UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017

or

[  ] TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transitional period from _____________ to ______________

Commission file number 333-189731

DIEGO PELLICER WORLDWIDE, INC.

(Exact name of registrant as specified in its charter)

Delaware	33-1223037
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

9030 Seward Park Ave S. #501, Seattle, Washington 98118

(Address of principal executive offices) (Zip Code)

(516) 900-3799

(Registrant’s telephone number, including area code)

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

Title of each class registered:	Name of each exchange on which registered:
None	None

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

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

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

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

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

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

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

Large Accelerated filer	[  ]	Accelerated filer	[  ]
Non-accelerated filer	[  ]	Smaller reporting company	[X]

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

There was no active public trading market as of the last business day of the Company’s second fiscal quarter, so there was no aggregate market value of common stock held by non-affiliates.

As of April 12, 2018, the registrant had 229,650,261 shares issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

TABLE OF CONTENTS

		Page
PART I		4
Item 1.	Business	4
Item 1A.	Risk Factors	16
Item 1B.	Unresolved Staff Comments	16
Item 2.	Location	16
Item 3.	Legal Proceedings	16
Item 4.	Mine Safety Disclosures	16
PART II		17
Item 5.	Market For Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	17
Item 6.	Selected Financial Data	17
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 8.	Financial Statements and Supplementary Data	23
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	24
Item 9A.	Controls and Procedures	24
Item 9B.	Other Information	25
PART III		26
Item 10.	Directors, Executive Officers and Corporate Governance	26
Item 11.	Executive Compensation	27
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	28
Item 13.	Certain Relationships and Related Transactions, and Director Independence	29
Item 14.	Principal Accountant Fees and Services	29
PART IV		30
Item 15.	Exhibits and Financial Statement Schedules	30

2

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

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

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

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

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

3

PART I

Item 1. Business

Overview of the Market

The cannabis market has a multi-billion dollar potential. The industry is in its infancy and is rapidly being propelled towards its potential by the state legalization and the rush by suppliers to meet the pent-up demand. Most suppliers are small unsophisticated but capable operators. The federal legal constraints provide an opportunity to those companies early to the market to gain a first mover advantage and to the successful ones, an opportunity to be a consolidator in the industry. How can a company establish itself as a prestigious national brand when federal laws prohibit the sale of these products? How can a legitimate company respect these laws and be the first mover in the retail and wholesale trade in this industry?

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

Diego is a real estate and a consumer retail development company that is focused on high quality recurring revenues resulting from leasing real estate to licensed cannabis operators. Diego provides a competitive advantage to these operators by developing “Diego Pellicer” as the world’s first premium marijuana brand and by establishing the highest quality standards for its facilities and products.

The Company’s first phase strategy is to acquire and develop the most prominent and convenient real estate locations for the purposes of leasing them to state licensed operators in the cannabis industry. Diego’s first phase revenues result from leasing real estate and selling non-cannabis related accessories to our tenants. The company has developed a brand name strategy, providing training, design services, branded accessories, systems and systems training, locational selection, and other advisory services to their tenants. We enter into branding agreements with our tenants. In addition, part of the vetting process in finding the proper tenant is selecting a tenant that shares the Company’s values and strictly complies with state laws, follows strict safety and testing requirements and provides consistent, high-quality products. If the tenants do not comply, they will not be allowed to use the brand.

The second phase of our strategy is to secure options to purchase the tenant’s operations when it becomes legal on a federal level to operate cannabis distribution operations. When mutually advantageous for Diego and the tenant, Diego will negotiate acquisition contracts with selected Diego operators/tenants. When it becomes federally legal to do so, Diego will execute the acquisition contracts, consolidate our selected tenants and become a nationally branded marijuana retailer and producer concurrent with the change of federal law.

Value Proposition

Value proposition 1: By providing branding, training, unique accessories, purchasing services, locational experience, standardized design, and experienced construction supervision, the tenant reduces his startup time, reduces cash drain, increases his efficiency, and builds his gross margin. Diego provides the capital for preopening lease costs and tenant improvements. This results in a turnkey retail location for the tenant. Thus, Diego’s real estate, consulting and accessory sales are positioned to deliver a premium return on our investment.

Value proposition 2: With each lease, Diego negotiates an acquisition contract with selected licensed tenants to acquire their operations. This contract will be executed at Diego’s option, and upon changes to federal law, introduces our second value proposition—ownership of operations in an industry that is projected to exceed $8 billion by 2018.

4

Revenue Generation and Growth

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

● Acquire target properties to be improved for the growing, processing, distribution, and sale of medical and recreational marijuana, extracts and ancillary products.

● Build and lease turnkey Retail, Processing and/or Growing facilities.

● Create future merger agreements with those operators deemed capable of carrying the Diego brand.

● Negotiate merger agreements with favored partners that will trigger when marijuana commerce becomes legal federally.

● Own DP Brands and other Intellectual Property.

● Charge reasonable rents to tenants to recover all build-out and start-up investment plus profit margin over the first lease term.

● Sell non-cannabis branded products lines such as apparel and edibles to Diego stores.

● Create an e-commerce platform selling non-cannabis branded merchandise

● Continue to build and market the brand utilizing all forms of media including traditional and digital media, social media, e-commerce, and strategic partners.

Why We Believe this is a Winning Strategy

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

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

What we accomplished in 2017:

In 2017, Diego opened three Colorado facilities. With the Washington facility having opened in the latter part of 2016, Diego now had four facilities generating rent in 2017 for nearly the full year. The tenants in their first year of operation were quickly growing their sales and improving operational efficiency. Diego worked with these tenants, partially forbearing on their rent so as to allow these operators to strengthen their position and become capable of paying full rents. The properties generating rents in 2017 are as follows:

Table 1: Property Portfolio

Purpose	Size	City	State
Retail (recreational and medical)	3,300 sq.	Denver	CO
Grow Warehouse	18,600 sq.	Denver	CO
Grow Warehouse	14,800 sq.	Denver	CO
Retail (recreational and medical)	4,500 sq.	Seattle	WA

Diego’s Washington tenant opened our first flagship store in Seattle in October 2016. The Colorado tenant opened the Diego Denver branded flagship store in February 2017. In addition, Diego’s two cultivation facilities in Denver, CO began production in late 2016.

Recurring lease revenues from signed agreements are amenable to forecast. Likewise, forecasting expenses of lease obligations for which Diego has signed contracts are also amenable to forecasting. As executed, by this summer Diego’s leases will be generating cash of over $120,000 monthly net of lease costs. After amortization of construction costs, gross income from leases will be over $100,000. In addition to this, there will be income from accessory sales.

5

Diego Pellicer Seattle

6

Diego Pellicer Denver

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

7

What does our premium branding accomplish?

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

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

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

8

The Industry: What is the Evidence of Rapid Growth?

Legalization of marijuana is a very recent movement. California was the first to legalize in 1996 when medical marijuana was approved. Even more recently, in 2012, recreational marijuana began to be legalized. The huge market is recreational marijuana. The following is the history:

Medical Marijuana Begins

1996: California legalized medical cannabis. (California Proposition 215)

1996: First marijuana dispensary, Marin Alliance for Medical Marijuana appears in Fairfax, California, USA.

1998: Oregon, Alaska, and Washington legalized medical cannabis

1999: Maine legalized medical cannabis

2000: Hawaii, Nevada, and Colorado legalized medical cannabis. Hawaii became the first state to do so by state legislature. 2004: Montana and Vermont legalized medical cannabis.

2007: New Mexico legalized medical cannabis.

2008: Michigan legalized medical cannabis. Massachusetts decriminalized cannabis.

2010: New Jersey and Arizona legalized medical cannabis. (Arizona’s proposition 203)

2010: California decriminalizes possession to a civil infraction

2012: Massachusetts legalized medical cannabis. (Massachusetts Medical Marijuana Initiative)

Recreational Marijuana begins

2012: Colorado and Washington legalized recreational marijuana for adults 21 years of age or older.

2014: Minnesota and New York legalized medical

2014: Utah legalizes CBD oil, becoming the first state to legalize a cannabis-based medicine without legalizing medical cannabis entirely.

2014: Oklahoma legalizes trials of CBD oil.

2014: Alaska and Oregon legalized recreational cannabis. Alaska’s law took effect on February 25, 2015. Oregon’s initiative began on July 1, 2015.

2015: Georgia and Texas legalized CBD oil.

2015: Louisiana legalized medical cannabis. 2015: Delaware decriminalized cannabis.

2016: Ohio and Pennsylvania legalized medical cannabis via state legislature.

2016: Illinois decriminalized cannabis.

2016: California, Nevada, Maine and Massachusetts legalized recreational cannabis via ballot initiative.

2016: Florida, North Dakota, and Arkansas legalized medical cannabis via ballot initiative.

9

Support for medical and recreational marijuana use has increased significantly over the past 20 years. According to a recent CNN poll, greater than 50% of the US population supports marijuana legalization. Figure 1 illustrates a select set of CNN poll results.

Figure 1: CNN/ORC Poll Results on Marijuana Use in the US

¹ CNN 2015

² Marijuana Business Daily, November 14, 2016

10

The US state-sanctioned medical and recreational marijuana market generated a total revenue of $5.4 billion in 2015, boosted by an incredible growth in the recreational sector of sales, from $351M to $998M, an estimated increase of 184% over 2014. By comparison, the marijuana market is less than 3% of the US tobacco market, a $144 billion market that has no medicinal value, and less than 3% of the alcohol market, which valued at $113.5 billion in 2014 ³.

Legalization resulted in rapid revenue growth in the U.S. Recreational is the big growth market. The marijuana secondary and tertiary markets have not yet been analyzed as sources of revenue; however, emerging secondary markets such as marijuana tourism could become a significant source of income for recreational legal states. As a point of comparison, Holland earns $48.55 billion per year in tourist dollars. Of the 10 million tourists, 5.5 million or 55% of tourists visit bars and marijuana cafes, generating a total of nearly $27 billion and 220,000 jobs. ⁴ This equals roughly 30% of all business revenue generated in Washington State in 2012.⁵

Marijuana has become a major issue in state elections as voters are seeking politicians that support legalization.⁶ As states legalize marijuana, and international markets develop, the emerging legalized marijuana industry will begin to rival that of tobacco and alcohol. Table 1 summarizes 2016 estimated revenues generated by marijuana retail sales based on a number of sources, including state marijuana program reports.

Table 1 ⁷

This table was published in 2016. As can be seen, the actual results are far surpassing the results expected just two years ago when 2017 was expected to hit $8.5 billion but instead reached $10 billion.

³ Marijuana Business Daily 2016, 2016 Brain Research Institute

⁴ NBTC Holland Marketing, 2009

⁵ Washington State Department of Revenue, 2014

⁶ Drug Policy Alliance, Steven Gutwillig, 2014

⁷ USA Today May 21, 2016

11

Where are the Greatest Market Opportunities?

Market distribution can be measured indirectly with registered medical consumers and dispensaries. As expected, California has the largest number of marijuana patients at more than 775,000, followed by Michigan at 344,000 and Colorado with 107,000. Washington is at 125,000 registered patients as listed in Table 2 and illustrated in Figure 3. There are currently an estimated 1.5 million medical marijuana patients in the US.

Table 2: Registered Medical Marijuana Patients 2015⁸

State	Registered Patients
Arizona	$	87,733
California		775,000
Colorado		107,534
Connecticut		8,201
DC		3,577
Delaware		776
Hawaii		13,150
Illinois		4,400
Maine		20,000
Massachusetts		19,000
Michigan		344,000
Montana		30,000
New Hampshire		1,600
New Jersey		6,354
New Mexico		19,629
Nevada		13,561
Oregon		77,620
Rhode Island		12,815
Vermont		2,477
Washington		125,000
Estimated Total Patients	$	1,508,594

⁸ Marijuana Business Daily 2016

12

Another indirect measure of market distribution is the number of medical marijuana dispensaries. Table 3 provides the distribution of dispensaries across the US.

Table 3: Registered Medical Marijuana Dispensaries ⁹

State	Registered Dispensaries
Alaska		0
Arizona		98
California		2,000
Colorado		516
Connecticut		6
DC		5
Delaware		1
Hawaii		0
Illinois		28
Maine		8
Massachusetts		4
Michigan		325
Montana		60
New Hampshire		4
New Jersey		5
New Mexico		29
Nevada		12
Oregon		400
Rhode Island		3
Vermont		4
Washington		800
Estimated Total Dispensaries		4,308

Although this is a good indicator of demand but it is limited as a predictor because of current legal constraints. In our estimation, the most important indicator of future demand for cannabis is the population in various states that have recently legalized recreational cannabis. This is Diego’s conclusion. We are therefore targeting California, Florida, and Nevada.

⁹ Source: (Marijuana Business Daily 2016; Illinois Cannabis Patients Association, 2010; Leal, 2014; Marijuana Business Daily, 2013)

13

What Benchmarks could Diego be Measured Against?

Diego was one of the first to the market with a real estate holding and branding business model; however, other companies have since adopted similar strategies. Key differentiators between Diego and its competitors are superior branding, optimized build-out and turnkey grow and retail development, and, most importantly, pre-negotiated acquisition contracts. Table 4 provides a financial benchmark of other cannabis.

Table 4: Financial Benchmark-millions

	Market Cap at 3/24/2016			Most Recent Revenue		Cost of Revenue		Gross Margin %			Net Profit			For the year ended
General Cannabis Corp(CANN)	$	105.24	M	$	3.511	$	2.785		21	%	$	(8.22	)	12/31/2017
Mountain High Acquisitions Corp. (MYHB)		5.67	M		23,057		2,204		90	%		(0.94	)	3/31/2017
Agritek Holdings, Inc.(AGTK)		10.708	M		3.228		3.161		2	%		(2.98	)	12/31/2016
Innovative Industrial Properties, Inc.(HPR)		176.47	M		1.560		N/A		N/A			(1.37	)	12/31/2016
M J Holdings Inc.(MJNE)		22.01	M		9.039		0.000		100	%		(0.08	)	12/31/2016

Status of Federal Law

While marijuana is legal under the laws of several U.S. States, at the present time the concept of “medical marijuana” and “retail marijuana” do not exist under U.S. federal law. The United States Federal Controlled Substance Act classifies marijuana as a Schedule I drug. As defined under U.S. federal law, a Schedule I drug or substance has a high potential for abuse, no accepted medical use in the United States, and a lack of safety for the use of the drug under medical supervision.

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

In a memorandum dated August 29, 2013, addressed to “All United States Attorneys” from James M. Cole, Deputy Attorney General (“Cole Memo”), the U.S. Department of Justice acknowledged that certain U.S. States had enacted laws relating to the use of marijuana and outlined the U.S. federal government’s enforcement priorities with respect to marijuana notwithstanding the fact that certain U.S. States have legalized or decriminalized the use, sale and manufacture of marijuana:

● Preventing the distribution of marijuana to minors;

● Preventing revenue from the sale of marijuana from going to criminal enterprises, gangs, and cartels;

● Preventing the diversion of marijuana from U.S. states where it is legal under state law in some form to other U.S. states;

● Preventing U.S. state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;

● Preventing violence and the use of firearms in the cultivation and distribution of marijuana;

● Preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use;

● Preventing the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands; and

Preventing marijuana possession or use on U.S. federal property.

¹⁰ Finance Yahoo and EDGAR

14

Newsweek recently reported:

“Representative Jared Polis (D-Colo.) recently introduced a bill that would make marijuana federally legal and allow the plant to be regulated as alcohol is in the U.S. Under the new bill, called the Regulate Marijuana Like Alcohol Act, the plant would be removed from its Schedule I listing on the Controlled Substances List and would be regulated by the Bureau of Alcohol, Tobacco, Firearms and Explosives. Adults 21 and up would be able to purchase and consume cannabis legally across the nation. Advertising rules similar to those regarding alcohol would also apply to marijuana under the bill.

The Regulate Marijuana Like Alcohol Act is part of a package of three cannabis-related bills introduced Thursday by members of the Cannabis Caucus in the House of Representatives, of which Polis is a member along with Sen. Ron Wyden, D-Ore. and Rep. Earl Blumenauer, D-Ore., who also sponsored the measures.” ¹¹

There is no guarantee that the current presidential administration will not change its stated policy regarding the low priority enforcement of U.S. federal laws that conflict with state laws. Additionally, the new U.S. federal government administration could change this policy and decide to enforce the U.S. federal laws vigorously. Any such change in the U.S. federal government’s enforcement of current U.S. federal laws could cause adverse financial impact to the Company’s business.

The Washington Post reported this after Jeff Session’s confirmation hearing for Attorney General on January 10, 2017:

“In his Senate confirmation hearing on Tuesday, Sen. Jeff Sessions, President-elect Trump’s nominee for attorney general, declined to say whether he’d adhere to the more lenient marijuana enforcement guidelines adopted by the Obama administration’s Justice Department in states that have legalized medicinal or recreational marijuana use. “Would you use our federal resources to investigate and prosecute sick people who are using marijuana in accordance with their state laws, even though it might violate federal laws?” Senator Patrick Leahy (D.-Vermont) asked. “I won’t commit to never enforcing federal law, Senator Leahy,” Sessions replied. “I think some of [the Obama-era guidelines] are truly valuable in evaluating cases,” he added. “Using good judgment about how to handle these cases will be a responsibility of mine. I know it won’t be an easy decision, but I will try to do my duty in a fair and just way.” Under Obama, the Department of Justice largely adopted a hands-off approach to marijuana enforcement in states that legalized the drug for medical or recreational use, provided that certain criteria — like keeping the drug out of the hands of children — were met under state laws. That policy was outlined in a Justice Department document that came to be known as the Cole Memo, for former U.S. Deputy Attorney General James Cole, who drafted the memo.

Drug policy experts have said that this tacit green light from the Obama administration was instrumental in Colorado and Washington’s decisions to fully follow through on recreational marijuana laws passed by voters in 2012. In November 2016, four more states including California voted to make the recreational use of marijuana legal, bringing the total to eight states plus the District. Medicinal marijuana has been legalized in 28 states.

In prior public statements, Sessions was harshly critical of the Justice Department’s approach on the issue. In an April 2016 Senate drug hearing, Sessions said, “I think one of [Obama’s] great failures, it’s obvious to me, is his lax treatment in comments on marijuana. It reverses 20 years almost of hostility to drugs that began really when Nancy Reagan started ‘Just Say No.’”

In February 2017, the Trump administration announced that there may be “greater enforcement” of federal laws regarding marijuana. In addition, on January 4, 2018, Attorney General Jeff Sessions revoked the Ogden Memo and the Cole Memos. Any such enforcement actions could have a negative effect on our business and results of operations.

¹¹ Newsweek , “Marijuana Could Soon Be Regulated Like Alcohol in All 50 States,”

by Janice Williams on 3/31/17 AT 9:56 AM

15

Item 1A. Risk Factors

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

Item 1B. Unresolved items

None.

Item 2. Location

Our principal executive office is located at 9030 Seward Park Ave S. #501, Seattle, Washington 98118.

Item 3. Legal proceedings

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

Item 4. Mine Safety

Not applicable.

16

PART II

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

There is no established public trading market for our common stock. As of the date of this Report, there are outstanding options and warrants to purchase 11,176,493 shares of common stock of the Registrant.

Record Holders

As of March 23, 2018, there were approximately 195 shareholders of record holding a total of 224,934,525 shares of common stock. The holders of the common stock are entitled to one vote for each share held of record on all matters submitted to a vote of shareholders. Holders of the common stock have no preemptive rights and no right to convert their common stock into any other securities. There are no redemption or sinking fund provisions applicable to the common stock.

Dividends

The Registrant has not declared any cash dividends since inception and does not anticipate paying any dividends in the foreseeable future. The payment of dividends is within the discretion of the Board of Directors and will depend on the Company’s earnings, capital requirements, financial condition, and other relevant factors. There are no restrictions that currently limit the Registrant’s ability to pay dividends on its common stock other than those generally imposed by applicable state law.

Unregistered Sale of Equity Securities

● During 2017 1,710,000 common shares valued at $256,327 were issued as payment of finance cost related to convertible notes.

● During 2017, 1,899,990 common shares were issued as security for the payment of convertible notes. The shares, valued at $257,259 are held in escrow, are refundable and are recorded in a contra equity account.

● During 2017, we sold 2,331,071 shares of common stock and received proceeds of $56,951. Of these shares, 336,071 valued at $8,675, were not issued as of December 31, 2017.

● During 2017, 3,430,504 shares of common stock, valued at $740,762 were issued as share-based compensation to related parties. Additionally, 24,973,389 shares, valued at $1,960,643, were authorized to be issued for related party services, but were not issued as of December 31, 2017.

● During 2017, 160,000 shares of common stock, valued at $5,521, were issued for service.

● During 2017, 1,000,000 shares of common stock, valued at $245,600, were issued for a related party debt settlement. 21,025,254 shares valued at 394,500, were authorized but not issued.

● During 2017, 250,000 shares of common stock, valued at $47,245, were issued to settle accounts payable to a consultant.

● During 2017, owners of convertible notes have converted $2,986,387 of notes and $139,263 of accrued interest into 83,916,269 shares of common stock valued at $7,553,246. Additionally, 567,433 shares, valued at $33,401, for the conversion of notes, were authorized but not issued as of December 31, 2017. 866,667 shares, valued at $260,000 were cancelled due to reclassify the fund received to a note payable.

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

Item 6. Selected Financial Data of

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

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

The following discussion and analysis of the results of operations and financial condition of Diego Pellicer Worldwide, Inc. (the “Company”, “we”, “us” or “our”) should be read in conjunction with the financial statements of Diego Pellicer Worldwide, Inc. and the notes to those financial statements that are included elsewhere in this Form 10-K This discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those under sections in the financial statements and footnotes included in the Company’s Form 10-K filed on March 31, 2018 for the year ended December 31, 2017. Words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions are used to identify forward-looking statements.

17

Overview

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

The industry is operating under stringent regulations within the various state jurisdictions. The company’s primary business plan is to lease various properties to licensed operators in these jurisdictions to grow, process and sell cannabis and related products. The Company will also provide educational training, compliance consultation, branding, and related accessories to their tenants. These leases are expected provide a substantial stream of income. We believe that as laws evolve, it is possible that we will have the opportunity to participate directly in these operations. Accordingly, the Company will selectively negotiate an option on our tenants’ operating company.

18

The company has already established four facilities in markets that have experienced high growth, Washington and Colorado. This growth is illustrated in the tables below:

Source: Washington State Liquor and Cannabis Board and Colorado Department of Revenue

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

19

This market is projected to grow rapidly in the future as this chart below illustrates:

Source: Marijuana Business Daily

Summary

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

2017 has been a year of transition for Diego Pellicer Worldwide. Much of the debt was consolidated and converted to stock. Four tenants were open and generating lease revenue. The tenants were showing steady revenue increases and operating improvements. The business model was being proven. The brand name was getting recognition with our Denver tenant being named the number one cannabis retailer in the United States.

Of Diego’s loss for 2017 of $14,649,961, $8,667,652 was the result of costs of new borrowing, restructuring existing debt, and conversions to common stock. Operations generated balance of the loss, $5,982,309. General and administrative expenses for 2017 were approximately the same as 2016 while revenues increased substantially.

Cash used for operating activities was $1,040,533, largely a result of non-cash financing of existing debt, and the executives and directors of the company being willing to take stock rather than cash for compensation. As a result of conversion of debt to stock and the officers and directors taking stock instead of cash as compensation, paid-in-capital of the company increased almost $12 million. This offset much of the increase in accumulated deficit resulting from the 2017 net loss.

Following this stabilization and transition, in 2018 Diego expects that its revenues from existing tenants will continue to improve as the tenants become more profitable and are able to pay the full rents as stipulated in their leases. General and administrative expenses should continue to decline also resulting in improved operating results.

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

20

RESULTS OF OPERATIONS

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

	Year Ended			Year Ended			Increase (Decrease)
	December 31, 2017			December 31, 2016			$			%
Total revenues
Rental Income	$	1,486,997		$	310,220		$	1,176,777			379	%
Rent expense		(1,212,161	)		(1,103,824	)		108,337			10	%
Gross Profit	$	274,836		$	(793,604	)	$	1,068,440			135	%
General and administrative expense		5,704,621			5,003,357			701,264			14	%
Selling expense		95,606			8,254			87,352			1,058	%
Depreciation expense		456,918			9,447			447,471			4,737	%
Loss from operations	$	(5,982,309	)	$	(5,814,662	)	$	(167,647	)		(3	)%

* Not divisible by zero

For the year ended December 31, 2017, the Company was the lessee of four facilities. Three were in Colorado and one in Washington. Driven by the opening of these facilities, total revenue for the year ended December 31, 2017 was $1,486,997, as compared to $310,220 for the year ended December 31, 2016, an increase of $1,176,777. There was forbearance of rent during the year, reducing revenues by $360,266.

Gross profit increased in 2017 by $1,068,440 as the result of the properties being open for most of the year. General and administrative expenses increased slightly as a result of contractual stock grants on connection with signing new executives. Depreciation on leasehold improvements began with the opening on the new facilities.

21

	Year Ended			Year Ended			Increase (Decrease)
	December 31, 2017			December 31, 2016			$			%
Other income (expense):
Interest expense	$	(2,576,211	)	$	(308,170	)	$	(2,268,041	)		(736	)%
Other income and expense		(4,123,647	)		(949,212	)		(3,174,435	)		334	%
Change in fair value of derivative and warrant liabilities		(1,967,794	)		5,359			(1,973,153	)		(36,819	)%
Net other income	$	(8,667,651	)	$	(1,252,023	)	$	(7,415,629	)		(592	)%

* Not divisible by zero

Interest expense and finance costs The increase in interest expense 2017 over 2016 was largely the result of the amortization of the convertible note discount, finance costs resulting from new convertible notes for warrants and stock, and the cost of the convertible notes recorded derivative liability.

LIQUIDITY AND CAPITAL RESOURCES

	Twelve Months Ended			Twelve Months Ended			Increase (Decrease)
	December 31, 2017			December 31, 2016			$			%
Net Cash used in operating activities	$	(1,040,533	)	$	(554,240	)		(486,293	)	$	(88	)%
Net Cash used in investing activities		(125,000	)		(860,469	)	$	735,469			85	%
Net Cash provided by financing activities		1,272,901			1,430,041			(157,140	)		(11	)%
Net Increase in Cash		107,368			15,332			92,036			600	%
Cash - beginning of period		51,333			36,001			15,332			43	%
Cash - end of period	$	158,701		$	51,333		$	107,368			209	%

Operating Activities. For the year ended December 31, 2017, we used net cash in operating activities of $1,040,533. When compared to the net loss of $14,649,962 for the year ended December 31, 2017, the majority of expenses were noncash.

Investing Activities. For the year ended December 31, 2017, cash of $125,000 was invested in leasehold improvements in Colorado compared to a substantial investment of $860,469 in 2016 for leasehold improvements in both Washington and Colorado.

Financing Activities. Net additional funds of $1,272,901 were provided mostly from new convertible stock.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

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

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

22

Item 8. Financial Statements and Supplementary Data.

Diego Pellicer Worldwide, Inc.

December 31, 2017 and 2016

Index to the Consolidated Financial Statements

Contents	Page(s)
Reports of Independent Registered Public Accounting Firm	F-1-2
Consolidated Balance Sheets at December 31, 2017 and 2016	F-3
Consolidated Statements of Operations for the Year Ended December 31, 2017 and 2016	F-4
Consolidated Statements of Stockholders’ Deficit for the Year Ended December 31, 2017 and 2016	F-5
Consolidated Statements of Cash Flows for the Year Ended December 31, 2017 and 2016	F-6
Notes to the Consolidated Financial Statements	F-7

23

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

Diego Pellicer Worldwide, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Diego Pellicer Worldwide, Inc. (the “Company”), as of December 31, 2017, and the related consolidated statements of operations, stockholders’ deficit and cash flows for the year ended December 31, 2017 and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017, and the results of its operations and its cash flows for each of the year ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

The Company’s Ability to Continue as a Going Concern

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

Basis for Opinion

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

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

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

We have served as the Company’s auditor since 2017

Larkspur, CA

April 17, 2018

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Diego Pellicer Worldwide, Inc.

We have audited the accompanying balance sheet of Diego Pellicer Worldwide, Inc. as of December 31, 2016, and the related statements of income, comprehensive loss, stockholders’ deficit, and cash flows for the year then ended. Diego Pellicer Worldwide, Inc’s. management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Diego Pellicer Worldwide, Inc. as of December 31, 2016, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has recurring losses since inception, its current liabilities exceed its current assets by $4,411,156, and has an accumulated deficit of $28,114,125 at December 31, 2016. These factors, among others raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Hackensack, NJ

April 29, 2017

F-2

Diego Pellicer Worldwide, Inc.

Consolidated Balance Sheets

	December 31, 2017			December 31, 2016
Assets
Current assets:
Cash and cash equivalents	$	158,702		$	51,333
Accounts receivable		170,677			-
Prepaid expenses		21,621			482,765
Inventory		32,945			47,025
Total current assets		383,945			581,123
Property and equipment, net		409,128			758,112
Investments, at cost		-			43,333
Security deposits		320,000			320,000
Total assets	$	1,113,073		$	1,702,568
Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable	$	626,258		$	823,797
Accrued payable - related parties		449,064			509,294
Accrued expenses		207,558			1,207,803
Notes payable - related parties		307,312			307,312
Notes payable		133,403			1,310,678
Convertible notes, net of discount and costs		468,116			334,156
Deferred rent		251,878			107,957
Deferred revenue		53,000			53,000
Derivative liabilities		4,106,521			338,282
Warrant liabilities		192,350			-
Total current liabilities		6,795,460			4,992,279
Deferred revenue		262,000			316,000
Total liabilities		7,057,460			5,308,279
Stockholders’ deficit:
Preferred stock, Series A and B, par value $.0001 per share; 5,000,000 shares authorized, none issued and outstanding
Common stock, par value $.000001 per share; 195,000,000 shares authorized, 142,576,974 and 49,081,878 shares issued, respectively,		143			49
Additional paid-in capital		34,422,338			24,508,365
Stock to be issued		2,397,218			-
Accumulated deficit		(42,764,086	)		(28,114,125	)
Total stockholders’ deficit		(5,944,387	)		(3,605,711	)
Total liabilities and stockholders’ deficit	$	1,113,073		$	1,702,568

See accompanying notes are integral to these consolidated financial statements

F-3

Diego Pellicer Worldwide, Inc.

Consolidated Statements of Operations

	Year Ended			Year Ended
	December 31, 2017			December 31, 2016
REVENUES
Net rental revenue	$	1,486,997		$	310,220
Rental expense		(1,212,161	)		(1,103,824	)
Gross Profit		274,836			(793,604	)
Operating expenses:
General and administrative expenses		5,704,621			5,003,357
Selling expense		95,606			8,254
Depreciation expense		456,918			9,447
Loss from Operations		(5,982,309	)		(5,814,662	)
Other Income (Expense)
Licensing revenue		54,000			54,000
Other income (expense)		85,084			1,786
Interest expense		(2,542,264	)		(298,673	)
Interest expense related parties		(33,947	)		9,497	)
Impairment loss		(82,478	)		(1,004,998	)
Extinguishment of debt		(4,180,253	)		-
Change in derivative liabilities		(1,817,277	)		5,359
Change in value of warrants		(150,517	)		-
Total Other Income (Loss)		(8,667,652	)		(1,252,023	)
Provision for taxes		-			-
NET LOSS	$	(14,649,961	)	$	(7,066,685	)
Loss per share - basic and diluted	$	(0.23	)	$	(0.17	)
Weighted average common shares outstanding - basic and diluted		62,746,740			42,436,405

See accompanying notes are integral to these consolidated financial statements

F-4

Diego Pellicer Worldwide, Inc.

Consolidated Statements of Stockholders’ Deficit

For the Years Ended December 31, 2016 and 2017

					Additional
	Common Stock				Paid-in		Stock		Accumulated
	Issued		Par Value		Capital		Payable		Deficit			Total
Balance, January 1, 2016		37,805,416	$	38	$	20,111,077		-	$	(21,047,440	)	$	(936,325	)
Sale of common stock		5,327,051		5		845,486				-			845,491
Issuance of common shares for consulting services		2,228,297		2		1,259,943				-			1,259,945
Non-employee stock compensation		3,466,040		4		2,063,308				-			2,063,312
Common stock issued upon conversion of notes payable		255,074		-		76,522				-			76,522
Fair value of warrants and options granted for services		-		-		145,362				-			145,362
Beneficial conversion feature		-		-		6,667				-			6,667
Net loss		-		-		-		-		(7,066,685	)		(7,066,685	)
Balance, December 31, 2016		49,081,878		49		24,508,365		-		(28,114,125	)		(3,605,711	)
Sale of common stock		1,995,000		2		48,274		8,675		-			56,951
Issuance of common shares for services		160,000		0		5,521		-		-			5,521
Issuance of common shares for services - related parties		3,430,504		4		740,759		1,960,643					2,701,406
Shares issued for finance cost		3,609,990		4		256,323		-		-			256,327
Common stock issued upon conversion of notes payable		83,049,602		83		7,293,164		33,400		-			7,326,647
Fair value of warrants and options granted for services		-		-		1,277,088		-		-			1,277,088
Shares Issued to settle accrued compensation - related parties		1,000,000		1		245,599		394,500		-			640,100
Shares Issued to settle accounts payable		250,000		0		47,245				-			47,245
Net loss		-		-		-		-		(14,649,961	)		(14,649,961	)
Balance, December 31, 2017		142,576,974	$	143	$	34,422,338	$	2,397,218	$	(42,764,086	)	$	(5,944,387	)

See accompanying notes are integral to these consolidated financial statements

F-5

Diego Pellicer Worldwide, Inc.

Consolidated Statements of Cash Flows

	Year Ended			Year Ended
	December 31, 2017			December 31, 2016
Cash flows from operating activities:
Net loss	$	(14,649,961	)	$	(7,066,685	)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation		456,918			9,447
Impairment on investment		43,333			1,004,998
Impairment on leasehold improvement		39,145			-
Change in fair value of derivative liability		1,817,277			(5,359	)
Change in value of warrants		150,517			-
Amortization of discount		770,301			105,169
Shares issued for finance fees		256,327			-
Extinguishment and conversion of debt		5,729,836			-
Stock based compensation – related parties		3,978,493			3,468,619
Stock based compensation		5,521			-
Changes in operating assets and liabilities:
Accounts receivable		(170,677	)		1,110
Inventory		14,080			33,946
Prepaid expenses		461,144			186,765
Other assets		-			3,000
Accounts payable		(150,294	)		1,472,125
Accrued liability - related parties		579,870			305,152
Accrued expenses		(992,842	)		(6,250	)
Deferred rent		143,921			(12,277	)
Derivative liability		488,726
Warrant liability		41,833
Deferred revenue		(54,000	)		(54,000	)
Cash used in operating activities		(1,040,532	)		(554,240	)
Cash flows from investing activities:
Purchase of property and equipment		(125,000	)		(860,469	)
Cash used in investing activities		(125,000	)		(860,469	)
Cash flows from financing activities:
Proceeds from note payable		-			464,050
Debt costs		(58,500	)		-
Proceeds from convertible notes payable		1,403,500			120,500
Repayments of notes payable		(129,050	)		-
Proceeds from sale of common stock		56,951			845,491
Cash provided by financing activities		1,272,901			1,430,041
Net increase (decrease) in cash		107,369			15,332
Cash, beginning of period		51,333			36,001
Cash, end of period	$	158,702		$	51,333
Cash paid for interest	$	-		$	-
Cash paid for taxes	$	-		$	-
Supplemental schedule of noncash financial activities:
Stock issued for accrued liability - related parties	$	245,600		$	-
Stock issued for accounts payable	$	47,245		$	-
Convertible notes and accrued interest converted to stock	$	2,936,387		$	-
Value of common stock to be issued for conversion of notes and accrued interest	$	7,586,647		$	-
Value of derivative liability extinguished upon conversion of notes and accrued interest	$	6,066,511		$	-

See accompanying notes are integral to these consolidated financial statements

F-6

Diego Pellicer Worldwide, Inc.

December 31, 2017 and 2016

Notes to the Consolidated Financial Statements

Note 1 – Organization and Operations

History

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

Prior to the Merger, 62,700,000 shares of Type 1 Media, Inc. were issued and outstanding. The principal owners of the Company agreed to transfer their 55,000,000 issued and outstanding shares to a third party in consideration for $169,000 and cancellation of their 55,000,000 shares. The remaining issued and outstanding shares are still available for trading in the marketplace. At the time of the Merger, Type 1 Media, Inc. had no assets or liabilities. Accordingly, the business conducted by Type 1 prior to the Merger is not being operated by the combined entity post-Merger.

At the closing of the Merger, Diego common stock issued and outstanding immediately prior to the closing of the Merger was exchanged for the right to receive 1 share of the surviving legal entity. An aggregate of 21,632,252 common shares of the surviving entity were issued to the holders of Diego in exchange for their common shares, representing approximately 74% of the combined entity.

The Merger has been accounted for as a reverse merger and recapitalization in which Diego is treated as the accounting acquirer and Diego Pellicer Worldwide, Inc. (f/k/a Type 1 Media, Inc.) is the surviving legal entity.

Business Operations

The Company leases real estate to licensed marijuana operators providing complete turnkey growing space, processing space, recreational and medical retail sales space and related facilities to licensed marijuana growers, processors, dispensary and recreational store operators. Additionally, the Company plans to explore ancillary opportunities in the regulated marijuana industry as well as offering for wholesale distribution branded non-marijuana clothing and accessories.

Until Federal law allows, the Company will not grow, harvest, process, distribute or sell marijuana or any other substances that violate the laws of the United States of America or any other country.

Note 2 – Significant and Critical Accounting Policies and Practices

The management of the Company is responsible for the selection and use of appropriate accounting policies and the appropriateness of accounting policies and their application. Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective, or complex judgments, often because of the need to make estimates about the effects of matters that are inherently uncertain. The Company’s significant and critical accounting policies and practices are disclosed below as required by generally accepted accounting principles.

Principles of Consolidation

The financial statements include the accounts of Diego Pellicer Worldwide, Inc., and its wholly-owned subsidiary Diego Pellicer World-wide 1, Inc. Intercompany balances and transactions have been eliminated in consolidation.

Reclassifications

Certain prior year amounts were reclassified to conform to the manner of presentation in the current period. These reclassifications had no effect on the Company’s balance sheet, net loss or stockholders’ equity.

Use of Estimates

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. These estimates and assumptions include valuing equity securities and derivative financial instruments issued in financing transactions and share based payment arrangements, determining the fair value of the warrants received for a licensing agreement, the collectability of accounts receivable and deferred taxes and related valuation allowances.

F-7

Certain estimates, including evaluating the collectability of accounts receivable, could be affected by external conditions, including those unique to our industry, and general economic conditions. It is possible that these external factors could influence our estimates that could cause actual results to differ from our estimates. The Company intends to re-evaluate all its accounting estimates at least quarterly based on these conditions and record adjustments when necessary.

Fair Value Measurements

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the condensed consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

Fair Value of Financial Instruments

As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2017 and 2016. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, prepaid expenses and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.

Cash

The Company maintains cash balances at various financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation, and the National Credit Union Share Insurance Fund, up to $250,000. The Company’s accounts at these institutions may, at times, exceed the federal insured limits. The Company has not experienced any losses in such accounts.

Property and Equipment, and Depreciation Policy

Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the useful lives of the assets. Leasehold improvements are amortized over the term of the lease. Expenditures for additions and improvements are capitalized; repairs and maintenance are expensed as incurred.

The Company intends to take depreciation or amortization on a straight-line basis for all properties, beginning when they are put into service, using the following life expectancies:

Equipment – 5 years

Leasehold Improvements – 10 years, or the term of the lease, whichever is shorter.

Buildings – 20 years

Inventory

The Company’s inventory is stated at the lower of cost or estimated realizable value, with cost primarily determined on a cost basis on the first-in, first-out (“FIFO”) method. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Inventory consists solely of finished goods.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are presented at their face amount, less an allowance for doubtful accounts. Accounts receivable consist of revenue earned and currently due from sub lessees. We evaluate the collectability of accounts receivable based on a combination of factors. We recognize reserves for bad debts based on estimates developed using standard quantitative measures that incorporate historical write-offs and current economic conditions. As of December 31, 2017 and 2016, allowance for doubtful accounts is $9,908.

The policy for determining past due status is based on the contractual payment terms of each customer. Once collection efforts by the Company and its collection agency are exhausted, the determination for charging off uncollectible receivables is made.

F-8

Revenue recognition

The Company recognizes revenue from rent, tenant reimbursements, and other revenue sources once all the following criteria are met in accordance with SEC Staff Accounting Bulletin 104, Revenue Recognition: (a) the agreement has been fully executed and delivered; (b) services have been rendered; (c) the amount is fixed or determinable; and (d) the collectability of the amount is reasonably assured. Thus, during the initial term of the lease, management has a policy of partial rent forbearance when the tenant first opens the facility to assure that the tenant has the opportunity for success.

When the collectability is reasonably assured, in accordance with ASC Topic 840 “Leases” as amended and interpreted, minimum annual rental revenue is recognized for rental revenues on a straight-line basis over the term of the related lease.

When management concludes that the Company is the owner of tenant improvements, management records the cost to construct the tenant improvements as a capital asset. In addition, management records the cost of certain tenant improvements paid for or reimbursed by tenants as capital assets when management concludes that the Company is the owner of such tenant improvements. For these tenant improvements, management records the amount funded or reimbursed by tenants as deferred revenue, which is amortized as additional rental income over the term of the related lease. When management concludes that the tenant is the owner of tenant improvements for accounting purposes, management records the Company’s contribution towards those improvements as a lease incentive, which is amortized as a reduction to rental revenue on a straight-line basis over the term of the lease.

In January 2014, the Company entered into an agreement to license certain intellectual property to an unrelated company. In consideration, the Company received warrants to purchase shares of the licensee’s common stock, the value of the warrants was recorded as an investment and the deferred revenue is being amortized over the ten year term of the licensing agreement.

The Company records rents due from the tenants on a current basis. However, as part of a line of credit agreement, the Company has deferred collection of such rents until the tenants receive the proper governmental licenses to begin operation. For 2016, management had decided to reserve these deferred amounts due to the contingency factor and experience with typical delays in governmental action.

Leases as Lessor

The Company currently leases properties to licensed cannabis operators for locations that meet the regulatory criteria applicable by the respective regulatory jurisdiction for the sale, production, and development of cannabis products. The Company evaluates the lease to determine its appropriate classification as an operating or capital lease for financial reporting purposes. The Company leases are currently all classified as operating leases.

Minimum base rent is recorded on a straight-line basis over the lease term after an initial period during which the tenant is establishing the business and during which the Company may forbear some or all of the rent. The Company is more likely than not to forbear some or all of the rental income which it considers uncollectable during the tenant’s initial ramp-up period (see Revenue Recognition above). The tenant is still liable for the full rent, although the collectability may be unlikely and the Company may not expect to collect it.

Leases as Lessee

The Company recognizes rent expense on a straight-line basis over the non-cancelable lease term and certain option renewal periods where failure to exercise such options would result in an economic penalty in such amount that renewal appears, at the inception of the lease, to be reasonably assured. Deferred rent is presented on current liabilities section on the consolidated balance sheets.

Income Taxes

Income taxes are provided for using the liability method of accounting in accordance with the Income Taxes Topic of the FASB ASC. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized and when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The computation of limitations relating to the amount of such tax assets, and the determination of appropriate valuation allowances relating to the realizing of such assets, are inherently complex and require the exercise of judgment. As additional information becomes available, the Company continually assesses the carrying value of their net deferred tax assets.

Common Stock Purchase Warrants and Other Derivative Financial Instruments

The Company classifies as equity any contracts that require physical settlement or net-share settlement or provide us a choice of net cash settlement or settlement in our own shares (physical settlement or net-share settlement) provided that such contracts are indexed to our own stock as defined in ASC Topic 815-40 “Contracts in Entity’s Own Equity.” The Company classifies as assets or liabilities any contracts that require net-cash settlement including a requirement to net cash settle the contract if an event occurs and if that event is outside our control or give the counterparty a choice of net-cash settlement or settlement in shares. The Company assesses classification of its common stock purchase warrants and other free-standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required.

F-9

Stock-Based Compensation

The Company recognizes compensation expense for stock-based compensation in accordance with ASC Topic 718. The Company calculates the fair value of the award on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock for unrestricted shares; the expense is recognized over the service period for awards expected to vest. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised. The Company considers many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience.

Loss per common share

The Company utilizes ASC 260, “Earnings Per Share” for calculating the basic and diluted loss per share. In accordance with ASC 260, the basic and diluted loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted net loss per share is computed similar to basic loss per share except that the denominator is adjusted for the potential dilution that could occur if stock options, warrants, and other convertible securities were exercised or converted into common stock. Potentially dilutive securities are not included in the calculation of the diluted loss per share if their effect would be anti-dilutive. The Company has 142,576,974 and 5,417,837 common stock equivalents at December 31, 2017 and 2016, respectively. For the years ended December 31, 2017 and 2016 these potential shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would reduce net loss per share.

Legal and regulatory environment

The cannabis industry is subject to numerous laws and regulations of federal, state and local governments. These laws and regulations include, but are not limited to, matters such as licensure, accreditation, and different taxation between federal and state. Federal government activity may increase in the future with respect to companies involved in the cannabis industry concerning possible violations of federal statutes and regulations.

Management believes that the Company is in compliance with local, state and federal regulations, While no regulatory inquiries have been made, compliance with such laws and regulations can be subject to future government review and interpretation, as well as regulatory actions unknown or unasserted at this time.

New accounting pronouncements

Recent Accounting Pronouncements. The Financial Accounting Standards Board (“FASB”) issued Accounting Standards

On December 22, 2017 the SEC staff issued Staff Accounting Bulletin 118 (SAB 118), which provides guidance on accounting for the tax effects of the Tax Cuts and Jobs Act (the TCJA).  SAB 118 provides a measurement period that should not extend beyond one year from the enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the TCJA for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the TCJA is incomplete but for which they are able to determine a reasonable estimate, it must record a provisional amount in the financial statements. Provisional treatment is proper in light of anticipated additional guidance from various taxing authorities, the SEC, the FASB, and even the Joint Committee on Taxation. If a company cannot determine a provisional amount to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the TCJA. The Company has applied this guidance to its financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers for guidance to clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP and International Financial Reporting Standards. The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. Lease contracts will be excluded from this revenue recognition criteria. For other transactions the standard requires that an entity recognizes 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. The Company revenues are principally from leasing. Therefore, this ASU has minimal applicability to the Company.

In February 2016, the Financial Accounting Standards Board (FASB) issued guidance that requires a lessee to recognize assets and liabilities arising from leases on the balance sheet. Previous GAAP did not require lease assets and liabilities to be recognized for most leases. Additionally, companies are permitted to make an accounting policy election not to recognize lease assets and liabilities for leases with a term of 12 months or less. For both finance leases and operating leases, the lease liability should be initially measured at the present value of the remaining contractual lease payments. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee will not significantly change under this new guidance. This new guidance is effective for the company as of the first quarter of fiscal year 2020. The Company is evaluating the effect that this ASU will have on its financial statements and related disclosures.

In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 clarifies the presentation and classification of certain cash receipts and cash payments in the statement of cash flows. This ASU is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. The Company is currently assessing the potential impact of ASU 2016-15 on its financial statements and related disclosures.

In April 2016 the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606). The core principle of Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services This ASU is effective for public business entities for fiscal years, and interim periods within those years, beginning after January 1. 2018. The Company is currently assessing the potential impact of ASU 2016-10 on its financial statements and related disclosures.

The Company believes that other recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future either will not have an impact on its accounting or reporting or that such impact will not be material to its financial position, results of operations and cash flows when implemented.

Note 3 – Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred losses since inception, its current liabilities exceed its current assets by $6,411,515, and has an accumulated deficit of $42,764,086 at December 31, 2017. These factors, among others raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company believes that it has sufficient cash on hand and cash generated by real estate leases to sustain operations provided that management and board members continue to agree to be paid company stock in exchange for accrued compensation. Through December 31, 2017, management and board members have accepted stock for accrued compensation at the same discount that has been extended to the convertible noteholders of fifty percent. There are other future noncash charges in connection with financing such as a change in derivative liability that will affect income but have no effect on cash flow.

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

F-10

Note 4 – Investment

In January 2014, the Company entered into an agreement with Plandai Biotechnology, Inc. (a publicly traded company) to license to them certain intellectual property rights in exchange for warrants to purchase 1,666,667 shares of Plandai Biotechnology, Inc. common stock. This licensing agreement carries a 10-year term with an exercise price of $0.01 per share. The Company was to obtain certain trademark rights certified by the government. The warrant has a restriction on them requiring that the sale of such shares must reach a certain traded price of $0.50 per share. In 2014, the Company used a third-party appraisal firm to ascertain the fair value of warrants held by the Company, which was determined to be $525,567 at the date of issuance. During the years ended December 31, 2017 and 2016, the Company recorded impairment losses of $43,333 and $73,334, respectively.

Note 5 – Property and Equipment

As of December 31, 2017 and 2016, fixed assets and the estimated lives used in the computation of depreciation are as follows:

	Estimated
	Useful Lives	December 31, 2017			December 31, 2016
Machinery and equipment	5 years	$	-		$	39,145
Leasehold improvements	10 years		853,413			728,413
			853,413			767,558
Less: Accumulated depreciation and amortization			(444,285	)		(9,446	)
Property and equipment, net		$	409,128		$	758,112

During the year ended December 31, 2016, the Company recorded an impairment loss of $1,066,664 for leasehold improvements to adjust the carrying value to the estimated fair value. The fair value was estimated at 30% discounted cash flow from sublease revenues net of lease. During 2017, the Company abandoned equipment with a cost basis of $39,145. This loss is included in the impairment loss for the year ended December 31, 2017.

Note 6 – Other Assets

Security deposits: Security deposits reflect the deposits on various property leases, most of which require for two months’ rental expense in the form of a deposit. These have remained unchanged at $170,000 for December 31, 2017 and 2016.

Deposits – end of lease: These deposits represent an additional two months of rent on various property leases that apply to the “end-of- lease” period. These have remained unchanged at $150,000 for December 31, 2017 and 2016.

Note 7 – Related Party

As of December 31, 2017 and 2016, the Company has accrued fees to related parties in the amount of $449,064 and $509,294, respectively. For the years ended December 31, 2017 and 2016, total cash based compensation was $693,093 and $2,424,100, respectively to related parties. For the years ended December 31, 2017 and 2016, total share-based compensation was $3,984,014 and $105,233, respectively to related parties. These amounts are included in general and administrative expenses in the accompanying financial statements.

On April 14, 2016, the Company issued 1,900,000 shares of common stock to Phoenix Consulting Enterprises valued at $1,577,000, a company owned by Mr. Throgmartin, for services.

On August 12, 2016, the Company entered into an agreement for the balance of accrued compensation payable to Alan Valdes in the amount of $332,709 as of June 1, 2016, to be converted (a) 50% of the accrued amount ($166,355) will be converted into restricted common stock at the price of $0.30 per share (554,517 shares), and; (b) 50% of the accrued amount ($166,355) will be converted into Company promissory notes, accruing interest at the rate of eight (8%) percent, per annum, and payable upon the earlier date of (i) the second anniversary date of the promissory notes, (ii) the date all of the current investor notes, in the outstanding aggregate principal and accrued interest amount of approximately $1,480,000, at June 30, 2016, have been paid in full and the Company has achieved gross revenues of at least $3,000,000 over any consecutive 12-month period.

F-11

On August 12, 2016, the Company entered into an agreement for the balance of accrued compensation payable to Mr. Throgmartin in amount of $281,914 as of June 1, 2016 to be converted (a) 50% of the accrued amount ($140,957) will be converted into restricted common stock at the price of $0.30 per share (396,190 shares), and; (b) 50% of the accrued amount ($140,957) will be converted into Company promissory notes, accruing interest at the rate of eight (8%) percent, per annum, and payable upon the earlier date of (i) the second anniversary date of the promissory notes, (ii) the date all of the current investor notes, in the outstanding aggregate principal and accrued interest amount of approximately $1,480,000, at June 30, 2016, have been paid in full and the Company has achieved gross revenues of at least $3,000,000 over any consecutive 12-month period.

The balance of the above two notes, aggregating $307,312 at December 31, 2017 and 2016, is reported as related party notes payable on the balance sheet.

Note 8 – Notes Payable

On April 11, 2017, the Company issued two convertible notes aggregating $2,123,676 (see Note 9). These were issued to refinance the following notes:

On May 20, 2015, the Company issued a note in total amount of $450,000 with third parties for use as operating capital. As of December 31, 2016, the outstanding principle balance of the note was $450,000.

On July 8, 2015, the Company issued a note in total amount of $135,628 with third parties for use as operating capital. As of December 31, 2016, the outstanding principle balance of the note was $135,628.

On February 8, 2016, the Company issued notes in total amount of $470,000 with third parties, bearing interest at 12% per annum with a maturity date of February 7, 2017. As of December 31, 2016, the outstanding principle balance of the note was $470,000.

In accordance with in accordance with FASB Codification- Liabilities, 470-50-40-10, these liabilities were considered extinguished and a loss on extinguishment of debt was recorded in the amount of $5,607,836.

On August 31, 2015, the Company issued a note in total amount of $126,000 with third parties for use as operating capital. The note was amended to include accrued interest on October 31, 2016 and extended the maturity date to October 31, 2018. As of December 31, 2017 and 2016, the outstanding principal balance of the note was $133,403 and $126,000, respectively.

On November 27, 2015, the Company entered into notes in total amount of $135,000 with third parties for purchasing a fixed asset. The notes payable agreements require the Company to repay the principal, together with $15,000 interest by the maturity date of January 26, 2016. During the year ended December 31, 2016, the Company paid $15,000 towards accrued interest and $5,950 towards principal. As of December 31, 2016, the outstanding principle balance of the note is $129,050. This note was extinguished during 2017 by applying the balance against rental income.

Note 9 – Convertible Notes Payable

In addition to the two notes issued on April 11, 2017 referred to in Note 8, the Company issued several convertible notes during the year ended December 31, 2017. The note holders shall have the right to convert principal and accrued interest outstanding into shares of common stock at a discounted price to the market price of our common stock. The conversion feature was recognized as an embedded derivative and was valued using a Black Scholes model that resulted in a derivative liability of $4,106,521 at December 31, 2017. In connection with the issuance of certain of these notes, the Company also issued warrants to purchase its common stock. The Company allocated the proceeds of the notes and warrants based on the relative fair value at inception.

Several convertible note holders elected to convert their notes to stock during the year ended December 31, 2017. The table below provides a reconciliation of the beginning and ending balances for the liabilities measured using fair significant unobservable inputs (Level 3) for the year ended December 31, 2017:

	Convertible notes			Discount			Convertible Note Net of Discount			Derivative Liabilities
Balance, December 31, 2016		370,500			36,344			334,156			338,282
Issuance of convertible notes		3,587,342			1,403,500			2,183,842			8,017,473
Conversion of convertible notes		(2,986,387	)		(166,204	)		(2,820,183	)		(6,066,511	)
Change in fair value of derivatives		—			—			—			1,817,277
Amortization		—			(770,301	)		770,301			—
Balance December 31, 2017	$	971,455		$	503,339		$	468,116		$	4,106,521

During the year ended December 31, 2017, $2,986,387 of notes and $139,263 of accrued interest was converted into 83,916,269 shares of common stock. A gain on extinguishment of debt of $1,427,583 has been recorded related to these conversions.

F-12

The following assumptions were used in calculations of the Black Scholes model for the periods ended December 31, 2017 and 2016.

	December 31, 2017			December 31, 2016
Risk-free interest rates		1.28-1.76	%		0.29-1.2	%
Expected life		0.02-1.23 year			0.25-1 year
Expected dividends		0	%		0	%
Expected volatility		211-354	%		142-356
Diego Pellicer Worldwide, Inc. Common Stock fair value	$	0.08		$	0.20 -0.77

Note 10 – Stockholders’ Equity (Deficit)

2017 Transactions:

During 2017, 1,710,000 common shares valued at $256,327 were issued as payment of finance cost related to convertible notes.

During 2017, 1,899,990 common shares were issued as security for the payment of convertible notes. The shares, valued at $257,259 are held in escrow, are refundable and are recorded in a contra equity account.

During 2017, we sold 2,331,071 shares of common stock and received proceeds of $56,951. Of these shares, 336,071 valued at $8,675, were not issued as of December 31, 2017.

During 2017, 3,430,504 shares of common stock, valued at $740,762 were issued as share-based compensation to related parties. Additionally, 24,973,389 shares, valued at $1,960,643, were authorized to be issued for related party services, but were not issued as of December 31, 2017.

During 2017, 160,000 shares of common stock, valued at $5,521, were issued for service.

During 2017 the Company recorded total option expense of $1,277,088.

During 2017, 1,000,000 shares of common stock, valued at $245,600, were issued for a related party debt settlement. 21,025,254 shares valued at 394,500, were authorized but not issued.

During 2017, 250,000 shares of common stock, valued at $47,245, were issued to settle accounts payable to a consultant.

During 2017, owners of convertible notes have converted $2,986,387 of notes and $139,263 of accrued interest into 83,916,269 shares of common stock valued at $7,553,246. Additionally, 567,433 shares, valued at $33,401, for the conversion of notes, were authorized but not issued as of December 31, 2017. 866,667 shares, valued at $260,000 were cancelled due to reclassify the fund received to a note payable.

As a condition of their employment, the Board of Directors approved employment agreements with three key executives. This agreement provided that additional shares will be granted each year at February 1 over the term of the agreement should their shares as a percentage of the total shares outstanding fall below prescribed ownership percentages. The CEO received an annual grant of additional shares each year to maintain his ownership percentage at 10% of the outstanding stock. The other two executives receive a similar grant to maintain each executive’s ownership percentage at 7.5% of the outstanding stock. At December 31, 2017 there is $1,779,943 accrued for the annual grant at February 1, 2018, representing 23,421,306 shares.

F-13

2016 Transactions:

During 2016, the Company issued to officers and employees 3,466,040 shares of common stock, valued at $2,063,309 for services.

During 2016, the Company issued 2,228,297 shares of common stock, valued at $1,259,944, to various third parties for services.

During 2016, the Company sold 5,393,718 shares of common stock for cash proceeds of $865,491.

Common stock warrant activity:

The following represents a summary of all common stock warrant activity:

	Number of Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term
Balance outstanding, January 1, 2016		1,901,426		1.21
Granted		125,887		-
Balance outstanding, December 31, 2016		2,027,313	$	1.18
Granted		3,250,000		0.26		6.07
Balance outstanding, December 31, 2017		5,277,313	$	0.61		4.74
Exercisable, December 31, 2017		5,277,313	$	0.61		4.83

The Company has determined that certain of its warrants are subject to derivative accounting. The table below provides a reconciliation of the beginning and ending balances for the warrant liabilities measured using fair significant unobservable inputs (Level 3) for the year ended December 31, 2017:

Balance at January 1, 2016	$	-
Issuance of warrants		342,867
Change in fair value during period		(150,517	)
Balance at December 31, 2017	$	192,350

The following assumptions were used in calculations of the Black Scholes model for the periods ended December 31, 2017 and 2016:

	For the Year Ended December 31, 2017			For the Year Ended December 31, 2016
Annual dividend yield		0	%		0	%
Expected life (years)		3-10			5
Risk-free interest rate		1.50 - 2.40	%		0.90	%
Expected volatility		177 - 284	%		266	%

Common stock option activity:

The Company maintains an Equity Incentive Plan pursuant to which 2,480,000 shares of Common Stock are reserved for issuance thereunder. This Plan was established to award certain founding members, who were instrumental in the development of the Company, as well as key employees, directors and consultants, and to promote the success of the Company’s business. The terms allow for each option to vest immediately, with a term no greater than 10 years from the date of grant, at an exercise price equal to par value at date of the grant. As of December 31, 2017, 1,775,000 shares had been granted, with 200,000 of those shares granted with warrants attached. There remain 705,000 shares available for future grants.

F-14

The following represents a summary of all common stock option activity:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term
Balance outstanding, January 1, 2016		-		-
Granted		1,000,000		0.30
Balance outstanding, December 31, 2016		1,000,000	$	0.30
Granted		4,899,180		0.25
Balance outstanding, December 31, 2017		5,899,180	$	0.26		8.15
Exercisable, December 31, 2017		2,849,590	$	0.26		8.31

During the years ended December 31, 2017 and 2016, the Company incurred total option expense of $1,277,088 and $145,362, respectively. Unamortized stock option expense at December 31, 2017 is $597,006, which will be charged to expense in 2018.

Note 11 – COMMITMENTS AND CONTINGENCIES

Leasing Activity

The Company’s business is to lease property in appropriate and desirable locations, and to make available such property for sub-lease to specifically assigned businesses that grow, process, and sell certain products to the public. Currently the Company has four separate properties under lease in the states of Colorado and Washington.

As Lessor

In Colorado, there are three properties leased in 2017 and 2016. Properties were leased for a three to five year period with an option for an additional five years, and carry terms requiring triple net payments. Each of the properties have fixed monthly rentals with periodic increases in the monthly rental rate. In Washington, there is one property which was leased in 2014. The property was leased for a five (5) year period with an option for an additional five (5) years, and carry terms requiring triple net (NNN) conditions. The property has an escalating annual rental. As of December 31, 2017, the aggregate remaining minimal annual lease payments under these operating leases were as follows:

2018	$	1,131,078
2019		746,039
2020		594,444
2021		431,227
2022		240,000
2023		240,000
2024		240,000
2025		40,000
Total	$	3,662,788

Rent expense for the Company’s operating leases for the years ended December 31, 2017 and 2016 was $1,212,161 and $1,103,824, respectively.

As Lessee

Employment Agreements

As a condition of their employment, the Board of Directors approved employment agreements with three key executives. This agreement provided that additional shares will be granted each year over the term of the agreement should their shares as a percentage of the total shares outstanding fall below prescribed ownership percentages. The CEO received an annual grant of additional shares each year to maintain his ownership percentage at 10% of the outstanding stock. The other two executives receive a similar grant each to maintain his ownership percentage at 7.5% of the outstanding stock.

F-15

Note 12 – Deferred Tax Assets and Income Tax Provision

The reconciliation of income tax benefit at the U.S. statutory rate of 34% for the year ended December 31, 2017 and for the year ended December 31, 2016 respectively to the Company’s effective tax rate is as follows:

	Year Ended			Year Ended
	December 31, 2017			December 31, 2016
Statutory federal income tax rate		(34	)%		(34	)%
State income tax, net of federal benefits		(3	)%		(6	)%
Non-deductible expense		7	%		-
Other		15	%		-
Tax rate change and true-up		11	%		-
Change in valuation allowance		4	%		40	%
Income tax provision (benefit)		-	%		-	%

The benefit for income tax is summarized as follows:

	Year Ended December 31, 2017			Year Ended December 31, 2016
Federal
Current	$	—		$	—
Deferred		1,212,219			(2,353,000	)
State
Current		-			—
Deferred		106,961			(415,000	)
Change in valuation allowance		(1,319180	)		2,769,000
Income tax provision (benefit)	$	-		$	-

Deferred tax assets (liabilities) consist of the following

	Year Ended			Year Ended
	December 31,  2017			December 31, 2016
Net operating loss carry forwards	$	(13,784,280	)	$	(11,188,000	)
Warrants issued for services		1,480,740			288,000
Impairment of investment		476,760			620,000
Depreciation		38,280			-
Interest expense on convertible notes		1,162,320			413,000
Change in fair value of derivative liability		-			(52,000	)
Loss on sales of assets		-			145,069
Total gross deferred tax asset/liabilities		(10,626,180	)		(10,064,069	)
Valuation allowance		10,626,180			10,064,069
Net deferred taxes	$	-		$	-

As of December 31, 2017, the Company had accumulated Federal net operating loss carryovers (“NOLs”) of $26,938,000. These NOLs begin to expire in 2033, and the utilization of NOLs may be subject to limitation under the Internal Revenue Code Section 382 should there be a greater than 50% ownership change as determined under the regulations.

The Tax Cuts and Jobs Act (the "Act") was enacted on December 22, 2017. Among other things, the Act reduces the U.S. federal corporate tax rate from 34 percent to 21 percent, eliminates the alternative minimum tax (“AMT”) for corporations, and creates a one-time deemed repatriation of profits earned outside of the U.S. The tax rate reduction also resulted in a write-down of the net deferred tax asset of approximately $5 million. The write-down of the net deferred tax asset related to the rate reduction resulted in a corresponding write-down of the valuation allowance of approximately $4 million. The Company fully reserves its deferred tax assets as such there was no impact.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, management has established a full valuation allowance against the entire deferred tax asset relating to NOLs for every period because it is more likely than not that all of the deferred tax asset will not be realized.

The Company files U.S. Federal and various State tax returns that are subject to audit by tax authorities beginning with the year ended December 31, 2014. The Company’s policy is to classify assessments, if any, for tax and related interest and penalties as tax expense.

Note 13 – Subsequent Events

Subsequent to the year ended December 31, 2017 through March 23, 2018, the Company issued 87,073,287 shares of common stock for the conversion of debt and the payment of liabilities.

Subsequent to the year ended December 31, 2016 and on April 11, 2017, the Company agreed with one of its lenders to amend the terms of several of its loans. See Note 10, Notes Payable.

F-16

Item 9. Changes in and Disagreement with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

We carried out an evaluation required by Rule 13a-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” and “internal control over financial reporting” as of the end of the period covered by this Annual Report.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act that are designed to ensure that information required to be disclosed in our reports filed or submitted to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that information is accumulated and communicated to management, including the principal executive and financial officer as appropriate, to allow timely decisions regarding required disclosures. Our principal executive officer and principal financial officer evaluated the effectiveness of disclosure controls and procedures as of the end of the period covered by this Annual Report (the “Evaluation Date”), pursuant to Rule 13a- 15(b) under the Exchange Act. Based on that evaluation, our principal executive officer and principal financial officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure, due to material weaknesses in our control environment and financial reporting process.

Limitations on the Effectiveness of Controls

Our management, including our principal executive officer and principal financial officer, does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision- making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework Company to confirm what framework was used in connection with its evaluation of internal controls over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (b) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the Company are being made only in accordance with authorizations of the our management and directors; and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Based on our evaluation under the framework described above, our management concluded that we had “material weaknesses” (as such term is defined below) in our control environment and financial reporting process consisting of the following as of the Evaluation Date:

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1)	lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our Board of Directors, resulting in ineffective oversight in the establishment and monitoring of required internal control and procedures;
2)	inadequate segregation of duties consistent with control objectives;
3)	ineffective controls over period end financial disclosure and reporting processes; and
4)	lack of accounting personnel with adequate experience and training.

A “material weakness” is defined under SEC rules as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls.

As of the date of this Annual Report, the Company does not intend to remedy the foregoing and therefore such material weaknesses in our control environment and financial reporting process will continue. A system of controls, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Attestation report of the registered public accounting firm

This Annual Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report on internal control in this Annual Report.

Changes in Internal Controls

There were no changes in our internal control over financial reporting during the fiscal year ended December 31, 2017 that have affected, or are reasonably likely to affect, our internal control over financial reporting.

Item 9B. Other Information

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

The following table sets forth the names and ages of all of our directors, executive officers and key employees; and all positions and offices held as of the date of this Report. The directors will hold such office until the next annual meeting of shareholders and until his or her successor has been elected and qualified.

Name	Age	Position
Ron Throgmartin	54	Chief Executive Officer, Director
Christopher Strachan	54	Chief Financial Officer
Alan Valdes	58	Chairman of the Board
Nello Gonfiantini David Thompson	60 74	Director VP-Finance

Business Experience

The following summarizes the occupation and business experience during the past five years for our officers, directors and key employees as of the date of this Report:

Officers and Directors

Ron Throgmartin joined as CEO of Diego Pellicer Worldwide Inc. in August 2013. In May 2010 Mr. Throgmartin began serving as an independent consultant for a medical marijuana company in Colorado where he managed State licensing, compliance, retail operations and production. From 2003-2008 Mr. Throgmartin was involved with the largest privately owned cattle producers in the United States with operations that encompassed 11 states. In 1989, Mr. Throgmartin started his own commercial development company, where over a span of 20 years he developed over 3 million square feet of commercial projects, working with some of the top rated retailers in the country, including Lowes, Home Depot, HH Gregg, Staples, McDonalds, Steak-n-Shake. From 1981-1989 Mr. Throgmartin worked for his family business HH Gregg, where he served in many roles including Operations and new and store development. Today HH Gregg (HHG) is a publicly owned and operated appliance and electronics retailer covering 16 states, and over $2.4 billion in annual sales. Mr. Throgmartin is a graduate of Ball State University with a Bachelor of Science degree. We believe that Mr. Throgmartin should serve as a member of the board of directors due to the perspective and experience he brings as our COO and his experience in the medical marijuana industry.

Christopher Strachan joined as CFO of Diego Pellicer Worldwide Inc. in January 2016. Mr. Strachan is an accomplished CFO, CEO, and manager with 30 years in corporate operations, marketing, securities, finance and 20 years of executive management experience. He has worked largely with developing and startup corporations, where he has honed his skills. For the past five years, Mr. Strachan has served as the President of Helisports LLC, a business development consulting company. In addition, he served as the CEO of Rhodes Architectural Stone from 2011 to 2012, the Director of Marketing and Sales of Glasair Aviation from 2012 to 2014 and the Director of Flight Operations and R&D at RotorWay Helicopters from 2009 to 2011.

Alan Valdes has operated as Chairman of the Company since inception Mr. Valdes has over 35 years’ experience on Wall Street. He appears regularly on television giving market comments on such networks as CNN, CNBC, CCTV and many other domestic and foreign media outlets. Since 2013, Mr. Valdes has worked as a senior partner at SilverBear Capital Inc., where he is in charge investment and development projects in the United States and Canada. Additionally, Mr. Valdes is currently a partner at Wall Street Capital Partners, a boutique Wall Street consultant that assists clients in accomplishing what the best and largest firms do within a fraction of the cost and time. He is also a co-founder and partner of the Louisiana International Gulf Terminal project, a $1.5 billion port project, the largest in the United States. He is also currently a board member of the World Air League and the Strang Cancer Prevention Center. Mr. Valdes is a graduate on Seton Hall University, New York University and Harvard University. We believe that Mr. Valdes should serve as a member of the board of directors due to his experience working for the Company since inception and the with early stage corporations, like the Company.

Nello Gonfiantini joined Diego Pellicer Worldwide, Inc. as a consultant in 2016, on February 1, 2017 he was made Vice President of Real Estate and was elected as a director of the Company in March 2018. He has more than forty years of experience in the real estate and financial sector including president and chairman of the board of Home Federal Saving Bank of Nevada which was later purchased by American Federal Savings Bank. He also formed Specialty Mortgage Trust, Inc., a real estate investment trust. In 2015 he founded Crystal Bay Financial to assist corporate and real estate clients find solutions to complex and multifaceted financial challenges.

David Thompson has consulted with the company since July 2016 and joined Diego as the Vice President of Finance in February1, 2017. He has more than forty years of business experience founding, buying, and selling companies as well as advising companies on business and financing. He has been the founder and chief executive officer of a publicly traded technology company named a “Top 100 Growth Company” by Business Week and traded on the NASDAQ. He recently was the chief operating officer of a biologics company. He has been a court-appointed bankruptcy trustee, reorganizing distressed companies.

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Family Relationships

No family relationship has ever existed between any director, executive officer of the Company, and any person contemplated to become such.

Committees

The board of directors has no standing committees. However, the Company intends to implement a comprehensive corporate governance program, including establishing various board committees and adopting a Code of Ethics in the future.

Section 16(a) of the Securities Exchange Act of 1934

As of the date of this report, we are not subject to Section 16(a) of the Securities Exchange Act of 1934.

Item 11. Executive Compensation

The following table shows for the period ended December 31, 2017, the compensation awarded (earned) or paid by the Company to its named executive officers or acting in a similar capacity as that term is defined in Item 402(a)(2) of Regulation S-K.

Name and Principal Position	Fiscal Year		Salary ($)		Bonus		Option Awards		All Other Compensation		Total ($)
Ron Throgmartin - CEO	2017	Accrued	$	453,161		-		-		748,099		1,201,260
		Paid	$	127,560		-		-		-		125,560
	2016	Accrued	$	280,125		1,645,833		-		-		1,925,958
		Paid	$	224,458		1,577,000		-		-		1,801,458
Christopher Strachan - CFO	2017	Accrued	$	53,500		-		-		-		53,500
		Paid	$	51,933		72,079		-		-		126,112
	2016	Accrued	$	67,200		-		-		-		67,200
		Paid	$	63,110		-		-		-		63,110
David Thompson – VP Finance	2017	Accrued	$	85,500		-		612,063		847,112		1,545,675
		Paid	$	311,706								311,706

Employment and Director Agreements

Mr. Ron Throgmartin and Mr. Alan Valdes entered into agreements with the Company, for the position of Chief Executive Officer and Chairman of the Board respectively. Following the Merger, Mr. Throgmartin’s position was changed to Chief Operating Officer. The other terms of his agreement remained in place.

On October 4, 2016, Alan Valdes, the Chairman of the Board of Directors of Diego Pellicer Worldwide, Inc. (the “Company”) and Ronald Throgmartin, the Chief Executive Officer and a Director of the Company, executed Deferred Compensation Agreements pursuant to which they agreed to convert 50% of their accrued salaries into restricted Company securities at a conversion rate of $0.30, and 50 % of these accruals into Company promissory notes. The Company promissory notes accrue interest at the rate of eight (8%) percent, per annum, and are payable upon the earlier date of (i) the second anniversary date of the Promissory notes, (ii) the date all current investor notes in the aggregate principal and accrued interest amount of approximately $1,480,000, at June 30, 2016, are paid in full and the Company has achieved gross revenues of at least $3,000,000 over any 12-month period, provided further that the Company shall not make any payments against the Chairman Valdes note or the CEO Throgmartin note until the Company pays the $100,000 in accrued fees due to the independent director of the Company, Steve Norris, in full.

In June 2016 the Chairman Alan Valdes, converted 50% ($166,354) of his accrued salary of $332,708 into Company securities and the Company issued Chairman Valdes a promissory note in the outstanding principal amount of $166,355. In addition, Chairman Valdes agreed to amend his employment agreement, lowering his annual salary from $250,000 to $120,000, payable (a) $5,000 in cash, and (b) $5,000, at the executive’s election, in the form of (i) a grant of 16,667 shares of the Company’s restricted common shares (calculated at the rate of $0.30 per share), or (ii) a 5-year stock option to purchase 5,000 restricted common shares at the exercise price of $0.30 per share, or (iii) a 5-year Warrant to purchase 5,000 restricted common shares at the exercise price of $0.30 per share. Chairman Valdes also agreed to eliminate his employment agreement right to have his annual salary increase to $280,000 per year.

27

In June 2016, CEO Ron Throgmartin converted 50% ($140,958) of his accrued salary of $281,916 into Company securities and the Company issued to CEO Throgmartin a promissory note in the principal amount of $140,958. On November 29^th, 2017 Mr. Throgmartin elected to convert $200,000 of his accrued salary into 14,234,875 shares of the Company’s common stock.

On November 29^th, 2017 Chairman Mr. Valdes elected to convert $ $250,255 of his accrued salary and Note into Company securities.

Each of Chairman Valdes and CEO Throgmartin has a choice to elect to receive their Company securities from the conversion of 50% of their accrued salaries in the form of a restricted common share grant, at the conversion rate of $0.30 per share, or a stock option or common stock purchase warrant, at the exercise price of $0.30 per underlying restricted common share.

In exchange for Mr. Norris’ service on the Board and resignation on January 18, 2018, he received 50,000 warrants with an exercise price of $0.0001. In addition, Mr. Norris currently receives $5,000 per month in exchange for his services on the Board, consisting of $2,500 in cash and $2,500 in Company securities.

Option Plan

The Company established an Equity Incentive Plan to provide additional incentive to key employees, directors and consultants, and to promote the success of the Company’s business. The terms of each option shall be no more than 10 years from the date of grant at an exercise price equal to the Fair Market Value on the date of the grant.

Director Compensation

On October 4, 2016 the Board of Directors also adopted a resolution, establishing a payment plan for all members of the Company’s Board of Directors, except Chairman Valdes, fixing the monthly payment at $5,000, payable $2,500 in cash and $2,500 in the form of a restricted common share grant, at the conversion rate of $0.30 per share, or a stock option or common stock purchase warrant, at the exercise price of $0.30 per underlying restricted common share.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth certain information as of March 23, 2018, with respect to the holdings of: (1) each person known to us to be the beneficial owner of more than 5% of our Common Stock; (2) each of our directors, nominees for director and named executive officers; and (3) all directors and executive officers as a group. To the best of our knowledge, each of the persons named in the table below as beneficially owning the shares set forth therein has sole voting power and sole investment power with respect to such shares, unless otherwise indicated.

Name of Beneficial Owner and Address (1)	Amount and Nature of Beneficial Ownership of Common Stock		Percent of Common Stock (2)
Alan Valdes (4)		30,030,014		13.35	%
Ron Throgmartin (4)		25,057,512		11.14	%
Stephen Norris		7,238,333		3.22	%
Christopher Strachan		3,362,570		1.49	%
Nello Gonfiantini		2,484,190		1.10	%
David Thompson		2,947,949		1.31	%
All directors and officers as a group (6 people)				31.62	%
5% Shareholders
Fromar Investments LP (3)		47,562,144		21.14	%
Chester Aldredge		13,515,174		6.01	%

(1)	Unless otherwise noted, the address of each beneficial owner is c/o 9030 Seward Park Ave S. #501, Seattle, Washington 98118.
(2)	Based on 224,934,525 shares of Common Stock issued and outstanding as of March 23, 2018.
(3)	Fromar Investments beneficially owns 46,123,165 shares of common stock held by Fromar Investments, 1,313,979 shares of common stock held in 0851229 BC Ltd, and 125,000 shares held by Douglas Froese.
(4)	7,020,000 shares of Wall Street Capital Partners LLC are beneficially owned as follows: (a) 3,900,000 by Alan Valdes; (b) 1,160,000 Ron Throgmartin, (c) 910,000 Julie Throgmartin, the wife of Ron Throgmartin, and (d) 1,300,000 by Steve Hubbard.
*	Less than 1 percent

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Item 13. Certain Relationships and Related Transactions, and Director Independence

Except as disclosed below, none of the following persons has any direct or indirect material interest in any transaction to which we are a party since our incorporation or in any proposed transaction to which we are proposed to be a party:

(A)	Any of our directors or officers;
(B)	Any proposed nominee for election as our director;
(C)	Any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to our Common Stock; or
(D)	Any relative or spouse of any of the foregoing persons, or any relative of such spouse, who has the same house as such person or who is a director or officer of any parent or subsidiary of our company.

Director Independence

Because our common stock is not currently listed on a national securities exchange, we have used the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a) (2) provides that an “independent director” is a person other than an officer or employee of the Company or any other individual having a relationship which, in the opinion of the Company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:

● the director is, or at any time during the past three years was, an employee of the company;

● the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);

● a family member of the director is, or at any time during the past three years was, an executive officer of the company;

● the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);

● the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.

We do not have any independent directors. We do not have an audit committee, compensation committee or nominating committee. We currently do not have a code of ethics that applies to our officers, employees and director.

Item 14. Principal Accounting Fees and Services

Audit Fees

For the Company’s fiscal years ended December 31, 2017 and 2016, we were billed approximately $32,080 and $35,145 for professional services rendered for the audit and quarterly reviews of our financial statements.

Audit Related Fees

None.

Tax Fees

None.

All Other Fees

None.

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PART IV

Item 15. Exhibits and Financial Statement Schedules

EXHIBIT
NUMBER	DESCRIPTION
3.1	Articles of Incorporation (1)
3.2	By-Laws (1)
10.1	Form of Sponsor Agreement (1)
10.2	Animas Canada Sponsorship Agreement dated April 9, 2012 (2)
31.1	Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF XBRL	Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

(1)	Incorporated by reference to the Company’s Registration Statement on Form S-1 filed on July 1, 2013.
(2)	Incorporated by reference to the Company’s Registration Statement on Form S-1 filed on August 12, 2013.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	DIEGO PELLICER WORLDWIDE, INC.
Date: April 17, 2018	By:	/s/ Ron Throgmartin
		Ron Throgmartin
		Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Ron Throgmartin	Chief Executive Officer	April 17, 2018
Ron Throgmartin
/s/ Christopher Strachan	Chief Financial Officer	April 17, 2018
Christopher Strachan

31