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EXCEL - IDEA: XBRL DOCUMENT - GENERAL CANNABIS CORPFinancial_Report.xls
EX-23.2 - GENERAL CANNABIS CORPcann_ex232.htm
EX-23.1 - CONSENT OF ATTORNEYS - GENERAL CANNABIS CORPcann_ex231.htm
EX-5 - OPINION OF HART & HART, LLC - GENERAL CANNABIS CORPcann_ex5.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-1
AMENDMENT NO. 1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
 
ADVANCED CANNABIS SOLUTIONS, INC
(Exact name of registrant as specified in its charter)
 
Colorado 

(State or other jurisdiction of incorporation or organization)
 
1389 

(Primary Standard Industrial Classification Code Number)
 
 
     4445 Northpark Drive, Suite 102
     Colorado Springs, CO  80907
  20-8096131     (719) 590-1414 
  (IRS Employer I.D.     (Address, including zip code, and telephone number
  Number)    including area of principal executive offices)
 
Robert L. Frictel
4445 Northpark Drive, Suite 102
Colorado Springs, Colorado 80907
(719) 590-1414 

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies of all communications, including all communications sent to the agent for service, should be sent to:
 
William T. Hart, Esq.
Hart & Hart, LLC
1624 Washington Street
Denver, Colorado  80203
(303) 839-0061
 
As soon as practicable after the effective date of this Registration Statement 

(Approximate date of commencement of proposed sale to the public)
 
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: þ

 
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
 
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
 
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
 
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 12b­2 of the Exchange Act.

Large accelerated filer o               Accelerated filer o
 
 Non-accelerated filer o               Smaller reporting company þ
(Do not check if a smaller reporting company)
 


 
1
 
 
 
CALCULATION OF REGISTRATION FEE
 
Title of each Class of Securities to be Registered   Amount to be Registered     Proposed Maximum Offering Price Per Share (1)     Proposed Maximum Aggregate Offering Price     Amount of Registration Fee  
                         
Common stock (2)                        
                         
Total    
3,415,700
    $ 12.50     $
42,696,250
    $
5,499
 
 
(1)  
Offering price computed in accordance with Rule 457 (c).
(2)  
Shares of common stock offered by selling shareholders.

Pursuant to Rule 416, this Registration Statement includes such indeterminate number of additional securities as may be required for issuance as a result of any stock dividends, stock splits or similar transactions.

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of l933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 
2

 
 
PROSPECTUS
 
ADVANCED CANNABIS SOLUTIONS, INC.
Common Stock
 
By means of this prospectus a number of our shareholders are offering to sell up to 3,415,700 shares of our common stock  which are issuable upon the exercise of outstanding warrants or the conversion of notes .
 
Our common stock is traded on the OTC Bulletin Board under the symbol “CANN”.  On April 30 , 2014, the closing price of our common stock was $15.69 .

The shares owned by selling shareholders may be sold in the over-the-counter market, or otherwise, at prices and terms then prevailing or at prices related to the then current market price, or in negotiated transactions.

Although we will receive proceeds if any of our Series A Warrants are exercised,  we will not receive any proceeds from the sale of the common stock by the selling stockholders.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus.  Any representation to the contrary is a criminal offense.


THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK.  FOR A DESCRIPTION OF CERTAIN IMPORTANT FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS, SEE "RISK FACTORS" BEGINNING ON PAGE  3 OF THIS PROSPECTUS.
 
 

 
The date of this prospectus is ___________, 2014.
 
 
1

 
 
PROSPECTUS SUMMARY

We were incorporated on November 12, 1987 in Colorado, under the name Promap Corporation.  Until August 2013 our primary business involved the sale of maps to the oil and gas industry.
 
On August 14, 2013, we acquired 92% of Advanced Cannabis Solutions, Inc., (“ACS”) a private Colorado corporation.  On October 1, 2013 we changed our name to Advanced Cannabis Solutions, Inc.

On November 19, 2013 we acquired the remaining 973,000 outstanding shares of ACS in exchange for the issuance of 973,000 shares of our common stock to the former shareholders of ACS.  In connection with the transaction, we issued 973,000 Series A warrants to the former ACS shareholders in exchange for a like number of warrants held by the former ACS shareholders.  The Series A warrants we issued have the same terms as the warrants exchanged by the former ACS shareholders.

We plan to lease growing space and related facilities to licensed marijuana growers and dispensary owners for their operations. Additionally, we plan to provide a variety of services to the cannabis industry, such as compliance support and consulting.

The Offering

By means of this prospectus, a number of our shareholders/warrant holders are offering to sell:

  
up to 973,000 shares of our common stock which they acquired in connection with our acquisition of Advanced Cannabis Solutions, Inc.;
 
  
up to 973,000 shares of our common stock which they may receive upon the exercise of our Series A warrants;
 
  
up to 427,000 shares of our common stock which they may receive upon the conversion of notes;
 
  
up to 42,700 shares of our common stock issuable upon the exercise of Series B warrants we issued to the placement agent for our offering of convertible notes and
 
  
up to 1,000,000 shares of common stock issuable upon the exercise of Series C warrants we sold to Full Circle Capital Corporation.

See the section of this prospectus entitled “Selling Shareholders” for more information.

The purchase of the securities offered by this prospectus involves a high degree of risk.  Risk factors include the lack of any relevant operating history, losses since we were incorporated, the possible need for us to sell shares of our common stock or other securities to raise capital.  In addition, our auditors, in their report on our financial statements for the period ended December 31, 2013 expressed substantial doubt as to our ability to continue in business.  See the “Risk Factors” section of this prospectus below for additional Risk Factors.
 
 
2

 
 
Forward-Looking Statements

This prospectus contains or incorporates by reference forward-looking statements, concerning our financial condition, results of operations and business.  These statements include, among others:
 
  
statements concerning the benefits that we expect will result from the business activities that we contemplate; and
 
  
statements of our expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts.

You can find many of these statements by looking for words such as “believes”, “expects”, “anticipates”, “estimates” or similar expressions used in this prospectus.

These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause our actual results to be materially different from any future results expressed or implied in those statements.  Because the statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied.  We caution you not to put undue reliance on these statements, which speak only as of the date of this prospectus.

To the extent, the information contained in this prospectus, changes in any material respect, we will amend this prospectus.

RISK FACTORS

This section of the prospectus discloses all material risks known to us.  We do not make, nor have we authorized any other person to make, any representation about the future market value of our common stock.  In addition to the other information contained in this prospectus, the following factors should be considered carefully in evaluating an investment in our securities.  If any of the risks discussed below materialize, our common stock could decline in value or become worthless.

We have a limited operating history and may never be profitable.  Since we recently commenced operations under our new business plan, it is difficult for potential investors to evaluate our business. We will need to raise additional capital in order to fund our operations.  There can be no assurance that we will be profitable or that the shares which may be sold in this offering will have any value.
 
There is substantial doubt about our ability to continue as a going concern.  Our financial statements have been prepared on a going concern basis which assumes we will be able to realize its assets and discharge our liabilities in the normal course of business for the foreseeable future.  We incurred a loss since Inception (June 5, 2013) resulting in an accumulated deficit of $710,962 as of December 31, 2013 and further losses are anticipated in the development of our business.  
 
Our ability to continue as a going concern is dependent upon our becoming profitable in the future and, or, obtaining the necessary financing to meet our obligations and repay its liabilities arising from normal business operations when they come due. There is no guarantee that we will be successful in achieving these objectives.
 
 
 
3

 

We may be unable to acquire the properties that are critical to our proposed business.  Our business plan involves the acquisition of properties which will be leased to marijuana growers.    There can be no assurance that we will be able to obtain the capital needed to purchase any properties.

Our failure to obtain capital may significantly restrict our proposed operations.  We need capital to operate and fund our business plan.  We do not know what the terms of any future capital raising may be but any future sale of our equity securities will dilute the ownership of existing stockholders and could be at prices substantially below the price of the shares of common stock sold in this offering.  The failure of us to obtain the capital which it requires may result in the slower implementation of our business plan.
 
Our proposed business is dependent on laws pertaining to the marijuana industry. Continued development of the marijuana industry is dependent upon continued legislative authorization of marijuana at the state level.  Any number of factors could slow or halt progress in this area.  Further, progress, while encouraging, is not assured.  While there may be ample public support for legislative action, numerous factors impact the legislative process.  Any one of these factors could slow or halt use of marijuana, which would negatively impact our proposed business.

As of April 30 , 2014, 21 states and the District of Columbia allow its citizens to use medical marijuana.  Additionally, voters in the states of Colorado and Washington approved ballot measures last November to legalize cannabis for adult use.  The state laws are in conflict with the federal Controlled Substances Act, which makes marijuana use and possession illegal on a national level. The Obama administration has effectively stated that it is not an efficient use of resources to direct law federal law enforcement agencies to prosecute those lawfully abiding by state-designated laws allowing the use and distribution of medical marijuana.   However, there is no guarantee that the administration will not change its stated policy regarding the low-priority enforcement of federal laws.  Additionally, any new administration that follows could change this policy and decide to enforce the federal laws strongly.  Any such change in the federal government’s enforcement of current federal laws could cause significant financial damage to us and its shareholders.

Further, and while we do not intend to harvest, distribute or sell cannabis, by leasing facilities to growers of marijuana, we could be deemed to be participating in marijuana cultivation, which remains illegal under federal law, and exposes us to potential criminal liability, with the additional risk that our properties could be subject to civil forfeiture proceedings.

The marijuana industry faces strong opposition.  It is believed by many that large well-funded businesses may have a strong economic opposition to the marijuana industry.  We believe that the pharmaceutical industry clearly does not want to cede control of any product that could generate significant revenue.  For example, medical marijuana will likely adversely impact the existing market for the current “marijuana pill” sold by mainstream pharmaceutical companies.  Further, the medical marijuana industry could face a material threat from the pharmaceutical industry, should marijuana displace other drugs or encroach upon the pharmaceutical industry’s products.  The pharmaceutical industry is well funded with a strong and experienced lobby that eclipses the funding of the medical marijuana movement.  Any inroads the pharmaceutical industry could make in halting or impeding the marijuana industry could have a detrimental impact on our proposed business.
 
 
 
4

 

Marijuana remains illegal under Federal law.  Marijuana is a schedule-I controlled substance and is illegal under federal law.  Even in those states in which the use of marijuana has been legalized, its use remains a violation of federal law.  Since federal law criminalizing the use of marijuana preempts state laws that legalize its use, strict enforcement of federal law regarding marijuana would likely result in our inability to proceed with its business plan.

Potential users of our proposed facility may have difficulty accessing the service of banks, which may make it difficult for them to operate.  Since the use of marijuana is illegal under federal law, there is a compelling argument that banks cannot accept for deposit funds from businesses involved with marijuana.  Consequently, businesses involved in the marijuana industry often have trouble finding a bank willing to accept their business.  The inability to open bank accounts may make it difficult for potential tenants of our proposed facility to operate.
 
Laws and regulations affecting the medical marijuana industry are constantly changing, which could detrimentally affect our proposed operations.  Local, state and federal medical marijuana laws and regulations are broad in scope and subject to evolving interpretations, which could require us to incur substantial costs associated with compliance or alter its business plan. In addition, violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on its operations.  In addition, it is possible that regulations may be enacted in the future that will be directly applicable to our proposed business.  We cannot predict the nature of any future laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on its business.  

Potential competitors could duplicate our business model.  There is no aspect of our business which is protected by patents, copyrights, trademarks, or trade names.  As a result, potential competitors could duplicate our business model with little effort.

We are dependent on its management and the loss of any of its officers could harm our business.  Our future success depends largely upon the experience, skill, and contacts of our officers.  The loss of the services of these officers may have a material adverse effect upon our business.
 
Disclosure requirements pertaining to penny stocks may reduce the level of trading activity in the market for our common stock and investors may find it difficult to sell their shares. Trades of our common stock will be subject to Rule 15g-9 of the Securities and Exchange Commission which rule imposes certain requirements on broker/dealers who sell securities subject to the rule to persons other than established customers and accredited investors.  For transactions covered by the rule, brokers/dealers must make a special suitability determination for purchasers of the securities and receive the purchaser's written agreement to the transaction prior to sale.  The Securities and Exchange Commission also has rules that regulate broker/dealer practices in connection with transactions in "penny stocks".  Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in that security is provided by the exchange or system).  The penny stock rules require a broker/ dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document prepared by the Commission that provides information about penny stocks and the nature and level of risks in the penny stock market.  The broker/dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker/dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer's account.  The bid and offer quotations, and the broker/dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation.
 
Since the market price for our common stock is volatile, investors may not be able to sell any of their shares at a profit.  The market price of our common stock, has been highly volatile, and the market has from time to time experienced significant price and volume fluctuations that are unrelated to our operating performance. Between August 15, 2013, and April 30, 2014 our stock price has ranged from a low of $1.50 per share to a high of $64.64 per share. Factors such as whether we are able to identify and purchase properties and government regulation may have a significant effect on the future market price of our common stock.
 
 
5

 
 
MARKET FOR OUR COMMON STOCK.

Trading of our stock on the OTC Bulletin Board began on August 15, 2013, was suspended on March 28, 2014 due to a suspension of trading order issued by the Securities and Exchange Commission, and resumed on April 10, 2014. As of April 30, 2014, we were trading under the symbol “CANN” on an unsolicited basis in the over-the-counter markets.
 
Shown below is the range of high and low sales prices for our common stock as reported by the OTC Bulletin Board for the periods presented.  
 
Quarter Ended
 
High
   
Low
 
September 30, 2013   $ 5.75     $ 1.60  
December 31, 2013
  $ 4.10     $ 1.91  
March 31, 2014   $ 48.38     $ 4.10  

            As of April 30 , 2014, the closing price of our common stock was $15.69 .

As of April 30 , 2014, we had 13,438,933 outstanding shares of common stock and 89 shareholders of record.  

Holders of our common stock are entitled to receive dividends as may be declared by the Board of Directors.  Our Board of Directors is not restricted from paying any dividends but is not obligated to declare a dividend.  No cash dividends have ever been declared and it is not anticipated that cash dividends will ever be paid.  We currently intend to retain any future earnings to finance future growth.  Any future determination to pay dividends will be at the discretion of the board of directors and will depend on our financial condition, results of operations, capital requirements and other factors the board of directors considers relevant.
 
 
6

 

Our Articles of Incorporation authorize our Board of Directors to issue up to 5,000,000 shares of preferred stock.  The provisions in the Articles of Incorporation relating to the preferred stock allow directors to issue preferred stock with multiple votes per share and dividend rights which would have priority over any dividends paid with respect to the holders of common stock.  The issuance of preferred stock with these rights may make the removal of management difficult even if the removal would be considered beneficial to shareholders generally, and will have the effect of limiting shareholder participation in certain transactions such as mergers or tender offers if these transactions are not favored by management.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION

We were incorporated on November 12, 1987 in Colorado, under the name Promap Corporation.  Prior to December 2013, we made hard copy and digital format maps for the oil and gas industry.  During that period of time, most of our sales were to a Company controlled by our the Chief Executive Officer On August 14, 2013, we acquired 92% of Advanced Cannabis Solutions Inc., a private Colorado corporation.  On November 19, 2013 we acquired the remaining shares of Advanced Cannabis Solutions.
 
During the years ended December 31, 2012 and 2013  we provided hard copy and digital format oil and gas production to oil and gas companies in the United States and Canada.  Our maps covered various geologic basins in numerous areas including:  Denver Basin, Powder River Basin, Michigan Basin, Williston Basin, Arkoma Basin, Illinois Basin, Cincinnati Arch, Uintah - Piceance Basins and The Nevada Basin.  We also provided maps of the North American Coal Basin and Coal Bed Methane Activity and North American Devonian - Mississippian Shale Map with detailed pipeline locations.  On December 31, 2013 we sold our oil and gas mapping business to our former Chief Executive Officer in consideration for his agreement to assume all liabilities associated with the mapping business.

Since August 2013, our core activity has been to provide sophisticated services and solutions to the regulated cannabis industry throughout the United States by leasing growing space and related facilities to licensed marijuana growers and dispensary owners for their operations.  Tenants will pay rent and other fees to us for the use of the properties, all in compliance with applicable local and state laws and regulations.  Additionally, we plan to provide a variety of services to the marijuana industry.

Our initial focus will be on opportunities within Colorado, which has allowed its citizens to use medical marijuana since 2000. Voters in Colorado recently approved a ballot measure in November 2013 to legalize marijuana for recreational adult use.

The following discussion analyzes our financial condition and summarizes the results of operations for the period ended December 31, 2013 .  This discussion and analysis should be read in conjunction with our financial statements included as part of this prospectus.

While we do not intend to harvest, distribute or sell cannabis, we may be irreparably harmed by a change in enforcement by the Federal or state governments.
 
 
7

 

The acquisition of Advanced Cannabis Solutions was accounted for as a reverse acquisition and recapitalization using accounting principles applicable to reverse acquisition.  Under this type of accounting ACS is considered to have acquired us.  Consequently, ACS’ financial results are disclosed for the period of inception (June 5, 2013) through December 31 , 2013, while our financial results have only been consolidated with those of ACS from August 14, 2013, forward.

Results of Operations

Period of inception (June 5, 2013) through December 31, 2013
 
We did not have any revenues for the period from inception through December 31, 2013.  This lack of revenue was primarily due to the development stage status of the Company.
 
Our general and administrative expenses were $53,265 for the period from inception to December 31, 2013. The expenses were related to travel, conference fees, and memberships.
 
Our payroll expenses were $108,588 for the period from inception to December 31, 2013.  These expenses consisted of two officers salaries and wages for a part-time administrative employee.
 
Our professional fees expenses were $391,132 for the period from inception to December 31, 2013.  These payments consisted of $86,854 of legal fees, $21,491 of accounting fees, and $256,175 of consulting fees related to the formation and start-up of the Company.  The consulting fees consisted of $64,000 paid to a contractor, who provided capital formation advice, and the balance was used for professional assistance in the formation of the company.
 
Our office expenses were $8,269 for the period from inception to December 31, 2013.  These expenses paid for our monthly rent and miscellaneous office supplies.
 
We had a loss on an option of $150,000 that we had acquired to purchase real estate in Boulder, Colorado.  The option expired, unexercised, and consequently we wrote off the full cost of the option.
 
 Liquidity and Capital Resources
 
Our sources and (uses) of funds for the period from inception through December 31, 2013 are shown below:
 
Net cash provided by (used in) operations
   
(488,192
)
Purchase and cancellation of common stock
   
(100,000
)
Purchase of option to acquire real property
   
(150,000
)
Purchase of property
   
(282,753
)
Sale of common stock and warrants
   
985,400
 
Sale of convertible notes
   
530,000
 
Debt acquisition costs     (66,140 )
 
 
 
8

 
 
During the period from June 5, 2013 (Inception) to December 31, 2013, we raised net funding of $1,349,260 through the sale of common stock, warrants, and convertible notes.  Of this amount, $432,753 was used to purchase real estate and an option to acquire property, and $488,192 was used to cover our operating losses.  At December 31, 2013, we had cash on hand of $427,436, other current assets of $2,244, and current liabilities of $46,142.  
 
In August 2013 we purchased 8,000,000 shares of our common stock from a former officer for $100,000 and caused these shares to be returned to treasury and cancelled.
 
Our continued operations will depend on being able to raise additional capital in order to execute our business plan.
 
During August and September 2013, we sold 973,000 units at a price of $1.00 per unit.  Each unit consisted of one share of our common stock and one Series A warrant.  Each Series A warrant entitles the holder to purchase one share of our common stock at a price of $10.00 per share.

During December 2013 and January 2014 we sold convertible promissory notes in the principal amount of $2,135,000 to 34 accredited investors.  The notes bear interest at 12% per year, payable quarterly, mature on October 31, 2018 and are convertible into shares of our common stock, initially at a conversion price of $5.00 per share. On March 31, 2014, 4 note holders with a combined note balance of $255,000 converted these notes into 51,733 shares of our Common Stock.

On January 21, 2014 we signed an agreement with Full Circle Capital Corporation, a closed-end investment company.  The agreement provides that Full Circle will initially provide $7.5 million to us in the form of Senior Secured Convertible Notes.
 
Full Circle will provide us with the $7.5 million when:
 
  
Full Circle agrees on the location of property to be purchased;
 
  
The property’s appraised value is satisfactory to Full Circle;
 
  
A Phase I environmental inspection is completed to the satisfaction of Full Circle; and
 
  
We are able to provide a first priority lien on the property to Full Circle.
 
We can borrow an additional $22.5 million with the mutual agreement of us and Full Circle.

At least 95% of any loan proceeds will be used to acquire properties which we will lease to licensed marijuana growers.

The six-year loan will be secured by real estate acquired with the loan proceeds and will require interest-only payments at a rate of 12% per year.
 
The initial loan can, at any time, be converted into shares of our common stock at a conversion price of $5.00 per share.  It is contemplated that further advances will be convertible at 110% of the market price of our stock on the day of advance, or the ten-day volume-weighted average price prior to the day of advance, whichever is lower.
 
 
 
9

 

The funding of the loan is subject to the execution of additional documents between the parties.

Full Circle also purchased, for $500,000, warrants which allow Full Circle to purchase up to 1,000,000 shares of our common stock at any time on or prior to January 21, 2017 at a price of $5.50 per share.

We plan to lease growing space and related facilities to licensed marijuana growers and dispensary owners for their operations. However we must first acquire the properties which we plan to lease.  The number of properties which will be able to acquire will be directly related to the amount of capital we are able to raise.
 
Trends

Except for our agreement with Full Circle, we do not have any commitments or arrangements from any person to provide us with any additional capital.  We may not be successful in raising the capital we will need.

Other than as disclosed above, we do not know of any:

  
trends, events or uncertainties that have had, or are reasonably expected to have, a material impact on our revenues or expenses.
 
  
trends, demands, commitments, events or uncertainties that will result in, or that are reasonably likely to result in, any material increase or decrease in liquidity; or
 
  
significant changes in expected sources and uses of cash.

Contractual Obligations

The following shows our contractual obligations at March 31, 2014, which have been adjusted to reflect the convertible notes we sold in January 2014, and the new office lease we signed in March 2014, and the convertible notes that were converted into Common Stock on March 31, 2014.

   
Amounts Due in
 
Description
 
Total
   
2014
   
2015
   
2016
   
2017
   
2018
   
Thereafter
 
                                                 
12% convertible notes
 
$
1,880,000
   
-
   
-
   
-
   
-
   
$
1,880,000
   
$
-
 
Mortgage on Pueblo Building
 
$
236,173
   
$
20,088
   
$
20,088
   
$
20,088
   
$
20,088
   
$
20,088
   
$
135,733
 
Office Rental
 
$
72,000
   
$
20,000
   
$
24,000
   
$
24,000
   
$
4,000
   
$
-
   
$
-
 
Contracted leasehold improvements   $ 400,000       400,000       -       -       -       -       -  
 
 
 
10

 
 
Critical Accounting Policies

See Note 2 to the financial statements included as part of this prospectus for a description of our critical accounting policies and the potential impact of the adoption of any new accounting pronouncements.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements that are reasonably likely to have a current or future material effect on our financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.
 
BUSINESS

On August 14, 2013, we acquired approximately 94% of the outstanding common stock of Advanced Cannabis Solutions, Inc. (“ACS”) in exchange for 12,400,000 shares of our common stock.

In connection with the acquisition:

  
Robert Frichtel was appointed as a director and as our Principal Executive and Financial Officer;
 
  
Robert Lopesino was appointed as our Vice President;
 
  
Steven Tedesco and Robert Carrington, Jr., resigned as our officers and directors; and
 
  
we purchased 8,000,000 shares of common stock from a former officer and caused these shares to be returned to treasury and cancelled.

On October 1, 2013 we changed our name to Advanced Cannabis Solutions, Inc.  On November 19, 2013 we acquired the remaining shares of Advanced Cannabis Solutions.

We have two wholly owned subsidiaries: ACS Colorado Corp and Advanced Cannabis Solutions Corporation.  Unless otherwise indicated all references to us include the operations of ACS Colorado Corp and Advanced Cannabis Solutions Corporation.  Advanced Cannabis Solutions Corporation has one wholly owned subsidiary: ACS Corp.

We plan to provide sophisticated services and solutions to the regulated cannabis industry throughout the United States by first acquiring, and then leasing, growing space and related facilities to licensed marijuana growers and dispensary owners for their operations.  Tenants will pay rent and other fees to us for the use of the properties, all in compliance with applicable local and state laws and regulations.  We plan to provide a variety of other services to the cannabis industry.

Our initial focus will be on opportunities within Colorado, which has allowed its citizens to use medical marijuana since 2000.  Voters in Colorado approved a ballot measure in November 2012 to legalize marijuana for adult use.

 
 
11

 
 
Starting Jan 1, 2014, adult Colorado citizens and visiting adults purchase marijuana without any medical licenses. 
 
On December 31, 2013 we purchased a property in Pueblo County, Colorado for $450,000.  The property, which is located in a suburb of Pueblo, Colorado, consists of approximately three acres of land, a 5,000 square foot steel building, and a parking lot.

The purchase price was paid with cash of $280,000 and a promissory note in the principal amount of $170,000.   The note bears interest at 8.5% per year and is payable in monthly installments of principal and interest in the amount of $1,674. This note is amortizable over 15 years with a maturity date of December 31, 2018. The note is convertible at any time on or before the maturity date at $5 per common share.

The property is zoned for growing marijuana and is leased to a medical marijuana grower until December 31, 2022.  In addition to the monthly rent, the tenant will pay all property taxes and insurance associated with the property.
 
The monthly rent on this property is as follows:
 
Month (1)                                      Rent
 
1                                             -0-
2-6                                 $   4,500
7-12                               $ 15,492
13-18                             $ 15,670
19-24                             $   9,031
25-36                             $   9,584
37-48                             $   9,396
49-60                             $   9,584
61-72                             $   9,775
73-84                             $   9,971
85-95                             $ 10,170
96-___                          $ 14,670
 
(1)  
Beginning January 1, 2014.
 
In addition to the monthly rent, the tenant will pay all property taxes and insurance associated with the property.

We also agreed with the tenant to begin construction of an 8,000 sq. ft. light deprivation greenhouse on the property at a cost not to exceed $400,000.  Construction is to begin no later than June 25, 2014. Depending on the availability of capital, we may construct up to five additional green houses on this property.
 
 
 
12

 

Once construction is completed, rent will increase by $100,000 annually for the duration of the lease.  During the construction phase, the tenant will pay us a discounted rent for the time required for the construction of the greenhouse.  Normal rent payments will commence once a final Certificate of Occupancy is issued.

We have identified four properties that are currently under review for purchase and leaseback to licensed marijuana growers in Colorado.  These projects include the purchase and leaseback of existing, currently operating facilities, as well as proposed new construction projects.  These opportunities are in Denver and Pueblo counties, Colorado and can be purchased/constructed in the range of $750,000 to $5 million for each project.
 
Our future plans will be dependent upon our ability to raise the capital required to acquire properties.

Market Conditions

According to the Colorado Department of Revenue, Colorado’s marijuana industry reported $45 million in recreational and medical marijuana in sales in January 2014, putting marijuana sales on pace to exceed $540 million for the year ending December 31, 2014.
 
The national regulated marijuana market is estimated to be between $2 -$3 billion in 2014 and is expected to increase to $6 billion by 2018.
 
In Colorado, the market was expanded in January 2014 to include adult use, including visitors from other states.  Voters in Washington recently approved a ballot measure to legalize cannabis for adult use.  Many experts predict that other states will follow Colorado and Washington in enacting legislation or approving ballot measures that expand the permitted use of cannabis.
 
Government Regulation

Marijuana is a Schedule-I controlled substance and is illegal under federal law.  Even in those states in which the use of marijuana has been legalized, its use remains a violation of federal laws.
 
A Schedule I controlled substance is defined as a substance that has no currently accepted medical use in the United States, a lack of safety for use under medical supervision and a high potential for abuse.  If the federal government decides to enforce the Controlled Substances Act in Colorado with respect to marijuana, persons that are charged with distributing, possessing with intent to distribute, or growing marijuana could be subject to fines and terms of imprisonment, the maximum being life imprisonment and a $50 million fine.
 
 
 
13

 
 
As of December 16, 2013, 20 states and the District of Columbia allow its citizens to use Medical Marijuana.  Additionally, voters in the states of Colorado and Washington approved ballot measures last November to legalize cannabis for adult use.  The state laws are in conflict with the federal Controlled Substances Act, which makes marijuana use and possession illegal on a national level. The Obama administration has effectively stated that it is not an efficient use of resources to direct law federal law enforcement agencies to prosecute those lawfully abiding by state-designated laws allowing the use and distribution of medical marijuana.   However, there is no guarantee that the administration will not change its stated policy regarding the low-priority enforcement of federal laws.  Additionally, any new administration that follows could change this policy and decide to enforce the federal laws strongly.  Any such change in the federal government’s enforcement of current federal laws could cause significant financial damage to us.  While we do not intend to harvest, distribute or sell cannabis, we may be irreparably harmed by a change in enforcement by the Federal or state governments.
 
Despite the Obama administration’s statements, the Department of Justice has stated that it will continue to enforce the Controlled Substance Act with respect to marijuana in Colorado to prevent:
 
  
the distribution of marijuana to minors;
 
  
criminal enterprises, gangs and cartels receiving revenue from the sale of marijuana;
 
  
the diversion of marijuana from states where it is legal under state law to other states;
 
  
state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;
 
  
violence and the use of firearms in the cultivation and distribution of marijuana;
 
  
driving while impaired and the exacerbation of other adverse public health consequences associated with marijuana use;
 
  
the growing of marijuana on public lands; and
 
  
marijuana possession or use on federal property.

General

Our offices are located at 4445 North Park Dr. #102, Colorado Springs, CO 80907. We lease this space for $2,000 per month until April 2017.

As of April 30 , 2014 we had five full time employees and one part time employee.
 
 
14

 
 
MANAGEMENT

Our current officers and directors are listed below. Directors are generally elected at an annual shareholders’ meeting and hold office until the next annual shareholders’ meeting, or until their successors are elected and qualified.  Executive officers are elected by directors and serve at the board’s discretion.
 

 
Name   Age   Position
         
Robert L. Frichtel    50   Chief Executive Officer and Director
Roberto Lopesino    36   Vice President
Christopher Taylor    60   Chief Financial and Accounting Officer
 
Information regarding our officers is shown below.

Robert L.  Frichtel, was appointed a director and as our Chief Executive Officer on August 14, 2013.  Mr. Frichtel served as a managing partner of IBC Capital Group, a commercial real estate and finance company, since 2002.  Between 1999 and 2001, Mr.  Frichtel was the president and Chief  Operating  Officer of EOS Group, a division of Health Net, a NYSE listed  healthcare  company.  Since 2001 Mr. Frichtel has consulted for numerous  clients  throughout the nation that are engaged in the medical marijuana business and has written articles for Bloomberg business  regarding the cannabis  industry.  Mr. Frichtel received a Bachelor of Science  degree in business  administrative  from Colorado  State  University in 1985.

Roberto Lopesino was appointed Vice President on August 14, 2013.  Since March 2013,  has  operated a  consulting business that studies and monitors the medical  marijuana market in Colorado and consults to the  industry on market  pricing and trends.  Since April 2011,  Mr. Lopesino  has  operated a  non-brokered  commodities  market for the  commercial production of medical grade  marijuana.  Between August 2010 and March 2011, he was the owner and manager of North Boulder Wellness Center in Boulder, Colorado, a multi-site medical dispensary and producer of marijuana. Between November 2007 and March 2010, Mr. Lopesino operated and managed a company specializing in deep powder  snowcat and heli skiing in the San Juan mountain  range of Colorado.  In February 2006, Mr.  Lopesino founded, and until December 2007 operated, a multilingual title company specializing in real estate document preparation and closings.  Mr.  Lopesino studied engineering at Purdue University and the University of Colorado in Boulder.
 
 
15

 
 
Mr. Taylor was appointed as our Chief Financial and Accounting Officer September 23, 2013.  Mr. Taylor is a Certified  Public  Accountant and has operated his own public  accounting  practice  since July of 2001.  Since 2010 Mr. Taylor has provided accounting services to approximately 50 marijuana dispensary clients in Colorado  and  Washington.

We believe that Mr. Frichtel is qualified to act as our director due to his past experience in commercial real estate and the marijuana industry.
 
The following table shows the compensation we paid to our officers for the years ended December 31, 2013 and 2012:
 
Name and Principal Position
Year
   
Salary
$
     
Bonus
$
     
Stock
Awards
$
     
Option
Awards
$
     
All Other
Compensation
$
     
Total
$
 
Robert Frichtel, Chief Executive Officer (1)   2013     49,118        --       --       --       --       49,118  
                                                   
Roberto Lopesino Vice President (1)  2013     31,500                                        31,500  
                                                   
Christopher Taylor Chief Financial Officer (2)  2013     15,398                                        15,398  
                                                   
Steven Tedesco (3) President and Chief  2013     --        --       --       --       --       --  
Executive Officer  2012     --        --       --       --       --       --  
                                                   
Robert W. Carington, Jr. Chief Financial Officer (4)  2013     --        --       --       --       --       --  
   2012     --        --       --       --       --       --  


(1)  
Mr. Frichtel and Mr. Lopesino were appointed officers on August 14, 2013.
 
(2)  
Mr. Taylor was appointed an officer on September 23, 2013.
 
(3)  
Mr. Tedesco resigned as an officer and director on August 14, 2013.
 
(4)  
Mr. Carrington resigned as an officer and director on August 14, 2013.
 
The following shows the amounts we expect to pay to our officers and directors during the twelve months ending December 31, 2014 and the amount of time these persons expect to devote to us.
 
Name   Projected Compensation     Percent of Time to be Devoted to the Our Business  
Robert L. Frichtel
  $ 108,000       100 %
Roberto Lopesino
  $ 108,000       100 %
Christopher Taylor
  $ 108,000       100 %
 
 
16

 
 
We do not have employment agreements with any of our officers.

Stock Option and Stock Bonus Plans.  We do not have any stock option plans, although we may adopt one or more of such plans in the future.

Long-Term Incentive Plans. We do not provide our officers or employees with pension, stock appreciation rights or long-term incentive plans.

Employee Pension, Profit Sharing or other Retirement Plans.  We do not have a defined benefit, pension plan, profit sharing or other retirement plan, although we may adopt one or more of such plans in the future.

Compensation of Directors.   In the period from June 5, 2013 (inception) to  December 31, 201 3 , we did not compensate our directors for acting as such.
 
Compensation Committee Interlocks and Insider Participation.  Robert Frichtel, our only director, acts as our compensation committee.  During the year ended December 31, 2013 none of our officers was a member of the compensation committee or a director of another entity, which other entity had one of its executive officers serving as one of our directors or as a member of our compensation committee.
 
 
 
17

 

Related Party Transactions

On June 30, 2013 ACS sold 1,000,000 shares of its common stock to Robert Frichtel and 1,150,000 shares of its common stock to Roberto Lopesino at a price of $0.001 per share.  On June 30, 2013 ACS also sold 10,250,000 shares of its common stock to an unaffiliated group of private investors at a price of $0.001 per share.  On August 14, 2013, the shareholders of ACS exchanged 12,400,000 shares of their ACS for 12,400,000 shares of our common stock.

Subsequently, one unaffiliated person which received 2,000,000 shares in August 2013 transferred 100,000 shares to Christopher Taylor and 150,000 to another non-affiliated shareholder.  The remaining 1,750,000 shares held by this person were returned to treasury and cancelled on January 14, 2014.
 
During the years ended December 31, 2013 and 2012, sales of $17,926 and $16,891 respectively, were made to Admiral Bay Resources and Running Foxes Petroleum, Inc., companies controlled by Steven Tedesco, our Chief Executive Officer at that time.  During the two years ended December 31, 2013 and 2012, we paid employees of Atoka Colabs, LLC $2,499 and $45,732 respectively, for producing the maps we sold.  Atoka is also controlled by Mr. Tedesco.

During the two years ended December 31, 2013 and 2012 we paid Running Foxes Petroleum $-0- and $6,024 respectively, for office rent under a verbal arrangement.

PRINCIPAL SHAREHOLDERS

The following table shows the beneficial ownership of our common stock as of the date of this prospectus by (i) each person whom we know beneficially owns more than 5% of the outstanding shares of its common stock; (ii) each of our officers; (iii) each of our directors; and (iv) all the officers and directors as a group.  Unless otherwise indicated, each owner has sole voting and investment powers over his shares of common stock. Unless otherwise indicated, beneficial ownership is determined in accordance with the Rule 13d-3 promulgated under the Securities and Exchange Act of 1934, as amended, and includes voting or investment power with respect to shares beneficially owned.

 
Name and Address   Number of Shares     Percentage of Class  
             
Robert L. Frichtel (1)
    1,000,000       7.4 %
                 
Roberto Lopesino (1)
    1,150,000       8.5 %
                 
Christopher Taylor (1)
    100,000       0.7 %
                 
All officers and directors as a group (three persons)     2,250,000       16.0 %
                 
BGBW, LLC
    2,500,000       18.6 %
GTC House
               
18 Station Rd.
               
Chesham Bucks HP5 1DH
               
GB
               
 
(1)  
Address for this person is 4445 Northpark Drive , Suite 102 , Colorado Springs, CO   80907

 
 
18

 
 
SELLING SHAREHOLDERS
 
The persons listed in the following table plan to offer the shares shown opposite their respective names by means of this prospectus.

On August 14, 2013, we acquired 12,400,000 shares of Advanced Cannabis Solutions, Inc., (“ACS”) a private Colorado corporation, in exchange for 12,400,000 shares of our common stock.

On November 19, 2013 we acquired the remaining 973,000 outstanding shares of ACS in exchange for the issuance of 973,000 shares of our common stock to the former shareholders of ACS.  In connection with the transaction, we issued 973,000 Series A warrants to the former ACS shareholders in exchange for a like number of warrants held by the former ACS shareholders.  The Series A warrants we issued have the same terms as the warrants exchanged by the former ACS shareholders.

The selling shareholders named below acquired their shares and Series A warrants in connection with our November 19, 2013 acquisition of the remaining shares of ACS.
 
         
Shares Issuable
             
         
Upon the
   
Shares to be
       
Name of Selling
 
Shares
   
Exercise of
   
Sold in this
   
Ownership
 
Shareholder
 
Owned
   
Series A Warrants
   
Offering
   
After Offering
 
                         
Tan, Erol Larson
    5,000       5,000       10,000       --  
Orrick, Peter M.
    12,000       12,000       24,000       --  
Michael, Edward A.
    25,000       25,000       50,000       --  
Irons, Henry C. Jr.
    10,000       10,000       20,000       --  
Jamieson, Raeleen B.
    5,000       5,000       10,000       --  
Guest, Alexander M.
    15,000       15,000       30,000       --  
Hynes, Gabriel W.
    10,000       10,000       20,000       --  
Vaughn Family LLC
    50,000       50,000       100,000       --  
Craig, Ann Robinette
    10,000       10,000       20,000       --  
Jannelli, Gilbert G.
    25,000       25,000       50,000       --  
Jannelli, Dominick G.
    25,000       25,000       50,000       --  
Mackin, Mark
    20,000       20,000       40,000          
Jensen, Michael S.
    25,000       25,000       50,000       --  
Lackie, Hugh T.
    20,000       20,000       40,000       --  
Blanchat, Kevin
    25,000       25,000       50,000       --  
Summers, Jeremy
    25,000       25,000       50,000       --  
Prazkik, Frank E. Jr.
    25,000       25,000       50,000       --  
Reed, Amanda
    25,000       25,000       50,000       --  
Verchick, Peter G.
    25,000       25,000       50,000       --  
Ferro, Frank & Irene
    10,000       10,000       20,000       --  
Topliff, James F.
    25,000       25,000       50,000       --  
Cork Investments, Inc.
    5,000       5,000       10,000       --  
Lenhart, Craig
    25,000       25,000       50,000       --  
Chapman, Stephen R.
    10,000       10,000       20,000       --  
 
 
 
19

 
 
Drozd, Hamilton Edward
    10,000       10,000       20,000       --  
Vaughn, Cyrus
    50,000       50,000       100,000       --  
Black, Thomas A.
    25,000       25,000       50,000       --  
Carr, Douglas
    5,000       5,000       10,000       --  
Meyers, Robert C.
    10,000       10,000       20,000       --  
Smith, Laurence D.
    5,000       5,000       10,000       --  
Culbertson, Jeffrey G.
    5,000       5,000       10,000       --  
Emerald Barbajo
    5,000       5,000       10,000       --  
GKG Investments LLC
    25,000       25,000       50,000       --  
McKeown, Wendy Ruth
    15,000       15,000       30,000       --  
Datsopoulos, Milton
    35,000       35,000       70,000       --  
Yakely, Heather
    5,000       5,000       10,000       --  
Doudney, Nathan
    25,000       25,000       50,000       --  
Andres, Fabian
    10,000       10,000       20,000       --  
Donato, Nicolo
    20,000       20,000       40,000       --  
Mago, Anu
    5,000       5,000       10,000       --  
Crowley, John & Patricia
    15,000       15,000       30,000       --  
Cooper, David
    25,000       25,000       50,000       --  
Shore, Cody
    3,000       3,000       6,000       --  
Krull, Chad
    10,000       10,000       20,000       --  
Miller, Perry
    25,000       25,000       50,000       --  
Hansen Capital, LP
    25,000       25,000       50,000       --  
Yelton III, Doran Dean
    10,000       10,000       20,000       --  
Ben Savy Accounting, Inc.
    5,000       5,000       10,000       --  
Fitterman, Yaffa
    15,000       15,000       30,000       --  
DCHCI, LLC
    50,000       50,000       100,000       --  
Shrira, Aaron
    25,000       25,000       50,000       --  
Oyster, Matthew
    5,000       5,000       10,000       --  
Tedesco, Steven
    4,000       4,000       8,000       --  
Tedesco, Trevor
    1,000       1,000       2,000       --  
 
20

 
 
         
Shares Issuable
             
         
Upon the
   
Shares to be
       
Name of Selling
 
Shares
   
Exercise of
   
Sold in this
   
Ownership
 
Shareholder
 
Owned
   
Series A Warrants
   
Offering
   
After Offering
 
                         
Fitterman, Yaffa
    18,000       18,000       36,000       --  
Attariwala, Joetey
    5,000       5,000       10,000       --  
Carr, Douglas
    5,000       5,000       10,000       --  
O'Brien, Bridgid M.
    5,000       5,000       10,000       --  
Andersen, Sherry
    10,000       10,000       20,000       --  
 
The controlling persons of the non-individual selling shareholders listed above are:
 
Name of
   
Selling Shareholder
 
Controlling Person
     
Vaughn Family LLC
  Cyprus Vaughn
Cork Investments, Inc.
Howard Crowley
GKG Investments LLC
  D.J. Gregorek
Hansen Capital, LP
  E.O. Hansen
Ben Savy Accounting, Inc.
Benjamin Sauy
DCHCI, LLC
  David R. Coombs
 
During December 2013 and January 2014 we sold convertible promissory notes in the principal amount of $2,135,000 to 34 accredited investors.  The notes bear interest at 12% per year, payable quarterly, mature on October 31, 2018 and are convertible into shares of our common stock, initially at a conversion price of $5.00 per share.

The Selling Shareholders named below are offering shares of our common stock which they may receive upon the conversion of their notes.
 
                
Name of Selling
 
Shares
 
Share Issuable
Upon Conversion
 
 
Shares to be
 ­Sold in this
 
Ownership
 
Shareholder
 
Owned
   of Notes    Offering
After Offering
 
 
Barnette, Sharon and Sherry
  --   8,000   8,000   --  
Black, Thomas A
  --   10,000   10,000   --  
Brooks, Daniel
  --   2,000   2,000   --  
Buehler, Jason
  --   4,000   4,000   --  
Clark, Edward
  --   10,000   10,000   --  
Datsopaulos, Mitton
  --   40,000   40,000   --  
Eison, Paul
  --   6,000   6,000   --  
Erickson, Dennis
  --   20,000   20,000   --  
Goodgoin, Michael
  --   10,000   10,000   --  
Gorden, Harold
  --   5,000   5,000   --  
Griffin, Dennis
  --   10,000   10,000   --  
Griffin, Lynn   --   10,000   10,000   --  
Jensen, Michael
  --   5,000   5,000   --  
K&M Ag Construction
  --   4,000   4,000   --  
Kaszycki, Deborah
  --   2,000   2,000   --  
Lazarus, Shulamut
  --   20,000   20,000   --  
McCammon, Darren
  --   10,000   10,000   --  
Miller, Perry L.
  --   20,000   20,000   --  
Mogan, Kathleen
  --   15,000   15,000   --  
Moscariello, Michael
  --   4,000   4,000   --  
Negrin, Alan
  --   10,000   10,000   --  
Panayotou, Nickitas
  --   20,000   20,000   --  
Postman, Warren
  --   20,000   20,000   --  
Rodriguez, Daniel
  --   6,000   6,000   --  
Smith, Donald
  --   10,000   10,000   --  
Stinnett, Ken
  --   2,000   2,000   --  
Taglieri, Joseph
  --   2,000   2,000   --  
Tedesco, Eleanor H.
  --   2,000   2,000   --  
Tedesco, Steven
  --   6,000   6,000   --  
Topliff, James
  --   20,000   20,000   --  
Van Dusen, Donna
  --   4,000   4,000   --  
VanderPloeg, Andrew
  --   60,000   60,000   --  
Vaughn, Cyrus
  --   40,000   40,000   --  
Young, Wayne
  --   10,000   10,000   --  
        427,000   427,000      
 
 
 
 
21

 
 
The controlling person of K&M ag Construction is Mark Bjustrom.

We paid a commission of $213,500 and a non-accountable expense allowance of $32,100 to the placement agent for the convertible note offering described above. The placement agent also received 213.5 Series B warrants for a total of 42,700 shares. Each Series B warrant allows the holder to purchase 200 shares of our common stock at a price of $5.00 per share.  The Series B warrants expire on October 31, 2018.

The Selling Shareholder named below is offering shares of our common stock which it may receive upon the exercise of the Series B warrants.
 
 
                
Name of Selling
 
Shares
 
Share Issuable
Upon Conversion
 
 
Shares to be
 ­Sold in this
 
Ownership
 
Shareholder
 
Owned
   of Notes    Offering
After Offering
 
                   
Spencer Edwards, Inc.
  --   42,700   42,700   --  


The controlling person of the non-individual selling shareholder listed above is:
 
        
Name
 
Controlling Person
 
       
Spencer Edwards, Inc.
  Donna Flemming  

 
On January 21, 2014 we entered into an agreement with Full Circle Capital Corporation whereby Full Circle agreed to provide us with capital pursuant to certain conditions.  As part of this transaction, we sold Full Circle 1,000,000 Series C warrants.  Each Series C warrant allows Full Circle to purchase one share of our common stock at an exercise price of $5.50 per share at any time on or before January 20, 2017.  Full Circle paid $500,000 for the Series C warrants.
 
The Selling Shareholder named below is offering shares of our common stock which it may receive upon the exercise of the Series C warrants.
 
                
Name of Selling
 
Shares
 
Share Issuable
Upon Conversion
 
 
Shares to be
 ­Sold in this
 
Ownership
 
Shareholder
 
Owned
   of Notes    Offering
After Offering
 
                   
Full Circle Capital Corporation
  --   1,000,000   1,000,000   --  
 
 
 
22

 
 
The controlling person of the non-individual selling shareholder listed above is:
 
        
Name
 
Controlling Person
 
       
Full Circle Capital Corporation
  Gregg J. Felton/John E. Stuart  
 
The shares of common stock owned by the selling shareholders may be offered and sold by means of this prospectus from time to time as market conditions permit, in the over-the-counter market, or otherwise, at prices and terms then prevailing or at prices related to the then-current market price, or in negotiated transactions.

The shares of common stock may be sold by one or more of the following methods, without limitation:

  
a block trade in which a broker or dealer so engaged will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction;
 
  
purchases by a broker or dealer as principal and resale by such broker or dealer for its account pursuant to this prospectus;
 
  
ordinary brokerage transactions and transactions in which the broker solicits purchasers; and
 
  
face-to-face transactions between sellers and purchasers without a broker/dealer.

In competing sales, brokers or dealers engaged by the selling shareholders may arrange for other brokers or dealers to participate.  Brokers or dealers may receive commissions or discounts from selling shareholders in amounts to be negotiated.  As to any particular broker-dealer, this compensation might be in excess of customary commissions.  Neither we nor the selling stockholders can presently estimate the amount of such compensation.  Notwithstanding the above, no FINRA member will charge commissions that exceed 8% of the total proceeds from the sale.

The selling shareholders and any broker/dealers who act in connection with the sale of their securities may be deemed to be "underwriters" within the meaning of §2(11) of the Securities Acts of 1933, and any commissions received by them and any profit on any resale of the securities as principal might be deemed to be underwriting discounts and commissions under the Securities Act.

If any selling shareholder enters into an agreement to sell his or her securities to a broker-dealer as principal, and the broker-dealer is acting as an underwriter, we will file a post-effective amendment to the registration statement, of which this prospectus is a part, identifying the broker-dealer, providing required information concerning the plan of distribution, and otherwise revising the disclosures in this prospectus as needed.  We will also file the agreement between the selling shareholder and the broker-dealer as an exhibit to the post-effective amendment to the registration statement.

           The selling stockholders may also sell their shares pursuant to Rule 144 under the Securities Act of 1933.
 
 
 
23

 

We have advised the selling shareholders that they, and any securities broker/dealers or others who sell the common stock or warrants on behalf of the selling shareholders, may be deemed to be statutory underwriters and will be subject to the prospectus delivery requirements under the Securities Act of 1933.  We have also advised each selling shareholder that in the event of a "distribution" of the securities owned by the selling shareholder, the selling shareholder, any "affiliated purchasers", and any broker/dealer or other person who participates in the distribution may be subject to Rule 102 of Regulation M under the Securities Exchange Act of 1934 ("1934 Act") until their participation in that distribution is completed.  Rule 102 makes it unlawful for any person who is participating in a distribution to bid for or purchase securities of the same class as is the subject of the distribution.  A "distribution" is defined in Rule 102 as an offering of securities "that is distinguished from ordinary trading transactions by the magnitude of the offering and the presence of special selling efforts and selling methods".  We have also advised the selling shareholders that Rule 101 of Regulation M under the 1934 Act prohibits any "stabilizing bid" or "stabilizing purchase" for the purpose of pegging, fixing or stabilizing the price of the common stock in connection with this offering.
 
DESCRIPTION OF SECURITIES

Common Stock

We are authorized to issue 100,000,000 shares of common stock.  Holders of common stock are each entitled to cast one vote for each share held of record on all matters presented to shareholders.  Cumulative voting is not allowed; hence, the holders of a majority of our outstanding shares of common stock can elect all directors.

                   Holders of common stock are entitled to receive such dividends as may be declared by the Board out of funds legally available and, in the event of liquidation, to share pro rata in any distribution of our assets after payment of liabilities.  Our directors are not obligated to declare a dividend.  It is not anticipated that dividends will be paid in the foreseeable future.

Holders of common stock do not have preemptive rights to subscribe to any additional shares which may be issued in the future.  There are no conversion, redemption, sinking fund or similar provisions regarding the common stock.  All outstanding shares of common stock are fully paid and non-assessable.

Warrants
 
Series A Warrants

As of the date of this prospectus we had 973,000 outstanding Series A warrants.  Each Series A warrants entitles the holder to purchase one share of our common stock at a price of $10.00 per share.  The Series A Warrants expire on the earlier of August 1, 2016, or twenty days following written notification from us that our common stock had a closing bid price at or above $12.00 for any ten consecutive trading days. This condition has been met as of April 30, 2014; however, the Company has chosen not to force this conversion feature at this time.
 
 
 
24

 
 
Series B Warrants

As of the date of this prospectus we had 213.5 Series B warrants outstanding.  Each Series B warrant allows holder to purchase 200 shares of our common stock at an exercise price of $5.00 per share at any time on or before October 31, 2018, a total of 42,700 shares.

Series C Warrants

As of the date of this prospectus we had 1,000,000 outstanding Series C warrants.  Each Series C warrant allows the holder to purchase one share of our common stock at an exercise price of $5.50 per share at any time on or before January 20, 2017.

Preferred Stock
 
We are authorized to issue 5,000,000 shares of preferred stock.  Shares of preferred stock may be issued from time to time in one or more series as may be determined by the Board of Directors.  The voting powers and preferences, the relative rights of each such series and the qualifications, limitations and restrictions of each series will be established by the Board of Directors.  Our directors may issue preferred stock with multiple votes per share and dividend rights which would have priority over any dividends paid with respect to the holders of our common stock.  The issuance of preferred stock with these rights may make the removal of management difficult even if the removal would be considered beneficial to shareholders generally, and will have the effect of limiting shareholder participation in transactions such as mergers or tender offers if these transactions are not favored by management.  As of the date of this prospectus we had not issued any shares of preferred stock.
 
Convertible Notes

As of the date of this prospectus we had outstanding convertible promissory notes in the principal amount of $2,049,057.  The notes bear interest at 12% per year, payable quarterly, mature on October 31, 2018 and are convertible into shares of our common stock, initially at a conversion price of $5.00 per share .

Transfer Agent and Registrar

Our transfer agent is:

Corporate Stock Transfer
3200 Cherry Creek South Drive, Suite 430
Denver, CO 80209
(303) 282-4800
 
LEGAL PROCEEDINGS

We are not involved in any legal proceedings and we do not know of any legal proceedings which are threatened or contemplated.
 
 
 
25

 

INDEMNIFICATION

Our Bylaws authorize indemnification of a director, officer, employee or agent against expenses incurred by him in connection with any action, suit, or proceeding to which he is named a party by reason of his having acted or served in such capacity, except for liabilities arising from his own misconduct or negligence in performance of his duty.  In addition, even a director, officer, employee, or agent found liable for misconduct or negligence in the performance of his duty may obtain such indemnification if, in view of all the circumstances in the case, a court of competent jurisdiction determines such person is fairly and reasonably entitled to indemnification.  Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers, or controlling persons pursuant to these provisions, we have been informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is therefore unenforceable.

AVAILABLE INFORMATION

We have filed with the Securities and Exchange Commission a Registration Statement on Form S-1 (together with all amendments and exhibits) under the Securities Act of 1933, as amended, with respect to the Securities offered by this prospectus.  This prospectus does not contain all of the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Securities and Exchange Commission.  For further information, reference is made to the Registration Statement which may be read and copied at the Commission’s Public Reference Room.

We are subject to the requirements of the Securities and Exchange Act of 1934 and are required to file reports and other information with the Securities and Exchange Commission.  Copies of any such reports and other information filed by us can also be read and copied at the Commission’s Public Reference Room.

The Public Reference Room is located at 100 F Street, N.E., Washington, D.C. 20549.  The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330.  The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding public companies.  The address of the site is http://www.sec.gov.
 
 
 
26

 
 
ADVANCED CANNABIS SOLUTIONS
(A DEVELOPMENT COMPANY)
Financial Statements

TABLE OF CONTENTS
 
 
Page
   
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
F-1
   
FINANCIAL STATEMENTS
 
   
     Balance Sheets
F-2
     Statement of operations
F-3
     Statements of cash flows
F-4
     Statements of changes in stockholders’ equity
F-5
     Notes to financial statements
F-6 – F-15

 
 
F-1

 
 
Cutler & Co., LLC
12191 W. 64th Street, Suite 205 B
Arvada, CO  80004
Telephone (303) 968-3281
Fax (303)456-7488
www.cutlercpas.com
Board of Directors
Advanced Cannabis Solutions, Inc.
Colorado Springs, Colorado, 80907

We have audited the accompanying consolidated balance sheet of Advanced Cannabis Solutions, Inc. (a development stage company) as of December 31, 2013 and the related consolidated statement of operations, changes in stockholders' equity and cash flows for the period from June 5, 2013 (Inception) to December 31, 2013. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit 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 consolidated 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 audit provides a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Advanced Cannabis Solutions, Inc. and its subsidiary companies as of December 31, 2013, and the results of their operations, changes in stockholders’ equity and cash flows for the period from June 5, 2013 (Inception) to December 31, 2013 in conformity with accounting principles generally accepted in the United States of America. 
 
The accompanying financial statements have been prepared assuming that the Advanced Cannabis Solutions, Inc. and its subsidiary companies will continue as a going concern. As discussed in Note 3 to the financial statements the Company has suffered losses and negative cash flow from operations since Inception which raises substantial doubt about their ability to continue as a going concern. Management's plans in regard to 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. 
 
   
 Arvada, Colorado
/s/ Cutler & Co., LLC
 April 15, 2014
 Cutler & Co., LLC

 
F-2

 
 
ADVANCED CANNABIS SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
 
   
December 31,
2013
 
ASSETS
 
Current assets
     
     Cash
  $ 427,436  
     Prepaid expenses
    2,244  
Total current assets
    429,680  
         
Property and equipment, net
    452,753  
         
Total assets
  $ 882,433  
         
LIABILITIES & STOCKHOLDERS’ EQUITY
 
Current liabilities:
       
     Accounts payable and accrued expenses
  $ 43,212  
     Convertible notes payable (net of debt discount) – current portion
    2,930  
          Total current liabilities
    46,142  
         
Long term liabilities
       
     Tenant deposits
    1,250  
     Convertible notes payable (net of debt discount) less current portion
    341,907  
          Total long term liabilities
    343,157  
         
Total liabilities
    389,299  
         
Commitments and Contingencies
       
         
Stockholders’ Equity
       
Preferred stock, no par value: 5,000,000 share authorized
       
No shares issued and outstanding at December 31, 2013
    -  
Common stock, no par value; 100,000,000 share authorized;
       
15,137,200 shares issued and outstanding on December 31, 2013
    1,204,096  
Deficit accumulated during development stage
    (710,962 )
Total stockholders’ equity
    493,134  
         
Total liabilities & stockholders’ equity
  $ 882,433  

See Accompanying Notes to Financial Statements
 
 
F-3

 
 
ADVANCED CANNABIS SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
 
   
From Inception (June 5, 2013) to
December 31
2013
   
From Inception (June 5, 2013) to
December 31,
2013
 
Revenues
  $ -     $ -  
Cost of goods sold
    -       -  
Gross Revenues
    -       -  
                 
Operating expenses
               
     General and administrative
    53,265       53,265  
     Payroll
    108,588       108,588  
     Professional fees
    391,132       391,132  
     Office expense
    8,269       8,269  
     Loss on expired option to acquire real estate
    150,000       150,000  
Total operating expenses
    (711,254 )     (711,254 )
Net loss from continuing operations
               
                 
Discontinued operations
               
     Income from discontinued operations (including $0 gain on disposal)
    1,957       1,957  
                 
Other income (expense)
               
Interest expense     (871 )     (871 )
Amortization of debt discount
    (794 )     (794 )
Total other income (expense)
    (1,665 )     (1,665 )
                 
Net loss
  $ (710,962 )   $ (710,962 )
                 
Weighted average number of common shares outstanding – basic and fully diluted
    14,026,127       14,026,127  
                 
Net loss per share – basic and fully diluted
               
From continuing operations
  $ (0.05 )   $ (0.05 )
From discontinued operations
    0.00 *     0.00 *
Net loss per share – basic and fully diluted
  $ (0.05 )   $ (0.05 )
 
* Denotes less than $0.01 per share.
 
See Accompanying Notes to Financial Statements.
 
 
F-4

 
 
ADVANCED CANNABIS SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS

   
From Inception
(June 5, 2013) to
December 31,
2013
   
From Inception
(June 5, 2013) to
December 31,
2013
 
Cash flows from operating activities
           
Net loss
  $ (710,962 )   $ (710,962 )
Adjustments to reconcile net loss to net cash used in operating activities:
               
     Loss on expired option to acquire property
    150,000       150,000  
     Issuance of stock for services
    40,000       40,000  
     Amortization of debt discount
    794       794  
Changes in operating assets and liabilities
               
     Accounts receivable and prepaid expenses
    (2,244 )     (2,244 )
     Accounts payable and accrued expenses
    43,212       43,212  
Net cash used in operating activities – continuing operations
    (479,200 )     (479,200 )
Net cash used in operating activities – discontinued operation
    (9,871 )     (9,871 )
Net cash used in operating activities
    (488,192 )     (488,192 )
                 
Cash flows from investing activities
               
Net cash used in the purchase of property
    (282,753 )     (282,753 )
Option to acquire property
    (150,000 )     (150,000 )
Net cash used in investing activities
    (432,753 )     (432,753 )
                 
Cash flows from financing activities
               
Purchase and cancellation of shares of common stock
    (100,000 )     (100,000 )
     Proceeds from issuance of common stock
    985,400       985,400  
     Proceeds from loan payable
    530,000       530,000  
     Debt acquisition costs paid
    (66,140 )     (66,140 )
Net cash provided by financing activities
    1,349,260       1,349,260  
                 
Net increase in cash
    427,436       427,436  
                 
Cash at the beginning of the period
    -       -  
                 
Cash at the end of the period
  $ 427,436     $ 427,436  
                 
Supplemental disclosure of cash flow information:
               
Income taxes paid
  $ -     $ -  
Interest Paid
  $ -     $ -  
                 
Supplementary disclosure of noncash financing activities
               
Net liabilities on transfer of subsidiary
  $ 10,663     $ 10,663  
Cancellation of shares of common stock
  $ 100,000     $ 100,000  
Issuance of common stock for services
  $ 40,000     $ 40,000  
Net assets transferred on disposal of mapping division
  $ 452     $ 452  
Purchase of property with mortgage   $ 170,000     $ 170,000  
 
See Accompanying Notes to Financial Statements.
 
 
F-5

 
 
ADVANCED CANNABIS SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM JUNE 5, 2013 (INCEPTION) TO DECEMBER 31, 2013
 
   
Preferred Stock
    Common Stock              
    Shares 
 Amount
    Shares
Amount
   
Deficit Accumulated During Development Stage
   
Total
Shareholders’
Equity
 
Balance, June 30, 2013 (unaudited)
    -     $  -       -     $ -     $ -     $                             -  
Common stock issued for cash at $0.0001 per share, June 30, 2013
    -        -       12,400,000     $ 12,400       -       12,400  
Common stock issued for cash at $1.00 per share, July 11 through August 8, 2013
    -        -       707,000     $ 707,000       -       707,000  
Recapitalization on August 14, 2013
    -        -       9,724,200     $ (10,663 )     -       (10,663 )
Purchase and cancellation of shares of common stock on August 14, 2013
    -        -       (8,000,000 )   $ (100,000 )     -       (100,000 )
Common stock issued for cash at $1.00 per share, August 14 through September 19, 2013
    -        -       266,000     $ 266,000       -       266,000  
Common stock issued for services December 9, 2013
    -        -       40,000     $ 40,000       -       40,000  
Discount on convertible notes December 27,2013
    -       -       -     $ 289,811       -       289,811  
Loss on sale of mapping business to related party
                            (452 )             (452 )
Net loss for the year ended December 31, 2013
    -       -       -       -       (710,962 )     (710,962 )
                                                 
Balance, December 31, 2013
    -     $ -       15,137,200     $ 1,204,096     $ (710,962 )   $ 493,134  
 
See Accompanying Notes to Financial Statements.
 
 
F-6

 
 
ADVANCED CANNABIS SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION ( JUNE 5, 2013) TO DECEMBER 31, 2013
 
1. NATURE OF OPERATIONS, HISTORY AND PRESENTATION:

Nature of Operations

Promap Corporation (“Promap”, “the Company” “we” or “us”) was incorporated in the State of Colorado on November 12, 1987. Prior to December 31, 2013, the Company was an independent GIS and custom draft energy mapping company for the oil and gas industry in the United States and Canada.  The Company provided hard copy and digital format oil and gas production maps which cover various geologic basins in numerous areas including:  Denver Basin, Powder River Basin, Michigan Basin, Williston Basin, Arkoma Basin, Illinois Basin, Cincinnati Arch, Uintah - Piceance Basins and The Nevada Basin.  The Company also provided maps of the North American Coal Basin and Coal Bed Methane Activity and North American Devonian - Mississippian Shale Map with detailed pipeline locations.

On August 14, 2013, the Company acquired 94% of the issued and outstanding share capital of Advanced Cannabis Solutions (“ACS”) (“the Share Exchange Agreement”), a development-stage company, planning to provide real estate leasing services to the regulated cannabis industry throughout the United States. While the Company will continue to provide energy mapping services on an ongoing basis as a non-core activity, it is planned that the  combined companies will focus on ACS’ business plan as its core activity and operate under the name Advanced Cannabis Solutions, Inc.  The Company has completed a change in trading symbol to CANN (OTCBB) and has completed its official name change.

The Share Exchange Agreement has been accounted for as a reverse acquisition and recapitalization using accounting principles applicable to reverse acquisition. Under reverse acquisition accounting, ACS, the legal acquiree, is treated as the accounting acquirer of the Company. Consequently, ACS’ financial results are disclosed for all periods presented, while the Company’s financial results have only been consolidated with those of the existing ACS business from August 14, 2013 onward. All outstanding shares have been restated to reflect the effect of the Agreement.

ACS was incorporated in the State of Colorado on June 5, 2013. As a development-stage company, ACS plans to provide real estate leasing services to the regulated cannabis industry throughout the United States by purchasing real estate assets and leasing growing space and related facilities to licensed marijuana growers and dispensary owners for their operations.  In addition, ACS plans to provide a variety of ancillary services to the industry, including the development of a proprietary line of grow mediums and plant nutrient lines, product tracking technology, and comprehensive consulting services to current and future cannabis entrepreneurs.

In the period from July through September, 2013, the Company raised $973,000 in capital by issuing 973,000 shares of common stock at $1.00 per share through a private placement.  These funds allowed us to rent offices, hire our executive team, and fund the initial operation of the Company.  In addition, we raised $530,000 in debt through the issuance of 12% convertible notes in December, 2013.  We also purchased our first commercial property on December 31, 2013, consisting of a 5,000 square foot facility located in Pueblo West, Colorado.  This property was leased on the same day to an established grower under an eight year lease averaging $9,588 per month.  The Company is currently in the process of negotiating several additional real estate purchases.

Our initial focus will be on opportunities within Colorado, which has allowed its citizens to use medical marijuana since 2000.  Voters in Colorado approved a ballot measure in November 2012 to legalize marijuana for adult use.   Starting Jan 1, 2014, adult Colorado citizens and visiting adults became able to purchase marijuana without any medical licenses.  Several studies have predicted that the retail cannabis market in Colorado will increase from $200 million annually to over $900 million after the new law takes effect.  While the national regulated cannabis market is estimated to be $1.5 billion annually, many experts expect it to reach $30 billion by 2018 as additional states approve cannabis use for its citizens.

ACS will not grow, harvest, distribute or sell cannabis or any substances that violate United States law or the Controlled Substances Act, nor does it intend to do so in the future.
 
 
F-7

 
 
2.  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the results of 1) the parent company, Advanced Cannabis Solutions Corporation, formed in the state of Colorado on June 5, 2013, 2) Advanced Cannabis Solutions Corporation’s wholly owned subsidiary company, ACS Corp., formed in the state of Colorado on June 6, 2013, and 3) ACS Corp.’s wholly owned subsidiary company, ACS Colorado Corp., formed in the state of Colorado on October 21, 2013.  All intercompany balances and transactions have been eliminated in consolidation.

Basis of Presentation

The accompanying financial statements have been prepared, under accounting principles generally accepted in the United States, assuming that the Company will continue as a going concern that contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. However, the ability of the Company to continue as a going concern on a longer-term basis will be dependent upon the ability to generate sufficient cash flow from operations to meet its obligations on a timely basis, the ability to successfully raise additional financing, and the ability to ultimately attain profitability.

Development Stage Company

The Company is a development stage company in accordance with Financial Accounting Standards Codification (“ASC”) 915 "Development Stage Entities".  Among  the  disclosures  required  as  a development  stage company are that the Company's financial  statements  are identified as those of a development  stage  company,  and that the  statements of operations, stockholders'  deficit and cash flows  disclose  activity  since the date of our Inception (June 5, 2013) as a development stage company.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and cash equivalents

The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents.  These deposits are insured up to $250,000 by the FDIC.  None of our bank accounts, as of December 31, 2013, exceeded this threshold and therefore were all covered by FDIC insurance.

Accounts receivable

The Company reviews accounts receivables periodically for collectability and establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary.

Property and equipment

Property and equipment are recorded at cost and depreciated under accelerated or straight line methods over each item's estimated useful life.
 
 
F-8

 
 
We review our property and equipment for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable.

Maintenance and repairs of property and equipment are charged to operations. Major improvements are capitalized. Upon retirement, sale or other disposition of property and equipment, the cost and accumulated depreciation are eliminated from the accounts and any gain or loss is included in operations.

Income tax

The Company accounts for income taxes pursuant to ASC 740. Under ASC 740 deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance 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. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Fair Value Measurements

ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), provides a comprehensive framework for measuring fair value and expands disclosures which are required about fair value measurements.  Specifically, ASC 820 sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs.  ASC 820 defines the hierarchy as follows:

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed on the New York Stock Exchange.

Level 2 – Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reported date.  The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts, or priced with models using highly observable inputs.
 
Level 3 – Significant inputs to pricing that are unobservable as of the reporting date.  The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial instruments.
 
Our financial instruments consist of prepaid expenses, accounts payable and accrued liabilities and convertible notes payable and approximate their fair value because of the short-term maturities of these instruments or bear market rates of interest.

Long-Lived Assets

In accordance with ASC 350, the Company regularly reviews the carrying value of intangible and other long-lived assets for the existence of facts or circumstances, both internally and externally, that suggest impairment. If impairment testing indicates a lack of recoverability, an impairment loss is recognized by the Company if the carrying amount of a long-lived asset exceeds its fair value.

 
F-9

 

Revenue recognition

The Company will recognize revenue in accordance with ASC. 605, “Revenue Recognition”. ASC-605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company will defer any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.

Advertising costs

Advertising costs are expensed as incurred. No advertising costs were incurred during the period of inception through December 31, 2013.

Comprehensive Income (Loss)

Comprehensive income is defined as all changes in stockholders' equity (deficit), exclusive of transactions with owners, such as capital investments. Comprehensive income includes net income or loss, changes in certain assets and liabilities that are reported directly in equity such as translation adjustments on investments in foreign subsidiaries and unrealized gains (losses) on available-for-sale securities. From our Inception there have been no differences between our comprehensive loss and net loss.

Net income (loss) per share

The net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common outstanding. Warrants, stock options, and common stock issuable upon the conversion of the Company's preferred stock (if any), are not included in the computation if the effect would be anti-dilutive and would increase the earnings or decrease loss per share.

Business Segments

During 2013, the Company operated two reportable business segments – a petroleum mapping business and a real estate leasing business.  On December 31, 2013 the petroleum mapping business was transferred to an unaffiliated shareholder in return for the assumption of liabilities of the business.

Recently Issued Accounting Standards

We have reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of our operations.

3. GOING CONCERN

The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.  The Company has incurred a loss since Inception (June 5, 2013) resulting in an accumulated deficit of $710,962 as of December 31, 2013 and further losses are anticipated in the development of its business.  Accordingly, there is substantial doubt about the Company’s ability to continue as a going concern.
 
 
F-10

 
 
The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and, or, obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. There is no guarantee that the Company will be successful in achieving these objectives.
 
4. SHARE EXCHANGE AGREEMENT

On August 14, 2013, pursuant to a Share Exchange Agreement (the “The Share Exchange Agreement”), Promap Corporation (the “Company”) acquired approximately 94% of the outstanding common stock of Advanced Cannabis Solutions, Inc. (“ACS”) in exchange for 12,400,000 shares of the Company’s common stock.

In connection with the Share Exchange Agreement:

  
The Company purchased 8,000,000 shares of its outstanding common stock from a former officer of the Company for $100,000.  These shares were then cancelled and returned to the status of authorized but unissued shares;
 
  
Robert Frichtel was appointed as a director and the Principal Executive and Financial Officer of the Company;
 
  
Roberto Lopesino was appointed Vice President of the Company; and
 
  
Steven Tedesco and Robert Carrington, Jr., resigned as officers and directors of the Company.

As a result of the acquisition, ACS is the Company’s 94% owned subsidiary and the former shareholders of ACS own approximately 88% of the Company’s common stock.  The Company plans to acquire the remaining outstanding shares of ACS at a later date (see Note 8 Subsequent Events below).

The acquisition has been accounted for as a reverse acquisition and recapitalization using accounting principles applicable to reverse acquisition. Under reverse acquisition accounting, ACS, the legal acquiree, is treated as the accounting acquirer of the Company. Consequently, CSA financial results are disclosed for all periods presented, while the Company’s financial results have only been consolidated with those of the existing ACS business from August 14, 2013 onward. All outstanding shares have been restated to reflect the effect of the Agreement.

The following table summarizes the estimated fair values of the Company’s assets acquired and liabilities assumed by the existing ASC business as on August 14, 2013:

Cash
  $ 1,790  
Accounts receivable
    8,370  
Accounts payable
    (20,823 )
The fair value of the company’s net liabilities at the August 14, 2013 recapitalization
  $ (10,663 )

5. DISCONTINUED OPERATIONS
 
Prior to December 31, 2013, the Company provided hard copy and digital format oil and gas production maps for the oil and gas industry. On December 31, 2013, the Company sold its oil and gas mapping business to its former Chief Executive Officer in consideration for his agreement to assume all liabilities associated with the mapping business. At the time of the transfer, the mapping business had assets of $2,729 and liabilities of $2,277. The Company recognized a loss on the transfer of $452 which was charged to equity.

The components of the discontinued operations are as follows:
 
   
June 5, 2013
(Inception) to
December 31,
2013
 
Revenues
  $ 455  
Cost of services
    183  
Gross profit
    272  
Operating expenses
       
     General administrative
    (1,685 )
Total operating expenses
    (1,685 )
Net income
  $ 1,957  
 
The credit to general administrative expenses arose due the write back of a provision for doubtful debts recorded in a prior period.
 
 
F-11

 
 
6. FIXED ASSETS

On December 31, 2013, the Company acquired a 5,000 square foot commercial building in Pueblo West for the purchase price of $452,753.  We did not book any depreciation expense for the asset in 2013.  In future years, the building will be depreciated using straight-line depreciation and an estimated useful life of 25 years.

7. CONVERTIBLE NOTES PAYABLE

12% Convertible notes

The Company issued $530,000 in convertible notes on December 27, 2013.  These notes have an interest rate of 12%, paid quarterly, and mature on October 31, 2018.  They are convertible at any time to shares of stock at $5.00 per share.  After November 1, 2015, the Company can force conversion of these notes if the trading stock price has exceeded $10 for 20 consecutive trading days.
 
The Company paid commission of $63,600 and incurred other debit issuance costs of $2,540. The Company also issued 10,600 warrants with an exercise price of $5.00 per share as further compensation to the broker dealer who raised this funding for us.

We valued the convertible feature of the 12% convertible notes and the warrants issued to the broker dealer using the Black Scholes valuation model, assuming an expected life of 4.8 years, an annual volatility factor of 127%, a risk free interest rate of 1.65%, and $0 dividends.  The debt discount on these convertible notes payable will be amortized over the life of the notes from December 27, 2013 through October 31, 2018 on a straight line basis that approximates the effective interest rate method.

8 ½% Convertible Note Payable

The Company executed a mortgage on their Pueblo West property in the amount of $170,000 at 8 ½% interest amortized over 15 years with a maturity date of  December 31, 2018.  This note is convertible at any time at $5.00 per share.

We valued the convertible feature of the 8 ½% Convertible note payable using the Black Scholes valuation model, assuming an expected life of 4.8 years, an annual volatility factor of 104%, a risk free interest rate of 1.65%, and $0 dividends.  The debt discount on this convertible note payable will be amortized over the life of the note from January 1, 2014 through January 2019 on a straight line basis that approximates the effective interest rate method

 
F-12

 

The table below summarizes our Convertible Notes activity during the year ended December 31, 2013:
 
   
Convertible Notes Payable
   
Debt Discount
   
Convertible Notes Payable, Net
 
June 5, 2013 (Inception)
  $ -     $ -     $ -  
Proceeds from issuance of convertible debt
                       
     12% convertible notes issued December 27,2013
    530,000       (278,853 )     251,147  
     8% convertible notes issued December 31,2013
    170,000       (77,104 )     92,896  
Amortization of debt discount
    -       794       794  
Total     700,000       (355,163 )     344,837  
Current portion of debt
    (5,356 )     2,426       (2,930 )
Long term portion at December 31, 2013
  $ 694,644     $ (352,737 )   $ 341,907  
 
8. COMMITMENTS AND CONTINGENCIES:

Operating Leases and Long term Contracts
 
The Company rents office space for its corporate needs. The Company entered into a month-to-month lease agreement in July 2013 to lease 2,000 square feet for an annual rate of $12,000, paid monthly. We paid $6,000 for the lease of our corporate offices for the period ended December 31, 2013.

In addition, the Company has a second mortgage on its Pueblo property in the amount of $170,000, with an interest rate of 8 1/2 %, a 15 year amortization, and a maturity date of December 31, 2018.

Legal

To the best of the Company’s knowledge and belief, no legal proceedings are currently pending or threatened.
 
9. STOCK HOLDERS’ EQUITY:

Preferred Stock

The Company is authorized to issue 5,000,000 shares of preferred stock, with no par value.  No shares of preferred stock have been issued or are outstanding, and no rights, privileges or preferences have been determined and designated by the board of directors.

Common Stock

The Company is authorized to issue 100,000,000 shares of no-par value common stock.
 
On June 30, 2013, the Company issued 12,400,000 shares of common stock to its founders for cash consideration of $0.001 per share.

Between July 11, 2013 and August 8, 2013, the Company sold 707,000 shares of its common stock for cash consideration of $1.00 per share.  Each of these shares has a Series A warrant attached with an exercise price of $10.00.  The company may force this exercise at any time, as the requirement for 10 days of consecutive trading at a price at or greater than $10 has already been met.
 
 
F-13

 

On August 14, 2013, following the reverse merger of ACS with the Company, existing shareholders of the Company owned 9,724,200 shares of its common shares However, 8,000,000 of these shares were then immediately purchased by the Company for cash consideration of $100,000 and cancelled.

Between August 14, 2013 and September 19 2013, the Company sold a further 266,000 shares of its common stock for cash consideration of $1.00 per share.  Each of these shares has a Series A warrant attached with an exercise price of $10.00.  The company may force this exercise at any time, as the requirement for 10 days of consecutive trading at a price at or greater than $10 has already been met.

On December 9, 2014, the Company issued 40,000 shares of stock in return for professional services.

On December 27, 2014, the Company issued 10,600 warrants to the placement agent for our convertible note offering.  Each warrant entitles the agent to purchase a one share of our common stock at a price of$5 per share.  The derivative effect of this feature has been calculated and included in the table in Note 6, with a note discount of $21,271.

At December 31, 2013, the Company had 15,137,200 shares of its common stock issued and outstanding.
 
   
Common Stock
   
Warrants
 
June 5, 2013 (Inception)
    -       -  
Issued for cash proceeds of $985,400
    13,373,000       973,000  
Issued as part of exchange agreement
    9,724,200          
Terminated as part of exchange agreement
    (8,000,000 )        
Issued as compensation under a consulting agreement
    40,000       -  
Warrants issued to placement agent
    -       10,600  
December 31, 2013
    15,137,200       983,600  
 
The following table summarizes information about warrants outstanding December 31, 2013:
 
Exercise Price
 
Warrants Outstanding
 
Weighted Average Life of Outstanding Warrants In Months
 
Date of Expiration
$5.00
 
10,600
 
58
 
10/31/2018
$1.00
 
973,000
 
31
 
7/31/2016
$1.04
 
983,600
 
31.3
   
 
10. INCOME TAXES

The Company accounts for income taxes in accordance with FASB ASC 740 “Income Taxes”.  Deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carry-forwards. No net provision for refundable Federal income tax has been made in the accompanying statement of loss because no recoverable taxes were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carry-forward has been recognized, as it is not deemed likely to be realized.
 
 
F-14

 
 
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows: 
 
   
Inception
(June 5, 2013) to
December 31,
2013
 
Deferred tax attributed:
     
Net operating loss carryover
  $ (241,727 )
Less: change in valuation allowance
  $ (241,727 )
Net deferred tax asset
  $ -  

At December 31, 2013 the Company had an unused net operating loss carry-forward approximating ($710,962) that is available to offset future taxable income; the loss carry-forward will expire in 2033.

  11. SUBSEQUENT EVENTS

On January 5, 2014, we acquired 1,750,000 shares of our common stock for no consideration and returned these shares to the status of authorized but unissued shares.

On January 21, 2014 we signed an agreement with Full Circle Capital Corporation, a closed-end investment company.  The agreement provides that Full Circle will initially provide $7.5 million to us in the form of Senior Secured Convertible Notes, subject to certain conditions.  We can borrow an additional $22.5 million with the mutual agreement of us and Full Circle.

At least 95% of the loan proceeds will be used to acquire properties which will lease to licensed marijuana growers.
 
   Full Circle will provide us with the $7.5 million when:
 
 
Full Circle agrees on the location of property to be purchased;
 
The property’s appraised value is satisfactory to Full Circle;
 
A Phase I environmental inspection is completed to the satisfaction of Full Circle; and
 
We are able to provide a first priority lien on the property to Full Circle.
 
We can borrow an additional $22.5 million on terms acceptable to us and Full Circle.
The six-year loan will be secured by real estate acquired with the loan proceeds and will require interest-only payments at a rate of 12% per year.

The initial loan can, at any time, be converted into shares of our common stock at a conversion price of $5.00 per share.  It is contemplated that further advances will be convertible at 110% of the market price of our stock on the day of advance, or the ten-day volume-weighted average price prior to the day of advance, whichever is lower.

The funding of the loan is subject to the execution of additional documents between the parties.

Full Circle also purchased, for $500,000, warrants which allow Full Circle to purchase up to 1,000,000 shares of our common stock at any time on or prior to January 21, 2017 at a price of $5.50 per share.

On January 29, 2014, the Company sold $1,605,000 worth of 12% convertible notes, convertible at $5 per share.  These notes mature on October 31, 2018.  The note holder may convert at any time and the Company has the right to force conversion any time after December 31, 2015 provided the stock price trades above $10 per share for 20 consecutive trading days.

Except for our agreement with Full Circle, we do not have any commitments or arrangements from any person to provide us with any additional capital.  We may not be successful in raising the capital we will need.

On March 27, 2014 the SEC issued a trading halt order on our stock, and issued a statement that they were investigating affiliated shareholders that may have made illegal sales of stock.  The order was not directed at the management of the Company and is considered a private investigation.  The stock began trading again unlisted on the OTC on April 10, 2014.
 
On April 4, 2014, the Company entered into a three year lease agreement to lease 3,000 square feet for an annual rate of $24,000, paid monthly.

The Company has evaluated all subsequent events through the date these financial statements were issued. Other than those set out above, there have been no subsequent events after December 31,
 
F-15

 
 
PART II
Information Not Required in Prospectus
Item 13.                 Other Expenses of Issuance and Distribution.

The following table sets forth the costs and expenses payable by us in connection with the issuance and distribution of the securities being registered.
 
SEC Filing Fee
 
$
5,499
 
Blue Sky Fees and Expenses     1,000  
Legal Fees and Expenses
    50,000
 
Accounting Fees and Expenses 
 
 
10,000
 
Miscellaneous     3,501  
     TOTAL   $ 70,000   

     All expenses other than the SEC filing fee are estimated.

Item 14.                 Indemnification of Officers and Directors                                                                         
 
Our Articles of Incorporation provide that we may indemnify any and all of our officers, directors, employees or agents or former officers, directors, employees or agents, against expenses actually and necessarily incurred by them, in connection with the defense of any legal proceeding or threatened legal proceeding, except as to matters in which such persons shall be determined to not have acted in good faith and in our best interest.

Item 15.                 Recent Sales of Unregistered Securities.
 
        On August 14, 2013, we acquired 12,400,000 shares of Advanced Cannabis Solutions, Inc., (“ACS”) a private Colorado corporation, in exchange for 12,400,000 shares of our common stock.  The 12,400,000 shares were owned by 18 persons, ten of which were accredited investors.

On November 19, 2013 we acquired the remaining 973,000 outstanding shares of ACS in exchange for the issuance of 973,000 shares of our common stock to the former shareholders of ACS.  In connection with the transaction, we issued 973,000 Series A warrants to the former ACS shareholders in exchange for a like number of warrants held by the former ACS shareholders.  The Series A warrants we issued have the same terms as the warrants exchanged by the former ACS shareholders.  The 973,000 shares were owned by 59 persons, all of which were accredited investors.

We relied upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933 with respect to the sale and issuance of the shares and warrants described above.  The purchasers of these securities were sophisticated investors who were provided full information regarding our business and operations.  There was no general solicitation in connection with the offer or sale of these securities.  The purchasers acquired the securities for their own accounts.  The securities cannot be sold unless pursuant to an effective registration statement or an exemption from registration.
 
 
 
27

 

During December 2013 and January 2014 we sold convertible promissory notes in the principal amount of $2,135,000 to 34 accredited investors.  The notes bear interest at 12% per year, payable quarterly, mature on October 31, 2018 and are convertible into shares of our common stock, initially at a conversion price of $5.00 per share.

The convertible notes were not registered under the Securities Act of 1933 and are restricted securities.  We relied upon the exemption provided by Rule 506 of the Securities and Exchange Commission in connection with the sale of these securities. The persons who acquired these securities were sophisticated investors and were provided full information regarding the Company’s business and operations. There was no general solicitation in connection with the offer or sale of these securities. The persons who acquired the convertible notes acquired them for their own accounts. The convertible notes cannot be sold except pursuant to an effective registration statement or an exemption from registration.  We paid a commission of $213,500 and a non-accountable expense allowance of $32,100 to the placement agents for this offering.  We paid a commission of $213,500 and a non-accountable expense allowance of $32,100 to the placement agent for the convertible note offering described above.

The placement agent for our convertible note offering also received 213.5 Series B warrants.  Each Series B warrant allows the holder to purchase 200 shares of our common stock at a price of $5.00 per share.  The Series B warrants expire on October 31, 2018, a total of 42,700 shares.

On January 21, 2014 we signed an agreement with Full Circle Capital Corporation.  The agreement provides that Full Circle will initially provide $7.5 million to us in the form of Senior Secured Convertible Notes, subject to certain conditions.  Full Circle also purchased, for $500,000, Series C warrants which allow Full Circle to purchase up to 1,000,000 shares of our common stock at any time on or prior to January 21, 2017 at a price of $5.50 per share.

The Series B and Series C warrants were not registered under the Securities Act of 1933 and are restricted securities.  We relied upon the exemption provided by Rule 506 of the Securities and Exchange Commission in connection with the sale of these warrants. The persons who acquired these warrants were sophisticated investors and were provided full information regarding our business and operations. There was no general solicitation in connection with the offer or sale of the warrants. The persons who acquired the warrants acquired them for their own accounts. The warrants cannot be sold except pursuant to an effective registration statement or an exemption from registration.
 
 
 
28

 

Item 16.                 Exhibits

The following Exhibits are filed with this Registration Statement:
 
Exhibit Number
 
Exhibit Name
     
2
 
Articles of Merger (Acquisition of shares in Advanced Cannabis Solutions) (1)
     
3.1
 
Articles of Incorporation (1)
     
3.2
 
Articles of Amendment (1)
     
3.3
 
Amended and Restated Articles of Incorporation (1)
     
3.4
 
Bylaws (1)
     
3.5
 
Articles of Amendment (name change) (4)
     
5   Opinion of Hart & Hart, LLC
     
10
 
Share Exchange Agreement ( 2 )
     
10.1
 
Securites Purchase Agreement ( 3 )
     
10.2
 
Warrant (Series C) ( 3 )
     
10.3
 
Registration Rights Agreement ( 3 )
     
10.4
 
Form of Convertible Note ( 3 )
     
10.5
 
Form of Guarantee ( 3 )
     
10.6
 
Form of Security Agreement ( 3 )
     
10.7
 
Agreement Regarding Sale of Oil and Gas Mapping Business (4)
     
10.8
 
Note and Deed of Trust (Pueblo County, Colorado purchase) (4)
     
10.9
 
Form of Convertible Note (4)
     
10.10
 
Form of Series A Warrant (4)
     
10.11
 
Form of Series B Warrant (to be filed by amendment)
     
10.12
 
Lease Agreement (Pueblo Property) (4)
     
23.1
 
Consent of Accountants
     
23.2
 
Share Exchange Agreement (1)
 
(1)  
Incorporated by reference to the same exhibit file with our registration statement on Form S-1, File No. 333-163342.
 
(2)  
Incorporated by reference to the same exhibit filed with our 8-K report dated August 14, 2013.
 
(3)  
Incorporated by reference to the same exhibit filed with our 8-K/A report dated January 21, 2014.
 
(4)  
Filed with initial Registration Statement.
 
 
29

 

 
Item 17.                  Undertakings
 

The undersigned registrant hereby undertakes:

(1)          To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i)         To include any prospectus required by Section l0 (a)(3) of the Securities Act:

( ii)         To reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement.  Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

(iii)         To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

(2)           That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3)      To remove from registration by means of a post-effective amendment any of the securities that remain unsold at the termination of the offering.

Insofar as indemnification for liabilities arising under the Securities Act of l933 (the “Act”) may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.  In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
 
 
 
30

 

(4)           That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:

(i)         If the registrant is relying on Rule 430B:

(A)       Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and

(B)           Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to