GENERAL CANNABIS CORP - FORM 10-Q/A

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EXCEL - IDEA: XBRL DOCUMENT - GENERAL CANNABIS CORP	Financial_Report.xls
EX-32.1 - CERTIFICATION - GENERAL CANNABIS CORP	acs_ex32.htm
EX-31.2 - CERTIFICATION - GENERAL CANNABIS CORP	acs_ex312.htm
EX-31.1 - CERTIFICATION - GENERAL CANNABIS CORP	acs_ex311.htm
EX-32.2 - CERTIFICATION - GENERAL CANNABIS CORP	acs_ex3122.htm

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 4

(Mark One)

þ	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for quarter period ended March 31, 2014.

o	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from __________ to __________.

Commission file number: 000-54457

ADVANCED CANNABIS SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

Colorado		20-8096131
(State of incorporation)		(IRS Employer Identification No.)

4445 Northpark Drive, Suite 102

Colorado Springs, CO 80907

(Address of principal executive offices) (Zip Code)

Former Name, Address and Fiscal Year End if Changed Since Last Report

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

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

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

Large accelerated filer o Accelerated filer o

Non-accelerated filer o Smaller reporting company þ

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

At September 9 , 2014, there were 13,703,933 issued and outstanding shares of the Company’s common stock.

EXPLANATORY NOTE

The purpose of this Amendment No. 4 to the Company’s Report on Form 10–Q/A for the three months ended March 31, 2014 filed with the Securities and Exchange Commission (the “SEC”) on June 23, 2014 (the “March 10–Q/A”), is to revise certain balances and disclosures relating to the Company’s conventional convertible debt and related debt discounts, convertible debt with beneficial conversion features, and derivative liabilities. We revised the March 10-Q/A as follows: (i) revised the Company’s financial statements and notes to the financial statements in Item 8; (ii) added note 16, “Restatement of Prior Period Financial Statements” in Item 8; (iii) revised disclosure of certain balances within Item 7 to reflect the changes identified in (i), as well as other minor changes; and (iv) revised Item 9A to reflect the impact of this Amendment No. 4.

This Amendment No. 4 speaks as of the original filing date of the Company’s initial Form 10–Q, and does reflect certain events that may have occurred subsequent to the original filing date, May 15, 2014. This amendment should be read in conjunction with our other filings made with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended.

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q/A, Financial Statements and Notes to Financial Statements contain forward-looking statements that discuss, among other things, future expectations and projections regarding future developments, operations and financial conditions. All forward-looking statements are based on management’s existing beliefs about present and future events outside of management’s control and on assumptions that may prove to be incorrect. If any underlying assumptions prove incorrect, our actual results may vary materially from those anticipated, estimated, projected or intended.

ADVANCED CANNABIS SOLUTIONS, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION		Page

Item 1.	Financial Statements	3

	Condensed consolidated balance sheets	3

	Condensed consolidated statements of operations	4

	Condensed consolidated statements of cash flows	5

	Notes to unaudited condensed consolidated financial statements	6-23

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24-28

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	29

Item 4.	Controls and Procedures	29

PART II. OTHER INFORMATION		31

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 3.	Defaults Upon Senior Securities	32

Item 4.	Mine Safety Disclosures	32

Item 5.	Other Information	32

Item 6.	Exhibits	32

	Signatures	33

ADVANCED CANNABIS SOLUTIONS, INC.

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2014			December 31, 2013
	(unaudited)			(audited)
	(As Restated)			(As Restated)
ASSETS

Current Assets
Cash	$	1,884,866		$	427,436
Tenant receivable (net of allowance for doubtful accounts)		47,454			1,595
Prepaid expenses		7,953			649
Total current assets		1,940,273			429,680

Property and equipment, net		457,887			452,753
Tenant receivable		19,765			-
Other assets, deferred financing costs (net of amortization)		109,000			-
Total Assets	$	2,526,925		$	882,433

LIABILITIES & STOCKHOLDERS' EQUITY

Current Liabilities
Accounts payable and accrued expenses	$	26,813		$	42,341
Accrued interest expense, notes payable		-			871
Derivative liability		1,147,640
Convertible notes payable– current portion		5,927			5,356
Total current liabilities		1,180,380			48,568

Long Term Liabilities
Convertible notes payable (net of debt discount)		657,483			609,950
Tenant deposits		1,250			1,250
Total long term liabilities		658,733			611,200

Total Liabilities		1,839,113			659,768
Commitments and Contingencies		-			-
Stockholders' Equity
Preferred stock, no par value; 5,000,000 share authorized; no shares issued and outstanding at March 31, 2014 and December 31, 2013		-			-
Common Stock, no par value; 100,000,000 shares authorized; 13,438,933 shares and 15,137,200 shares issued and outstanding on March 31, 2014 and December 31, 2013, respectively		2,604,696			933,627
Deficit accumulated during development stage		(1,916,884	)		(710,962	)
Total Stockholders' Equity		687,812			222,665

Total Liabilities & Stockholders' Equity	$	2,526,925		$	882,433

See Accompanying Notes to Condensed Consolidated Unaudited Financial Statements

ADVANCED CANNABIS SOLUTIONS. INC.

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

				From Inception
	Three Months Ended			(June 5, 2013) to
	March 31, 2014			March 31, 2014
	(unaudited)			(unaudited)
	(As Restated)			(As Restated)
Revenues
Tenant rentals	$	28,765		$	28,765
Consulting fees		20,000			20,000
Total revenues		48,765			48,765

Operating expenses:
General and administrative		54,476			107,741
Payroll and related		105,135			213,723
Professional fees		82,516			473,648
Office expense		7,689			15,958
Loss on expired option to acquire real estate		-			150,000
Depreciation		3,116			3,116
Total operating expenses		252,932			964,186

Operating income (loss) from continuing operations		(204,167	)		(915,421	)

Other income (expense):

Amortization of debt discount		(304,841	)		(305,635	)
Gain (loss) on derivative liability , net		(647,640	)		(647,640	)
Interest expense		(49,274	)		(50,145	)
Total other expense		(1,001,755	)		(1,003,420	)

Loss from continuing operations		(1,205,922	)		(1,918,841	)

Income from discontinued operations		-			1,957

Net loss	$	(1,205,922	)	$	(1,916,884	)

Net loss per share-basic and diluted	$	(0.09	)

Weighted average number of common shares outstanding –basic and diluted		13,659,997

See Accompanying Notes to Condensed Consolidated Unaudited Financial Statements

ADVANCED CANNABIS SOLUTIONS. INC.

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended March 31, 2014			From Inception (June 5, 2013) to March 31, 2014
	(unaudited)			(unaudited)
	(As Restated)			(As Restated)
Cash Flows Provided By (Used In) Operating Activities:
Net loss	$	(1,205,922	)	$	(1,916,884	)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Loss on expired option to acquire property		-			150,000
Depreciation		3,116			3,116
Amortization of debt discount		304,841			305,635
Amortization of deferred financing costs		6,000			6,000
(Gain) Loss on derivative liability, net		(647,640	)		(647,640	)
Issuance of stock to pay interest expense		3,669			3,669
Issuance of stock compensation		-			40,000
Changes in operating assets and liabilities
(Increase) / decrease in accounts receivable		(65,624	)		(67,868	)
(Increase) / decrease in prepaid		(7,304	)		(7,304	)
Increase / (decrease) in accounts payable and accrued expenses		(16,399	)		26,813
Net cash used in operating activities – continuing operations		(329,983	)		(809,183	)
Net cash used in operating activities – discontinued operations		-			(9,871	)
Net cash used in operating activities:		(329,983	)		(819,054	)

Cash Flows Provided By (Used In) Investing Activities:
Purchase of property and equipment		(8,250	)		(291,003	)
Purchase of option to acquire real estate		-			(150,000	)
Net cash used in investing activities		(8,250	)		(441,003	)

Cash Flows Provided By (Used In) Financing Activities:
Purchase and cancellation of shares of common stock		-			(100,000	)
Sales of common stock for cash		-			985,400
Proceeds from sale of warrants, net		400,000			400,000
Principal repayment on convertible notes payable		(1,737	)		(1,737	)
Proceeds from issuance of convertible notes payable, net of cash expenses		1,412,400			1,876,260
Deferred financing costs		(15,000	)		(15,000	)
Net cash provided by financing activities		1,795,663			3,144,923

Net Increase In Cash		1,457,430			1,884,866

Cash, beginning of period		427,436			-

Cash, end of period	$	1,884,866		$	1,884,866

SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash paid for interest	$	46,476		$	46,476
Cash paid for income tax	$	-		$	-
Supplemental Disclosure on non-cash financing activities:
Net liabilities acquired on recapitalization	$	-		$	10,663
Cancellation of shares of stock	$	-		$	100,000
Issuance of common shares for services	$	-		$	40,000
Net assets transferred on disposal-mapping division	$	-		$	452
Purchase of property with mortgage	$	-		$	170,000
Non-cash financing costs	$	100,000		$	100,000
Convertible notes payable settled in stock	$	255,000		$	255,000
Interest on convertible notes payable settled in stock	$	3,669		$	3,669
Warrants issued as payment for deferred financing costs	$	92,600		$	92,600

See Accompanying Notes to Condensed Consolidated Unaudited Financial Statements.

ADVANCED CANNABIS SOLUTIONS, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONDOLIDATED UNAUDITED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2014 AND THE PERIOD FROM JUNE 5, 2013 (INCEPTION) TO MARCH 31, 2014

1. NATURE OF OPERATIONS, HISTORY AND PRESENTATION

Nature of Operations

Advanced Cannabis Solutions, Inc. (“ACS”) was incorporated in the State of Colorado on June 5, 2013 (“Inception”). ACS provide s 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.

While ACS does 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, we may be irreparably harmed by a change in enforcement by the Federal or state governments.

Reverse merger

Promap Corporation (“Promap”, “the Company” “we” or”us”) was incorporated in the State of Colorado on November 12, 1987. The Company was an independent GIS and custom draft energy mapping company for the oil and gas industry in the United States and Canada.

On August 14, 2013, the Company acquired 94% of the issued and outstanding share capital of Advanced Cannabis Solutions, Inc. (“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. On November 9, 2013, we acquired the remaining 6% of the share capital of Advanced Cannabis Solutions, Inc. It was planned that the ongoing Company operations would focus on ACS’ business plan as its core activity and operate under the name Advanced Cannabis Solutions, Inc. (“ACS”). The Company has completed a change in trading symbol to CANN (OTCBB) and has completed its official name change. In December, 2013 the previous oil and gas mapping operations of Promap, as described above, were sold to the former Chief Executive Officer of Promap.

The Share Exchange Agreement has been accounted for as a reverse acquisition and recapitalization using accounting principles applicable to reverse acquisitions. Under reverse acquisition accounting, ACS, the legal acquired entity, 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 Share Exchange Agreement.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of signficant accounting policies is presented to assist the reader in understanding and evaluating the company's financial statements. The Condensed Consolidated Financial Statements and notes are the representation of the Company's management, who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied to the preparations of the Financial Statements.

Principles of Consolidation

The consolidated financial statements include the results of ACS and its two wholly owned subsidiary companies, ACS Colorado Corp. and Advanced Cannabis Solutions Corporation, from the dates of their incorporation and for Promap Corporation from August 14, 2013 onwards. All intercompany balances and transactions have been eliminated in consolidation.

Basis of Presentation

The accompanying (a) condensed consolidated balance sheet at December 31, 2013 has been derived from audited statements and (b) the unaudited condensed consolidated financial statements, have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements , and should be read in conjunction with the audited consolidated financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the Inception to Date period ended December 31, 2013 (the “2013 Annual Report”), as amended, filed with the Commission on August 20, 2014. It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments), have been made which are necessary for a fair financial statements presentation. The financial statements include all adjustments (consisting of normal recurring accruals) necessary to make the financial statements not misleading as required by Regulation S-X, Rule 10-01. Operating results for the three months ended March 31, 2014 are not necessarily indicative of the results of operations for the year ending December 31, 2014. As the Company's Inception date is June 3, 2013, there are no comparative condensed statement of operations or cash flows for the three months period ended March 31, 2013.

Development Stage Operations

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 our financial statements are identified as those of a development stage company, and that the statements of operations, changes in stockholders' equity 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 about future events that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the related notes 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. All cash is maintained with major financial institutions in the United States. Deposits may exceed the amount of insurance provided on such deposits.

Receivables

The Company reviews receivables periodically for collectability and establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary. Receivables are primarily contract-based billings to tenants and consulting engagement receivables.

Deferred Financing Costs, Net

Costs with respect to the issuance of common stock, warrants, stock options or debt instruments by the Company are initially deferred and ultimately offset against the proceeds from such equity transactions or amortized as debt discount over the term of any debt funding, if successful, or expensed if the proposed equity or debt transaction is unsuccessful.

Revenue Recognition

Revenue is recognized on an accrual basis as earned under contract terms. Specifically, revenue from tenant rentals is recognized on a straight-line basis over the reasonably assured lease term, and collectibility is reasonably assured. Consulting revenue is recognized based upon the payment terms within the contracts, and collectibility is reasonably assured.

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.

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 common shares outstanding in accordance with FASB ASC 260, “Earnings Per Share.” Diluted earnings or loss per share is computed using the weighted average common shares and diluted potential common shares outstanding. Warrants and common stock issuable upon the conversion of the Company's convertible notes payable have not been included in the computation as the effect would be anti-dilutive and would decrease the loss per share as the Company has incurred losses in all periods reported .

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 reporting 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 reporting 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 transmission rights.

Our financial instruments consist of cash, accounts receivable, other receivables, prepaid expenses, deferred financing costs, accounts payables and accrued expenses, notes payable and tenant deposits. The carrying values of these financial instruments approximate their fair value due to their short maturities.

The Company's derivative liability is a Level 3 estimated fair market value instrument (see Note 12).

Conventional Convertible Debt

The Company records conventional convertible debt in accordance with ASC Topic 470-20, “Debt with Conversion and Other Options.” Conventional convertible debt is a financial instrument in which the holder may only realize the value of the conversion option by exercising the option and receiving the entire proceeds in a fixed number of shares or the equivalent amount of cash. Conventional convertible debt with a non-detachable conversion feature that does not contain a cash settlement option, and is not accounted for as a derivative, is recorded as a debt instrument in its entirety. The Company has accounted for a December 2013 debt issuance and an 8 ½% Convertible Notes Payable as conventional convertible debt (see Note 9).

Derivatives Liabilities, Beneficial Conversion Features and Debt Discounts

The Company evaluates stock options, stock warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under the relevant sections of ASC Topic 815-40, Derivative Instruments and Hedging: Contracts in Entity’s Own Equity. The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative instrument and is marked-to-market at each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or other expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Financial instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815-40 are reclassified to a liability account at the fair value of the instrument on the reclassification date.

The common stock purchase warrants were not issued with the intent of effectively hedging any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. The warrants do not qualify for hedge accounting, and as such, all future changes in the fair value of these warrants are recognized currently in earnings until such time as the warrants are exercised, expire or the related rights have been waived. These common stock purchase warrants do not trade in an active securities market. The Company estimates the fair value of these warrants using the binomial method. The Company has recorded a derivative liability related to the Series C Warrants (see Note 11).

If a conversion feature of conventional convertible debt is not accounted for as a derivative instrument and provides for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount. The convertible debt is recorded net of the discount related to the BCF. The Company amortizes the discount to interest expense over the life of the debt using the straight-line method which approximates the effective interest rate method. The Company has recorded a BCF to the January 2014 Note issuance (see Note 9).

Business Segments

Following the sale of its oil and gas mapping operations effective December 31, 2013, during the quarter ended March 31, 2014, the Company operated one reportable business segment – its real estate leasing business.

Recently Issued Accounting Standards

The Financial Accounting Standards Board (the “FASB”) has issued a draft of ASU 2014-10 regarding development stage entities. The ASU would remove the definition of development stage entity, as was previously defined under generally accepted accounting principles in the United States (U.S. GAAP), from the accounting standards codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP.

In addition, the ASU would eliminate the requirements for development stage entities to (i) present inception-to-date information in the statement of income, cash flow and stockholders' equity, (ii) label the financial statements as those of a development stage entity, (iii) disclose a description of the development stage activities in which the entity is engaged, and (iv) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage.

The Company adopted this proposed ASU on April 1, 2014.

Reclassifications

Certain reclassifications have been made to the prior period financial statements to conform to the 2014 presentation. The reclassifications had no effect on net loss, total assets, or total stockholders’ equity.

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 approximately $1,917,000 and $711,000 as of March 31, 2014 December 31, 2013, respectively, 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.

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.

The accompanying condensed financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

On April 10, 2014, trading in our Common Stock resumed on the OTC after having been suspended by the SEC on March 27, 2014.

4. SHARE EXCHANGE AGREEMENT

On August 14, 2013, pursuant to the Share Exchange Agreement, Promap acquired approximately 94% of the outstanding common stock of ACS in exchange for 12,400,000 shares of Promap's common stock.

In connection with the Share Exchange Agreement:

●	Promap 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 Promap .

As a result of the acquisition, ACS is Promap’s 94% owned subsidiary and the former shareholders of ACS own approximately 88% of Promap’s common stock. On November 9, 2013, Promap acquired the remaining 6% of the share capital of Advanced Cannabis Solutions, Inc.

The Agreement has been accounted for as a reverse acquisition and recapitalization using accounting principles applicable to reverse acquisitions. Under reverse acquisition accounting, ACS, the legal acquired entity, is treated as the accounting acquirer of the Predecessor Company. Consequently, ACS’ financial results are disclosed for all periods presented, while Promap'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.

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:

Revenues	$	455
Cost of services		183
Gross profit		272
Operating expenses (credits)	$
General administrative		(1,685	)
Total operating expenses (credits)		(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.

6. RECEIVABLES

The Company recognizes tenant rentals on a straight-line basis over the reasonably assured lease term. The Company's tenant rental agreements provide for scheduled rent increases during the lease term. Tenant rental revenue that has been earned on straight-line basis over the reasonably assured rental term, but has not been invoiced as yet under the terms of the tenant rental agreement, has either been classified as current or non-current under tenant receivable. Tenant rental revenue that has been earned on a straight-line basis, but that will not be invoiced to tenants under the terms of the tenant rental agreement within twelve months of the balance sheet date, has been classified as non-current under tenant receivable.

Receivables consist of the following:

	March 31, 2014

Tenant receivable, current	$	47,454
Tenant receivable, non-current		19,765
Receivables		67,219
Less: Allowance for doubtful accounts		-
Receivables, net	$	67,219

Tenant rental income earned but not invoiced for the three month period ended March 31, 2014 was $19,765. The allowance for doubtful accounts at March 31, 2014 is $0.

The following discloses scheduled tenant receipts for the remainder of 2014, the next five fiscal years, and thereafter:

	Scheduled Tenant Receipts

Remainder of 2014	$	106,455
2015		148,205
2016		110,536
2017		112,753
2018		115,008
2019		117,308
Thereafter		246,202
Total scheduled rental receipts	$	956,467

7. DEFERRED FINANCING COSTS, NET

As of March 31, 2014, we had recognized $115,000 of deferred financing costs. On January 10, 2014 the Company paid $15,000 to Full Circle Capital Corporation (“Full Circle”) as a deposit for deal-related expenses related to the long-term financing commitment. On January 21, 2014 as part of the $500,000 proceeds from the warrant being issued to Full Circle, $100,000 was retained by Full Circle out of the total consideration of $500,000 to cover legal and deal-related expenses in connection with the long-term financing commitment from Full Circle (see Note 11).

The deferred financing costs of $115,000 are being amortized over the estimated term of the long-term financing agreement of three years (see Note 11). For the three month period ended March 31, 2014, amortization expense was approximately $6,000. The unamortized deferred financing balance at March 31, 2014 was approximately $109,000.

8. PROPERTY AND EQUIPMENT

On December 31, 2013 the Company purchased a property in Pueblo County, Colorado (the "Pueblo West Property") for $450,000. The property, which is located in a suburb of Pueblo, consists of approximately three acres of undeveloped land, a 5,000 square foot steel building, and a parking lot. The purchase price was allocated $12,340 for land and $437,660 for buildings and related equipment.

The purchase price was paid for cash of $280,000 and a promissory note in the principal of $170,000. The note bears interest at 8.5% interest per annum and is payable in monthly installments, including principal and interest, in the amount of $1,674. All unpaid principal and interest is due December 31, 2018. The promissory note is convertible at any time on or before the maturity date at $5 per common share (See Note 9).

The property is zoned for growing marijuana and is leased to a licensed medical marijuana grower through December 31, 2022 on a triple net lease basis. The Company has agreed with the tenant to begin construction of a light deprivation greenhouse on the property at a cost not to exceed $400,000, with construction scheduled to begin in the second quarter of 2014.

The Company incurred $8,250 in leasehold improvements on the property during the three months ended March 31 , 2014.

Depreciation on the Pueblo building facility began effective January 1, 2014. Depreciation is calculated on a straight-line basis over 30 years. The depreciation expense for the three months ended March 31, 2014 was $3,116.

The following table summarizes Property and Equipment and Related Accumulated Depreciation :

	March 31, 2014			December 31, 2013
	(unaudited)			(audited)

Land	$	12,340		$	12,340
Buildings and Equipment		448,663			440,413
		461,003			452,753
Less: Accumulated Depreciation		(3,116	)		-
Property and Equipment, net	$	457,887		$	452,753

9. CONVERTIBLE NOTES PAYABLE

12% Convertible Notes

December 2013 Issuance

In December 2013, the Company entered into various unsecured convertible promissory notes with various third parties totaling $530,000 (the "December 2013 Issuance"), of which the entire amount was outstanding at March 31, 2014 and December 31, 2013. The principal amounts of these notes range between $10,000 and $300,000. Under the terms of these notes, they mature on October 31, 2018, accrue interest at 12.0% per annum, and are convertible into shares of our common stock at a conversion rate of $5.00 per share, with standard dilution clauses (i.e. dividends, stock splits). 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 $63,600 to a placement agent for finders fees which the Company recorded as a debt discount as of March 31, 2014 and December 31, 2013. In addition, the Company granted the placement agent warrants to purchase 10,600 shares at a price of $5.00 per share, (with standard dilution clause for dividend, stock splits) which vest immediately, and expire October 31, 2018. The value of the warrants was $21,271 based on the Black-Scholes pricing model. The Company recorded the value of warrants as additional debt discount at March 31, 2014 and December 31, 2013. The debt discount is being amortized to interest expense over the life of the notes. For the three months ended March 31, 2014, approximately $4,000 has been amortized to interest expense and the unamortized debt discount balance at March 31, 2014 is approximately $80,000.

To properly account for the December 2013 Issuance, the Company performed a detailed analysis to obtain a thorough understanding of the transaction. The Company reviewed ASC Topic 815, to identify whether any equity-linked features in the December 2013 Issuance are freestanding or embedded. The Company determined that there were no free standing features. The December 2013 Issuance was then analyzed in accordance with Topic 815 to determine if the embedded conversion feature should be bifurcated and accounted for at fair value and remeasured at fair value in income. The Company determined that the embedded conversion feature did not meet the requirments for bifurcation pursuant to Topic 815 and therefore accounted for the December 2013 Issuance as conventional debt. The Company then reviewed ASC Topic 470-20, and determined that the December 2013 Issuance met the criteria of a conventional convertible note and that none of the December 2013 Issuance had a beneficial conversion feature. As a result, pursuant to ASC Topic 470-20, the Company recorded the conventional convertible note as a debt instrument in its entirety.

January 2014 Issuance

In January 2014, the Company entered into various unsecured convertible promissory notes with various third parties totaling $1,605,000 (the "January 2014 Issuance"), of which $1,350,000 was outstanding at March 31, 2014. The principal amounts of these notes range between $10,000 and $200,000. Under the terms of these notes, they mature on October 31, 2018, accrue interest at 12.0% per annum, and are convertible into shares of our common stock at a conversion rate of $5.00 per share, with standard dilution clauses (i.e. dividends, stock splits). They are convertible at any time on or before maturity date at $5.00 per common share. The Company paid $160,500 in debt issuance costs and $32,100 to a placement agent for finders fees which the Company recorded as a debt discount as of March 31, 2014. In addition, the Company granted the placement agent warrants to purchase 32,100 shares at a price of $5.00 per share, (with standard dilution clause for dividend, stock splits) which vest immediately, and expire October 31, 2018. The value of the warrants was $83,452 based on the Black-Scholes pricing model. The Company recorded the value of warrants as additional debt discount at March 31, 2014.

To properly account for the January 2014 Issuance, The Company evaluated the debt instruments pursuant to ASC 815, to identify whether any equity-linked features in the convertible debt are freestanding or embedded. The January 2014 Issuance was issued availing the option for note holders to convert debt to common stock at fixed conversion price of $5.00 per share. The Company determined that conversion feature was embedded in the January issuance, but did not meet the definition of a derivative pursuant to ASC 815 and therefore should not be bifurcated. The Company concluded that the January 2014 Issuance was conventional debt and assessed under ASC 470-20 whether the January 2014 Issuance had a beneficial conversion feature. Since the initial conversion price of the security was less than the market value of the common stock at the time of issuance, it was determined that a beneficial conversion feature existed. The Company calculated the value of the beneficial conversion feature using the intrinsic value method.

The stock price on the date of issuance was $13.75 and the conversion price was $5.00.

The calculated value of the beneficial conversion feature and the combined value of the debt discount resulted in a value greater than the value of the debt and as such, the total discount was limited to the value of the debt balance of $1,605,000.

The debt discount is being amortized to interest expense over the life of the notes. For the three months ended March 31, 2014, approximately $300,000 has been amortized to interest expense (including amounts related to debt conversion of approximately $252,000) and the unamortized discount balance at March 31, 2014 was $1,305,000.

Conversion of 12% Convertible Notes

On March 31, 2014, four of the January 2014 Issuance note holders converted their loan notes with principal balances totaling $255,000 and accrued interest of $3,669 into 51,733 shares of the Company’s common stock at a conversion price of $5.00 per share.

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 (the “Pueblo Mortgage”). This note is convertible at any time at $5.00 per share.

To properly account for the Pueblo Mortgage, the Company performed a detailed analysis to obtain a thorough understanding of the transaction. The Company reviewed ASC Topic 815, to identify whether any equity-linked features in the Pueblo Mortgage are freestanding or embedded. The Company determined that there were no free standing features. The Pueblo Mortgage was then analyzed in accordance with Topic 815 to determine if the embedded conversion feature should be bifurcated and accounted for at fair value and remeasured at fair value in income. The Company determined that the embedded conversion feature did not meet the requirements for bifurcation pursuant to Topic 815 and therefore accounted for the Pueblo Mortgage as conventional debt. The Company then reviewed ASC Topic 470-20, and determined that the Pueblo Mortgage met the criteria of a conventional convertible note and that none of the Pueblo Mortgage had a beneficial conversion feature As a result, pursuant to ASC Topic 470-20, the Company recorded the conventional convertible note as a debt instrument in its entirety.

The table below summarizes our convertible notes activity during the three months ended March 31, 2014:

	Principal			Debt			Accrued
	Balance			Discount			Interest			Total
Balance at December 31, 2013	$	700,000		$	(84,694	)	$	871		$	616,177

Issued in the period		1,605,000			(1,605,000	)		-			-

Converted into shares of common stock		(255,000	)		-			(3,669	)		(258,669	)

Amortization of debt discount		-			304,841			-			304,841

Payment of loan principal		(1,737	)		-			-			(1,737	)

Interest accrued during period		-			-			49,274			49,274

Interest paid during period		-			-			(46,476	)		(46,476	)

Balance at March 31, 2014		2,048,263			(1,384,853	)		-			663,410

Less: Current portion		(5,927	) (1)		-			-			(5,927	)
Long-term debt	$	2,042,336		$	(1,384,853	)	$	-		$	657,483

(1)	The current portion represents the principal balance payable on the 8 ½% convertible note payable in the twelve months following the balance sheet date

10. COMMITMENTS AND CONTINGENCIES:

Long-term financing commitment

On January 21, 2014, we signed an agreement with Full Circle. 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 named conditions. We can borrow an additional $22.5 million with the mutual agreement of Full Circle and ourselves.

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

Full Circle will provide us with the initial $7.5 million when:

● Full Circle agrees on the location of property to be purchased;

● The specified 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 in favor of Full Circle.

We can borrow an additional $22.5 million on terms acceptable to Full Circle and ourselves.

The six-year loan(s) will be secured by real estate acquired with the loan proceeds and will require interest-only payments at a rate of 12% a year, payable monthly. As of March 31, 2014 no amounts have been funded pursuant to its agreement.

The initial loan can, at any time, be converted into shares of our common stock at a conversion price of $5 per common share. It is contemplated that further advances will be convertible at 110% of the market price of our stock on the day of any advance, or the ten-day volume-weighted average price prior to the day of advance, whichever is lower.

The funding of the loan(s) 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. Of the $500,000 proceeds from the warrant being issued to Full Circle, $100,000 was retained by Full Circle Capital Corporation to cover legal and deal related expenses of future financing transactions (See Notes 11 and 12).

Operating Leases

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. This lease was terminated effective April 1, 2014. The Company entered into a new three-year lease agreement effective April 4, 2014 for its corporate offices. The facility leased is 3,000 square feet with total payments due of $82,600 through March 31, 2017.

We paid $3,000 for the lease of our corporate offices for the quarter ended March 31, 2014.

Leasehold Improvements

We also agreed with the tenant of the Pueblo West Property 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 greenhouses on this property.

Legal

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

11. STOCKHOLDERS’ EQUITY:

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.

On January 5, 2014 the Company re-acquired 1,750,000 shares of our common stock for no consideration from existing common stockholders. The re-acquired shares were returned to our authorized but unissued share account. The $1,750 gain on the return of these shares of common stock has been charged to stockholders’ equity.

Warrants

Series A warrants

Between July 11, 2013 and August 8, 2013, the Company issued 707,000 shares of its common stock and 707,000 Series A Warrants for cash consideration of $1.00 per share. 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.

Between August 14, 2013 and September 19 2013, the Company issued a further 266,000 shares and 266,000 Series A Warrants of its common stock for cash consideration of $1.00 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.

As at March 31, 2014, there were 973,000 Series A warrants issued and outstanding.

Series B Warrants

On January 29, 2014, the Company issued 106.5 series B warrants, convertible to 32,100 shares of our common stock, to a broker dealer as compensation for placement of convertible notes payable totaling $1,605,000. 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. At the time the warrants were issued, they had an estimated fair market value of $83,452, based on the Black-Scholes pricing model which has been recognized as part of the debt discount related to this note issuance and is being amortized over the life of the notes from January 29, 2014 through October 31, 2018 on a straight-line basis that approximates the effective interest method.

The following assumptions were used to derive the value of the warrants using the Black-Scholes pricing model:

Stock price	13.75
Risk-free interest rate	1.81	%
Expected dividend yield	0.00	%
Expected term (in years)	4.8
Expected volatility	171	%

At March 31, 2014, there were 213.5 Series B warrants issued and outstanding in respect of 42,700 shares of our common stock.

Series C Warrants

On January 21, 2014, the Company issued to Full Circle, 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. As part of the $500,000 proceeds from the warrant being issued to Full Circle, $100,000 was retained by Full Circle to cover legal and deal related expenses of future financing transactions, which was recorded as deferred financing costs (see Note 7). At March 31, 2014, there were 1,000,000 Series C warrants issued and outstanding (see Note 12).

The following table summarizes information about warrants outstanding as of March 31, 2014:

	Exercise Price		Warrants Outstanding		Weighted Average Life of Outstanding Warrants in Months		Date of Expiration
Series A Warrants	$	10.00		973,000		28	7/31/2016
Series B Warrants		5.00		42,700		56	10/31/2018
Series C Warrants		5.50		1,000,000		34	1/21/2017
	$	7.77		2,015,700		32

The following table summarizes shares of common stock and warrants issued and outstanding for the three months ended March 31, 2014:

	Common Stock		Warrants
Balance at December 31, 2013		15,137,200		983,600
Re-acquired shares of common stock		(1,750,000)		-
Warrants issued to Full Circle for $500,000 consideration – Series C Warrants		-		1,000,000
Warrants issued to placement agent – Series B Warrants		-		32,100
Issued in settlement of $255,000 convertible notes payable and accrued interest of $3,669		51,733		-
Balance at March 31, 2014		13,438,933		2,015,700

12. DERIVATIVE WARRANT LIABILITY

The Series C Warrants issued in connection with our agreement with the Full Circle private placement offering initially provided Full Circle with the opportunity to purchase 1,000,000 shares of the common stock at the original exercise price of $5.50 per share. The Series C Warrants have non-standard anti-dilution protection provisions and, under certain conditions, grant the right to the holder to require the Company to adjust the warrant’s exercise price to a lower price. Accordingly, through March 31, 2014, these warrants were accounted for as derivative liabilities. On January 21, 2014, the value of the initial warrant derivative liability was calculated to be $1,368,908. The Company received $500,000 in cash of which $100,000 was identified as deferred financing costs, resulting in an initial loss on the fair value of the derivative liability of $868,908 on the grant date. The price of $5.00 per share of the Series A and Series B warrants granted in conjunction with the January 2014 Issuance resulted in the revaluation of the Series C warrants granted to Full Circle and an increase to the derivative liability of $153,994.

The Company used the binomial pricing model and assumptions that consider, among other factors, the fair value of the underlying stock, risk-free interest rate, volatility, expected life and dividend rates in estimating fair value for the warrants considered to be derivative instruments. The Company’s common stock has been thinly traded since being delisted in the first quarter 2014, and all conversions of debt from the January 2014 Issuance during the first quarter of 2014 were converted using a stock price of $5.00 per share. Using the binomial pricing model and a stock price of $5.00 per share, management utilized initial scenario stock prices of $3.00, $4.00, $6.00, and $7.00. Assuming a three-year expected term, management assessed the probabilities of the stock prices for each year, with probabilities more heavily weighted toward lower stock prices, in light of the Company’s delisted status, changes in leadership, and the Company’s current inability to execute its initial financing with Full Circle. The underlying assumptions used for the three months ended March 31, 2014 were:

	Three Months Ended March 31, 2014
Risk-free interest rate		0.04	%
Expected dividend yield		0.00	%
Expected term (in years)		3
Expected volatility		40	%

Changes in fair value of the derivative financial instruments are recognized in the Company’s consolidated statement of operations as a derivative gain or loss and are included in other income (expense). The warrant derivative gains (losses) are non-cash income (expenses); and for the three months ended March 31, 2014 a net loss of $647,640 was included in other income (expense) in the Company’s consolidated statement of operations. The primary underlying risk exposure pertaining to the warrants is the change in fair value of the underlying Common Stock for each reporting period.

Changes in the derivative warrant liability for the three months ended March 31, 2014 are as follows:

	Three Months Ended March 31, 2014
Balance at December 31, 2013		—
Fair value of warrants issued	$	1,368,908
Increase in derivative liability resulting from anti-dilution provision in agreement with Full Circle		153,994
Decrease in the fair value of warrant liability		(375,262	)
Balance at March 31, 2014	$	1,147,640

Change in Gain (Loss) on Derivative Liability	Three Months Ended March 31, 2014
Beginning balance at Jauary 1, 2014		-
Original loss on recognition of derivative liability	$	(868,908	)
Change in estimated fair market value		221,268
Loss on derivative liability at end of period	$	(647,640	)

13. 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. If there were any unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.

No provision was made for income taxes for the period March 31, 2014. The Company, from the date of Inception, has incurred net operating losses for tax purposes of approximately $1,917,000. The net operating loss carry-forward may be used to reduce taxable income through the year 2033.

There was no significant difference between reportable income tax and statutory income tax. A 100% valuation allowance has been established against the deferred tax asset, as the utilization of the loss carry-forwards cannot be reasonably assured. A reconciliation between the income taxes computed in the United States is as follows:

	March 31,
	2014

Deferred tax asset	$	651,741
Valuation allowance		(651,741	)
	$	-

US federal income tax rate		34.00	%
Valuation allowance		(34.00	)%
Provision for income tax		0.00	%

14. 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 common stock for 12,400,000 shares of our common stock.

Subsequently, one unaffiliated person who 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 canceled on January 14, 2014.

During the period from June 5, 2013 to December 31, 2013, sales of $8,362 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 period from June 5, 2013 to December 31, 2013, we paid employees of Atoka Colabs, LLC, $762 for producing the maps we sold. Atoka is also controlled by Mr. Tedesco. Both the related party revenue and employee expenses are classified as discontinued operations in the Statement of Operations. We recognized no related party revenues or employee costs in the three months ended March 31, 2014.

15. SUBSEQUENT EVENTS

On April, 10, 2014, trading in our commons stock recommenced on the OTC after having been suspended on March 27, 2014 by the SEC.

On April 21, 2014, the Company entered into a lease agreement as a tenant with a third party landlord to lease warehouse space for general corporate purposes for a period effective April 21, 2014 through April 30, 2017. The total payments called for during the lease period are $38,965 for rent payments. The lease is considered a “gross lease” and payments include estimated charges for property taxes, property insurance, and common area maintenance. The Company will be responsible for utilities under the terms of the agreement.

On August 4, 2014 the Company appointed Michael Feinsod as a member of the Company’s board of directors (the “Board”) and Executive Chairman of the Board. Mr. Feinsod is the Managing Member and holds controlling interest of Infinity Capital, LLC (“Infinity”), an investment management company he founded in 1999. The Board approved the issuance of 200,000 shares of the Company’s common stock, with a par value of $0.01 per share to Infinity. The Board also approved terms that may result in the issuance of additional common stock to Infinity, provided Mr. Feinsod meets specific performance criteria, which could include: (i) the issuance of 1,000,000 shares of the Company’s common stock to Infinity upon the uplisting of the Company’s common stock, (ii) the issuance of 150,000 shares of common stock to Infinity on August 4, 2015, provided that Mr. Feinsod remains a member of the Board on that date, and (iii) the issuance of 150,000 shares of Common Stock to Infinity on August 4, 2016, provided that Mr. Feinsod remains a member of the Board on that date. The agreement with Mr. Feinsod requires the issuance of a number of shares of common stock to Infinity equal to 10% of any new issuance not to exceed 600,000 shares of common stock in the aggregate during the time that Mr. Feinsod remains a member of the Board, which will not be triggered upon issuances relating to convertible securities existing as of the date hereof.

In accordance with ASC 855, Subsequent Events, the Company has evaluated events that occurred subsequent to the balance sheet date through September 9, 2014, the date of available issuance of these unaudited financial statements. The Company determined that other than as disclosed above, there were no material reportable subsequent events to be disclosed.

16. RESTATEMENT OF PRIOR PERIOD FINANCIALS

Conventional Convertible Debt

In connection with the Company’s second quarter 2014 review procedures and internal control analysis, management conducted an analysis of the Company’s various financial instruments and agreements involving its convertible debt and related warrants, and in particular, the $530,000 in unsecured convertible notes issued in December 2013 (the “12% December 2013 Notes”), and the $170,000 convertible debt mortgage relating to the Company’s property in Pueblo (the “Pueblo Mortgage”) (collectively, the “Convertible Debt”). Management’s analysis was particularly focused on the accounting treatment of derivative financial instruments and debt under Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 815, “Derivatives and Hedging” (“ASC 815”) and ASC Topic 470, “Debt” (“ASC 470”), respectively.

Management’s analyses included reviewing its previous analysis and accounting of the Convertible Debt noted above to see if any events may have occurred subsequent to the original issuance which would cause the Company’s original accounting and classification to change. Through the Company’s reevaluation process which included the Company obtaining a thorough understanding of the transactions, including gaining a thorough understanding of the terms of each instrument issued, and any potential derivative features. The Company reevaluated the debt instruments pursuant to ASC 815, to identify whether any equity-linked features in the Convertible Debt are freestanding or embedded. The Convertible Debt was issued availing the option for note holders to convert debt to common stock at fixed conversion price of $5.00 per share. The Company determined that conversion feature was embedded in the debt instrument and was therefore not a free standing features. The Convertible Debt were then analyzed in accordance with ASC 815 to determine if the embedded conversion feature should be bifurcated and accounted for at fair value and remeasured at fair value in income. The Company determined that the embedded conversion feature did not meet the definition of a derivative pursuant to ASC Topic 815 and therefore should not be bifurcated pursuant to ASC 815 and therefore should be evaluated and accounted for as conventional convertible debt. The Company then reviewed ASC 470-20, and determined that the Convertible Debt met the criteria of conventional convertible notes and that none of the Convertible Debt instruments had a beneficial conversion feature as the conversion price was greater than the market price of the Company’s common stock on the date of issuance(s). As a result, pursuant to ASC 470-20, the Company concluded that the Convertible Debt should have been recorded as a conventional convertible debt instrument in its entirety.

The Company had originally accounted for embedded conversion feature associated with the Convertible Debt as beneficial conversion features in the previously issued consolidated financial statements. In addition, the Company originally valued the conversion features using the Black-Scholes pricing model as the Company originally identified that the conversion price of the debt was greater than then value of the Company’s common stock on the date of issuance. Based on our reevaluation analyses performed during the second quarter 2014, we concluded that our original accounting for the embedded conversion feature as a debt discount on the Convertible Debt was incorrect, as the embedded conversion features did not meet the definition of a derivative and therefore should not have been bifurcated and the embedded conversion feature did not have a beneficial conversion, therefore the Company should not have accounted for the embedded conversion feature as a debt discount.

On August 15, 2014, as a result of this analysis, management, along with Company’s board of directors, concluded that it was necessary to restate its previously filed consolidated financial statements for the period from June 5, 2013 (Inception) to December 31, 2013 filed on Form 10-K and Form 10-Q for March 31, 2014.

Derivative Warrant Liability

In connection with the Company’s second quarter 2014 review procedures, management conducted an analysis of the Company’s warrants, specifically, the 1,000,000 Series C warrants issued in conjunction with the Company’s financing arrangement with Full Circle. Management’s analysis was particularly focused on the accounting treatment of derivative financial instruments under Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 815, “Derivatives and Hedging” (“ASC 815”).

Management’s analyses included reviewing its previous analysis and accounting for the Series C warrants to see if any events may have occurred subsequent to the original issuance which would cause the Company’s original accounting and classification to change. Through the Company’s reevaluation process which included the Company obtaining a thorough understanding of the transactions, including gaining a thorough understanding of the terms of the warrants issued, and any potential derivative features. The Company reevaluated the warrants instruments pursuant to ASC 815, to assess whether the share settlement feature of the Series C warrants included in the agreement with Full Circle was within the Company’s control. Management’s analysis of the agreement noted that without a conversion price floor or maximum number of shares, the Company cannot conclude that a sufficient number of shares are available. In order to share settle all outstanding contracts for common stock, the Company would be required to increase the authorized number of shares. Per ASC 815-40-25-19, if the Company is required to increase the number of authorized shares, share settlement is not within the control of the Company. Per ASC 815-40-25-22, if share settlement is not within the control of the Company, asset or liability classification is required. ASC 815-10-35-1 requires all derivatives be measured at fair value at each reporting period, and ASC 815-10-35-2 requires the gain or loss to be recognized in the Company's consolidated statement of operations.

On August 15, 2014, as a result of this analysis, management, along with Company’s board of directors, concluded that it was necessary to restate its previously filed consolidated financial statements for the three months ended March 31, 2014 filed on Form 10-Q and for the period from June 5, 2013 (Inception) to December 31, 2013 filed on Form 10-K (collectively, the “Restated Periods”).

Restatement Impact

As a result of the restatement, the table below sets forth the changes to be made in the consolidated financial statements for the Restated Periods:

Effect of Corrections	As Previously						As
	Reported		Adjustments				Restated
Balance Sheet as of December 31, 2013
Convertible notes payable (net of debt discount) – current portion	$	2,930	$	2,426		(1)	$	5,356
Total current liabilities		46,142		2,426		(1)		48,568
Convertible notes payable (net of debt discount), less current portion		341,907		268,043		(1)		609,950
Total long-term liabilities		343,157		268,043		(1)		611,200
Common stock		1,204,096		(270,469	)	(2)		933,627
Total stockholders’ equity		493,134		(270,469	)	(2)		222,665
Statement of Changes in Stockholders’ Equity for the Period from June 5, 2013 (Inception) to December 31, 2013
Discount on convertible notes December 27, 2013		289,811		(270,469	)	(2)		19,342
Common stock		1,204,096		(270,469	)	(2)		933,627
Total stockholders’ equity		493,134		(270,469	)	(2)		222,665

Effect of Corrections	As Previously
	Reported				Adjustments				As Restated
Balance Sheet as of March 31, 2014:
Deferred financing costs, net		$	115,000		$	(6,000	)	(3)	$	109,000
Total Assets			2,532,925			(6,000	)	(8)		2,526,925
Derivative liability			-			1,147,640		(5)		1,147,640
Accounts payable and accrued expenses			32,813			(6,000	)	(3)		26,813
Total current liabilities			38,740			1,141,640		(8)		1,180,380
Convertible notes payable, net			402,595			254,888		(1)		657,483
Total long-term liabilities			403,845			254,888		(8)		658,733
Total liabilities			442,585			1,396,528		(8)		1,839,113
Common stock			3,375,165			(770,469	)	(11)		2,604,696
Deficit accumulated during the development stage			(1,284,825	)		(632,059	)	(10)		(1,916,884	)
Total Stockholders' Equity			2,090,340			(1,402,528	)	(8)		687,812
Total Liabilities & Stockholders' Equity			2,532,925			(6,000	)	(8)		2,526,925
Statement of Operations for the three months ended March 31, 2014:
Amortization of debt discount			(320,422	)		15,581		(4)		(304,841	)
Gain (loss) on derivative liability, net			-			(647,640	)	(8)		(647,640	)
Total other expense			(369,696	)		(632,059	)	(8)		(1,001,755	)
Net loss			(573,863	)		(632,059	)	(8)		(1,205,922	)
Net loss per share - basic and diluted			(0.04	)		(0.05	)	(9)		(0.09	)
Statement of Operations for the period from Inception (June 5, 2013) to March 31, 2014
Amortization of debt discount			(321,216	)		15,581		(4)		(305,635	)
Gain (loss) on derivative liability, net			-			(647,640	)	(6)		(647,640	)
Total other expense			(371,361	)		(632,059	)	(8)		(1,003,420	)
Loss from continuing operations			(1,286,782	)		(632,059	)	(8)		(1,918,841	)
Net loss			(1,284,825	)		(632,059	)	(8)		(1,916,884	)
Statement of Cash Flows for the three months ended March 31, 2014:
Net loss			(573,863	)		(632,059	)	(8)		(1,205,922	)
Amortization of debt discount			320,422			(15,581	)	(4)		304,841
Amortization of deferred financing costs			-			6,000		(3)		6,000
(Gain) loss on derivative liability, net			-			647,640		(6)		647,640
Increase/ (decrease) in accounts payable and accrued expenses			(11,193	)		(5,206	)	(3)		(16,399	)
Net cash provided by (used in) operating activities – continuing operations			(330,777	)		794		(8)		(329,983	)
Net cash provided by (used in) operating activities			(330,777	)		794		(8)		(329,983	)
Principal repayment on convertible notes payable			(943	)		(794	)	(4)		(1,737	)
Statement of Cash Flows for the period from Inception (June 5, 2013) to March 31, 2014:
Net loss			(1,284,825	)		(632,059	)	(8)		(1,916,884	)
Amortization of debt discount			321,216			(15,581	)	(4)		305,635
Amortization of deferred financing costs			-			6,000		(3)		6,000
(Gain) loss on derivative liability, net			-			647,640		(6)		647,640
Increase/ (decrease) in accounts payable and accrued expenses			32,019			(5,206	)	(3)		26,813
Net cash provided by (used in) operating activities – continuing operations			(809,977	)		794		(8)		(809,183	)
Net cash provided by (used in) operating activities			(819,848	)		794		(8)		(819,054	)
Principal repayment on convertible notes payable			(943	)		(794	)	(4)		(1,737	)
Statement of Changes in Stockholders' Equity for the period from Inception (June 5, 2013) to March 31, 2014:
Discount on convertible notes issued December 27, 2013			289,811			(270,469	)	(2)		19,342
Common stock at December 31 , 2013			1,204,096			(270,469	)	(8)		933,627
Warrants sold to Full Circle January, 2014 in financing transaction			500,000			(500,000	)	(7)		-
Common stock at March 31, 2014			3,375,165			(770,469	)	(8)		2,604,696
Net loss for three months ended March 31, 2014			(573,863	)		(632,059	)	(8)		(1,205,922	)
Total Stockholders' Equity			2,090,340			(1,402,528	)	(8)		687,812

(1)	To reclassify debt discount, net of amortization, previously recognized as a beneficial conversion feature to current and noncurrent convertible notes payable from discount on convertible notes and common stock.

(2)	To reclassify debt discount, net of amortization, previously recognized as a beneficial conversion feature from discount on convertible notes and common stock to current and noncurrent convertible notes payable.

(3)	To present amortization expense recognized on deferred financing costs as its own line item in the statement of cash flows and reclassify it from Increase/ (decrease) in accounts payable and accrued expenses.

(4)	To recognize amortization of debt discount and reclassify amounts repaid on the principal of the convertible notes.

(5)	To record derivative liability at March 31, 2014.

(6)	To present the loss on the warrant derivative liability.

(7)	To derecognize the warrants sold to Full Circle which were erroneously recorded as adjustments to common stock.

(8)	To present the cumulative impact of adjustments discussed above. This is a line item is a subtotal or total balance on the financial statements.

(9)	To present the cumulative impact of adjustments on the net loss per share.

(10)	To present the cumulative impact of adjustments on the Company’s deficit accumulated during the development stage.

(11)	To present the cumulative impact of adjustments relating to items (7) and (2).

PART I

Item 2. Management's discussion and analysis of financial condition and results of operations

This discussion should be read in conjunction with the Condensed Consolidated Unaudited Financial Statements contained in this quarterly report and the Consolidated Financial Statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of operations appearing in our Annual Report on Form 10-K for the inception date (June 5, 2013) to December 31, 2013. The results of operations for an interim period may not give a true indication of results for future interim periods or the year. In the following discussion, there does not appear a comparison for the three months ended March 31, 2014 with the three months ended March 31, 2013, as the Company was not incorporated until June 5, 2013.

Overview

Advanced Cannabis Solutions, Inc. (“ACS,” “the Company”, “we” or “us”) is a Colorado corporation. We were incorporated in the State of Colorado on November 12, 1987 under the name Promap Corporation. Promap originally traded as an independent GIS and custom draft energy mapping company providing hard copy and digital format oil and gas production maps for the oil and gas industry in the United States and Canada. Prior to December, 2013 most of the Company’s sales were to a company controlled by our chief executive officer.

On August 14, 2013, Promap acquired 94% of the issued and outstanding share capital of ACS in exchange for 12,400,000 shares of its common stock (see note 4 Share Exchange Agreement in the attached financial statements for a more detailed explanation of the transaction). On November 9, 2013, we acquired the remaining 6% of the share capital of Advanced Cannabis Solutions, Inc. On October 1, 2013, we changed our name from Promap Corporation to Advanced Cannabis Solutions, Inc. The Company has completed a change in trading symbol to CANN (OTCBB).

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.

The acquisition of Advanced Cannabis Solutions, Inc. was accounted for as a reverse acquisition and recapitalization using accounting principles applicable to reverse acquisitions. Under this type of accounting ACS is considered to have acquired us. Consequently, ACS’ financial results are disclosed for the period inception (June 5, 2013) through March 31, 2014, while our financial results have only been consolidated with those of ACS from August 14, 2013 forward.

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 ancillary 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 approved a ballot measure in November 2013 to legalize marijuana for adult use.

While we do not intend to grow, harvest, distribute or sell cannabis or any substances that violate United States law or the Controlled Substances Act, we may be irreparably harmed by a change in enforcement by the federal or state governments.

The Company’s wholly owned subsidiary, Advanced Cannabis Solutions Corporation, is the parent company formed in the state of Colorado on June 5, 2013. Advanced Cannabis Solutions Corporation’s wholly owned subsidiary company, ACS Corp., was formed in the state of Colorado on June 6, 2013. ACS Corp.’s wholly owned subsidiary company, ACS Colorado Corp., was formed in the state of Colorado on October 21, 2013.

During the quarter ending March 31, 2014, we:

-	raised $1,605,000 in capital through a private placement offering,

entered into a financing agreement with Full Circle Capital Corporation ("Full Circle"). 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 named conditions. We can borrow an additional $22.5 million with the mutual agreement of Full Circle and ourselves, and

-	sold 1,000,000 Series C warrants to Full Circle for $500,000. As part of the $500,000 proceeds from the warrants being issued to Full Circle, $100,000 was retained by Full Circle to cover legal and transaction-related expenses for future financing transactions.

On March 27, 2014 the SEC issued a trading halt order on our stock, and issued a statement that they were investigating affiliated stockholders who 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 on the OTC on April 10, 2014

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.

As of June 3, 2014, 22 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

Critical Accounting Policies

Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates, assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

Our significant accounting policies are summarized in Note 2 of our condensed consolidated financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would materially affect our consolidated results of operations, financial position or liquidity for the periods presented in this report.

Going Concern

The Company has incurred a loss since Inception (June 5, 2013) resulting in an accumulated deficit of approximately $1,917,000 and $711,000 as of March 31, 2014 and December 31, 2013, respectively, 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.

The accompanying condensed financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

On April 10, 2014, trading in our Common Stock resumed on the OTC after having been suspended by the SEC on March 27, 2014.

RESULTS OF OPERATION FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2014

As the Company was incorporated on June 5, 2013, no comparable results for the three month period ended March 31, 2013 are available for comparison and discussion.

Revenues

Revenues for three month period ending March 31, 2014 were $48,765. Tenant rental income related to a real estate leasing transaction for our property near Pueblo, Colorado was $28,765 and we recognized $20,000 from a consulting contract with a Canadian entity.

Operating expense

Operating expenses for the three month period presented in these financial statements consisted of (1) general and administrative expenses of $54,476, primarily for corporate expenses including insurance premiums, travel and promotion, and website maintenance; (2) payroll and related expenses of $105,135 for staff salaries and employer share of health benefit premiums; (3) professional fees of $82,516, primarily legal and accounting and audit fees, (4) office expenses of $7,689 and (5) depreciation expense of $3,116.

Other Income and Expense

During the three months ended March 31, 2014 we incurred other expenses of $1,001,755. We amortized debt discount of $304,841 and incurred interest expense of $49,274 on our convertible notes payable. L oss on the recognition of the derivative liability was $647,640.

Net loss

The net loss for the three month period ended March 31, 2014 was $1,205,922 due to the factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

As at March 31, 2014, we had working capital of approximately $760,000. However, the Company has incurred a loss since Inception (June 5, 2013) resulting in an accumulated deficit of approximately $1,917,000 as of March 31, 2014 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.

Operating activities

We used funds totaling $329,983 in operating activities during the three month period ended March 31, 2014. We incurred a net loss of $1,205,922 of which $965,266 related to non-cash items. We used a further $89,327 in increases in accounts receivable, other receivables and prepayments and a reduction in accounts payable and accruals.

Investing activities

We used funds totaling $8,250 in investing activities during the three month period ended March 31, 2014. The funds were used in purchasing leasehold improvements with respect to our property in Pueblo County, Colorado.

Financing activities

During the three months ended March 31, 2014 we generated $1,412,400, net of debt issuance costs, from the sale of convertible notes and $400,000 from the sale of 1,000,000 Series C warrants. We used $15,000 in the payment of deferred financing costs and $1,737 in principal repayments relating to our 81/2% convertible note.

CONTRACTUAL OBLIGATIONS

The Company had the following contractual obligations as of March 31, 2014:

			Amounts Due in
Description	Total		2014		2015		2016		2017		2018		Thereafter
12% Convertible notes issued December 27,2013	$	530,000		-		-		-		-		530,000		-
12% Convertible notes issued January 29, 2014	$	1,350,000		-		-		-		-		1,350,000		-
Mortgage on Pueblo Building	$	169,057		15,067		20,089		20,089		20,089		93,723
Office Rental	$	82,600		19,000		26,700		29,400		7,500		-		-
Leasehold improvements	$	400,000		400,000		-		-		-		-		-

PLAN OF OPERATIONS

On January 21, 2014, we signed an agreement with Full Circle, 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 named conditions. We can borrow an additional $22.5 million with the mutual agreement of Full Circle and ourselves.

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

Full Circle will provide us with the initial $7.5 million when:

● Full Circle agrees on the location of property to be purchased;

● The specified 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 in favor of Full Circle.

We can borrow an additional $22.5 million on terms acceptable to Full Circle and ourselves.

The six-year loan(s) will be secured by real estate acquired with the loan proceeds and will require interest-only payments at a rate of 12% a year, payable monthly.

The funding of the loan(s) 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. As part of the $500,000 proceeds from the warrant being issued to Full Circle, $100,000 was retained by Full Circle to cover legal and deal related expenses of future financing transactions.

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 for amounts in the range of $750,000 to $5 million for each project. There can be no assurance that we will be able to complete any of these transactions,

OFF-BALANCE SHEET ARRANGEMENTS

The Company did not have any off-balance sheet arrangements (as that term is defined in Item 303 of Regulation S-K) 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.

Item 4. Controls and procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

We carried out an evaluation under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2014, the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses discussed below.

Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive officer and principal financial officer and effected by our board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

●	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

●

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

●	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Because of our inherent limitations, our internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of March 31, 2014. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework.

The Company restated its consolidated financial statements and other financial information as of March 31, 2014, for the three-month period ended March 31, 2014, as of December 31, 2013, for the period June 5, 2013 (Inception) to March 31, 2014, and for the period June 5, 2013 (Inception) to December 31, 2013 as a result of the Company’s determination that the original accounting for certain of its convertible note offerings failed to inappropriately recognized a beneficial conversion features for debt discounts relating to our conventional convertible debt. See the accompanying notes to the condensed consolidated financial statements for the period ended March 31, 2014 for more information.

In connection with the restatement our Chief Executive Officer and Chief Financial Officer considered the effect of the error on the adequacy of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q for the three months ended March 31, 2014. A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard No. 5), or combination of control deficiencies, that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management has identified the following material weaknesses which have caused management to conclude that, as of March 31, 2014, our disclosure controls and procedures were not effective at the reasonable assurance level:

We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

2.	We had not effectively implemented comprehensive entity-level internal controls.

3.	We did not implement financial controls that were properly designed to meet the control objectives or address all risks of the processes or the applicable assertions of the significant accounts.

Due to material weaknesses identified at our entity level controls we did not test whether our financial activity level controls or our information technology general controls were operating sufficiently to identify a deficiency, or combination of deficiencies, that may result in a reasonable possibility that a material misstatement of the consolidated financial statements would not be prevented or detected on a timely basis.

Remediation of Material Weaknesses

While management believes that the Company’s financial statements previously filed in the Company’s SEC reports have been properly recorded and disclosed in accordance with US GAAP, based on the control deficiencies identified above, we have designed and plan to implement, or in some cases have already implemented, the specific remediation initiatives described below:

●	We are in the process of further enhancing our internal finance and accounting organizational structure, which includes hiring additional resources.

●	We are in the process of further enhancing the supervisory procedures to include additional levels of analysis and quality control reviews within the accounting and financial reporting functions.

●

We are in the process of strengthening our internal policies and enhancing our processes for ensuring consistent treatment and recording of reserve estimates and that validation of our conclusions regarding significant accounting policies and their application to our business transactions are carried out by personnel with an appropriate level of accounting knowledge, experience and training.

We do not expect to have fully remediated these material weaknesses until management has tested those internal controls and found them to have been remediated. We expect to complete this process during our annual testing for fiscal 2014.

Management has reviewed the consolidated financial statements and underlying information included herein in detail and believes the procedures performed are adequate to fairly present our financial position, results of operations and cash flows for the periods presented in all material respects.

This Quarterly Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to such attestation pursuant to rules of the Securities and Exchange Commission that permits us to provide only management’s report in this Quarterly Report.

Changes in Internal Control over Financial Reporting

No changes in the Company's internal control over financial reporting have come to management's attention during the Company's last fiscal quarter that have materially affected, or are likely to materially affect, the Company's internal control over financial reporting.

PART II

Item 1. Legal Proceedings.

To the best of our knowledge and belief, no legal proceedings are currently pending or threatened.

Item 1A. Risk Factors.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required regarding market risk factors

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

During January 2014 we sold convertible promissory notes in the principal amount of $1,605,000 to 29 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. .

The placement agent for our convertible note offering also received 160 Series B warrants in respect of 32,100 shares of our common stock. 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.

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. As part of the $500,000 proceeds from the warrant being issued to Full Circle, $100,000 was retained by Full Circle to cover legal and deal related expenses of future financing transactions.

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.

During the three month period, we issued 51,733 shares of our common stock to holders of our 12% convertible promissory notes in exchange for $255,000 face value of those 12% notes issued January 29, 2014 and related accrued interest of $3,669 converted at a price of $5 per common share.

The shares issued in these transactions were to existing convertible note holders who are considered to be accredited investors and had access to sufficient information concerning the Company. The shares are restricted.

Item 3. Defaults Upon Senior Securities.

We were not in default under any of our securities issued and outstanding during the three months end March 31, 2014.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Not applicable

Item 6. Exhibits

Exhibits

31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ADVANCED CANNABIS SOLUTIONS, INC.

Date: September 9, 2014	By:	/s/ Robert Frichtel
		Robert Frichtel, Chief Executive Officer


	By:	/s/ Christopher Taylor
		Christopher Taylor, Principal Financial and Accounting Officer

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