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EX-10.1 - EXHIBIT 10.1 - MEDICAN ENTERPRISES, INC.ex10-1.htm
EX-31.2 - EXHIBIT 31.2 - MEDICAN ENTERPRISES, INC.ex312.htm
EX-31.1 - EXHIBIT 31.1 - MEDICAN ENTERPRISES, INC.ex311.htm
EX-10.7 - EXHIBIT 10.7 - MEDICAN ENTERPRISES, INC.ex10-7.htm
EX-10.2 - EXHIBIT 10.2 - MEDICAN ENTERPRISES, INC.ex10-2.htm
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EX-10.5 - EXHIBIT 10.5 - MEDICAN ENTERPRISES, INC.ex10-5.htm
EX-10.4 - EXHIBIT 10.4 - MEDICAN ENTERPRISES, INC.ex10-4.htm
EX-10.3 - EXHIBIT 10.3 - MEDICAN ENTERPRISES, INC.ex10-3.htm
EX-10.6 - EXHIBIT 10.6 - MEDICAN ENTERPRISES, INC.ex10-6.htm
EX-10.9 - EXHIBIT 10.9 - MEDICAN ENTERPRISES, INC.ex10-9.htm
EX-10.12 - EXHIBIT 10.12 - MEDICAN ENTERPRISES, INC.ex10-12.htm
EX-10.11 - EXHIBIT 10.11 - MEDICAN ENTERPRISES, INC.ex10-11.htm
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EX-10.10 - EXHIBIT 10.10 - MEDICAN ENTERPRISES, INC.ex10-10.htm
EXCEL - IDEA: XBRL DOCUMENT - MEDICAN ENTERPRISES, INC.Financial_Report.xls
EX-32 - EXHIBIT 32 - MEDICAN ENTERPRISES, INC.ex32.htm
EX-10.13 - EXHIBIT 10.13 - MEDICAN ENTERPRISES, INC.ex10-13.htm


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

FORM 10-K

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

For the fiscal year ended December 31, 2014

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

Commission File Number: 000-53408
 
MEDICAN ENTERPRISES, INC.
(Exact Name of Registrant as Specified in Its Charter)


Nevada
 
87-0474017
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)

3440 East Russell Road
   
Las Vegas, NV
 
89120
(Address of principal executive offices)
 
(Zip Code)

(800) 416-8802
(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, par value $0.001

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

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

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

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

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company:

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

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


 
 

 

The aggregate estimated market value was determined by multiplying the approximate number of shares of common stock held by non-affiliates by the average bid price of such stock $1.89 on the last day of the Company’s second fiscal quarter, as quoted on the Over-the-Counter Bulletin Board (the “OTCBB”) of the Financial Industry Regulatory Authority (“FINRA”). There were 21,393,336 shares of common voting stock held by non-affiliates, valued in the aggregate at $40,433,405.

Outstanding Shares

As of April 15, 2015, the Registrant had 447,063,367 shares of common stock outstanding.

Documents Incorporated by Reference

See Part IV, Item 15.
 

 
 

 

 
TABLE OF CONTENTS

 
Page
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
ii
   
PART I
1
   
ITEM 1. BUSINESS
1
   
ITEM 1A. RISK FACTORS
8
   
ITEM 1B. UNRESOLVED STAFF COMMENTS
17
   
ITEM 2: PROPERTIES
17
   
ITEM 3: LEGAL PROCEEDINGS
17
   
ITEM 4: MINE SAFETY DISCLOSURES
17
   
PART II
18
   
ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
18
   
ITEM 6: SELECTED FINANCIAL DATA
26
   
ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
26
   
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
27
   
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
28
   
ITEM 9A: CONTROLS AND PROCEDURES
45
   
ITEM 9B: OTHER INFORMATION
45
   
PART III
46
   
ITEM 10: DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
46
   
ITEM 11: EXECUTIVE COMPENSATION
49
   
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
50
   
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
51
   
ITEM 14: PRINCIPAL ACCOUNTING FEES AND SERVICES
52
   
PART IV
52
   
ITEM 15: EXHIBITS, FINANCIAL STATEMENT SCHEDULES
52


 
 

 

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
 
This Annual Report and the documents we have filed with the United States Securities and Exchange Commission (the “SEC”) that are incorporated by reference herein contain forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve significant risks and uncertainties.  Any statements contained, or incorporated by reference, in this Annual Report that are not statements of historical fact may be forward-looking statements. When we use the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will” and other similar terms and phrases, including references to assumptions, we are identifying forward-looking statements.  Forward-looking statements involve significant risks and uncertainties which may cause our actual results, performance or achievements to be materially different from those expressed or implied by forward-looking statements.
 
A variety of factors, some of which are outside our control, may cause our operating results to fluctuate significantly. They include, but are not limited to:

 
the new and evolving regulatory requirements in the U.S. and Canada regarding the production and distribution of medical marijuana;
 
 
our ability to secure and maintain our relationships with our key commercial partners or otherwise establish our business;
 
 
our expectations regarding the commercial market for our products;
 
 
 •
the effect of competition; and
 
 
the availability of required additional financing.
 
As more fully described in this Annual Report under the heading “Risk Factors,” many important factors may affect our ability to achieve our stated objectives and to manufacture and commercialize our products, including, among other things, our ability to:
 
 
obtain substantial additional funds to commence and expand our planned operations;
 
 
obtain and maintain all necessary regulatory approvals and licenses and to operate our business in compliance with the same;
 
 
meet obligations and required milestones under agreements;
 
 
retain key executives, and attract, retain and motivate qualified personnel;
 
 
be capable of manufacturing and distributing our product in commercial quantities at reasonable costs; and
 
 
compete against others in a profitable manner.
 
Moreover, new risks regularly emerge and it is not possible for our management to predict all risks, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements. All forward-looking statements included in this Annual Report are based on information available to us on the date hereof. Except to the extent required by applicable laws or rules, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained throughout this Annual Report and the documents we have filed with the SEC. 
 

ii 
 

 

PART I

ITEM 1.  BUSINESS

Medican Enterprises, Inc. is a bio-pharmaceutical company focused on pursuing business opportunities in the growing medical and recreational marijuana sector.  Through our subsidiaries, we are seeking to invest in businesses associated with the growing, marketing, research and development, training, distribution and retail sale of medical and recreational marijuana, both in the United States and Canada.  We are seeking to establish and expand a real estate and leasing services business under which we would lease real estate that is outfitted with turnkey solutions for legally compliant marijuana growing facilities to licensed growers. As of the date of this report, we have not commenced the actual the production and sale of medical marijuana but are seeking to lay the foundation to commence this business or related business in the marijuana sector.  References in this report to “we,” “us,” “our” and “the Company” are to Medican Enterprises, Inc. and its subsidiaries.

Other businesses have been operated through our company in the past.  The following are the material organizational business developments related to our company since inception: 

Corporate History (1990-2012)

We were organized under the laws of the State of Nevada on October 27, 1988, under the name “Extant Investments, Inc.”

Commencing on or about December 5, 1990, pursuant to a Registration Statement on Form S-18 filed with the SEC and Exchange Commission and a prospectus dated as of such date, our company offered and sold units consisting of common stock and warrants that was closed on January 31, 1991.

Effective May 17, 1991, we acquired all of the issued and outstanding shares of common stock of Sentinel Diagnostics, Inc., an Arizona corporation, pursuant to an Agreement and Plan of Reorganization, and changed our name to “Sentinel Scientific, Inc.”  The Sentinel Diagnostics business operations were discontinued in late 1992 for lack of funding.

Effective August 10, 1993, and pursuant to a Reorganization Agreement, we acquired all of the outstanding shares of common stock of A.F.C. Entertainment, Inc., a corporation organized under The Companies Act of Barbados, and changed our name to “TC X Calibur, Inc.”

Effective December 31, 1993, we acquired all of the outstanding shares of common stock of Film Opticals Investments, Limited, a corporation organized under the laws of the Province of Ontario, Canada (“Film Opticals”).

In 1993, Film Opticals of Canada Limited, a wholly-owned subsidiary of Film Opticals (“Film Opticals of Canada”), sought court protection by filing a Notice of Intention to Make a Proposal pursuant to Subsection 50.4(1) of the Bankruptcy and Insolvency Act of Canada, because of a dispute with a creditor pursuant to a secured promissory note, and a trustee (the “Trustee”) was appointed to oversee Film Opticals of Canada’s financial management in the Ontario Justice Court, General Division, Case No. B163/94.  Operation of the Film Opticals business continued pending a resolution of the dispute with this creditor.

On or about December 28, 2004, pursuant to resolutions adopted by our Board of Directors and approved by the holders of a majority our outstanding shares of common stock, we sold substantially all of our assets by the conveyance of our wholly-owned subsidiary, Film Opticals (and its subsidiary, Film Opticals of Canada), and our film library (“Film Library”), to Film Opticals of Canada 2004 Limited, a newly formed corporation organized under the Province of Ontario, Canada (“New Film Opticals”), and a wholly-owned subsidiary of Berliner Holdings, Inc. (“Berliner”). Berliner was wholly-owned by our then President, Claus Voellmecke.  As consideration of the purchase and sale of these assets, Berliner agreed to cancel 500,000 shares of our common stock that it owned and agreed, together with New Film Opticals, to assume, pay and/or compromise all of our outstanding claims or liabilities related to Film Opticals and our Film Library and indemnify and hold us harmless from them.  For additional information, please see our 8-K Current Report, our 8-K/A-1 Current Report and our 8-K/A-2 Current Report that have been previously filed with the Securities and Exchange Commission on or about December 8, 2004, December 9, 2004 and January 4, 2005, respectively, and which include a copy of the Definitive Proxy Statement that was mailed to our stockholders on or about December 8, 2004.

In addition to the above referenced sale of substantially all of our assets on or about December 28, 2004, pursuant to resolutions adopted by our Board of Directors and approved by the holders of a majority of our outstanding shares of common stock, we amended our Articles of Incorporation to change our capitalization to add a class of preferred stock, and gave our Board of Directors authority to effect recapitalizations and/or name changes without further stockholder approval.
 
 
 
1

 

On or about September 15, 2005, certain shares of our outstanding common stock were acquired pursuant to a private transactions which shares, when accumulated with shares of our common stock that were already owned by these persons, represented a controlling interest in us.

On November 2, 2007, we announced the execution of a Letter of Intent to acquire EV Rental, LLC, a California limited liability company.  On March 3, 2008, we terminated our obligations under the Letter of Intent.

On December 28, 2007, in the OTCBB trading market on that date, we effected a forward split of our outstanding common stock on a basis of 2.3943 for one, while retaining the current par value of $0.001 per share, with all fractional shares rounded up to the nearest whole share, and with appropriate adjustments in our capital accounts.  All share references and computations herein take into account this recapitalization.

On February 28, 2008, we filed Restated Articles of Incorporation with the State of Nevada, a copy of which is incorporated herein by reference.  See Part IV, Item 15.

On September 11, 2008, we filed a registration statement on Form 10 of the SEC registering our common stock under Section 12(g) of the Exchange Act.  This registration statement became effective on or about November 9, 2008.  

There were no material business developments in 2009.

On November 29, 2010, in the OTCBB trading market on that date, we effected a reverse split of our outstanding common stock on a basis of one for four, while retaining the current par value of $0.001 per share, with all fractional shares rounded up to the nearest whole share, and with appropriate adjustments in our capital accounts.  All share references and computations herein take into account this recapitalization.

There were no material business developments in 2011 or 2012.

Recent Developments

On January 21, 2014, we appointed a new director, Gary Johnson.

On February 18, 2014, we appointed a new Chief Financial Officer, Wayne Hansen.

During 2014, we sought to acquire a 51% interest in International Herbs Medical Marijuana Ltd. (“IHMML”), a company that is applying to obtain licensed producer status from Health Canada and seeking to establish marijuana growing and distribution facilities in Canada.  On July 25, 2014, we and our CanaLeaf subsidiary entered into a Non-binding Letter of Intent (the “LOI”) with Zenabis Limited Partnership (“Zenabis”) and IHMML.  Pursuant to the LOI, we sought to restructure our proposed acquisition of an interest in IHMML so that we would acquire an outright 51% interest in IHMML and an option to acquire the remainder and, in return, IHMML and its affiliates would obtain a majority ownership interest in and control of our company.  Due to regulatory challenges in Canada and other structuring challenges, this opportunity is not presently the focus of our operations, but we will continue to monitor IHMML and potentially revisit the opportunity should conditions warrant.
 
In early March 2014, our Board of Directors and majority stockholder approved an increase of our authorized shares of common stock from 50,000,000 to 100,000,000 shares.

In October, 2014, the Company appointed Drew Milburn to the position of CEO of our subsidiary, Medican (US) Systems, Inc.

On October 21, 2014, the Company entered into a binding letter of intent to acquire Future Harvest Development Ltd. (“Future Harvest”), a Canadian manufacturing company in the home and garden, indoor growing, and hydroponic sector. Under the terms of the letter of intent, the Company will acquire 70% interest in Future Harvest, with an option to acquire the remaining 30%, for approximately $5 million in a combination of cash and common stock.  Medican has not been able reach a mutually acceptable agreement with the various parties involved. As a result, the parties have terminated the letter of intent and the refundable portion of the deposit funds have been returned to Medican.
 
 
 
2

 

On December 2, 2014, the Company signed an agreement to acquire a 67,000 square foot facility in Phoenix, Arizona which the company plans to lease as a marijuana growing and warehouse facility to licensed growers.  The industrial building sits on 2.55 acres of industrial zoned land. The anticipated final purchase price for the property is $2,340,310 and a closing is planned during the first quarter of 2015 pending, among other closing conditions, a variance to zone the building for the cultivation of marijuana. The acquisition of this property will launch Medican’s real estate and leasing services business under which the company would lease real estate that is outfitted with turnkey solutions for legally compliant growing facilities to licensed growers.

On January 20, 2015, the Company entered into a purchase agreement to acquire a 7,200 square foot retail and commercial property in Phoenix, Arizona. The property is currently leased through August 2018 to an Arizona state licensed medical marijuana dispensary. Per the purchase agreement, the lease agreement will be assigned to Medican. The rental amount of the current lease is in excess of $200,000 annually, triple net. The lease provides for two five-year tenant renewal options. The lease rate increases at 3 percent per year or CPI, whichever is greater. Total purchase price for the property is $2,250,000, which Medican expects to pay through a combination of mortgage debt and an $850,000 convertible promissory note secured by the property. The property’s value has been appraised at $2,385,000 and was substantiated by an independent appraiser.  As per the Amendment No. 2 and 3 to the original agreement, the closing for the purchase of this property is expected to occur on or before May 31, 2015.

On February 16, 2015, the Company filed with the State of Nevada a Certificate of Amendment to its Articles of Incorporation increasing the authorized amount of shares of common stock to 1,000,000,000 shares, par value $0.001 per share. The Company is also authorized, according to the Definitive Information Statement dated January 26, 2015, to enact a reverse split in an amount up to 1:10 according to the Board of Director’s discretion.

Overview of Current Business

We are a bio-pharmaceutical business currently focused on pursuing business opportunities in the growing medical and recreational marijuana sector.   We also are actively searching to acquire smaller operations in the medical and recreational marijuana industry in Canada and the United States with the intention of increasing their profits through economies of scale.

We currently have five wholly-owned subsidiaries through which we operate our business.


Medican Systems Inc. (“Medican Systems”) is a corporation incorporated under the laws of the Territory of the Yukon under incorporation number 535642 on December 30, 2013. The authorized share structure is an unlimited number of common shares without par value, with 100 common shares issued to our company, making Medican Systems our direct wholly-owned subsidiary.  The primary focus of Medican Systems is to function as a holding company for Canadian based investments, joint ventures and opportunities.
 
 
 
3

 
 
Medican (Delta) Systems Inc. is a corporation incorporated under the laws of the Province of British Columbia under incorporation number BC0989867 on December 31, 2013.  The authorized share structure is an unlimited number of common shares without par value, with 100 common shares issued to Medican Systems. The primary focus of Medican Delta is to pursue opportunities in the medical marijuana industry in and around the city of Delta in British Columbia, Canada.

CanaLeaf Systems Inc. is a corporation incorporated under laws of Canada under the Canada Business Corporation Act under incorporation number 883348-6 on March 25, 2014.  The authorized share structure is an unlimited number of common shares. CanaLeaf is our operating subsidiary focused on business opportunities.

Medican (US) Systems, Inc. (“Medican US”) is a corporation incorporated under laws of Nevada on September 26, 2014 and is also a subsidiary of Medican Systems.  Medican US is our operating subsidiary focused on business opportunities in the United States.  The new entity, operating out of Las Vegas, Nevada, will:
 
 
·
seek investments in commercial real estate which it can lease to marijuana growers in states where growing is legal;
 
·
provide dispensary management and professional consulting services to the medical marijuana and recreational marijuana sectors; and
 
·
offer a broad range of leasing and financing solutions to dispensaries, kitchens and cultivations centers.

Medican Nations, LLC (“Medican Nations”) is a corporation incorporated under the laws of Nevada on February 6, 2015 and is also a subsidiary of Medican Systems.  Medican Nations will be focused on building strategic partnerships with Indian communities in the United States and Canada to create and build business solutions within the indoor gardening and marijuana industries.

Our plan of operation for the next 12 months is to continue to seek to acquire or establish joint ventures with businesses in the medical and recreational marijuana sector.  To that end, in the last quarter of 2014 and first quarter of 2015, we entered into purchase agreements to acquire a 7,200 square foot retail and commercial property in Phoenix, Arizona, and an agreement to acquire a 67,000 square foot facility in Phoenix, Arizona which the company plans to lease as a marijuana growing and warehouse facility to licensed growers. We are actively seeking similar and other business opportunities in the marijuana sector, including operating businesses such as these and the possibility of acquiring real estate which we can then lease to licensed growers in jurisdictions where such activities are permissible.

Our Products and Markets

We are actively meeting with other companies and individuals in the medical marijuana industry to establish relationships and partnerships that we believe will benefit us and out subsidiaries going forward.

Competition

Currently, there are a number of other companies that are in the marijuana industry, many of which we consider to be our competition. Many of these companies provide similar products and/or services, such as leasing of real estate, warehouse sales, and consulting services. In the future the Company fully expects that other companies will recognize the value of ancillary businesses serving the marijuana industry and enter into the marketplace as competitors.

Intellectual Property

None.

Reports to Security Holders
 
We are subject to the reporting and other requirements of the Exchange Act and we intend to furnish our shareholders annual reports containing financial statements audited by our independent registered public accounting firm and to make available quarterly reports containing unaudited financial statements for each of the first three quarters of each year. We file Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and Current Reports on Form 8-K with the SEC in order to meet our timely and continuous disclosure requirements. We may also file additional documents with the SEC if they become necessary in the course of our Company’s operations.
 
The public may read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is www.sec.gov. 
 
 
 
4

 

Effect of Existing or Probable Governmental Regulations on the Business

United States

Marijuana is a Schedule I controlled substance and is illegal under federal law. Even in those states in which the use of marijuana has been legalized, its use remains a violation of federal laws.

A Schedule I controlled substance is defined as a substance that has no currently accepted medical use in the United States, a lack of safety for use under medical supervision and a high potential for abuse. The Department of Justice defines Schedule I controlled substances as “the most dangerous drugs of all the drug schedules with potentially severe psychological or physical dependence.” If the federal government decides to enforce the Controlled Substances Act in Colorado with respect to marijuana, persons that are charged with distributing, possessing with intent to distribute, or growing marijuana could be subject to fines and terms of imprisonment, the maximum being life imprisonment and a $50 million fine.

As of January 13, 2015, 23 states and the District of Columbia allow their residents to use medical marijuana. Voters in the states of Colorado, Washington, Oregon and Alaska have approved ballot measures to legalize cannabis for adult use. The state laws are in conflict with the federal Controlled Substances Act, which makes marijuana use and possession illegal on a national level. The Obama administration has effectively stated that it is not an efficient use of resources to direct law federal law enforcement agencies to prosecute those lawfully abiding by state-designated laws allowing the use and distribution of medical marijuana. However, there is no guarantee that the administration will not change its stated policy regarding the low-priority enforcement of federal laws. Additionally, any new administration that follows could change this policy and decide to enforce the federal laws strongly. Any such change in the federal government’s enforcement of current federal laws could cause significant financial damage to us. While we do not intend to harvest, distribute or sell cannabis, we may be irreparably harmed by a change in enforcement by the federal or state governments.

Despite the Obama administration’s statements, the Department of Justice has stated that it will continue to enforce the Controlled Substance Act with respect to marijuana in Colorado to prevent:

1.  
the distribution of marijuana to minors;

2.  
criminal enterprises, gangs and cartels receiving revenue from the sale of marijuana;

3.  
the diversion of marijuana from states where it is legal under state law to other states;

4.  
state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;

5.  
violence and the use of firearms in the cultivation and distribution of marijuana;

6.  
driving while impaired and the exacerbation of other adverse public health consequences associated with marijuana use;

7.  
the growing of marijuana on public lands; and

8.  
marijuana possession or use on federal property.

We do not presently grow or distribute marijuana. However, our anticipated business of providing of ancillary products and services to state-approved marijuana growers and dispensary facilities could be deemed to be aiding and abetting illegal activities, a violation of federal law. We intend to remain within the guidelines outlined in the Cole Memo (see the “Risk Factors” section below), which does not alter the Department of Justice’s authority to enforce federal law, including federal laws relating to marijuana, but does recommend that U.S. Attorneys prioritize enforcement of federal law away from the marijuana industry operating as permitted under certain state laws, so long as certain conditions are met.  Where the individual state framework fails to protect the public, the Justice Department has instructed federal prosecutors to enforce the Controlled Substances Act of 1970. However, we cannot provide assurance that the Company is in full compliance with the Cole Memo or any other federal laws or regulations.
 
 
 
5

 

Our ongoing and future business plans rely on our ability to successfully establish and maintain effective controls that follow the United States Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) Guidance, “BSA Expectations Regarding Marijuana-Related Businesses,” in vetting and monitoring potential tenants, customers and clients of the Company.  On February 14, 2014, FinCEN issued guidance to clarify Bank Secrecy Act (“BSA”) expectations for financial institutions seeking to provide services to marijuana-related businesses. FinCEN issued this guidance in light of certain state initiatives to legalize certain marijuana-related enforcement priorities. The FinCEN guidance clarifies how financial institutions can provide services to marijuana-related businesses consistent with their BSA obligations, and aligns the information provided by financial institutions in BSA reports with federal and state law enforcement priorities. This FinCEN guidance is intended to enhance the availability of financial services for, and the financial transparency of, marijuana-related businesses.

While ACS is not currently subject to the BSA or FinCEN guidelines, we will institute policies and procedures that mirror the stated goals of the FinCEN guidelines and will provide a framework, by which the Company believes it can comply with the federal government’s stated objectives with respect to the potential conflict of law. The Company plans to use the FinCEN Guidelines, as may be amended, as the basis for assessing its relationships with potential tenants, clients and customers.

State Regulation

Where applicable, we will apply for state licenses that are necessary to conduct our business in compliance with local laws.

Smaller Reporting Company Status

We are subject to the reporting requirements of Section 13 of the Exchange Act, and we are subject to the disclosure requirements of Regulation S-K of the SEC, as a “smaller reporting company.”   That designation will relieve us of some of the informational requirements of Regulation S-K, including comprehensive information in the Summary Compensation Tables, a reduction of information included in the Management’s Discussion and Analysis section, and decreased reporting obligations in Item 404 Transactions with Related Persons.

Sarbanes-Oxley Act

We are also subject to the Sarbanes-Oxley Act of 2002 and related rules and regulations.  The Sarbanes-Oxley Act created a strong and independent accounting oversight board to oversee the conduct of auditors of public companies and strengthens auditor independence.  It also requires steps to enhance the direct responsibility of senior members of management for financial reporting and for the quality of financial disclosures made by public companies; establishes clear statutory rules to limit, and to expose to public view, possible conflicts of interest affecting securities analysts; creates guidelines for audit committee members’ appointment, compensation and oversight of the work of public companies’ auditors; management assessment of our internal controls; auditor attestation to management’s conclusions about internal controls; prohibits certain insider trading during pension fund blackout periods; requires companies and auditors to evaluate internal controls and procedures; and establishes a federal crime of securities fraud, among other provisions. Compliance with the requirements of the Sarbanes-Oxley Act has the potential to substantially increase our legal and accounting costs.

Exchange Act Reporting Requirements

Section 14(a) of the Exchange Act requires all companies with securities registered pursuant to Section 12(g) of the Exchange Act to comply with the rules and regulations of the SEC regarding proxy solicitations, as outlined in Regulation 14A. Matters submitted to our stockholders at a special or annual meeting thereof or pursuant to a written consent will require us to provide our stockholders with the information outlined in Schedules 14A or 14C of Regulation 14; preliminary copies of this information must be submitted to the SEC at least 10 days prior to the date that definitive copies of this information are forwarded to our stockholders.

On September 11, 2008, we filed a registration statement on Form 10 of the SEC registering our $0.001 par value common stock under Section 12(g) of the Exchange Act.  This registration statement became effective on or about November 9, 2008.

We are required to file Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q with the SEC on a regular basis, and are required to timely disclose certain material events (e.g., changes in corporate control; acquisitions or dispositions of a significant amount of assets other than in the ordinary course of business; and bankruptcy) in a Current Report on Form 8-K. We are not considered an emerging growth company under the JOBS Act because the Company sold securities pursuant to an effective registration statement prior to December 8, 2011.

 
 
6

 
 
 
Research and Development Costs During the Last Two Fiscal Years

None; not applicable.

Cost and Effects of Compliance with Environmental Laws

We do not believe that our current or intended business operations are subject to any material environmental laws, rules or regulations that would have an adverse material effect on our business operations or financial condition or result in a material compliance cost; however, we will become subject to all such governmental requirements to which the reorganized, merged or acquired entity is subject or may become subject.

Employees

As of March 31, 2015, we have three employees, our CEO, Ken Williams, our CFO, Wayne Hansen, and CEO of Medican (US) Systems, Inc., Drew Milburn.

Additional Information

You may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.  You may also find all of the reports or registration statements that we have previously filed electronically with the SEC at its Internet site at www.sec.gov.  Please call the SEC at 1-202-551-8090 for further information on this or other Public Reference Rooms. 

 
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ITEM 1A. RISK FACTORS
 
An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this Annual Report, before making an investment decision. If any of the following or similar risks actually occurs, our business, financial condition or results of operations could suffer and our business might fail. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. You should read the section entitled “Cautionary Note Regarding Forward Looking Statements” above for a discussion of what types of statements are forward-looking statements, as well as the significance of such statements in the context of this Annual Report.
 
Risks Related to Our Business

We have only recently commenced operations and are thus subject to the risks associated with new businesses.

We have only recently commenced developing and pursuing business opportunities in the medical and recreational marijuana market.  As of the date of this Annual Report, we have no cash resources, products, manufacturing facilities or sales and marketing operations.  As such, we are a “start-up” company with no history of revenue-generating operations.  We are, and expect for the foreseeable future to be, subject to all the risks and uncertainties, inherent in a new business.  As a result, we still must establish many functions necessary to operate a business, including finalizing our managerial and administrative structure, acquiring our manufacturing facilities, continuing product development, assessing and commencing our marketing activities, implementing financial systems and controls, and recruiting personnel.

Accordingly, you should consider our prospects in light of the costs, uncertainties, delays, and difficulties frequently encountered by companies in their pre-revenue generating stages, particularly those in heavily regulated industries like the medical marijuana industry.  Potential investors should carefully consider the risks and uncertainties that a company with no operating history will face.  In particular, potential investors should consider that there is a significant risk that we will not be able to:
 
 
·
implement or execute our current business plan, or that our business plan is sound;
 
·
raise sufficient funds in the capital markets or otherwise to effectuate our business plan;
 
·
maintain and expand our management team and Board of Directors;
 
·
determine that the processes that we are developing are commercially viable; and/or
 
·
attract, enter into, or maintain contracts with, and retain customers.

If we cannot execute any one of the foregoing, our business may fail, in which case you would lose the entire amount of your investment in our company.

We currently have no cash resources and therefore must raise additional funds in the near term and again thereafter in order to continue our business, and we will continue to need additional financing to carry out our business plan.  

We currently have no cash resources.  We need to obtain significant additional funding to successfully continue our business.  Such additional funds may not be readily available or may not be available on terms acceptable to us.  As such, our failure to raise funding in the near future would have a significantly adverse impact on our business viability and could cause our business to fail.  We do not currently have any arrangements or credit facilities in place as a source of funds, and there can be no assurance that we will be able to raise sufficient additional capital on acceptable terms, or at all.
 
If we raise additional capital by issuing equity securities, the percentage ownership of our existing stockholders may be reduced, and accordingly these stockholders may experience substantial dilution.  We may also issue equity securities that provide for rights, preferences and privileges senior to those of our common stock. Given our need for cash and that equity raising is the most common type of fundraising for companies like ours, the risk of dilution is particularly significant for stockholders of our company.
 
 
 
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Debt financing, if obtained, may involve agreements that include liens on our assets, covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, could increase our expenses and require that our assets be provided as a security for such debt.  Debt financing would also be required to be repaid regardless of our operating results. 
 
If we raise additional funds through collaborations and licensing arrangements, we may be required to relinquish some rights to our technologies or candidate products, or to grant licenses on terms that are not favorable to us.

We cannot accurately predict the volume or timing of any future sales, making the timing of any revenues difficult to predict.

We may be faced with regulatory or operational challenges that could impede our ability to commence sales of our marijuana products.  Consequently, we may incur substantial expenses and devote significant management effort and expense in launching sales efforts, which may not result in revenue generation.  We must also obtain regulatory approvals to engage in our business, which is subject to risk and potential delays, and which may not actually occur.  As such, we cannot accurately predict the volume or timing of any future sales of our products.

We may not be able to effectively manage our growth.  

If we are able to launch our business, any growth in or expansion of our business is likely to place a strain on our management and administrative resources, infrastructure, and systems.  As with other growing businesses, we expect that we will need to further refine and expand our business development capabilities, our systems and processes, and our access to financing sources.  We also will need to hire, train, supervise, and manage new employees.  These processes are time consuming and expensive, will increase management responsibilities, and will divert management attention.  We cannot assure you that we will be able to:

·
expand our products effectively or efficiently or in a timely manner;
·
allocate our human resources optimally;
·
meet our capital needs;
·
identify and hire qualified employees or retain valued employees; or
·
incorporate effectively the components of any business or product line that we may acquire in our effort to achieve growth.
 
Our inability or failure to manage our growth and expansion effectively could harm our business and materially and adversely affect our operating results and financial condition.
 
If we incur substantial liability from litigation, complaints, or enforcement actions our financial condition could suffer.

Litigation, complaints, and enforcement actions involving us could consume considerable amounts of financial and other corporate resources, which could have a negative impact on our sales, revenue, profitability and growth prospects.  We have not been, and are not currently, subject to any material litigation, complaint or enforcement action regarding our publications by any federal, state or foreign regulatory authority.

We will be required to attract and retain top quality talent to compete in the marketplace. 

We believe our future growth and success will depend in part on our ability to attract and retain highly skilled managerial, product development, sales and marketing, and finance personnel.  There can be no assurance of success in attracting and retaining such personnel.  Shortages in qualified personnel could limit our ability to increase sales of existing products and services and launch new product and service offerings. The population of the area and preference for youth to move from the North to the South of Canada is a risk factor that will require considerable planning and recruitment efforts.
 
Our forecasts are highly speculative in nature and we cannot predict results in a development stage company with a high degree of accuracy.  

Any financial projections, especially those based on ventures with minimal operating history, are inherently subject to a high degree of uncertainty, and their ultimate achievement depends on the timing and occurrence of a complex series of future events, both internal and external to the enterprise.  There can be no assurance that potential revenues or expenses we project will, in fact, be received or incurred.
 
We will be subject to evolving and expensive corporate governance regulations and requirements.  Our failure to adequately adhere to these requirements or the failure or circumvention of our controls and procedures could seriously harm our business.  

As a publicly traded company, we are subject to various federal, state, and other rules and regulations, including applicable requirements of the Sarbanes-Oxley Act of 2002.  Compliance with these evolving regulations is costly and requires a significant diversion of management time and attention, particularly with regard to our disclosure controls and procedures and our internal controls over financial reporting.  Our internal controls and procedures may not be able to prevent errors or fraud in the future.  Faulty judgments, simple errors or mistakes, or the failure of our personnel to adhere to established controls and procedures, may make it difficult for us to ensure that the objectives of the control system are met.  A failure of our controls and procedures to detect other than inconsequential errors or fraud could seriously harm our business and results of operations.  Moreover, our internal controls and our ability to comply with applicable laws, rules and regulations is impaired as we do not maintain independent audit and compensation committees of our board of directors.
 
 
 
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The limited size of our senior management team may hamper our ability to effectively manage a publicly traded company while developing our products, which may harm our business.  

Our management team has experience in the management of publicly traded companies and complying with federal securities laws, including compliance with recently adopted disclosure requirements on a timely basis.  They realize it will take significant resources to meet these requirements while simultaneously working on developing, marketing, distributing, and protecting our products. Our management will be required to design and implement appropriate programs and policies in responding to increased legal, regulatory compliance and reporting requirements, and any failure to do so could lead to the imposition of fines and penalties and harm our business. The limited size of our management team may hinder our ability to effectively expand our R&D, conduct clinical trials and horticulture advancements, meet regulatory demands, or otherwise develop, market, or sell our products.

Our independent auditor's reports on our financial statements for the years ended December 31, 2014 and 2013 includes a "going concern" explanatory paragraph.

Our independent auditor has presented our financial statements on the basis that we are a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable length of time. This means that we may not generate enough funds to pay our general operating expenses and bills from professionals and other advisors that we are obligated to pay.

We may not acquire the facilities as planned and will therefore not be able to commence operations on the timetable or the scale that we have planned.

A key component to our growth and future operations are the retrofitting of two potential facilities in New Brunswick to house our growing and business operations.  If these facilities are not obtained or if something happens to these facilities, the company may experience significant delays and expenses as it finds new facilities.

Risks Related to Our Industry

Federal regulation and enforcement may adversely affect the implementation of medical marijuana laws and regulations may preclude us from operating our proposed business, and even of we do operate such business, could negatively impact our revenues and potential profits.
 
Our business plan is to operate promising business opportunities in the marijuana space.  Marijuana is a schedule-I controlled substance and is illegal under federal law. Even in those states in which the use of marijuana has been legalized, its use remains a violation of federal law. Since federal law criminalizing the use of marijuana preempts state laws that legalize its use, strict enforcement of federal law regarding marijuana would likely result in our inability to proceed with our business plan and the failure of our company.

Currently, there are 23 states plus the District of Columbia that have laws and/or regulations that recognize, in one form or another, legitimate medical uses for cannabis and consumer use of cannabis in connection with medical treatment. Many other states are considering similar legislation. Conversely, under the Controlled Substance Act (the “CSA”), the policies and regulations of the Federal government and its agencies are that cannabis has no medical benefit and a range of activities including cultivation and the personal use of cannabis is prohibited. Unless and until Congress amends the CSA with respect to medical marijuana, as to the timing or scope of any such potential amendments there can be no assurance, there is a risk that federal authorities may enforce current federal law, and we may be deemed to be producing, cultivating or dispensing marijuana in violation of federal law with respect to our proposed business operations or we may be deemed to be facilitating the selling or distribution of drug paraphernalia in violation of federal law.  Active enforcement of the current federal regulatory position on cannabis may thus indirectly and adversely affect our revenues and profits. The risk of strict enforcement of the CSA in light of Congressional activity, judicial holdings and stated federal policy remains uncertain.
 
The U.S. Supreme Court declined to hear a case brought by San Diego County, California that sought to establish federal preemption over state medical marijuana laws. The preemption claim was rejected by every court that reviewed the case. The California 4th District Court of Appeals wrote in its unanimous ruling, “Congress does not have the authority to compel the states to direct their law enforcement personnel to enforce federal laws.” However, in another case, the U.S. Supreme Court held that, as long as the CSA contains prohibitions againstmarijuana, under the Commerce Clause of the United States Constitution, the United States may criminalize the production and use of homegrown cannabis even where states approve its use for medical purposes.
 
 
 
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In an effort to provide guidance to federal law enforcement, the Department of Justice (the “DOJ”) has issued Guidance Regarding Marijuana Enforcement to all United States Attorneys in a memorandum from Deputy Attorney General David Ogden on October 19, 2009, in a memorandum from Deputy Attorney General James Cole on June 29, 2011 and in a memorandum from Deputy Attorney General James Cole on August 29, 2013. Each memorandum provides that the DOJ is committed to the enforcement of the CSA, but, the DOJ is also committed to using its limited investigative and prosecutorial resources to address the most significant threats in the most effective, consistent and rational way.
 
The August 29, 2013 memorandum provides updated guidance to federal prosecutors concerning marijuana enforcement in light of state laws legalizing medical and recreational marijuana possession in small amounts.  The memorandum sets forth certain enforcement priorities that are important to the federal government:
 
 
·
Distribution of marijuana to children;
 
 
·
Revenue from the sale of marijuana going to criminals;
 
 
·
Diversion of medical marijuana from states where it is legal to states where it is not;
 
 
·
Using state authorized marijuana activity as a pretext of other illegal drug activity;
 
 
·
Preventing violence in the cultivation and distribution of marijuana;
 
 
·
Preventing drugged driving;
 
 
·
Growing marijuana on federal property; and
 
 
·
Preventing possession or use of marijuana on federal property.
 
The DOJ has not historically devoted resources to prosecuting individuals whose conduct is limited to possession of small amounts of marijuana for use on private property but has relied on state and local law enforcement to address marijuana activity. In the event the DOJ reverses its stated policy and begins strict enforcement of the CSA in states that have laws legalizing medical marijuana and recreational marijuana in small amounts, there may be a direct and adverse impact to our proposed business and our revenue and profits.
 
We could be found to be violating laws related to medical cannabis, but current enforcement standards are uncertain.
 
Unless and until Congress amends the CSA with respect to medical marijuana, there is a risk that federal authorities may enforce current federal law against us.  The risk of strict enforcement of the CSA in light of Congressional activity, judicial holdings and stated federal policy remains uncertain.  Should it be determined under the CSA that our products or services (once we begin to provide the same) are deemed to fall under the definition of drugs or drug paraphernalia because they are determined to be primarily intended or designed for use in manufacturing or producing cannabis, we could be found to be in violation of federal drug laws and there may be a direct and adverse effect on our business and our revenues and profits.  Further, even if we obtain the necessary state and local government approvals and permits and obtain the necessary funding to commence our marijuana related businesses (of which no assurances are given), we could be found in violation of the CSA. This would cause a direct and adverse effect on our subsidiaries’ intended business and on our revenue and profits.
 
Variations in state and local regulation and enforcement in states that have legalized medical cannabis that may restrict marijuana-related activities, including activities related to medical cannabis may negatively impact our revenues and profits.
 
Individual state laws do not always conform to the federal standard or to other states laws. A number of states have decriminalized marijuana to varying degrees, other states have created exemptions specifically for medical cannabis, and several have both decriminalization and medical laws. Two states, Colorado and Washington, have legalized the recreational use of cannabis. Variations exist among states that have legalized, decriminalized or created medical marijuana exemptions. For example, Alaska and Colorado have limits on the number of marijuana plants that can be homegrown. In most states, the cultivation of marijuana for personal use continues to be prohibited except for those states that allow small-scale cultivation by the individual in possession of medical marijuana needing care or that person’s caregiver. Active enforcement of state laws that prohibit personal cultivation of marijuana may indirectly and adversely affect our business and our revenue and profits.
 
 
 
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Prospective customers may be deterred from doing business with a company with a significant nationwide online presence because of fears of federal or state enforcement of laws prohibiting possession and sale of medical or recreational marijuana.
 
Our website is visible in jurisdictions where medicinal and/or recreational use of marijuana is not permitted and, as a result, we may be found to be violating the laws of those jurisdictions. We could lose potential customers as they could fear federal prosecution for growing marijuanawith our equipment, reducing our revenue. In most states in which the production and sale of marijuana have been legalized, there are additional laws or licenses required and some states altogether prohibit home cultivation, all of which could make the loss of potential customers more likely.
 
Laws and regulations affecting the medical marijuana industry are constantly changing, which could detrimentally affect our proposed operations.
 
Local, state and federal medical marijuana laws and regulations are broad in scope and subject to evolving interpretations, which could require us to incur substantial costs associated with compliance or alter certain aspects of our business plan. In addition, violations of these laws, or allegations of such violations, could disrupt certain aspects of our business plan and result in a material adverse effect on certain aspects of our planned operations. In addition, it is possible that regulations may be enacted in the future that will be directly applicable to certain aspects of our proposed medical marijuana businesses. We cannot predict the nature of any future laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on our business.
 
We may not obtain the necessary permits and authorizations to operate medical or recreational marijuana businesses.
 
We may not be able to obtain or maintain the necessary licenses, permits, authorizations or accreditations, or may only be able to do so at great cost, to operate its medical marijuana business. In addition, we may not be able to comply fully with the wide variety of laws and regulations applicable to the medical marijuana industry. Failure to comply with or to obtain the necessary licenses, permits, authorizations or accreditations could result in restrictions on our ability to operate the medical marijuana business, which could have a material adverse effect on our business.
 
If we incur substantial liability from litigation, complaints, or enforcement actions, our financial condition could suffer.
 
Our proposed participation in the medical marijuana industry may lead to litigation, formal or informal complaints, enforcement actions, and inquiries by various federal, state, or local governmental authorities against these subsidiaries. Litigation, complaints, and enforcement actions involving these subsidiaries could consume considerable amounts of financial and other corporate resources, which could have a negative impact on our sales, revenue, profitability, and growth prospects.
 
We may have difficulty accessing the service of banks, which may make it difficult for us to operate.
 
Since the use of marijuana is illegal under federal law, there is a strong argument that banks cannot accept for deposit funds from businesses involved with the marijuana industry. Consequently, businesses involved in the marijuana industry often have difficulty finding a bank willing to accept their business. The inability to open bank accounts may make it difficult for us to operate our contemplated medical or recreational marijuana businesses.

The marijuana industry faces significant opposition.

It is believed by many that large well-funded businesses may have a strong economic opposition to the marijuana industry. For example, medical marijuana will likely adversely impact the existing market for the current “marijuana pill” sold by mainstream pharmaceutical companies. Further, the medical marijuana industry could face a material threat from the pharmaceutical industry, should marijuana displace other drugs or encroach upon the pharmaceutical industry’s products. The pharmaceutical industry is well funded with a strong and experienced lobby that eclipses the funding of the medical marijuana industry. Any inroads the pharmaceutical industry could make in halting or impeding the marijuana industry could have a detrimental impact on our proposed business.
 
 
 
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We are operating in a highly competitive industry and may not be able to compete successfully.  

We are involved in a highly competitive industry where we may compete with numerous other companies in the medical marijuana industry, who may have far greater resources, more experience, and personnel perhaps more qualified than we do.  There can be no assurance that we will be able to successfully compete against these other entities, particularly since we are just a start-up enterprise.  Moreover, there is no aspect of our business which is protected by patents, copyrights, trademarks, or trade names. As a result, potential competitors could duplicate our business model with little effort. Some of our potential competitors may have significantly greater resources than we have, which may make it difficult for us to compete. There can be no assurance that we will be able to successfully compete against these other entities.

Our reputation in the industry will be very important as we grow our proposed  business, and any negative impact on our reputation could be damaging to our business.

As a company involved in businesses related to cannabis, a substance that has been commonly associated with various other narcotics, violence, and criminal activities, it is expected that such a venture will likely result in widespread negative publicity and public opinion.  Lack of understanding and awareness of the medical benefits associated with cannabis is poorly understood across the mainstream public despite various efforts to build such awareness.

There are risks related to the quality and quality control of our products.

We may be subject to liability of our products and must ensure quality control of the product at every stage. If a patient has an adverse reaction to the products, we may be subject to product liability related to the products and their quality in relation to the intended use of the products.

Increased popularity with the legalization of medical cannabis in Canada and the United States could result in unfavorable media coverage, which could ultimately negatively affect our business.

Our business industry receives a high degree of media coverage in the United States.  The legalization of cannabis, both for medical uses and recreational uses, is becoming popular in the United States and Canada.  This will increase the amount of media coverage our business industry receives.  This media coverage could be negative coverage that may affect how others view our business.  If this occurs, we may have difficulty attracting new customers.  

We may be unable to acquire the properties that are critical to our proposed business.

Our business plan involves the acquisition of real estate properties, which will be leased to participants in the marijuana industry. The zoning and operational restrictions on marijuana industry participants may limit the availability of properties suitable for this purpose. There can be no assurance that we will be able to obtain the capital needed to purchase any properties.

We may be unable to expand into new markets.

We intend to continue to pursue our aggressive growth strategy for the foreseeable future. Our continued growth and profitability depend on our ability to successfully realize our growth strategy by expanding both inside and outside the state of Arizona and Colorado. We cannot assure that our efforts to expand into new markets, particularly in states where we do not currently operate, will succeed. In order to operate in new markets, we may need to modify our existing business model and cost structure to comply with local regulatory or other requirements, which may expose us to new operational, regulatory or legal risks. In addition, expanding into new states may subject us to unfamiliar or uncertain local regulations that may adversely affect our operations, for example, by applying, obtaining and/or maintaining appropriate licenses. Facilities we open in new markets may also take longer to reach expected revenue and profit levels on a consistent basis and may have higher construction, occupancy or operating costs than facilities we open in existing markets, thereby affecting our overall profitability. New markets may have competitive conditions, consumer preferences and spending patterns that are more difficult to predict or satisfy than our existing markets.

We may need to make greater investments than we originally planned in advertising and promotional activity in new markets to build brand awareness

We may find it more difficult in new markets to hire, motivate and keep qualified personnel. We may need to augment our labor model to meet regulatory requirements and the overall cost of labor may be higher. As a result, these new facilities may be less successful and may not achieve target facility level profit margins at the same rate or at all. If any steps taken to expand our existing business model into new markets are unsuccessful, we may not be able to achieve our growth strategy and our business, financial condition or results of operations could be adversely affected.
 
 
 
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Risks Relating to Ownership of Our Securities

Our stock price may be volatile, which may result in losses to our shareholders.
 
The stock markets have experienced significant price and trading volume fluctuations, and the market prices of companies listed on the Over-the-Counter Bulletin Board quotation system in which shares of our common stock are listed, have been volatile in the past and have experienced sharp share price and trading volume changes. The trading price of our common stock is likely to be volatile and could fluctuate widely in response to many factors, including the following, some of which are beyond our control:
 
·
variations in our operating results;
·
changes in expectations of our future financial performance, including financial estimates by securities analysts and investors;
·
changes in operating and stock price performance of other companies in our industry;
·
additions or departures of key personnel; and
·
future sales of our common stock.
 
Domestic and international stock markets often experience significant price and volume fluctuations. These fluctuations, as well as general economic and political conditions unrelated to our performance, may adversely affect the price of our common stock.   
 
Our common shares are thinly traded and you may be unable to sell at or near ask prices, or at all.
 
We do not have a liquid market for our common stock, and we cannot predict the extent to which an active public market for trading our common stock will be achieved or sustained.
 
This situation is attributable to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stockbrokers, institutional investors and others in the investment community who generate or influence sales volume.  Even if we came to the attention of such persons, those persons tend to be risk-averse and may be reluctant to follow, purchase, or recommend the purchase of shares of an unproven company such as ours until such time as we become more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained.
 
The market price for our common stock is particularly volatile given our status as a relatively small company, which could lead to wide fluctuations in our share price. You may be unable to sell your common stock at or above your purchase price if at all, which may result in substantial losses to you.
 
Shareholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices could increase the volatility of our share price.

An active trading market for our common stock may not develop or be sustained.

As we are in our early stages, an investment in our company will likely require a long-term commitment, with no certainty of return. Although our common stock is listed for quotation on the OTCBB and OTCQB markets under the symbol of MDCN, we cannot predict whether an active market for our common stock will ever develop in the future.  In the absence of an active trading market:
 
 
 
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·
investors may have difficulty buying and selling or obtaining market quotations;
 
·
market visibility for shares of our common stock may be limited; and
 
·
a lack of visibility for shares of our common stock may have a depressive effect on the market price for shares of our common stock.
 
The OTCBB and OTCQB markets are relatively unorganized, inter-dealer, over-the-counter markets that provide significantly less liquidity than NASDAQ or the NYSE MKT (formerly known as the NYSE AMEX).  In this event, there would be a highly illiquid market for our common stock and you may be unable to dispose of your common stock at desirable prices, or at all.  Moreover, there is a risk that our common stock could be delisted from the OTCBB and OTCQB, in which case it might be listed on the so called “Pink Sheets”, which is even more illiquid than the OTCQB.

The lack of an active market impairs your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable.  The lack of an active market may also reduce the fair market value of your shares.  An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire additional intellectual property assets by using our shares as consideration.

We may not maintain qualification for OTC Bulletin Board or OTCQB inclusion, and therefore you may be unable to sell your shares.

Trading of our common stock could be suspended.  If for any reason our common stock does not become eligible or maintain eligibility for quotation on the OTCBB or OTCQB or a public trading market does not develop, purchasers of shares of our common stock may have difficulty selling their shares should they desire to do so.  If we are unable to satisfy the requirements for quotation on the OTCBB and OTCQB, any quotation of in our common stock could be conducted in the “pink” sheets market.  As a result, a purchaser of our common stock may find it more difficult to dispose of, or to obtain accurate quotations as to the price of their shares.  This would materially and adversely affect the liquidity of our securities.

There may be limitations on the effectiveness of our internal controls, and a failure of our control systems to prevent error or fraud may materially harm our company.

Proper systems of internal controls over financial accounting and disclosure are critical to the operation of a public company.  As we are a start-up company, we are at the very early stages of establishing, and we have not yet, and we may be unable to effectively establish, such systems.  Our board of directors lacks a functioning, independent audit committee, which could preclude us from establishing effective controls.  If this condition persists, we will continue to be subject to the risk of our company not having the ability to reliably assimilate and compile financial information about our company and significantly will continue to impair our ability to prevent error and detect fraud, all of which would have a negative impact on our company from many perspectives.  Moreover, we do not expect that disclosure controls or internal controls over financial reporting, even if established, will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.  Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.  Failure of our control systems to prevent error or fraud could materially adversely impact us.

We do not anticipate paying any cash dividends to our common shareholders.
 
We presently do not anticipate that we will pay dividends on any of our common stock in the foreseeable future. If payment of dividends does occur at some point in the future, it would be contingent upon our revenues and earnings, if any, capital requirements, and general financial condition. The payment of any common stock dividends will be within the discretion of our Board of Directors. We presently intend to deploy available capital to execute our business plan; accordingly, we do not anticipate the declaration of any dividends for common stock in the foreseeable future.
 
Because the SEC imposes additional sales practice requirements on brokers who deal in shares of penny stocks, some brokers may be unwilling to trade our securities. This means that you may have difficulty reselling your shares, which may cause the value of your investment to decline.
 
Our shares are classified as penny stocks and are covered by Section 15(g) of the Exchange Act which imposes additional sales practice requirements on brokers-dealers who sell our securities in this offering or in the aftermarket. For sales of our securities, broker-dealers must make a special suitability determination and receive a written agreement prior from you to making a sale on your behalf. Because of the imposition of the foregoing additional sales practices, it is possible that broker-dealers will not want to make a market in our common stock. This could prevent you from reselling your shares and may cause the value of your investment to decline.
 
 
 
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Financial Industry Regulatory Authority (“FINRA”) sales practice requirements may limit your ability to buy and sell our common stock, which could depress the price of our shares.  
 
FINRA rules require broker-dealers to have reasonable grounds for believing that an investment is suitable for a customer before recommending that investment to the customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status and investment objectives, among other things. Under interpretations of these rules, FINRA believes that there is a high probability such speculative low-priced securities will not be suitable for at least some customers. Thus, FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our shares, have an adverse effect on the market for our shares, and thereby depress our share price.
 
Volatility in our common share price may subject us to securities litigation.
 
The market for our common stock is characterized by significant price volatility as compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. Although we are not currently the subject of any pending litigation, we may, in the future, be the target of such litigation. Securities litigation could result in substantial costs and liabilities and could divert management's attention and resources.

The elimination of monetary liability against our director, officer and employees under Nevada law and the existence of indemnification rights of our director, officer and employees may result in substantial expenditures by our Company and may discourage lawsuits against our director, officer and employees.

Our articles of incorporation provide that directors and officers of the Company will not be personally liable to the Company or any of its stockholders for damages for breach of fiduciary duty as a director or officer except for acts or omissions which involve intentional misconduct, fraud or knowing violation of law, or the payment of dividends.  In addition, our bylaws implement indemnification provisions requiring the Company to indemnify our directors to the fullest extent permitted by state law, and permit our board of directors to indemnify our officers.  We may also have contractual indemnification obligations under our employment agreements with our officers. The foregoing indemnification obligations could result in our company incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup. These provisions and resultant costs may also discourage our company from bringing a lawsuit against directors and officers for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our shareholders against our directors and officers even though such actions, if successful, might otherwise benefit our company and shareholders.

As a public company, our business is subject to regulations related to corporate governance and public disclosure that have increased both our costs and the risk of noncompliance.
 
Because our common stock is publicly traded, we are subject to certain rules and regulations of federal, state and financial market exchange entities charged with the protection of investors and the oversight of companies whose securities are publicly traded. These entities, including the Public Company Accounting Oversight Board, the SEC and FINRA, have issued requirements and regulations and continue to develop additional regulations and requirements in response to corporate scandals and laws enacted by Congress, most notably the Sarbanes-Oxley Act of 2002. Our efforts to comply with these regulations have resulted in, and are likely to continue resulting in, increased general and administrative expenses and diversion of management time and attention from revenue-generating activities to compliance activities. Because new and modified laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated by ongoing revisions to our disclosure and governance practices.

Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares and have a depressive effect on the price of the shares of our common stock.
 
A majority of the outstanding shares of our common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act (“Rule 144”). As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides in essence that one year following a company ceasing to be a “shell company” and filing Form 10 information with the SEC to that effect, a non-affiliate who has held restricted securities for a period of at least six months may sell their shares of common stock. Under Rule 144, affiliates who have held restricted securities for a period of at least six months may, under certain conditions, sell every three months, in brokerage transactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volume during the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTCQB). A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of common stock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.
 
 
 
16

 
 
Because we were once a “shell company,” if we ever become delinquent with the filing of our reports, Rule 144 will no longer be available until and unless we become current.
 
Rule 144 provides, as indicated above, that sales of securities of a former shell company may only be made once the applicable waiting period has terminated and only if appropriate current information is available by the company, and that it has filed all relevant periodic reports that it is required to file. If we become delinquent with our SEC reports, any holders of restricted securities will no longer be able to sell until, if ever, the company becomes current. No assurance can be made that we will be able to remain current with its reports given the costs of an international audit and difficulty in raising capital.
 
ITEM 1B. UNRESOLVED STAFF COMMENTS

None

ITEM 2:  PROPERTIES

Our principal offices are located at 5955 Edmond Street, Suite 102, Las Vegas, Nevada 89118.  Our telephone number is 800-416-8802. Our office is approximately 185 square feet in size. The lease is month-to-month and the rate is $1,500 per month.

On December 2, 2014, the Company signed an agreement to acquire a 67,000 square foot facility in Phoenix, Arizona which the company plans to lease as a marijuana growing and warehouse facility to licensed growers.  The industrial building sits on 2.55 acres of industrial zoned land. The anticipated final purchase price for the property is $2,340,310 and a closing is planned during the second quarter of 2015 pending, among other closing conditions, a variance to zone the building for the cultivation of marijuana.

On January 20, 2015, the Company entered into a purchase agreement to acquire a 7,200 square foot retail and commercial property in Phoenix, Arizona. The property is currently leased through August 2018 to an Arizona state licensed medical marijuana dispensary. Per the purchase agreement, the lease agreement will be assigned to Medican. The rental amount of the current lease is in excess of $200,000 annually, triple net. The lease provides for two five-year tenant renewal options. The lease rate increases at 3 percent per year or CPI, whichever is greater. Total purchase price for the property is $2,250,000, which Medican expects to pay through a combination of mortgage debt and an $850,000 convertible promissory note secured by the property.

ITEM 3:  LEGAL PROCEEDINGS

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

ITEM 4:  MINE SAFETY DISCLOSURES

None; not applicable.

 

 
17

 

 
PART II

ITEM 5:  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is not traded on any exchange.  Our common stock is quoted on OTC Bulletin Board and OTCQB Market under the trading symbol “MDCN”.   We cannot assure you that there will be a market in the future for our common stock. 
 
OTC Bulletin Board and OTCQB securities are not listed and traded on the floor of an organized national or regional stock exchange.  Instead, securities transactions are conducted through a telephone and computer network connecting dealers.   Issuers on these listing services are, like us, traditionally smaller companies that do not meet the financial and other listing requirements of a national or regional stock exchange.

The following table sets forth, for the periods indicated over the last two years, the high and low closing bid quotations, as reported by the OTC Bulletin Board, and represents prices between dealers, does not include retail markups, markdowns or commissions, and may not represent actual transactions:

2013
 
Closing Bid High
 
Closing Bid Low
January 1 – March 31
   
4.10
     
0.31
 
April 1 – June 30
   
4.36
     
1.06
 
July 1 – September 30
   
1.93
     
0.38
 
October 3 – December 30
   
0.54
     
0.01
 
2014
               
January 1 – March 31
   
0.0105
     
0.008
 
April 2 – June 29
   
0.0105
     
0.0105
 
July 2 – September 28
   
0.05
     
0.0105
 
October 1 – December 31
   
0.042
     
0.031
 
2015
               
January 1- March 31
   
0.044
     
0.0007
 

These prices were obtained from OTC Markets and do not necessarily reflect actual transactions, retail markups, mark downs or commissions. 

Holders

As of April 15, 2015, there were 197 stockholders of record of our common stock. This number does not include shares held by brokerage clearing houses, depositories or others in unregistered form.

Dividends

Any decisions regarding dividends will be made by our board of directors. We currently intend to retain and use any future earnings for the development and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Our board of directors has complete discretion on whether to pay dividends, subject to the approval of our stockholders. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.

Securities Authorized for Issuance under Equity Compensation Plans

We do not have in effect any compensation plans under which our equity securities are authorized for issuance and we do not have any outstanding stock options.  
 
 
18

 
 
Recent Sales of Unregistered Securities And Use of Proceeds

Name
Service
Date
Number of Shares Issued
Certificate Number
0845915 B.C. LTD
Consulting
10/30/2014
23,668
854
Barnstorm Communications Corp.
Consulting
10/30/2014
60,146
853
Brunson Chandler & Jones
Legal
10/30/2014
11,905
860
Brunson Chandler & Jones
Legal
10/30/2014
27,028
861
DJ Investment Trust LLC
Consulting
10/30/2014
25,000
862
Kenneth Williams
Director
10/30/2014
10,000
858
Matthew Toren
Consulting
10/30/2014
1,000,000
859
Gary Johnson
Director
10/30/2014
10,000
857
Norman James Payton
Consulting
10/30/2014
1,000,000
855
Michael Thompson
Director
10/30/2014
10,000
856
Vincent Calicchia
Consulting
9/30/2014
7,500
847
National Securities Corporation
Consulting
9/30/2014
17,500
846
Apdel Investments LLC
Consulting
8/18/2014
50,000
839
John Brady
Consulting
8/18/2014
100,000
844
Brunson Chandler & Jones
Legal
8/18/2014
6,623
841
Scout Holdings LLC
Consulting
8/18/2014
100,000
840
Alain Salem
Consulting
7/21/2014
100,000
837
Ralph Olson
Consulting
7/15/2014
300,000
835
Brunson Chandler & Jones, PLLC
Legal
7/7/2014
100,000
833
Green Grow, LLC
Consulting
7/7/2014
4,000,000
832
Kenneth Williams
Employment
7/7/2014
50,000
834
John Brady
Consulting
6/13/2014
1,000,000
829
Brunson Chandler & Jones, PLLC
Legal
6/13/2014
6,411
830
JT Sands Corp.
Consulting
6/13/2014
50,000
828
Anthony Baker
Consulting
5/29/2014
60,000
815
Tyler Bousield
Consulting
5/29/2014
45,110
816
Brunson Chandler & Jones, PLLC
Legal
5/29/2014
6,667
825
Kaycee Buckles
Consulting
5/29/2014
9,000
817
Ken Buckles
Consulting
5/29/2014
20,000
820
Dean Dovanne
Consulting
5/29/2014
10,000
814
Eagle Eye Capital, Inc.
Consulting
5/29/2014
500,000
827
Emerging Growth, LLC
Consulting
5/29/2014
60,000
822
Sandra Jackson
Subscription
5/29/2014
4,500
818
Corey Alvin Lawrence
Subscription
5/29/2014
45,000
819
Dina Lyaskovets
Consulting
5/29/2014
10,000
823
Dina Lyaskovets
Consulting
5/29/2014
10,000
824
Kevin Dale Moore
Subscription
5/29/2014
23,000
813
Andrea Ody
Subscription
5/29/2014
12,500
821
Kenneth Williams
Employment
5/29/2014
20,000
826

On November 10, 2014, the Company received conversion notices of 22,321 shares of the Company's common stock to Adar Bays, LLC (“Adar Bays”) in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated March 31, 2014, with an original principal amount of $57,500 and held by Adar Bays. The conversion price per share was $0.224.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On November 25, 2014, the Company received conversion notices of 41,901 shares of the Company's common stock to Adar Bays in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated March 31, 2014, with an original principal amount of $57,500 and held by Adar Bays. The conversion price per share was $0.16071.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.
 
 
 
19

 

On November 25, 2014, the Company received conversion notices of 568,064 shares of the Company's common stock to JSJ Investment Inc. (“JSJ”) in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated May 8, 2014, with an original principal amount of $100,000 and held by JSJ. The conversion price per share was $0.0880183.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On December 1, 2014, the Company received conversion notices of 67,505 shares of the Company's common stock to Adar Bays in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated March 31, 2014, with an original principal amount of $57,500 and held by Adar Bays. The conversion price per share was $0.11851.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On December 1, 2014, the Company received conversion notices of 75,188 shares of the Company's common stock to Adar Bays in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated March 31, 2014, with an original principal amount of $57,500 and held by Adar Bays. The conversion price per share was $0.1064.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On December 8, 2014, the Company received conversion notices of 119,342 shares of the Company's common stock to LG Capital Funding (“LG”) in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated March 31, 2014, with an original principal amount of $57,500 and held by LG. The conversion price per share was $0.0882.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On December 10, 2014, the Company received conversion notices of 252,101 shares of the Company's common stock to Adar Bays in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated March 31, 2014, with an original principal amount of $57,500 and held by Adar Bays. The conversion price per share was $0.0357.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On December 11, 2014, the Company received conversion notices of 332,957 shares of the Company's common stock to Adar Bays in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated March 31, 2014, with an original principal amount of $57,500 and held by Adar Bays. The conversion price per share was $0.0325.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On December 18, 2014, the Company issued 174,034 shares of the Company's common stock to Adar Bays in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated March 31, 2014, with an original principal amount of $57,500 and held by Adar Bays. The conversion price per share was $0.02873.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On December 22, 2014, the Company received conversion notices of 103,950 shares of the Company's common stock to Adar Bays in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated March 31, 2014, with an original principal amount of $57,500 and held by Adar Bays. The conversion price per share was $0.02405.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.
 
 
 
20

 

On December 29, 2014, the Company received conversion notices of 120,833 shares of the Company's common stock to Himmil Investments Ltd. (“Himmil”) in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated June 25, 2014, with an original principal amount of $1,500,000 and held by Himmil. The conversion price per share was $0.03.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On December 30, 2014, the Company received conversion notices of 807,168 shares of the Company's common stock to Typenex Co-Investment, LLC (“Typenex”) in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated June 4, 2014, with an original principal amount of $1,105,000 and held by Typenex. The conversion price per share was $0.037167.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On January 5, 2015, the Company received conversion notices of 1,775,148 shares of the Company's common stock to Adar Bays in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated March 31, 2014, with an original principal amount of $57,500 and held by Adar Bays. The conversion price per share was $0.00845.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On January 6, 2015, the Company received conversion notices of 4,500,000 shares of the Company's common stock to Himmil in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated June 25, 2014, with an original principal amount of $1,500,000 and held by Himmil. The conversion price per share was $0.0087.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On January 6, 2015, the Company received conversion notices of 2,514,743 shares of the Company's common stock to JSJ in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated May 8, 2014, with an original principal amount of $100,000 and held by JSJ. The conversion price per share was $0.00605.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On January 9, 2015, the Company received conversion notices of 1,738,282 shares of the Company's common stock to Typenex in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated June 4, 2014, with an original principal amount of $1,105,000 and held by Typenex. The conversion price per share was $0.0075.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On January 12, 2015, the Company received conversion notices of 3,866,000 shares of the Company's common stock to Himmil in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated June 25, 2014, with an original principal amount of $1,500,000 and held by Himmil. The conversion price per share was $0.0087.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On January 13, 2015, the Company received conversion notices of 5,925,558 shares of the Company's common stock to Himmil in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated June 25, 2014, with an original principal amount of $1,500,000 and held by Himmil. The conversion price per share was $0.0083.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.
 
 
 
21

 

On January 22, 2015, the Company received conversion notices of 5,505,570 shares of the Company's common stock to Himmil in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated June 25, 2014, with an original principal amount of $1,500,000 and held by Himmil. The conversion price per share was $0.0074.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On January 29, 2015, the Company received conversion notices of 5,470,068 shares of the Company's common stock to Himmil in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated June 25, 2014, with an original principal amount of $1,500,000 and held by Himmil. The conversion price per share was $0.0074.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On February 4, 2015, the Company received conversion notices of 2,555,195 shares of the Company's common stock to Himmil in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated June 25, 2014, with an original principal amount of $1,500,000 and held by Himmil. The conversion price per share was $0.0073.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On February 6, 2015, the Company received conversion notices of 918,473 shares of the Company's common stock to Himmil in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated June 25, 2014, with an original principal amount of $1,500,000 and held by Himmil. These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On February 6, 2015, the Company received conversion notices of 1,033,289 shares of the Company's common stock to LG Capital Funding (“LG”) in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated March 31, 2014, with an original principal amount of $57,500 and held by LG. The conversion price per share was $0.008353333.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.
 
 
On February 17, 2015, the Company received conversion notices of 3,149,530 shares of the Company's common stock to RDW Capital, LLC (“RDW”) in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated June 4, 2014 with Typenex, with an original principal amount of $1,105,000, $75,000 of which was purchased by RDW in a private transaction. The conversion price per share was $0.006.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On February 18, 2015, the Company received conversion notices of 3,220,069 shares of the Company's common stock to JSJ in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated May 8, 2014, with an original principal amount of $100,000 and held by JSJ. The conversion price per share was $0.00605.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On February 18, 2015, the Company received conversion notices of 4,250,000 shares of the Company's common stock to Himmil in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated June 25, 2014, with an original principal amount of $1,500,000 and held by Himmil. The conversion price per share was $0.0035.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On February 23, 2015, the Company received conversion notices of 4,250,000 shares of the Company's common stock to Himmil in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated June 25, 2014, with an original principal amount of $1,500,000 and held by Himmil. The conversion price per share was $0.0035.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.
 
 
 
22

 

On February 24, 2015, the Company issued the following shares: 3,000,000 shares to BCB Capital, LLC under a consulting agreement dated October 1, 2014 and 6,000,000 shares to Eagle Eye Capital Inc. under a consulting agreement dated October 1, 2014, 1,502,507 shares to its legal counsel under its engagement agreement, 30,000 shares to Ken Williams for his services as a director, 30,000 shares to Gary Johnson for his services as s director, 30,000 shares to Michael Thompson for his services as a director, 2,000,000 shares to Demitri Downing for his services as a consultant, 1,205,281 shares to Jade Mercantile under a consulting agreement, 5,000,000 shares to Chardan Capital Markets, LLC as compensation for services as a financial advisor, and 1,000,000 shares to Seraphim Holdings, LLC as compensation for shares as a consultant.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On February 26, 2015, the Company received conversion notices of 4,033,345 shares of the Company's common stock to JSJ in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated May 8, 2014, with an original principal amount of $100,000 and held by JSJ. The conversion price per share was $0.00286.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On February 26, 2015, the Company received conversion notices of 4,250,000 shares of the Company's common stock to Himmil in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated June 25, 2014, with an original principal amount of $1,500,000 and held by Himmil. The conversion price per share was $0.00182.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On February 26, 2015, the Company received conversion notices of 2,797,203 shares of the Company's common stock to Adar Bays, LLC (“Adar Bays”) in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated March 31, 2014, with an original principal amount of $57,500 and held by Adar Bays. The conversion price per share was $0.003575.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On February 26, 2015, the Company received conversion notices of 4,312,000 shares of the Company's common stock to RDW Capital, LLC in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated June 4, 2014 with Typenex, with an original principal amount of $1,105,000, $75,000 of which was purchased by RDW in a private transaction. The conversion price per share was $0.003165.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On February 27, 2015, the Company received conversion notices of 4,250,000 shares of the Company's common stock to Himmil in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated June 25, 2014, with an original principal amount of $1,500,000 and held by Himmil. The conversion price per share was $0.00182.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On February 26, 2015, the Company received conversion notices of 4,250,000 shares of the Company's common stock to Himmil in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated June 25, 2014, with an original principal amount of $1,500,000 and held by Himmil. The conversion price per share was $0.00182.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.
 
 
 
23

 

On March 3, 2015, the Company received conversion notices of 2,474,038 shares of the Company's common stock to LG Capital Funding (“LG”) in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated March 31, 2014, with an original principal amount of $57,500 and held by LG. The conversion price per share was $0.005366667.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On March 3, 2015, the Company received conversion notices of 8,200,000 shares of the Company's common stock to Typenex Co-Investment, LLC (“Typenex”) in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated June 4, 2014, with an original principal amount of $1,105,000 and held by Typenex. The conversion price per share was $0.002733.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On March 3, 2015, the Company received conversion notices of 2,945,990 shares of the Company's common stock to Adar Bays, LLC (“Adar Bays”) in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated March 31, 2014, with an original principal amount of $57,500 and held by Adar Bays. The conversion price per share was $0.003055.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On March 6, 2015, the Company received conversion notices of 4,250,000 shares of the Company's common stock to Himmil in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated June 25, 2014, with an original principal amount of $1,500,000 and held by Himmil. The conversion price per share was $0.00182. These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On March 6, 2015, the Company issued 3,000,000 shares to Kenneth Williams for employment services, 3,000,000 shares to Wayne Hansen for employment services, 15,000,000 shares to Norman James Payton for consulting services, 5,000,000 shares to John Lorencz for consulting services, 25,000,000 shares to Green Grow, LLC for consulting services, 25,000,000 to Jade Mercantile Ltd. for consulting services, 500,000 to Ken Pamplin for consulting services, 6,000,000 shares to Tim Donald for consulting services, 9,000,000 shares to Drew Milburn for consulting services.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On March 6, 2015, the Company received conversion notices of 7,847,000 shares of the Company's common stock to RDW Capital, LLC in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated June 4, 2014 with Typenex, with an original principal amount of $1,105,000, $75,000 of which was purchased by RDW in a private transaction. The conversion price per share was $0.00175.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On March 10, 2015, the Company received conversion notices of 7,339,878 shares of the Company's common stock to JSJ in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated May 8, 2014, with an original principal amount of $100,000 and held by JSJ. The conversion price per share was $0.0015767.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On March 11, 2015, the Company received conversion notices of 20,000,000 shares of the Company's common stock to Himmil in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated June 25, 2014, with an original principal amount of $1,500,000 and held by Himmil. The conversion price per share was $0.000665.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.
 
 
 
24

 

On March 13, 2015, the Company received conversion notices of 14,730,000 shares of the Company's common stock to RDW Capital, LLC in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated June 4, 2014 with Typenex, with an original principal amount of $1,105,000, $75,000 of which was purchased by RDW in a private transaction. The conversion price per share was $0.00085.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On March 16, 2015, the Company received conversion notices of 14,500,000 shares of the Company's common stock to Himmil in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated June 25, 2014, with an original principal amount of $1,500,000 and held by Himmil. The conversion price per share was $0.0006503.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On March 17, 2015, the Company received conversion notices of 20,000,000 shares of the Company's common stock to Himmil in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated June 25, 2014, with an original principal amount of $1,500,000 and held by Himmil. The conversion price per share was $0.000665.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On March 18, 2015, the Company received conversion notices of 15,000,000 shares of the Company's common stock to Himmil in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated June 25, 2014, with an original principal amount of $1,500,000 and held by Himmil. The conversion price per share was $0.00056.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On March 18, 2015, the Company received conversion notices of 15,502,700 shares of the Company's common stock to RDW Capital, LLC in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated June 4, 2014 with Typenex, with an original principal amount of $1,105,000, $75,000 of which was purchased by RDW in a private transaction. The conversion price per share was $0.000615.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On March 19, 2015, the Company received conversion notices of 3,473,945 shares of the Company's common stock to Adar Bays, LLC (“Adar Bays”) in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated March 31, 2014, with an original principal amount of $57,500 and held by Adar Bays. The conversion price per share was $0.002015.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On March 19, 2015, the Company received conversion notices of 30,000,000 shares of the Company's common stock to Himmil in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated June 25, 2014, with an original principal amount of $1,500,000 and held by Himmil. The conversion price per share was $0.000525.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

On March 24, 2015, the Company received conversion notices of 4,853,859 shares of the Company's common stock to Adar Bays, LLC (“Adar Bays”) in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated March 31, 2014, with an original principal amount of $57,500 and held by Adar Bays. The conversion price per share was $0.00078.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.
 
 
 
25

 

On March 30, 2015, the Company received conversion notices of 16,668,700 shares of the Company's common stock to RDW Capital, LLC in partial satisfaction of its obligations under, and the holder's election to convert a portion of, the Convertible Promissory Note dated June 4, 2014 with Typenex, with an original principal amount of $1,105,000, $75,000 of which was purchased by RDW in a private transaction. The conversion price per share was $0.0004.  These shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering.

Purchases of Equity Securities by Us and Affiliated Purchasers

None; not applicable.

ITEM 6:  SELECTED FINANCIAL DATA

See Item 8.

ITEM 7:  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Prospective investors should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements”.  You should review the “Risk Factors” section of this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
 
Plan of Operation

Our plan of operation for the next 12 months is to continue to seek to acquire or establish joint ventures with businesses in the medical and recreational marijuana sector.  To that end, we announced two proposed real estate acquisitions in Arizona that would represent our initial entry into the U.S. market.  In December 2014, we signed an agreement to acquire a 67,000 square foot facility in Phoenix, Arizona.  The Company plans to lease it as a marijuana growing and warehouse facility to licensed growers.  In January 2015, Medican entered into a purchase agreement to acquire a 7,200 square foot retail and commercial property in Phoenix, Arizona. The property is currently leased through August 2018 to an Arizona state licensed medical marijuana dispensary. We are actively seeking similar and other business opportunities in the marijuana sector, including operating businesses such as Future Harvest and the possibility of acquiring real estate which we can then lease to licensed growers in jurisdictions where such activities are permissible.

Based on the current plans and objectives, we will have significant foreseeable cash requirements related to the establishment of our business, including the acquisition of companies and relates costs. Additionally, we will have expenses that related to maintaining our Company’s good standing or the payment of expenses associated with legal fees, accounting fees, outstanding debt and other general operating expenses.  No assurances can be given that we will be able to fund our business or establish our operations, which could cause us to reevaluate our business strategy in its entirety and could lead to the failure of our business.

Additionally we will have expenses that will relate to maintaining our Company’s good standing or the payment of expenses associated with legal fees, accounting fees, and other general operating expenses.

 
 
26

 
 
Critical Accounting Policies and Estimates

Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States ("US GAAP"). US GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expenses 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 US 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.

Recent Accounting Pronouncements

The Company does not expect that the adoption of any recent accounting pronouncements will have any material impact on its financial statements.

Results of Operations

Year Ended December 31, 2014 Compared to the Year Ended December 31, 2013

Our current operations began on October 1, 2013.  General and administrative expenses were $1,501,640 for the year ended December 31, 2014, compared to $367,042 for the year ended December 31, 2013. General and administrative expenses were comprised mainly legal, consulting, and investor relation fees.  We had a net loss of $56,521,453 for the year ended December 31, 2014 compared to a net loss of $376,449 for the year ended December 31, 2013.  The increase in net loss for the period ended December 31, 2013, is due to the increase in professional services expenses resulting from issuing stock for consulting, legal, management and investor relation fees and other services arising from the change in control of the company and increasing operating activities in Canada and the US. Consulting fees include $26,591,126 as common shares issued for consulting services.  The increase in consulting fees reflects the realization of business goals for the year including acquisition of Phoenix properties and Medican Nations initiatives.

We issued 19,460,448 common shares pursuant to consulting, legal, and management services, valued at $42,702,687 during the year ended December 31, 2014, which accounted for the majority of the net loss.  No common shares were issued pursuant to such services in the year ending December 31, 2013.

Liquidity and Capital Resources

On December 31, 2014 and 2013, we had $79,624 and $0 in cash on hand. If additional funds are required, such funds may be advanced by management or shareholders. Compensation to these individuals has been rendered in the form of stock payments and warrants as described in Note 7 to the financial statements. Various loans for advances made to the company were also incurred as described in note 3 to the financial statements.

During the year ended December 31, 2014, the Company received gross proceeds of $1,055,735 pursuant to private placements (2013 - $nil).  The Company received proceeds of $1,727,000 from issuance of various convertible notes (2013 - $nil) and $171,323 in demand promissory note (2013 - $nil).

Off-Balance Sheet Arrangements

We had no Off-Balance Sheet arrangements during the fiscal year ended December 31, 2014.

ITEM 7A:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.
  

 
27

 


ITEM 8:  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

MEDICAN ENTERPRISES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014

TABLE OF CONTENTS
 
Report of Independent Registered Public Accounting Firms
29
Consolidated Balance Sheets
30
Consolidated Statements of Operations
31
Consolidated Statements of Stockholders’ Deficit
32
Consolidated Statements of Cash Flows
33
Notes to Consolidated Financial Statements
34
 

 
28

 


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Stockholders of
Medican Enterprises, Inc.
5955 Edmond Street Suite 102
Las Vegas,NV 89118

We have audited the accompanying consolidated balance sheet of Medican Enterprises, Inc. as of December 31, 2014 and 2013 and the related statements of operations, changes in stockholders’ deficit, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Medican Enterprise, Inc. as of December 31, 2014 and the results of its operations and its cash flows for the years ended December 31, 2014 and 2013, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern as indicated in Note 2. The Company has had no revenues and an accumulated deficit of $57,576,152. These conditions, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management's plans concerning these matters are also described in the Note 2, which includes the raising of additional equity financing. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.


Anton & Chia LLP
Newport Beach, California
April 15, 2015
 

 
29

 

MEDICAN ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2014 AND 2013

             
   
2014
   
2013
 
             
ASSETS
           
Current asset:
           
Cash
 
$
79,624
   
$
-
 
Prepaid deposit
   
33,000
     
-
 
Total current assets
   
112,624
     
-
 
Total assets
 
$
112,624
   
$
-
 
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
               
Current liabilities:
               
Accounts payable
 
$
1,954,488
   
$
176,187
 
Accrued Interest - related parties
   
-
     
4,172
 
Convertible Notes Payable (net of discount of $525,500)
   
5,749,937
     
-
 
Promissory Note
   
176,057
     
-
 
Stock issuance liability
   
145,578
     
-
 
Notes Payable - related parties
   
-
     
116,529
 
Total current liabilities
   
8,026,060
     
296,888
 
                 
Derivative liability
   
389,397
     
-
 
Total liabilities
   
8,415,457
     
296,888
 
                 
Stockholders’ Deficit:
               
Preferred Stock - 5,000,000 shares authorized, $.001 par value; 0 shares issued and outstanding
   
-
     
-
 
Common stock - 100,000,000 shares authorized, $.001 par value; 48,769,256 shares issued and outstanding as of December 31, 2014 and 27,151,240 as of December 31, 2013
   
48,769
     
27,151
 
Additional paid-in capital
   
49,224,550
     
770,428
 
Accumulated deficit
   
(57,576,152
)
   
(1,094,467
)
Total  stockholders' deficit
   
(8,302,833
)
   
(296,888
)
Total liabilities and stockholders' deficit
 
$
112,624
   
$
-
 
 
See accompanying notes to the consolidated financial statements

 
30

 

 
MEDICAN ENTERPRISES, INC.
 
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
 
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
 
(Unaudited)
 
   
2014
   
2013
 
             
REVENUE
 
$
-
   
$
-
 
                 
OPERATING EXPENSES
               
                 
Professional Services
               
  Consulting
   
35,195,854
     
-
 
  Legal
   
1,578,009
     
-
 
  Management
   
14,862,965
     
-
 
  Consulting and media relations
   
43,542
     
-
 
Stock Compensation
   
4,354,867
     
-
 
Selling, General & Administrative
   
1,501,640
     
367,042
 
                 
Total Operating Expenses
   
57,536,877
     
367,042
 
                 
Loss From Operations
   
(57,536,877
)
   
(367,042
)
OTHER INCOME (EXPENSE):
               
Related Party Interest Expense
   
-
     
(9,407
)
Gain on revaluation of derivative liability
   
1,559,423
     
-
 
Loss on excess of fair value of stock issued over convertible note principal
   
(107,784
)
   
-
 
Loss on excess derivative liability over note principal
   
(436,215
)
   
-
 
NET LOSS
 
$
(56,521,453
)
 
$
(376,449
)
                 
Currency Translation Adjustment
   
39,767
     
-
 
                 
COMPREHENSIVE LOSS
 
$
(56,481,686
)
 
$
(376,449
)
                 
NET LOSS PER BASIC AND DILUTED SHARES
 
$
(1.37
)
 
$
(0.01
)
                 
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
   
41,251,844
     
26,569,076
 
 
See accompanying notes to the consolidated financial statements
 

 
31

 


 
MEDICAN ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 2014 AND 2013
 
     
Number of Shares
   
Common Stock
   
Additional Paid-In Capital
   
Accumulated Deficit
   
Net Stockholders’ (Deficit)
 
Balance, December 31, 2012
      26,501,240     $ 26,501     $ 588,499     $ (718,018 )   $ (103,018 )
Common stock issued for services at $0.25 per share
      650,000       650       161,850       -       162,500  
Related party debt forgiveness
      -       -       9,603       -       9,603  
Contributions from directors
      -       -       10,476       -       10,476  
Net loss for the year
      -       -       -       (376,449 )     (376,449 )
Balance, December 31, 2013
      27,151,240     $ 27,151     $ 770,428     $ (1,094,467 )   $ (296,888 )
Private placement
- at $0.50
      100,000       100       49,900       -       50,000  
- at $1.00       161,110       160       160,950       -       161,110  
- at $1.10       252,000       252       276,948       -       277,200  
Subscriptions received
      1,154,800       1,155       566,270       -       567,425  
Conversion of related party payables
      175,624       175       208,281       -       208,456  
Conversion of convertible debt into common stock
      174,034       174       4,826       -       5,000  
Common stock issued for services pursuant to:
                                         
- Consulting
      13,861,814       13,863       26,577,263       -       26,591,126  
- Legal
      598,634       599       1,360,962       -       1,361,561  
- Management
      5,000,000       5,000       14,745,000       -       14,750,000  
                                           
Issuance of warrants
      -       -       4,155,467       -       4,155,467  
Beneficial conversion price
      -       -       41,212       -       41,212  
Stock compensation to directors
      140,000       140       199,260       -       199,400  
Loss on excess of fair value of stock over conversion principal
      -       -       107,784       -       107,784  
Net loss for the year
      -       -       -       (56,481,685 )     (56,481,685 )
Balance, December 31, 2014
      48,769,256     $ 48,769     $ 49,224,550     $ (57,576,152 )     (8,302,833 )
 
See accompanying notes to the consolidated financial statements

 
32

 

 
MEDICAN ENTERPRISES, INC.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
 
   
2014
   
2013
 
             
Operating Activities:
           
Comprehensive Loss
  $ (56,481,686 )   $ (376,449 )
Adjustments to reconcile net loss to net cash used in operating activities:
               
Warrants issued as compensation
    4,155,467       -  
Stock compensation expenses
    199,400       -  
Gain on revaluation of derivative liabilities
    (1,559,423 )     -  
Loss on excess of fair value of stock over principal
    107,784       -  
Loss on excess of derivative liability over note principal
    436,215       -  
       Convertible debt issued on consulting fees     4,450,000       -  
Interest and accretion
    1,286,801       -  
Stock Issued for Services:
               
   Consulting
    26,591,126       162,500  
   Management
    14,750,000       -  
   Legal
    1,361,561       -  
Change in operating assets and liabilities:
               
Prepaid deposit
    (33,000 )     -  
Accounts payable
    1,753,566       176,187  
Payables to related parties
    -       22,948  
Accrued interest – related party
    -       (5,265 )
Net cash used in operating activities:
    (2,982,189 )     (20,079 )
Financing Activities:
               
Related party debt forgiveness
    -       9,603  
Notes payable
    87,755       -  
Convertible notes
    1,727,000       -  
Demand promissory note
    171,323       -  
Subscription agreements
    1,075,735       -  
Proceeds from borrowing, related parties
    -       10,476  
Net cash provided by financing activities:
    3,061,813       20,079  
Net change in cash in period
    79,624       -  
Cash, beginning of period
    -       -  
Cash, end of period
  $ 79,624     $ -  
Supplemental Disclosure of Cash Flow Information
               
Cash paid for interest
  $ -     $ -  
Cash paid for taxes
  $ -     $ -  
Note payable issued for payables to related party
  $ -     $ 146,309  
Related party debt forgiveness
  $ -     $ 9,603  
Capital stock issued to settle related party debt
  $ 43,904     $ -  
Conversion of convertible note to common stock
  $ -     $ -  
Convertible note issued on consulting fees
  $ 4,450,000     $ -  
 
See accompanying notes to the consolidated financial statements

 
33

 
 
MEDICAN ENTERPRISES, INC.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2014 and 2013


NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Organization

Medican Enterprises, Inc. (“the Company”) was incorporated in Nevada in October, 1988, under the name Extant Investments, Inc. In 1991, the Company merged with and changed its name to Sentinel Scientific, Inc. From 1991 to 1993, the Company was involved with research and development of biomedical technologies, but ceased active operations due to lack of operating capital. In August, 1993, the Company merged with A.F.C. Entertainment, Inc. (“A.F.C.”), a Barbados corporation, which was involved with the foreign film industry. In December, 1993, the Company purchased all of the shares of Film Optical Investments Limited, a corporation organized in the Province of Ontario, Canada (“Film Opticals”) in exchange for 120,000 of its common shares. With the acquisition of Film Opticals, the Company had been engaged in the business of providing a full range of motion picture printing services and creative titles, credits and optical effects for features, commercials, theatrical and television programs. The foreign film library, acquired with the merger of A.F.C., remained intact, but funding constraints curtailed the Company’s ability to develop and market this business. Because of these constraints, the board of directors elected on December 8, 2004, to sell Film Opticals. The Company is currently considering new business opportunities for its planned principal operations. On August 6, 2013, The Company changed its name to Medican Enterprises, Inc.

We are a bio-pharmaceutical company focused on pursuing business opportunities in the growing medical and recreational marijuana sector. Through its subsidiaries, the Company is seeking to invest in businesses associated with the growing, marketing, research and development, training, distribution and retail sale of medical and recreational marijuana, both in the United States and Canada.  As of the date of this report, the Company has not commenced the actual the production and sale of medical marijuana but is seeking to lay the foundation to commence this business or related business in the marijuana sector.

We currently have five subsidiaries through which we operate our business.

Medican Systems Inc. is a corporation incorporated under the laws of the Territory of the Yukon under incorporation number 535642 on December 30, 2013. The authorized share structure is an unlimited number of common shares without par value, with 100 common shares issued to our company, making Medican Systems our direct wholly-owned subsidiary.  The primary focus of Medican Systems is to function as a holding company for Canadian based investments, joint ventures and opportunities.
 
Medican (Delta) Systems, Inc. (“Medican Delta”) is a corporation incorporated under the laws of the Province of British Columbia under incorporation number BC0989867 on December 31, 2013 and is a subsidiary of Medican Systems.  The authorized share structure is an unlimited number of common shares without par value, with 100 common shares issued to Medican Systems. The primary focus of Medican Delta is to pursue opportunities in the medical marijuana industry in and around the city of Delta in British Columbia, Canada.

Canaleaf Systems, Inc. (“CanaLeaf”) is a corporation incorporated under laws of Canada under the Canada Business Corporation Act under incorporation number 883348-6 on March 25, 2014 and is also a subsidiary of Medican Systems.  The authorized share structure is an unlimited number of common shares. CanaLeaf is our operating subsidiary focused on business opportunities in Canada.

Medican (US) Systems, Inc. (“Medican US”) is a corporation incorporated under laws of Nevada on September 26, 2014 and is also a subsidiary of Medican Systems.  Medican US is our operating subsidiary focused on business opportunities in the United States.

Medican Nations, LLC (“Medican Nations”) is a corporation incorporated under the laws of Nevada on February 6, 2015 and is also a subsidiary of Medican Systems.  Medican Nations will be focused on building strategic partnerships with Indian communities in the United States and Canada to create and build business solutions within the indoor gardening and marijuana industries.

The consolidated financial statements of the Company have been prepared in accordance with U. S. generally accepted accounting principles. The consolidated financial statements of the Company include the accounts of Medican Enterprises, Inc. and its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated. The following summarizes the more significant of such policies:

 
 
34

 
 
(b) Statement of Cash Flows

For purposes of the consolidated statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.

(c) Income Taxes

The Company applies the provisions of Financial Accounting Standards Board Accounting Standard Codification (“ASC”) 740 Income Taxes.  The Standard requires an asset and liability approach for financial accounting and reporting for income taxes, and the recognition of deferred tax assets and liabilities for the temporary differences between the financial reporting basis and tax basis of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. Due to a loss from inception, the Company has no outstanding tax liability.  At this time the Company has no deferred taxes arising from temporary differences between income for financial reporting and income tax purposes.

The Company classifies tax-related penalties and net interest on income taxes as income tax expense. As of December 31, 2014 and 2013, no income tax expense had been incurred or accrued.

(d) Fair Value Measurements and Financial Instruments

ASC Topic 820 defines fair value, establishes a framework for measuring fair value, establishes a three-level valuation hierarchy for disclosure of fair value measurement and enhances disclosure requirements for fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

Level 1 - Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The carrying value of cash, accounts receivable, investment in a related party, accounts payables, accrued expenses, due to related party, notes payable, and convertible notes approximates their fair values due to their short-term maturities.

(e) Foreign currency fluctuations and inflationary pressures may have a negative impact on our financial condition and results of operations.

Our operations in Canada, subject us to foreign currency fluctuations and inflationary pressures which may adversely affect our financial position and results of operations. Since we report our results of operations and financial condition in U.S. dollars, fluctuations in foreign currencies relative to the U.S. dollar may impact our financial results. We do not currently have a hedging program to address foreign currency fluctuations. Any steps taken by us to address foreign currency fluctuations may not eliminate all adverse effects.

(f) Net Loss Per Common Share

Basic loss per common share is based on the weighted-average number of shares outstanding. Diluted income or loss per share is computed using weighted average number of common shares plus dilutive common share equivalents outstanding during the period using the treasury stock method. There are no common stock equivalents outstanding, thus, basic and diluted income or loss per share calculations are the same.  

(g) Impairment of Long-Lived Assets

The Company reviews long-lived assets, at least annually, to determine if impairment has occurred and whether the economic benefit of the asset (fair value for assets to be used and fair value less disposal costs for assets to be disposed of) is expected to be less than the carrying value. Triggering events, which signal further analysis, consist of a significant decrease in the asset’s market value, a substantial change in the use of an asset, a significant physical change in the asset, a significant change in the legal or business climate that could affect the asset, an accumulation of costs significantly in excess of the amount originally expected to acquire or construct the asset, or a history of losses that imply continued losses associated with assets used to generate revenue. The Company has no long-lived assets as of December 31, 2014 and 2013.

(h) Use of Estimates in Preparation of Financial Statements

The preparation of financial statements in conformity with U. S. generally accepted accounting principles (“US GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
 
 
35

 

(i) Revenue Recognition

The Company shall recognize revenues in accordance with the Securities & Exchange Commission Staff Accounting Bulletin (SAB) number 104, “Revenue Recognition.”  SAB 104 clarifies application of U.S. generally accepted accounting principles to revenue transactions. Accordingly the Company shall recognize revenues when earned which shall be as products or services are delivered to customers. The Company shall also record accounts receivable for revenue earned but not yet collected. An allowance for bad debts shall be provided based on estimated losses. For revenue received in advance of service the Company shall record a current liability as deferred revenue until the earnings process is complete.

(j) Impact of New Accounting Standards

The Company has reviewed all recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its results of operation, financial position or cash flows.  Based on that review, the Company believes that none of these pronouncements will have a significant effect on its consolidated financial statements.

(k) Derivative Financial Instruments

The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses a weighted average Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

(l) Stock Based Compensation

Shares were issued to various directors as compensation for services rendered. During the year ended December 31, 2014, 140,000 common shares were issued at a value of $199,260.

During the year ended December 31, 2014, the Company issued 3,230,000 warrants in connection with the share issuances and subscriptions that occurred during the period. The fair value of these warrants was determined to be $6,643,981. All warrants have a term that extends from the date of issuance through June 30, 2015. Accrual of expenses related to these warrants during the year ended December 31, 2014 amounted to $4,155,467.   The Company also granted 297,832 warrants in connection with convertible note financing and recorded a derivative liability and corresponding debt discount on the convertible note financing in the amount of $195,927. At December 31, 2014, the fair value of this derivative liability relating to the 297,832 warrants had decreased to $nil.

NOTE 2 LIQUIDITY/GOING CONCERN

The Company has an accumulated deficit of $57,576,152 as of December 31, 2014, and has had negative cash flows from operating activities through December 31, 2014 as well as very limited cash resources as of December 31, 2014.  The loss was primarily due to the issuance of common stock and warrants for professional services.  These factors raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty. Management plans to continue to seek to build the foundations of its medical and recreational marijuana businesses, but it may be unable to do for a number of reasons, including the inability to reach final agreements with its partners and the inability to raise sufficient funds to commence and operate its business.

 
 
36

 
 
NOTE 3 RELATED PARTY TRANSACTIONS AND BALANCES

On December 31, 2014, total balances due to related parties amounted to $0 (2013 - $116,529).  Various loans have been obtained through related parties in the prior year. These loans constituted the balance of the related party payables as of December 31, 2013. During the year ended December 31, 2014, the Company settled amounts payable to related parties by issuance of 175,624 shares of common stock valued at $208,456 which is valued at the market value of shares at the date of issuance.

NOTE 4 EQUITY

On August 16, 2013, the Company’s board of directors approved a forward split paid as a stock dividend, on a basis of 20:1 (the “Stock Dividend”), pursuant to which, the Company’s shareholders as at September 24, 2013 received twenty (20) shares of our Company’s common stock for each one (1) share of common stock currently held. The pay-out date as approved by the board of directors and Financial Industry Regulatory Authority is September 25, 2013. 

On October 4, 2013, 20,000 shares were issued to individuals in exchange for services. The shares were valued at $0.25 per share and had a par value of $0.001.

On November 25, 2013, 600,000 shares were issued to individuals in exchange for services. The shares were valued at $0.25 per share and had a par value of $0.001.

On December 6, 2013, 30,000 shares were issued in exchange for services. The shares were valued at $0.25 per share and had a par value of $0.001.

On April 23, 2014, the Company filed an Amendment to its Articles of Incorporation with the Nevada Secretary of State increasing its authorized shares to 100,000,000 shares, par value $0.001 per share.

During the year ended December 31, 2014, the Company:

i.  
Issued 1,726,910 common shares for proceeds of $1,075,735 pursuant to private placements.
ii.  
Issued 140,000 common shares valued at $197,400 to officers and employees and recorded stock compensation expense at the market value of shares at the date of issuance.
iii.  
Issued 175,624 common shares to a shareholder pursuant to settlement of notes payable of $208,281 due to a shareholder.
iv.  
Issued to various consultants 13,861,814 common shares valued at $26,591,126, as payment for consulting services.  Shares were valued as of their respective issuance dates throughout the period.
v.  
Issued 598,634 common shares valued at $1,361,561 as payment for legal services. Shares were valued as of their respective issuance dates throughout the period.
vi.  
Issued 5,000,000 common shares valued at $14,750,000 as payment for management services. Shares were valued as of their respective issuance dates throughout the period.

During the year ended December 31, 2014, the Company issued 3,230,000 warrants issued in connection with the share issuances and subscriptions that occurred during the year. The fair value of these warrants was determined to be $6,643,981, which is calculated using the Black-Scholes method and the following assumptions: volatility 120-128%, risk-free rate 0.2%-0.3%, 0% dividends. All warrants have a term that extends from the date of issuance through June 30, 2015. Accrual of expenses related to these warrants during the year ending December 31, 2014 amounted to $4,155,467.

During the year ended December 31, 2014, the Company issued 1,599,910 warrants in connection with private placements that occurred during the year.  The warrants are exercisable into one common share at $0.50 to $1.50 per warrant, expiring June 30, 2015.  The Company also issued 297,832 warrants in connection with a $1,500,000 convertible note (Note 7 (d)).

A summary of the warrants issued as of December 31, 2014 and 2013 is as follows:
 
   
Number
   
Weighted Average Exercise Price
 
Outstanding at December 31, 2013
    -     $ -  
Issued
    5,127,742       0.70  
Exercised
    -       -  
Outstanding and exercisable at December 31, 2014
    5,127,742     $ 0.70  

 
 
37

 
 
NOTE 6 CASH

As of December 31, 2014, total cash balances amounted to $79,624. Of this amount, $46,554 is held in a bank account denominated in Canadian dollars. Because the reporting company reports all balances in US Dollars, transactions over the course of the period which were denominated in Canadian dollars were adjusted as of December 31, 2014 to reflect their value in US Dollars. The effect of this is a foreign currency translation adjustment of $39,767 on the Statement of Operations.

NOTE 7 NOTES PAYABLE

(a) $115,000 March 31, 2014 LG Capital/Adar Bays Convertible Notes

On March 31, 2014, the Company issued two convertible notes in the principal amounts of $57,500 each. The notes mature on March 31, 2015, are 8% per annum convertible notes and each includes a 5% original issue discount such that the total proceeds to the Company from issuance of the two notes is $115,000 and the purchase price for each note is $55,000.  At the option of the holder after 180 days, all or any amount of the principal of the note then outstanding may be converted into shares of the Company’s common stock.  The conversion price for each share is 70% of the average of the 3 lowest closing bid prices for twenty prior trading days.  Interest shall be paid by the Company in common stock.

The Company recorded a derivative liability of $84,506 from the variable conversion pricing of the convertible note and recorded accretion expense of $84,506 relating to the derivative liability from variable conversion pricing during the year ended December 31, 2014.  At December 31, 2014, the derivative liability from variable conversion pricing was revalued and the Company recorded a gain on revaluation of $56,295 during the year ended December 31, 2014, resulting in an ending derivative liability balance of $28,211.

During the three months ended December 31, 2014, the debtors elected to convert $65,321 in convertible debt principal and interest into 1,189,299 shares of common stock with an aggregate fair value of $91,960, representing the fair value of the derivative liabilities and the amortized cost of convertible debt settled was included as additional paid-in capital.  During the year ended December 31, 2014, the Company recorded a loss of $26,639 on the excess of fair value of stock issued over the converted principal amount.  As at December 31, 2014, the stock has not been issued, and the conversion value of $65,321 has been recorded to stock issuance liability.  At December 31, 2014, the convertible note principal and interest balances are $54,875.

The back-end notes entered into on March 31, 2014, with face values of $57,500 each was funded and the Company received the funds on October 22, 2014 and December 11, 2014. The Company issued two convertible notes in the principal amounts of $57,500 each. The note matures on March 31, 2015, are 8% per annum convertible notes and each includes a 5% original issue discount such that the total proceeds to the Company from issuance of the note is $55,000 and the purchase price for each note is $55,000.  The back-end notes were also amended such that the conversion price for each share is 65% of the lowest closing bid price for twenty prior trading days.  At the option of the holder after 180 days, all or any amount of the principal of the note then outstanding may be converted into shares of the Company’s common stock.  Interest shall be paid by the Company in common stock. At December 31, 2014, the back-end convertible note principal and interest balances are $115,835.

The Company recorded a derivative liability of $80,028 from the variable conversion pricing of the convertible note and recorded accretion expense of $14,543 relating to the derivative liability from variable conversion pricing during the year ended December 31, 2014.  At December 31, 2014, the derivative liability from variable conversion pricing was revalued and the Company recorded a gain on revaluation of $48,145 during the year ended December 31, 2014, resulting in an ending derivative liability balance of $31,883.

Subsequent to December 31, 2014, the debtor elected to convert $15,000 of convertible debt principal into 1,775,148 shares of common stock with an aggregate fair value of $71,006 which is the market trading price at date of conversion.

(b) $100,000 May 8, 2014 JSJ Investments Convertible Note

On May 8, 2014, the Company issued a 12% convertible note in exchange for cash received of $100,000.  The Company must pay 12% interest per annum on the unpaid principal balance, and the principal balance was due on November 8, 2014.  Upon maturity date, the note has a cash redemption premium of 130% of the principal amount.  The note may be converted to stock at a conversion price equal to 45% discount to the average of the three lowest trades on the previous ten trading days to the date of conversion.

The Company recorded a derivative liability of $129,359 from the variable conversion pricing of the convertible note and recorded accretion expense of $129,359 relating to the derivative liability from variable conversion pricing during the year ended December 31, 2014. As the amount of derivative liability was in excess of the principal amount of the note, the Company recorded a charge on the statement of operations of $28,333 for the year ending December 31, 2014.  At December 31, 2014, the derivative liability from variable conversion pricing was revalued and the Company recorded a gain on revaluation of $128,978, during the year ended December 31, 2014, resulting in an ending derivative liability balance of $381.

 
 
38

 
 
During the three months ended December 31, 2014, the debtor elected to convert $50,000 in convertible debt principal into 568,064 shares of common stock with an aggregate fair value of $96,571, representing the fair value of the derivative liabilities and the amortized cost of convertible debt settled was included as additional paid-in capital. During the year ended December 31, 2014, the Company recorded a loss of $46,571 on the excess of fair value of stock issued over the converted principal amount.  As at December 31, 2014, the stock has not been issued, and the conversion value of $50,000 has been recorded to stock issuance liability.  At December 31, 2014, the convertible note principal and interest balance is $57,118.

(c) $1,105,000 June 4, 2014 Typenex Convertible Note

On June 4, 2014, the Company issued a 10% secured convertible promissory note in the principal amount of $1,105,000. The Company must pay 10% interest per annum on the unpaid principal balance which is due November 4, 2015.  The purchase price for the note is $1,000,000, computed as $1,105,000 original principal balance, less the original issue discount (“OID”) of $100,000, less the transaction cost of $5,000.  On the closing date, the investor shall pay the purchase price to the Company by delivering the following at closing:

a) The initial cash purchase price of $170,000 and $15,000 of the OID (received)
b) Secured investor note #1 in the principal amount of $85,000 and $8,500 of the OID
c) Secured investor note #2 in the principal amount of $85,000 and $8,500 of the OID
d) Secured investor note #3 in the principal amount of $85,000 and $8,500 of the OID
e) Secured investor note #4 in the principal amount of $85,000 and $8,500 of the OID
f) Investor note #5 in the principal amount of $85,000 and $8,500 of the OID
g) Investor note #6 in the principal amount of $85,000 and $8,500 of the OID
h) Investor note #7 in the principal amount of $85,000 and $8,500 of the OID
i) Investor note #8 in the principal amount of $85,000 and $8,500 of the OID
j) Investor note #9 in the principal amount of $85,000 and $8,500 of the OID
k) Investor note #10 in the principal amount of $85,000 and $8,500 of the OID

The conversion price for each lender conversion shall be $1.65.  Lender has the right at any time after the purchase price date to convert all or any part of the outstanding balance into shares of common stock. During the year ended December 31, 2014, the Company received the first tranche of $170,000 less transaction cost.

As the conversion price at the date of issuance of the note was less than the Company’s market trading price of $2.04 on June 4, 2014, the Company recorded a beneficial conversion feature of $41,212 against additional paid-in capital and recorded accretion expense of $16,453 for the year ended December 31, 2014.

During the three months ended December 31, 2014, the debtor elected to convert $30,000 in convertible debt principal into 807,168 shares of common stock with an aggregate fair value of $64,573, representing the fair value of the derivative liabilities and the amortized cost of convertible debt settled was included as additional paid-in capital.  During the year ended December 31, 2014, the Company recorded a loss of $34,573 on the excess of fair value of stock issued over the converted principal amount.  As at December 31, 2014, the stock has not been issued, and the conversion value of $30,000 has been recorded to stock issuance liability. At December 31, 2014, the convertible note principal and interest balance is $159,675.

(d) $1,500,000 June 25, 2014 Himmil Convertible Note

On June 25, 2014, the Company entered into a Securities Purchase Agreement (the “Agreement”) with a single accredited investor (the “Investor”) in a private placement pursuant to which the Investor purchased a 5% Convertible Note with a face amount of $1,500,000 for a purchase price of $1,000,000  (the “Note”).  The Note bears interest at a rate of 5% per annum and is payable one year after the date of the issuance.  The Company may pay interest due either in cash or, at its option, through freely tradable stock.  The Note will be convertible at the option of the Investor at any time into shares of the Company’s common stock at a conversion price equal to the less of (i) $1.90 and (ii) 70% (60% in the event of default) of the average of the two lowest volume-weighted-average-price of the Common Stock during the 12 consecutive trading days immediately preceding the applicable conversion date.  All or part of the then remaining principal amount of the Note may be prepaid at any time at a price equal to 125% of the sum of the remaining principal amount of the Note to be prepaid plus all accrued and unpaid interest thereon.  The principal amount of the Note will be reduced by $500,000 if the shares of Common Stock underlying the Note are registered for public resale pursuant to an effective registration statement by August 24, 2014.  As at December 31, 2014, the carrying amount of this Convertible Note is $808,043, net of a $500,000 original issuer discount.
 
 
 
39

 

At September 1, 2014, due to the issuance of a separate convertible note which violates the Agreement, the interest rate on the Convertible Note increased from 5% to 18%.

In connection with the Agreement, the Investor received a warrant to purchase 297,832 shares of common stock, exercisable for a period of 5 years from the date of issuance at exercise price of $2.15, subject to adjustment.  If a registration statement is not effective for the resale by the Holder of all of the Warrant Shares, the Investor may exercise the warrant on a “cashless” basis. The conversion price of the Note and the exercise price of the Warrant are subject to “full ratchet” anti-dilution adjustment for subsequent lower price issuances by the Company, as well as customary adjustments provisions for stock splits, stock dividends, recapitalizations and the like.  During the year ended December 31, 2014, the Company recorded $195,927 as a derivative liability on the issuance of these warrants.  At December 31, 2014, the derivative liability from the issuance of warrants was revalued, resulting in a gain on revaluation of derivative liability of $195,927.  During the year ended December 31, 2014, the Company recorded accretion expense of $101,453 on the derivative liability of these warrants.  At December 31, 2014, the convertible note principal and interest balance is $1,603,476.

The Company recorded a derivative liability of $1,164,745 from the variable conversion pricing of the convertible note and recorded accretion expense of $603,114 relating to the derivative liability from variable conversion pricing during the year ended December 31, 2014.  As the amount of derivative liability was in excess of the principal amount of the note, the Company recorded a charge on the profit and loss of $360,672 for the year ending December 31, 2014.  At December 31, 2014, the derivative liability from variable conversion pricing was revalued and the Company recorded a gain on revaluation of $1,099,709, resulting in an ending derivative liability balance at December 31, 2014 of $261,209.

Subsequent to December 31, 2014, the debtor elected to convert $221,122 in convertible debt principal into 27,822,391 shares of common stock with an aggregate fair value of $503,352 which is the market trading price at respective dates of conversion.

(e) $83,500 September 1, 2014 KBM Worldwide Convertible Note

On September 1, 2014, the Company issued a convertible note in the principal amount of $83,500. The note matures on June 1, 2015 and bears 8% interest per annum.  At the option of the holder after 180 days, all or any amount of the principal of the note then outstanding may be converted into shares of the Company’s common stock.  The conversion price for each share is 58% of the average of the 3 lowest closing bid prices for ten prior trading days.

The Company recorded a derivative liability of $85,871 from the variable conversion pricing of the convertible note and recorded accretion expense of $39,211 relating to the derivative liability from variable conversion pricing during the year ended December 31, 2014.  As the amount of derivative liability was in excess of the principal amount of the note, the Company recorded a charge on the profit and loss of $4,967 for the year ended December 31, 2014.  At December 31, 2014, the derivative liability from variable conversion pricing was revalued and the Company recorded a gain on revaluation of $76,440 during the year ended December 31, 2014, resulting in an ending derivative liability balance of $9,431. At December 31, 2014, the convertible note principal and interest balance is $87,362.

(f) $82,688 September 12, 2014 LG Capital Convertible Note

On September 12, 2014, the Company issued a convertible note in the principal amount of $82,688. The note matures on September 12, 2015 and bears 8% interest per annum.  The note contains a 5% original issue discount such that the purchase price is $78,750. At the option of the holder after 180 days, all or any amount of the principal of the note then outstanding may be converted into shares of the Company’s common stock.  The conversion price for each share is 70% of the average of the 3 lowest closing bid prices for twenty prior trading days. Interest shall be payable in common stock.

The Company recorded a derivative liability of $68,933 from the variable conversion pricing of the convertible note and recorded accretion expense of $21,175 relating to the derivative liability from variable conversion pricing during the year ended December 31, 2014.  At December 31, 2014, the derivative liability from variable conversion pricing was revalued and the Company recorded a gain on revaluation of $59,964 during the year ended December 31, 2014, resulting in an ending derivative liability balance of $8,969. At December 31, 2014, the convertible note principal and interest balance is $86,185.

 
 
40

 
 
(g)                      $4,450,000 October 1, 2014 Convertible Notes

On October 1, 2014, the Company issued convertible notes to various debtors in the principal amount of $4,450,000 in consideration of consulting expenses from the debtors.  The note matures on April 1, 2015 and bears 10% interest per annum.  At the option of the holder after 180 days, all or any amount of the principal of the note then outstanding may be converted into shares of the Company’s common stock.  The conversion price for each share is 50% of the average of the lowest closing bid price for twenty prior trading days. Interest shall be payable in common stock. At December 31, 2014, the convertible note principal and interest balance is $4,560,945.

(h) $75,000 November 25, 2014 Tangiers Convertible Note

On November 25, 2014, the Company issued a convertible note in the principal amount of $220,000.  The initial amount received by the Company was $75,000, with an additional $7,500 of the financing retained by the debtor through an original issuer discount.  The debtor has the option to finance additional amounts up to the balance of $220,000 until May 25, 2015.  The note matures on November 25, 2015 and bears 10% interest per annum.  The note contains a 5% original issue discount such that the purchase price is $78,750. At the option of the holder, all or any amount of the principal of the note then outstanding may be converted into shares of the Company’s common stock.  The conversion price for each share is 58% of the lowest closing bid prices for ten prior trading days.

The Company recorded a derivative liability of $78,148 from the variable conversion pricing of the convertible note and recorded accretion expense of $4,926 relating to the derivative liability from variable conversion pricing during the year ended December 31, 2014. As the amount of derivative liability was in excess of the principal amount of the note, the Company recorded a charge on the statement of operations of $14,596 for the year ending December 31, 2014.  At December 31, 2014, the derivative liability from variable conversion pricing was revalued and the Company recorded a gain on revaluation of $52,651 during the year ended December 31, 2014, resulting in an ending derivative liability balance of $25,497. At December 31, 2014, the convertible note principal and interest balance is $84,966.

(i) $43,000 November 26, 2014 KBM Worldwide Convertible Note

On November 26, 2014, the Company issued a convertible note in the principal amount of $43,000.  The note matures on August 28, 2015 and bears 8% interest per annum.  At the option of the holder, beginning May 13, 2015, all or any amount of the principal of the note then outstanding may be converted into shares of the Company’s common stock.  The conversion price for each share is 42% of the lowest three closing bid prices for ten prior trading days.

The Company recorded a derivative liability of $61,303 from the variable conversion pricing of the convertible note and recorded accretion expense of $2,173 relating to the derivative liability from variable conversion pricing during the year ended December 31, 2014.  As the amount of derivative liability was in excess of the principal amount of the note, the Company recorded a charge on the statement of operations of $26,621 for the year ending December 31, 2014. At December 31, 2014, the derivative liability from variable conversion pricing was revalued and the Company recorded a gain on revaluation of $37,487 during the year ended December 31, 2014, resulting in an ending derivative liability balance of $23,816. At December 31, 2014, the convertible note principal and interest balance is $44,178.

The carrying value of convertible debentures are as follows:
   
2014
   
2013
 
             
Balance of convertible debentures, beginning of year
 
$
-
   
$
-
 
Proceeds from new convertible debt tranches
   
1,727,000
     
-
 
Convertible debt issued on consulting fees
   
4,450,000
     
-
 
Derivative liability of variable conversion price
   
(1,794,105
)
   
-
 
Derivative liability of warrants
   
(195,927
)
   
-
 
Excess of derivative liability of conversion price on principal amount
   
436,215
     
-
 
Interest accrued on principal
   
239,434
     
-
 
Accretion of derivative liability of conversion price
   
1,032,636
     
-
 
Conversion of convertible debt
   
(145,315
)
   
-
 
Balance of convertible debentures, end of year
 
$
5,749,937
   
$
-
 

The fair value of derivative liabilities are as follows:
   
2014
   
2013
 
             
Fair value of derivative liabilities, beginning of year
  $ -     $ -  
Fair value of derivative liability at inception of new tranches
    1,752,893       -  
Fair value of derivative liability of warrants
    195,928       -  
Gain of revaluation of derivative liability
    (1,559,423 )     -  
Fair value of derivative liabilities, end of year
  $ 389,397     $ -  

 
 
41

 
 
(j) $200,000 CDN October 1, 2014 Demand Promissory Note

On October 1, 2014, the Company received CDN $200,000 (US $171,323) pursuant to a demand promissory note agreement.  The note bears interest at 12% per annum, calculated yearly and is due and payable in full on demand.  Interest is due and payable annually on the first day of January of each year and must be paid no later than September 30, 2015.

NOTE 8 SUBSCRIPTION AGREEMENT

Under the Amendment to the Subscription Agreement that was entered into on April 29, 2014, the Company agreed to acquire a 51% interest in International Herbs Medical Marijuana Ltd. (“IHMML”), a company that is applying to obtain licensed producer status from Health Canada.
On July 25, 2014, the Company and CanaLeaf entered into a non-binding letter of intent with Zenabis Limited Partnership (“Zenabis”) and IHMML. In September 2014, the Company announced that due to structuring and regulatory issues, the prospects for consummating this restructuring are uncertain and that although the Company will continue to monitor this situation, the Company was turning to focus on other potential opportunities.  As such, no assurances can be given that the transactions described in such non-binding letter of intent will be effectuated, and the Company is focusing on other operational activities at this time.

NOTE 9 PROPERTY

On December 2, 2014, the Company signed an agreement to acquire a 67,000 square foot facility in Phoenix, Arizona which the company plans to lease as a marijuana growing and warehouse facility to licensed growers.  The industrial building sits on 2.55 acres of industrial zoned land. The anticipated final purchase price for the property is $2,340,310 and a closing is planned during the first half of 2015 pending, among other closing conditions, a variance to zone the building for the cultivation of marijuana. The acquisition of this property will launch Medican’s real estate and leasing services business under which the company would lease real estate that is outfitted with turnkey solutions for legally compliant growing facilities to licensed growers.

NOTE 10 INCOME TAXES

The provision for income taxes consists of the following:

   
2014
   
2013
 
Current tax
 
$
-
   
$
-
 
Deferred tax benefit
   
(19,217,294
)
   
(127,993
)
Benefits of operating loss carryforwards
   
19,217,294
     
127,993
 
Provision for income tax
 
$
-
   
$
-
 

Below is a summary of deferred tax asset calculations on net operating loss carry forward amounts as of December 31, 2014:

   
NOL Balance
   
Tax
   
Rate
 
Net operating loss
 
$
10,266,101
   
$
3,490,474
     
34
%
Related party interest accrual
   
9,407
     
3,198
     
34
%
Warrants issued as compensation
   
4,155,467
     
1,412,859
     
34
%
Stock compensation expense
   
199,400
     
67,796
     
34
%
Stock issued for services
   
42,702,687
     
14,518,914
     
34
%
Other items
   
271,377
     
92,268
     
34
%
Valuation allowance
           
(19,585,509
)
       
Deferred tax asset, December 31, 2014
         
$
-
         

 
 
42

 
 
Below is a summary of deferred tax asset calculations on net operating loss carry forward amounts as of December 31, 2013:

   
NOL Balance
   
Tax
   
Rate
 
Net operating loss
  $ 1,073,579     $ 365,017       34 %
Related party interest accrual
    9,407       3,198       34 %
Valuation allowance
            (368,215 )        
Deferred tax asset, December 31, 2013
          $ -          

A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized.  Currently there is no reasonable assurance that the Company will be able to take advantage of a deferred tax asset. Thus, an offsetting allowance has been established for the deferred asset.  The valuation allowance has increased by $16,998,435, from the prior year balance of $368,215, as of December 31, 2013.

The Company has the following operating loss carry forwards available at December 31, 2014:

Operating Losses Expires
 
Amount
 
2020
  $ 38,250  
2021
    12,382  
2022
    17,151  
2023
    14,274  
2024
    529,784  
2025
    32,564  
2026
    6,488  
2027
    7,905  
2028
    14,696  
2029
    6,905  
2030
    8,636  
2031
    8,035  
2032
    9,467  
2033
    367,042  
2034
    49,192,522  
Total
  $ 10,266,101  

Reconciliation between income taxes at the statutory tax rate (34%) and the actual income tax provision for continuing operations follows:
 
   
2014
   
2013
 
Expected tax provision
 
$
19,217,294
   
$
(127,993
)
Effect of:
               
Increase in valuation allowance
   
(19,217,294
)
   
127,993
 
Actual tax provision
 
$
-
   
$
-
 

Uncertain Tax Positions

The Company has not made any adjustments to deferred tax asset or liabilities.  The Company did not identify any material uncertain tax positions of the Company on returns that have been filed or that will be filed.  The Company has not had operations and is carrying a Net Operating Loss as disclosed above.  Since it is not unlikely that the Net Operating loss will ever produce a tax benefit, even if examined by taxing authorities and disallowed entirely, there would be no effect on the financial statements.

The Company has filed income tax returns in the U.S.  All years prior to 2011 are closed by expiration of the statute of limitations.  The tax year ended December 31, 2011, will close by expiration of the statute of limitations on April 15, 2015.  The years ended December 31, 2012, 2013 and 2014 are open for examination.

NOTE 11 SUBSEQUENT EVENTS

On January 14, 2015, the Company issued a convertible note in the principal amount of $54,000 to KBM Worldwide.  The note matures on October 16, 2015 and bears 8% interest per annum.  At the option of the holder, all or any amount of the principal of the note then outstanding may be converted into shares of the Company’s common stock.  The conversion price for each share is 58% of the lowest three closing bid prices for ten prior trading days.
 
 
 
43

 

On January 16, 2015, the Company issued a convertible note in the principal amount of $100,000 to RDW Capital.  The holder will pay $45,000 upon execution (received) and $45,000 once the 14C is effective. The note matures on July 16, 2015 and bears 10% interest per annum.  At the option of the holder, all or any amount of the principal of the note then outstanding may be converted into shares of the Company’s common stock.  The conversion price for each share is 35% of the lowest twenty closing bid prices for ten prior trading days.

On January 20, 2015, the Company entered into a purchase agreement to acquire a 7,200 square foot retail and commercial property in Phoenix, Arizona. The property is currently leased through August 2018 to an Arizona state licensed medical marijuana dispensary. Per the purchase agreement, the lease agreement will be assigned to Medican. The rental amount of the current lease is in excess of $200,000 annually, triple net. The lease provides for two five-year tenant renewal options. The lease rate increases at 3 percent per year or CPI, whichever is greater. Total purchase price for the property is $2,250,000, which Medican expects to pay through a combination of mortgage debt and an $850,000 convertible promissory note secured by the property. The property’s value has been appraised at $2,385,000 and was substantiated by an independent appraiser, Kalinowski & Associates.  As per the Amendment No. 2 and 3 to the original agreement, the closing for the purchase of this property is expected to occur on or before May 31, 2015.

On January 30, 2015, the Company issued a convertible note in the principal amount of $66,000 to Black Mountain Equities, Inc.  The note bears an original issue discount of $6,000.  The note matures on January 30, 2016 and bears 10% interest per annum.  At the option of the holder, all or any amount of the principal of the note then outstanding may be converted into shares of the Company’s common stock.  The conversion price for each share is the lesser of $0.03 or 60% of the lowest three closing bid prices for twenty prior trading days.

On February 16, 2015, the Company filed with the State of Nevada a Certificate of Amendment to its Articles of Incorporation increasing the authorized amount of shares of common stock to 1,000,000,000 shares, par value $0.001 per shares. The Company is also authorized, according to the Definitive Information Statement dated January 26, 2015, to enact a reverse split in an amount up to 1:10 according to the Board of Director’s discretion.

On February 19, 2015, the Company entered into a 10% convertible debenture with RDW Capital, LLC (“RDW”) in the principal amount of $25,000 (the "RDW Note"). The financing on the initial amount closed on March 23, 2015.
 
The principal due under the RDW Note bears interest at the rate of 10% per annum. Upon an event of default, the outstanding balance shall immediately be due in cash and shall incur a late fee of $1,000 per day. The principal and interest underlying the RDW Note is convertible at any time into common stock, at RDW’s option, and will be equal to 35% of the lowest trading price of the Company’s common stock during the twenty consecutive trading days prior to the date on which RDW (or the then-holder of the RDW) elects to convert all or part of the RDW Note. In connection therewith, the Company agreed to reserve from its authorized and unissued shares at least the number of shares that may be issuable upon conversion of the note once the Company has increased its authorized shares. The Company may prepay any portion of the principal amount at 130% of such amount along with any accrued interest of the RDW Note at any time upon seven days’ written notice to RDW.

On March 12, 2015, the Company entered into an 8% convertible promissory note with Vis Vires, Inc. (“Vis Vires”) in the principal amount of $43,000 (the "Vis Vires Note"). The financing on the initial amount closed on March 18, 2015.
 
The principal due under the Vis Vires Note bears interest at the rate of 8% per annum. Upon an event of default, the outstanding balance shall immediately increase to 150% of the outstanding balance immediately prior to the event of default. The principal and interest underlying the Vis Vires Note is convertible at any time into common stock, at Vis Vires’s option, and will be equal to 58% of the average of the lowest three trading price of the Company’s common stock during the ten consecutive trading days prior to the date on which Vis Vires (or the then-holder of the Vis Vires) elects to convert all or part of the Vis Vires Note. In connection therewith, the Company agreed to reserve from its authorized and unissued shares at least the number of shares that may be issuable upon conversion of the note once the Company has increased its authorized shares. The Company may prepay any portion of the principal amount at between 115% and 145% of such amount along with any accrued interest of the Vis Vires Note at any time upon seven days’ written notice to Vis Vires.

 
44

 

ITEM 9:  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A:  CONTROLS AND PROCEDURES

Our management, with the participation of our principal executive and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by the Annual Report were effective such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
 
Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.

Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our internal control over financial reporting as of December 31, 2014.  In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework (2013).  Management noted that there were inconsistencies in control over common stock issuances as well as late adjusting journal entries required.  In order to resolve control over common stock and treasury, we seek to engage another transfer agent to improve control over common stock issuances.  Late adjusting journal entries will be addressed through enhanced communication between CEO, CFO, and consultants. Based on this evaluation, our management, with the participation of the Chief Executive Officer and Chief Financial Officer, concluded that, as of December 31, 2014, our internal control over financial reporting requires enhancement but based on implementing the planned control improvements, we seek to continually improve effectiveness of internal control.

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

Changes in Internal Control Over Financial Reporting

There have been no changes in internal control over financial reporting.

ITEM 9B:  OTHER INFORMATION

On August 16, 2013, our company’s board of directors approved a stock dividend, on a basis of 20:1 (the “Stock Dividend”), pursuant to which, our Company’s shareholders as at September 24, 2013 received twenty (20) shares of our Company’s common stock for each one (1) share of common stock currently held. The pay-out date was approved by our board of directors and Financial Industry Regulatory Authority is September 25, 2013.

On March 25, 2014, we filed a Definitive Information Statement announcing that on March 6, 2014 the Company’s majority shareholder and Board of Directors authorized an increase in the authorized shares of the Company from 50,000,000 shares of common stock to 100,000,000 shares of common stock. The Information Statement has been mailed to shareholders and the Amendment to our company’s Articles of Incorporation will be filed twenty days after the mailing date.
 
 
 
45

 

On February 16, 2015, the Company filed with the State of Nevada a Certificate of Amendment to its Articles of Incorporation increasing the authorized amount of shares of common stock to 1,000,000,000 shares, par value $0.001 per shares. The Company is also authorized, according to the Definitive Information Statement dated January 26, 2015, to enact a reverse split in an amount up to 1:10 according to the Board of Director’s discretion.


PART III

ITEM 10:  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Executive Officers
 
The following sets forth information about our director and executive officer as of the date of this report:  

Name
Age
Positions Held
Kenneth Williams
43
CEO, Director
Michael Thompson
44
Director
Gary Johnson
62
Director
Wayne Hansen
72
CFO

Background and Business Experience

Mr. Kenneth Williams

Mr. Williams, age 43, is a director and the Chief Executive Officer of the Company. He has over eighteen years of work experience in information technology, security and network engineering. Mr. Williams has held various positions as a systems and network engineer and network architect.  From 2004-2011, Mr. Williams worked at the University of Michigan-MBNI Research as a research network specialist.  In 2011, Mr. Williams was appointed as a chief technology officer in the public sector (at Digagogo Ventures Corp.) and later served as the chief executive officer and director. Since 2008, Mr. Williams has been a state-authorized caregiver in the Michigan Medical Marijuana Program.

Mr. Wayne Hansen

Mr. Hansen, age 72, is the Chief Financial Officer of the Company. Mr. Hansen has an extensive history of corporate financial management. Mr. Hansen is President of Caulfield Capital Management Inc. and has served in that capacity since 1997. He was formerly a Managing Partner of Asia Liaison and Practice Partner of BDO Dunwoody.
 
The Honorable Gary Johnson

Mr. Johnson, age 62, is the former two-term Republican governor of New Mexico. Raised in North Dakota and then New Mexico, Mr. Johnson graduated from the University of New Mexico in 1975. Mr. Johnson started a construction business in 1974, which grew into a multi-million dollar enterprise in the decades since. Mr. Johnson won the governorship of New Mexico in 1994 as an upstart Republican candidate, making a name for himself over the course of his time in office as a libertarian-minded conservative. Mr. Johnson has been active in libertarian causes, including marijuana legalization, since leaving office. Mr. Johnson was the Libertarian party's nominee for president in 2012. Mr. Johnson is an accomplished athlete competing in cycling and skiing and has climbed the highest mountain on 6 of the 7 continents. In 2003, Mr. Johnson summited Mount Everest.

Mr. Michael Thompson
 
Mr. Thompson, age 44, received a BS in Psychology and Sociology from the University of Oregon and a Masters in Marriage and Family Therapy.  From 2009 - 2013, Mr. Thompson worked in the pharmaceutical industry as a sales representative for Amgen, Inc.  He left that position in 2013 to focus his efforts on alternate projects.  He has started and operates a retail and wholesale electronic cigarette company.  Mr. Thompson has been involved in the medical marijuana industry as a licensed provider since early 2012.  He has several years of hands-on cultivation experience, which include indoor, outdoor and advance hydroponic production.  He also has in-depth knowledge and experience on the processing of the cannabis flower and by-products into a variety of marketable products.  Mr. Thompson has been involved in efforts to legalize cannabis both for medicinal and recreational purposes.  As a part of those efforts, he has gained a broad understanding of the changing laws regarding medical marijuana.  Currently, he is heading a group designed to capitalize on mainstreaming the industry in areas where recreational use of marijuana has been legalized.  The goal of that endeavor is to provide an upscale retail experience for a broad range of customers.  Mr. Thompson brings his expertise from both a production and retail perspective to the Board.
 
 
 
46

 

Significant Employees
 
Other than the foregoing named officers and directors, we have no full-time employees whose services are materially significant to our business and operations, although we rely heavily on our consultant that helps administer our website.
 
Family Relationships

None. 

Involvement in Other Public Companies

Mr. Williams is the Chief Technology Officer of Digagogo Ventures Corp.

Involvement in Certain Legal Proceedings

During the past 10 years, to our knowledge, none of our present or former directors, executive officers or persons nominated to become directors or executive officers has been the subject of any of the following:

(1) A petition under the federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two (2) years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two (2) years before the time of such filing;

(2) Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

(3) Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him or her from, or otherwise limiting, the following activities:

(i) Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

(ii) Engaging in any type of business practice; or

(iii) Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;

(4) Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than sixty (60) days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity;

(5) Such person was found by a court of competent jurisdiction in a civil action or by the SEC to have violated any federal or state securities law, and the judgment in such civil action or finding by the SEC has not been subsequently reversed, suspended, or vacated;
 
 
 
47

 

(6) Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated; 

(7) Such person was the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:

(i) Any federal or state securities or commodities law or regulation; or

(ii) Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or

(iii) Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

(8) Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Compliance with Section 16(a) of the Exchange Act

The common stock of the Company is registered under the Exchange Act, and therefore, the officers, directors and holders of more than 10% of our outstanding shares are subject to the provisions of Section 16(a) which requires them to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and our other equity securities.  Officers, directors and greater than 10% beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file.  We have reviewed the filings and have determined that the Company’s officers and directors are not in compliance with this requirement.

Code of Ethics

We have not adopted a code of ethics that applies to our executive officers and directors.  When we do adopt a code of ethics, we will disclose it in a Current Report on Form 8-K. 

Audit Committee

Our board of directors has determined that it does not have a member of its audit committee who qualifies as an "audit committee financial expert" as defined in Item 407(d)(5)(ii) of Regulation S-K, and is "independent" as the term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934, as amended.
 
We do not have an audit committee of our board of directors.  We believe that our board of directors is capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. We believe that retaining an independent director who would qualify as an "audit committee financial expert" would be overly costly and burdensome and is not warranted in our circumstances given the stage of our development and the fact that we have not generated any significant profitability to date. In addition, we currently do not have a nominating, or a compensation committees or committees performing similar functions nor do we have a written nominating, compensation or audit committee charter. Our director does not believe that it is necessary to have such committees because they believe the functions of such committees can be adequately performed by our board of directors.

Compensation Committee

We do not have a Compensation Committee of our board of directors.

Nominating Committee

We have not established a Nominating Committee because, due to our lack of material operations and the fact that we presently have only four directors and executive officers. We believe that we are able to effectively manage the issues normally considered by a Nominating Committee.  Following the entry into any business or the completion of any acquisition, merger or reorganization, a further review of this issue will no doubt be necessitated.
 
 
 
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If we do establish a Nominating Committee, we will disclose this change to our procedures in recommending nominees to our Board of Directors. 


ITEM 11:  EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the named persons for services rendered in all capacities during the noted periods. No other executive officer received total annual salary and bonus compensation in excess of $100,000.

       
Stock  
Option  
All Other  
 
   
Salary  
Bonus  
Awards  
Awards  
Compensation  
Total  
Name and Principal Position  
Year  
($)  
($)  
($)  
($)  
($)  
($)  
Kenneth Williams
2013
$0
$0
$4,200
$0
$0
$4,200
Michael Thompson
2013
$0
$0
$4,200
$0
$0
$4,200
Wayne Hansen
2013
$5,000
$0
$0
$0
$0
$5,000
Gary Johnson
2014
$0
$0
$38,890
$0
$0
$38,890
Kenneth Williams
2014
$0
$0
$157,100
$0
$0
$157,100
Michael Thompson
2014
$0
$0
$38,170
$0
$0
$38,170
Wayne Hansen
2014
$93,925
$0
$0
$0
$0
$93,925
 
Gary Johnson, Kenneth Williams and Michael Thompson received 110,000, 100,000, and 30,000 shares of common stock during the year ended December 31, 2014, respectively, for their services as directors of the Company. Each of Kenneth Williams and Michael Thompson received 10,000 shares of common stock on October 4, 2013 for their services as directors of the Company.

Summary of Employment Contracts and Material Terms
 
On January 29, 2014, we entered into an employment contract with Wayne Hansen, our Chief Financial Officer.  Under the terms of the contract, Mr. Hansen agreed to serve as Chief Financial Officer of the Company and will be compensated under the following terms: (i) Five Thousand dollars ($5,000) for the month of December 2013; (ii) Five Thousand dollars ($5,000) for the month of January 2014; (iii) Seven Thousand Five Hundred dollars ($7,500) for the month of February 2014; (iv) Seven Thousand Five Hundred dollars ($7,500) for the month of March 2014; (v) Ten Thousand dollars ($10,000) for the month of April 2014; (vi) Following April 2014, Ten Thousand dollars ($10,000) per month until amended by either party; (vii) At the option of either party, the compensation can be converted from cash to shares at a conversion rate of .25 per share. All shares converted will not be free trading until six months from the date of the agreement to be signed upon conversion; (viii) This compensation will be subject to adjustment pursuant to our employee compensation policies applicable to senior executives, as in effect from time to time.
 
Compensation of Directors  
 
Our board members receive 10,000 shares of our common stock quarterly for their service on our board. Mr. Johnson received 100,000 shares of our common stock when he joined the Board of Directors during the first quarter of 2014.

 
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ITEM 12:  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Security Ownership of Certain Beneficial Owners

The following table sets forth the ownership by any person known to us to be the beneficial owner of more than five percent (5%) of any of our outstanding voting securities as of April 7, 2015.  Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities.  The persons named in the table below have sole voting power and investment power with respect to all shares of common stock shown as beneficially owned by them.  The percentage of beneficial ownership is based upon 447,063,367 shares of common stock outstanding at that date.

Beneficial Owners

Title of Class
Name and Address of
Beneficial Owners
Amount and Nature of Beneficial Ownership
Percent of Class
Common Stock
Green Grow, LLC
1919 N Woodruff
Mesa, AZ 85207
27,000,000
6.039%
Common Stock
Jade Mercantile
1919 N Woodruff
Mesa, AZ 85207
27,205,281
6.085%
Common
Kenneth Williams
15,508,523
3.469%
 
CEO, Director
   
 
885 Cliffs Dr #304
   
 
Ypsilanti, MI 48198
   

Management

Title of Class
Name and Address of
Beneficial Owners
Amount and Nature of Beneficial Ownership
Percent of Class
Common
Kenneth Williams
15,508,253
3.469%
 
CEO, Director
   
 
885 Cliffs Dr #304
   
 
Ypsilanti, MI 48198
   
Common
Wayne Hansen
3,200,000
0.716%
 
CFO
   
 
565 Hawthorne Rise
   
 
Parksville, BC V9P 2KE
Canada
   
Common
Gary Johnson
1,028,878
0.230%
 
Director
   
 
PO Box 1858
   
 
El Prado, NM 87529
   
Common
Michael Thompson
30,000
0.007%
 
4906 S. Lincoln Way
   
 
Spokane, WA 99224
   
Common
All Officers and directors as a group (three)
19,767,131
4.422%

           SEC Rule 13d-3 generally provides that beneficial owners of securities include any person who, directly or indirectly, has or shares voting power and/or investment power with respect to such securities, and any person who has the right to acquire beneficial ownership of such security within 60 days.  Any securities not outstanding which are subject to such options, warrants or conversion privileges exercisable within 60 days are treated as outstanding for the purpose of computing the percentage of outstanding securities owned by that person.  Such securities are not treated as outstanding for the purpose of computing the percentage of the class owned by any other person.  At the present time there are no outstanding options or warrants.
 
 
 
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Changes in Control
 
Some of our convertible debtholders could convert their debt into enough shares to result in a change of control, although the agreements with the convertible debtholders have provisions that limit the beneficial ownership limitations of these lenders. There are no provisions in our Articles of Incorporation or Bylaws that would delay, defer or prevent a change in control.

Securities Authorized for Issuance under Equity Compensation Plans

None, not applicable.

ITEM 13:  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Transactions with Related Persons

On June 25, 2013, Ken Williams, our Chief Executive Officer, entered into a series of Stock Purchase Agreements through which he acquired a majority of the then-issued and outstanding shares of the Company. Pursuant to that transaction, a change of control occurred.