE uses a mixture of LED and 1000w fixtures.

51. PEST MANAGEMENT

Cannabis pest management will be of CORNERSTONE’ top cannabis cultivation business concerns. Several Integrated Pest Management practices will be implemented by the facility to ensure optimal growing conditions for the plants. Techniques include focusing on the long‐term prevention of pests and their damage by using a varied combination of strategies such as pest resistant strains, habitat manipulation and modification of cultivation practices when needed. Prevention is a much better option than perpetual treatment of an existing infestation. Infestations typically happen due to workers coming from other infected gardens or infected clones being carelessly brought into the cultivation area. Some problems, such as powdery mildew or aphids, can come from air intake and other openings. Cleanliness standards along with IPM techniques will mitigate much of the risk of pest infestation.

Several steps shall be taken to minimize the risk of pests being brought into the site, including positive‐ pressure entryways that are stationed between the entrance and the plant cultivation area, where all workers will be required to change clothes prior to entering the cultivation area. Additionally, quarantine rooms will be utilized to mitigate the risk of clones carrying pests from entering the cultivation area.

No chemical insect or rodent baits will be used inside the cultivation facility. Interior mechanical traps will be positioned at 20 ‐ 40 feet intervals along the interior perimeter of the building, especially near entrances leading to the building exterior. Traps are inspected at least every other week by a QA technician – live traps are checked daily or as required and needed. Contents of traps are emptied into a separate trash bag that is tied and placed into waste containers located outside. Traps are cleaned periodically and inspected and tested to ensure they are functioning properly.

Cannabis clones that are brought into the site, will be put in a special quarantine room with lighting adequate for inspection, where the clones can sit for up to two weeks before getting integrated into the main plant area. 10‐40x magnifiers will be used on a daily basis to examine the clones and the surface are of the medium to look for small moving objects such as aphids, mites or whiteflies or the eggs from those pests.

The sooner an infestation is found, the easier it is to contain. Certain bugs are common and easy to handle, such as fungus gnats or caterpillars, whereas others will change the process of the daily operations for a period of time, until they are controlled or eliminated. These include mites of all kinds, some types of aphids and also powdery mildew.

Each type of infestation or infection has its own treatment regimen that must be swiftly and comprehensively applied in order to work properly. Employees shall be trained to handle pest infestations in the best possible manner.

9.1.12 Nutrients and Pesticides

CORNERSTONE will source organic, non‐intrusive pesticides to treat their crops. They have an IPM (integrative pest management) that will be used. These products also help eliminate any mold spores, neem oil, green cleaner, and sulfur, all of which can be sprayed up to day the plants are harvested. Plants will be sprayed Monday, Wednesday and Friday mixing up the listed above products. Additionally, the nutrients used by CORNERSTONE consists of the brand Clade9 – which is a commercial nutrient brand that tests clean.

A list of nutrients and pesticides used will be kept at the cultivation site and instantly updated upon any change. This list will be supplied to any third‐party waste management team as needed, to ensure that all waste can be treated and disposed of properly. This list will also be made available to the city at any time upon request. Additionally, CORNERSTONE shall follow all pesticide use requirements in compliance with local, state and federal laws

9.1.13 Humidity and Temperature Control Grown and Processing Rooms

9.1.13.1 Grow and Processing Rooms

CORNERSTONE utilizes advanced technology for climate control and resource management inside both grow and processing rooms. CORNERSTONE uses Coleman Johnson controls to regulate temperature, humidity and airflow to achieve and maintain optimum conditions. Each room is equipped with HVAC and dehumidification systems to reduce volatile organic compounds that may compromise plants and harvested product.

Controls are preset, gauges display current humidity (rH) and temperature (°F)

 Humidity levels should not exceed 65%.  Humidity levels should decrease to 45% as wet plants dry.  Temperature should be between 60–70 °F

9.1.14 Compromised Product

9.1.14.1 Visual Inspection and Removal of Unhealthy Cannabis Plants

During the cultivation process plants are inspected daily for mold, mildew, pests, and other contaminations or infestations. Infected or unhealthy plants are flagged and quarantined from healthy plants until treated and deemed appropriate to return to the general population. If plants are unhealthy beyond treatment and rehabilitation, they are removed from quarantine and destroyed. All quarantined plants are treated and rehabilitated naturally without the use of hazardous pesticides or fungicides. Any removal of cannabis plants is comprehensively documented and entered in the track and trace software solution.

9.1.14.2 Standard Operating Procedures for Flagging Compromised Cannabis Plants

CORNERSTONE has developed a comprehensive system to ensure the safety and quality of all cannabis products we produce. All cultivation team members can identify compromised product early and with confidence. All cultivation team members know how to handle and store compromised product to avoid all cross‐contamination.

9.1.14.3 Visual Inspection and Removal of Compromised Finished Cannabis Product

Packaged cannabis products are regularly inspected for signs of contamination and degradation. Any contaminated or degraded product is pulled from storage and moved to the quarantine area to prevent cross‐contamination. Any removal of finished cannabis product from storage is comprehensively documented and entered in the track and trace software solution.

9.1.14.4 Sanitizing Protocols for Equipment, Containers and Tools

 Tables are sanitized at least once per shift using the bleach solution.  Trim trays are sanitized at least once per shift with the isopropyl alcohol.  Scissors are sanitized regularly, between batch processing and as needed for functionality. Scissors are soaked for five to ten (5–10) minutes in isopropyl alcohol to remove residue. Scissors are wiped off and permitted to air‐dry on a designated shop towel.  Scissors are not left in the alcohol for more than ten (10) minutes to avoid dulling.

9.1.15 Designation and Handling of Scales and Weights

All staff members handling scales have been trained in their proper usage and sanitation. All scales are kept clean, sanitary, and free from obstruction, fans, or heavy air circulation. All scales are sanitized between weighing of batches to prevent cross contamination. Scales are calibrated daily and checked for accuracy. Scales remain static in their designated position to avoid damage. Completion of cleaning and sanitization are documented in the scale maintenance log.

9.1.15.1 Protocols for Inspecting and Handling Scales

Inspection and cleaning of scales includes careful examination of the scale itself, around it, and under it for any imperfection or impediment. Any dings, dents, divots, cracks, crimps and corrosion are reported immediately to management. No further weighing occurs until the scale has been repaired, re‐calibrated and tested for accuracy.

 All scales are designated for a specific process or use, numbered, and kept in a static location.  All scales use safe and reliable power sources.  Effective and safe cleaning supplies are stored in close proximity to each scale station. 34

 Scales are regularly disassembled for cleaning.

52. TRACK AND TRACE SPECIFICATIONS

9.1.16 Overview

GrowFlow is a track and trace program which has been utilized in the cannabis industry in California as well as other States. It is currently integrated with Metrc in other states and will be fully integrated with Metrc in California as soon as the State implements the program.

GrowFlow is a full seed to sale program with multiple steps geared to the individual components of microbusinesses. Program features include custom compliance reports, waste destruction, moisture loss tracking, transportation manifest generation, product recall tracking, compliant label printing and internet security.

9.1.17 Training

GrowFlow training will be required to be completed by all staff responsible for inputting data into the system. GrowFlow training will be completed in a combination of classroom and interactive training provided by GrowFlow for the first training. Additional annual training and as needed training will be completed by GrowFlow or the Operations Manager. Staff who will be responsible for inputting data in the GrowFlow system include:  Operations Manager ‐ Responsible for all operations  Security Manager ‐ Responsible for all security  Logistics Manager ‐ Responsible for all distribution operations All listed staff will be trained prior to commencing operations and at a minimum refresher training will be provided annually.