As filed with the U.S. Securities and Exchange Commission on June 27, 2017

SEC File No. 1-14088

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

 

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FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 

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(Exact name of registrant as specified in its charter)

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

Danny Gibbs, Director

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

Copies to:

Clifford J. Hunt, Esquire

Law Office of Clifford J. Hunt, P.A.

8200 Seminole Boulevard

Seminole, FL 33772

(727) 471-0444

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.☐

CALCULATION OF REGISTRATION FEE

 

 

(1) Represents shares of common stock previously issued and offered for resale by certain of our current shareholders; and, by Peak One Opportunity Fund, L.P. (“Peak One”), which shares are issuable by the registrant pursuant to the Equity Purchase Agreement, dated March 21, 2017 (“Equity Line”), between the registrant and Peak One.  The Company’s calculation of the maximum number of shares that may be registered for resale under the Equity Line pursuant to this Registration Statement is based upon the purchase price per share which shall be 90% of the Market Price on such date on which the Purchase Price is calculated in accordance with the terms and conditions of the Equity Line which is for a maximum of $5,000,000.00.  Market Price shall mean the lesser of the (i) lowest closing price of the common stock on the principal market for any trading day during the ten (10) trading days immediately preceding the respective put date, or (ii) lowest closing bid price of the common stock on the principal market for any trading day during the valuation period. The Company estimates that the maximum number of shares to be issued under the Equity Line is an additional 3,015,000.  The Company has already issued 110,000 shares to Peak One under the Equity Line.  The figure also includes shares held by certain of our current shareholders, be referred to herein as “Selling Stockholders.”

(2) This offering price has been estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) of the Securities Act with respect to the shares of common stock registered hereunder, based upon the price of $1.70, which was the average of the high and low prices for the Company’s common stock on May 31, 2017, as reported on the OTC Market Group, Inc.’s OTCQB tier.

(3) Estimated pursuant to Rule 457(a) of the Securities Act of 1933, as amended (the “Securities Act”) solely for purposes of calculating the registration fee.

(4) Computed in accordance with Section 6(b) of the Securities Act as in effect on June 21, 2017.

  

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

  

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE AND THE SELLING SHAREHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED JUNE 27, 2017

PRELIMINARY PROSPECTUS

16,537,031 SHARES OF COMMON STOCK

ACACIA DIVERSIFIED HOLDINGS, INC.

 

This Prospectus (this “Prospectus”) relates to the offer and sale of up to 16,537,031 shares of common stock, par value $0.001 of Acacia Diversified Holdings, Inc., a Texas corporation, by Peak One Opportunity Fund, L.P. (“Peak One”) and certain of our shareholders (the “Selling Stockholders”).  We are registering the resale of up to 3,125,000 shares of common stock issuable under an equity line in the amount of $5,000,000 (the “Equity Line”) established by the Equity Purchase Agreement, dated March 21, 2017 (“Equity Line”), between us and Peak One, as more fully described in this Prospectus and 13,412,031 shares of common stock previously issued to certain of our shareholders. The resale of such shares by the Selling Stockholders and Peak One pursuant to this Prospectus is referred to as the “Offering.”

 

We are not selling any securities under this Prospectus and will not receive any of the proceeds from the sale of shares of common stock by the Selling Stockholders. We will, however, receive proceeds from our sale of our shares of common stock under the Equity Line to Peak One.

 

Peak One is deemed an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act. Our current shareholders offering their shares of common stock for resale in the Offering may be deemed an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act. Both Peak One and the Selling Stockholders may sell the shares of common stock described in this Prospectus in a number of different ways and at varying prices. See “Plan of Distribution” for more information about how the Selling Stockholders may sell the shares of common stock being registered pursuant to this Prospectus.

 

We will pay the expenses incurred in registering the shares, including legal and accounting fees. See “Plan of Distribution.”

 

Our common stock is currently quoted on the OTC Market Group, Inc.’s OTCQB tier under the symbol “ACCA.” On May 31, 2017, the last reported sale price of our common stock was $1.70.

 

Our principal executive offices are located at 13575 58^th Street North, #138, Clearwater, Florida 33760.

 

Investing in our Common Stock involves a high degree of risk. See “Risk Factors” beginning on page 5 of this prospectus.

 

Neither the U.S. Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

The date of this prospectus is June 27, 2017

TABLE OF CONTENTS

 

 

ABOUT THIS PROSPECTUS

 

You should rely only on the information contained in this prospectus.  We have not authorized anyone to provide you with different information from that contained in this prospectus.  The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock.  This prospectus does not constitute an offer to sell, or a solicitation of an offer to buy the securities in any circumstances under which the offer or solicitation is unlawful.  Neither the delivery of this prospectus nor any distribution of securities in accordance with this prospectus shall, under any circumstances, imply that there has been no change in our affairs since the date of this prospectus.

We will receive no proceeds from the sale of the shares of common stock sold by Selling Stockholders.  However, we will receive proceeds from our sale of our shares of common stock under the Equity Line to Peak One.

 

OTHER INFORMATION

 

We maintain our web site at www.acaciadiversifiedholdings.com. Information on such web site is not considered a part of this prospectus. Unless specifically set forth to the contrary, when used in this prospectus the terms “Acacia Diversified Holdings, Inc.”, “we”, “us”, “our” and similar terms refer to Acacia Diversified Holdings, Inc., a Texas corporation.

SUMMARY INFORMATION, RISK FACTORS AND RATIO OF EARNINGS TO FIXED CHARGES

 

Past Transactions With Peak One Opportunity Fund, L.P.

We have not previously done any transactions with Peak One Opportunity Fund, L.P. or its affiliates.

Capital Requirements

We have previously done a transactions with Peak One.  During the three months ended March 31, 2017, the Company entered into a financing agreement with Peak One, whereby the Company will issue unsecured convertible note agreements to the investor in the aggregate principal amount of $400,000 at 10% discount. The financing will be funded in tranches, each with the issuance of a separate convertible note agreement by the Company.  On March 31, 2017, the Company issued the first convertible note agreement (“first note”) in the principal amount of $100,000 at 10% discount. The first note matures on March 31, 2019 and is convertible into the Company’s common stock at a conversion price of $1.60 per share if no event of default has occurred and is converted prior to 180 days after the issuance date.  See Footnotes 6 and 7 to Notes to Financial Statements for more detail.

PROSPECTUS SUMMARY 

About Us

 

Description of business, principal products, services and their markets

Acacia Diversified Holdings, Inc. (“we”, “us”, the “Company”, or the “Parent Company”) was incorporated in Texas on October 1, 1984 as Gibbs Construction, Inc. (“Gibbs”). The Company changed its name from Gibbs Construction, Inc. to Acacia Automotive, Inc. effective February 20, 2007. On October 18, 2012, the Company changed its name from Acacia Automotive, Inc. to Acacia Diversified Holdings, Inc. in an effort to exemplify the Company’s desire to expand into alternative industries as well as more diversified service and product offerings.  

On January 15, 2016, the Company acquired the assets and businesses of the MariJ Group of companies that included MariJ Agricultural, JR Cannabis Industries, LLC and Canna-Cures Research & Development Center, LLC.  The transaction has an effective date of January 4, 2016. On January 19, 2016, the Company filed a Current Report on Form 8-K announcing the acquisition. The Company subsequently filed expanded and updated information relating to that acquisition on its Amended Current Report on Form 8-K/A on April 25, 2016.  That document is available for viewing on the Company’s website at http://www.acacia.bz/sec/sec.htmand on the SEC website at:

https://www.sec.gov/Archives/edgar/data/1001463/000118518516004336/0001185185-16-004336-index.htm

 

Following the acquisition, the Company formed two new subsidiaries to conduct its new medical cannabis business activities, being MariJ Pharmaceuticals, Inc. (“MariJ Pharma”) and Canna-Cures Research & Development Center, Inc. (“Canna-Cures”).

MariJ Pharmaceuticals, Inc. 

The impetus of the MariJ Pharma subsidiary, among many other initiatives, is its proprietary mobile CO2, supercritical cannabis oil extraction unit which was USDA certified Organic on September 28th, 2016, by OneCert, under the US National Organic Program; 7 CFR PART205. MariJ Pharma extracts and processes very high quality, high-cannabinoid profile content medical grade cannabis oils from medicinal cannabis plants.  MariJ specializes in organic strains of the plant where available, setting itself apart from the general producers of non-organic products.    

Currently, the Company is transacting business in the state of Colorado where its activities are deemed legal under the laws of such state.

Canna-Cures launched its first research and development center in Colorado. In conjunction with that opening, Canna-Cures officially launched the Dahlia’s Botanicals Endocannabinoid Nutraceuticals product line.  A portion of the proceeds from our Dahlia’s Botanicals line are awarded to the Canna Moms 501(c)(3) organization in support of its continuing public education and awareness campaign.

Distribution methods of the products and services

MariJ Pharma extracts and processes a very high quality, high-cannabinoid profile content medical grade cannabis oils from medicinal cannabis plants in its propriety mobile CO2, supercritical cannabis oil extraction unit which was USDA certified Organic on September 28th, 2016, by OneCert, under the US National Organic Program; 7 CFR PART205. The finished product is then delivered to its customers.  Canna-Cures sells medical cannabis oils, oil-infused products, and other merchandises primarily through its retail dispensaries in Colorado.

 

Status of any publicly announced new products or services

The Company’s business plan includes developing its proprietary GeoTrackingTechnology that is fully compliant with the Health Insurance Portability and Accountability standard (“HIPAA”) utilizing its “plant to patient” solution. This GeoTraking Technology is designed to provide a full-channel patient care tracking system that is fully compliant under today’s strict HIPAA regulations that require privacy and security of the patient’s information. Beginning with RFID labeling and tracking of every single seed employed in the grow program and continuing through the sale of prescription products in a sophisticated retail Point of Sale delivery system, the GeoTraking Technology will be the most advanced system available.

The Company also plans to enter into research and development projects with institutions of higher learning in efforts to:  (i) develop new and better strains of medical cannabis related products for dispensing as medications, nutraceuticals, cosmeceuticals, and potential dietary supplements; and (ii) provide private label packaging services; and (iii) sell additional medical cannabis oils, oil-infused products, and other merchandise through its web-based portal or retail dispensaries planned for that purpose; and (iv) sell cosmeceutical and nutraceutical products and dietary supplements containing its high-quality cannabis oil extracts.

Sources and availability of raw materials and the names of principal suppliers

One of the ingredients used in the extraction process is carbon dioxide. MariJ Pharma depends on a supplier to supply high quality carbon dioxide. This supplier produces the highest quality carbon dioxide for the cannabis industry. If MariJ Pharma was not able to continue obtaining carbon dioxide from this supplier, it would need to look to other suppliers to supply this critical ingredient. However, the quality of the ingredient would suffer and the Company may not be able to obtain it at reasonable cost. At the present time, the Company is not anticipating a disruption of service by this supplier, whose identity we choose to keep confidential.

Dependence on one or a few major customers

In November 2016, MariJ Pharmaceuticals, Inc. entered into a service provider agreement with a USDA organic farm in northern Colorado.  The company has concluded its first 500lb contract and has executed a second 500lb contract, producing what the company believes to be the first USDA certified organic Hemp oil produced in America today.  During the year ended December 31, 2016, the Company’s revenues were concentrated on two customers who accounted for approximately 72% and 23%, of the total consolidated revenues, respectively.

Patents, trademarks, licenses, franchises, concessions, royalty agreements or labor contracts, including duration

The Company currently has patents pending, trademarks pending, and no franchises, concessions, royalty agreements or labor contracts. The Company intends to acquire, through its MariJ Pharma subsidiary, portions or complete ownership of licenses and grow operations in one or more states and is seeking to cultivate, organically extract and process its medicinal cannabis crops year around in indoor facilities.  The acquisition of these licenses is anticipated to provide the Company with the opportunity to compound medicinal products using mixtures of high cannabinoid profile oils that have very little hallucinogenic properties but have significantly improved medicinal properties.

Effect of existing or probable governmental regulations on the business

 

A majority of the states that have legalized the growing, production, and use of cannabis oil have passed legislation authorizing the use of high-CBD content and low-THC content oils.  As a result, and in keeping with regulations and laws in those venues, the Company, through its subsidiaries, intends to concentrate on those products unless and until the laws change to facilitate a wider range of grow and production opportunities.  The Company does have the technology and capability of extracting high-THC oils in those venues that do allow it, and will provide services to growers in those areas as contracted. The Company, through its new subsidiaries, will operate in the medical cannabis sector.  In order to help our shareholders better understand the products we intend to employ in our business plans, we have provided certain explanations and definitions below.

The Company will initially extract and process a derivative of the cannabis plant known as CBD oil. CBD is one of dozens of compounds found in cannabis plants that belong to a class called cannabinoids. Of these compounds, CBD, CBG, CBN, CBC and THC are usually present in the highest concentrations, and have the most common practical applications in the medical field.  The Company’s subsidiaries currently give most attention to high-CBD/low-THC products.  Marijuana, unlike most modern-day medicine, contains a wide range of chemical compounds. Scientists have identified to date, over 114 unique molecules in cannabis known as cannabinoids, which include THC and CBD. Many other non-cannabinoid compounds are produced by the plant, but these are the compounds that are most addressed as having a use by the medical community.

 

The medical cannabis industry faces very uncertain regulation in the light of the continuing deregulation of cannabis products in many states, either as high-CBD/low-THC products, or as high-THC products, but the continuing regulation of the cannabis industry by the federal government.  While the federal government has for several years chosen to not intervene in the cannabis business conducted legally within the states that have legislated such activities, there is nonetheless the potential that the federal government may at any time choose to begin enforcing its laws against the manufacturing, possession, or use of cannabis-based products.  Similarly, there is the possibility that the federal government may enact legislation or rules that authorize the manufacturing, possession or use of those products under specific guidelines.  In the event the federal government was to tighten its regulation of the industry, the Company would likely suffer substantial losses.  In the event the federal government was to loosen or change its rules or laws in favor of the industry, the Company would have an opportunity to benefit substantially if it were properly positioned to take advantage of the new opportunities.

Number of total employees and number of full-time employees

As of December 31, 2016, the Company had a total of eight employees, six of which are full time.

 

Use of Proceeds

 

We intend to use the proceeds from the Equity Line for general corporate purposes and working capital requirements.

 

We intend to raise additional capital through equity and debt financing as needed, though there cannot be any assurance that such funds will be available to us on acceptable terms, on an acceptable schedule, or at all. 

 

Transfer Agent

 

The transfer agent for our common stock is Pacific Stock Transfer, Inc. at 6725 Via Austi Pkwy, Suite 300, Las Vegas, Nevada 89119. The transfer agent’s telephone number is (702) 361-3033.

 

Financing Transaction Related to the Offering

 

The Equity Line

 

On March 20, 2017 (the “Closing Date”), the Company entered into an equity purchase agreement (the “Purchase Agreement”) with Peak One Opportunity Fund, L.P., whereby, upon the terms and subject to the conditions thereof, the Buyer is committed to purchase shares of the Company’s common stock (the “Purchase Shares”) at an aggregate price of up to $5,000,000 (the “Total Commitment Amount”) over the course of its 24-month term. From time to time over the 24-month term of the Purchase Agreement, commencing on the date on which a registration statement registering the Purchase Shares (the “Registration Statement”) becomes effective, the Company may, in its sole discretion, provide Peak One with a put notice (each a “Put Notice”) to purchase a specified number of the Purchase Shares (each a “Put Amount Requested”) subject to the limitations discussed below and contained in the Purchase Agreement. Upon delivery of a Put Notice, the Company must deliver the Put Amount Requested as Deposit Withdrawal at Custodian (“DWAC”) shares to Peak One within two trading days.

 

The actual amount of proceeds the Company receives pursuant to each Put Notice (each, the “Put Amount”) is to be determined by multiplying the Put Amount Requested by the applicable purchase price. The purchase price for each of the Purchase Shares equals 90% of the “Market Price,” which is defined as the lesser of the (i) lowest closing bid price of our common stock for any trading day during the ten (10) trading days immediately preceding the date of the respective Put Notice, or (ii) lowest closing bid price of the common stock for any trading day during the seven trading days immediately following the clearing date associated with the applicable Put Notice (the “Valuation Period”). Within three trading days following the end of the Valuation Period, Peak One will deliver the Put Amount to the Company via wire transfer.

 

The Put Amount Requested pursuant to any single Put Notice must have an aggregate value of at least $15,000, and cannot exceed the lesser of (i) 250% of the average daily trading value of the common stock in the ten trading days immediately preceding the Put Notice or (ii) such number of shares of common stock that has an aggregate value of $150,000.

 

In order to deliver a Put Notice, certain conditions set forth in the Purchase Agreement must be met, as provided therein. In addition, the Company is prohibited from delivering a Put Notice if: (i) the sale of Purchase Shares pursuant to such Put Notice would cause the Company to issue and sell to Buyer, or Buyer to acquire or purchase, a number of shares of the Company’s common stock that, when aggregated with all shares of common stock purchased by Buyer pursuant to all prior Put Notices issued under the Purchase Agreement, would exceed the Total Commitment Amount; or (ii) the sale of the Purchase Shares pursuant to the Put Notice would cause the Company to issue and sell to Buyer, or Buyer to acquire or purchase, an aggregate number of shares of common stock that would result in Buyer beneficially owning more than 4.99% of the issued and outstanding shares of the Company’s common stock.

Unless earlier terminated, the Purchase Agreement will terminate automatically on the earlier to occur of: (i) 24 months after the initial effectiveness of the Registration Statement, (ii) the date on which the Buyer has purchased or acquired all of the Purchase Shares, or (iii) the date on which certain bankruptcy proceedings are initiated with respect to the Company. In connection with the execution of the Purchase Agreement, the Company agreed to issue 110,000 shares of its common stock (the “Commitment Shares”) to Buyer or Buyer’s designee as a commitment fee.

 

Registration Rights Agreement

 

On the Closing Date, and in connection with the Purchase Agreement, the Company also entered into a registration rights agreement (the “Registration Rights Agreement”) with Buyer whereby the Company is obligated to file the Registration Statement to register the resale of the Commitment Shares and Purchase Shares. Pursuant to the Registration Rights Agreement, the Company must (i) file the Registration Statement within thirty calendar days from the Closing Date, (ii) use reasonable efforts to cause the Registration Statement to be declared effective under the Securities Act of 1933, as amended (the “Securities Act”), as promptly as possible after the filing thereof, but in any event no later than the 90th calendar day following the Closing Date, and (iii) use its reasonable efforts to keep such Registration Statement continuously effective under the Securities Act until all of the Commitment Shares and Purchase Shares have been sold thereunder or pursuant to Rule 144. 

RISK FACTORS

 

An investment in our Common Stock involves a significant degree of risk. You should not invest in our Common Stock unless you can afford to lose your entire investment. You should consider carefully the following risk factors and other information in this prospectus before deciding to invest in our Common Stock.

 

Risks Related to this Offering

 

We are dependent upon the proceeds from various offerings to provide funds to develop our business. There are no assurances we will raise sufficient capital to enable us to continue to develop our business.

While this offering will give us capital to implement our immediate strategies we cannot guarantee prospective investors that we will ever generate any significant revenues or report profitable operations, or that our revenues will not decline in future periods.  Until we begin making enough cash flow from our operations we are dependent upon the proceeds from various offerings to provide funds for the development of our business. If we cannot raise sufficient funds, we will have significantly less funds available to us to implement our business strategy, and our ability to generate any revenues may be adversely affected. We do not have any firm commitments to provide capital and we anticipate that we will have certain difficulties raising capital given the development stage of our company, and the lack of a public market for our securities. Accordingly, we cannot assure you that additional working capital as needed will be available to us upon terms acceptable to us. If we do not raise funds as needed, our ability to continue to implement our business model is in jeopardy and we may never be able to achieve profitable operations. In that event, our ability to continue as a going concern is in jeopardy and you could lose all of your investment in our company.

Our management has full discretion regarding the use of proceeds from this offering.

 

We anticipate that the net proceeds from this offering will be used the purposes set forth under “Use of Proceeds” appearing elsewhere in this prospectus. We reserve the right, however, to use the net proceeds from this offering for other purposes not presently contemplated which we deem to be in our best interests in order to address changed circumstances and opportunities. As a result of the foregoing, investors in the shares of Common Stock offered hereby will be entrusting their funds to our management, upon whose judgment and discretion the investors must depend.

There may not be enough liquidity in the market to sell the shares being registered in this offering.

Our common stock is currently listed on OTCQB. Over the last ninety (90) day period from June 6, 2017, the average daily volume was 1,257 shares traded (as reported on Yahoo Finance), which is not adequate to sell any significant number of shares if you wish to sell a significant number of your shares that you may buy through this offering due to that lack of liquidity in our stock in the market. There is no assurance that a more liquid market for our shares would ever develop and if so you may stand to lose your total investment you make buying our stock.

Risks Related to Our Business

 

Our auditors have issued a going concern opinion with respect to our consolidated financial statements, although our financial statements are prepared using generally accepted accounting principles, assuming the Company will continue as a going concern.

Inherent risks currently exist in this industry as a result of the determination by many nationally-chartered banks that they would be operating outside the federal laws by accepting deposits from cannabis oil producers.  Many states have legalized the growing, production, sale, and consumption of various cannabis related products, but the federal government has continued to take the position that such activities are not legal.  However, the federal government has taken the posture for years that it will defer to the states in those matters insofar as certain products, such as those containing a high concentration of THC, are not transported across state lines.  While the federal government has generally turned a blind eye to these matters in favor of state legislation, it nonetheless sends confusing signals to the industry.  As such, many nationally-chartered banks fear prosecution under money-laundering or other statutes, relegating some businesses to maintain large sums of cash on hand, even meeting payrolls and accounts payable obligations with cash rather than checks.  As a result, those businesses are placed at high risk of internal and external theft and crimes relating to the lack of controls and security afforded by transactional banking.  The Company is currently utilizing credit unions for its deposit needs, but this still creates risks when the proceeds at diverse production locations, are often themselves in cash due to the same issues, and cannot be deposited in nearby accessible depositories.  The Company has acquired an armored vehicle for use in the transport of cash and cannabis products, but believes those risks will not be minimized until national depository institutions allow cannabis-related businesses to utilize their facilities.

Because we have limited operating history, it is difficult to evaluate our business.

 

On January 15, 2016, the Company acquired certain assets that it will utilize in revenue-producing operations under two new operating subsidiaries related to the medicinal cannabis industry.  As a result of our limited operating history in those businesses, you have very little operating and financial data about us upon which to base an evaluation. You should consider our prospects in light of the risks, expenses and difficulties we may encounter, including those frequently encountered by new companies. If we are unable to execute our plans and grow our business, either as a result of the risks identified in this section or for any other reason, this failure would have a material adverse effect on our results of operations, business prospects, and financial condition.

The medicinal cannabis industry faces very uncertain regulation in the light of the continuing deregulation of cannabis products in many states, either as high-CBD/low-THC products, or as high-THC products, but the continuing regulation of the cannabis industry by the federal government.  While the federal government has for several years chosen to not intervene in the cannabis business conducted legally within the states that have legislated such activities, there is nonetheless the potential that the federal government may at any time chose to begin enforcing its rules against the manufacturing, possession, or use of cannabis-based products.  Similarly, there is the possibility that the federal government may enact legislation or rules that authorize the manufacturing, possession or use of those products under specific guidelines.  In the event the federal government were to tighten its regulation of the industry, the Company would likely suffer substantial losses.  In the event the federal government were to loosen or change its rules or laws in favor of the industry, the Company would have an opportunity to benefit substantially if it were properly positioned to take advantage of the new opportunities.

As such, the purchase of our securities is a purchase of an interest in what should be considered as a high risk venture or in a new or “start-up” venture with all the unforeseen costs, expenses, problems, and difficulties to which such ventures are subject.

We also plan to grow through acquisitions.

 

We also plan to grow through expansion of our new operations, creation of new businesses, acquisitions, and/or mergers, and investors have little current basis to evaluate the possible merits or risks of the target businesses’ operations or our ability to identify and integrate acquired operations into our company. Because we intend to develop and expand our business at least in part through selective acquisitions of or mergers with other businesses, there are significant risks that we may not be successful. We may not be able to identify, acquire or profitably manage additional companies or assets or successfully integrate such additional companies or assets into our Company without substantial costs, delays or other problems. In addition, companies we may acquire may not be profitable at the time of their acquisition or may not achieve levels of profitability that would justify our investment. Acquisitions may involve a number of special risks, including but not limited to:

 

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adverse short-term effects on our reported operating results,

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diversion of management’s attention,

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dependence on hiring, training, and retaining key personnel,

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risks associated with unanticipated problems or legal liabilities,

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amortization of acquired intangible assets, some or all of which could reflect poorly on our operating results and financial reports,

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implementation or remediation of controls, procedures and policies appropriate for a public company at companies that, prior to the acquisition, lacked these controls, procedures and policies; and,

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incursion of debt to make acquisitions or for other operating uses.

To the extent we complete a business combination with a financially unstable company or an entity in its development stage, we may be affected by numerous risks inherent in the business operations of those entities. Although our management will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all of the significant risk factors.

 

We may acquire a business in what may be considered a mature industry in which single-digit or low double-digit growth may occur. Most growth for our Company would, accordingly, occur largely through acquisitions. To the extent that competitors are also seeking to grow through acquisitions, we could encounter competition for those acquisitions or a generally increasing price to acquire going concerns.

A part of the Company’s strategy is to establish revenue through the acquisition of or merger with additional companies or operations. There can be no assurance that the Company will be able to identify, acquire, combine with, or profitably manage additional companies or successfully integrate the operations of additional companies into those of the Company without encountering substantial costs, delays or other problems. In addition, there can be no assurance that companies acquired in the future will achieve or maintain profitability that justify liabilities that could materially adversely affect the Company’s results of operations or financial condition. The Company may compete for acquisition, merger, and expansion opportunities with companies that have greater resources than the Company. There can be no assurance that suitable acquisition or merger candidates will be available, that purchase terms or financing for acquisitions or mergers will be obtainable on terms acceptable to the Company, that acquisitions or mergers can be consummated, or that acquired businesses can be integrated successfully and profitability into the Company’s operations. Further, the Company’s results of operations in fiscal quarters immediately following a material acquisition or merger could be materially adversely affected while the Company integrates the acquired business into its existing structure.

The Company will attempt to acquire or merge with business entities that are going and functioning concerns with a trailing history of profitability, but may acquire or merge with certain businesses that have either been unprofitable, have had inconsistent profitability prior to their acquisition or combination therewith, or that have had no operating history. An inability of the Company to improve the profitability of these acquired businesses could have a material adverse effect on the Company. Finally, the Company’s acquisition and merger strategy places significant demands on the Company’s resources and there can be no assurance that the Company’s management and operational systems and structure can be expanded to effectively support the Company’s acquisition strategy. If the Company is unable to successfully implement its acquisition and merger strategy, this inability could have a material adverse effect on the Company’s business, results of operations, or financial condition. The Company may face the opportunity to enhance shareholder value by being acquired by another company. Upon any acquisition of the Company, the Company would be subject to various risks, including the replacement of its management by persons currently unknown. There can also be no assurance that, if acquired, new management will be successfully integrated or can profitably manage the Company. In addition, any acquisition or merger of or by the Company may involve immediate dilution to existing shareholders of the Company. No assurances can be given that the Company will be able to or desire to be acquired, or be able to acquire or merge with additional companies.

 

Need for additional financing.

 

The Company does not have adequate capital or resources to fund its operations and other capital needs for the next six months without new and expanding revenue sources or additional capital infusion, and there can be no assurance that such funds will become available in amounts sufficient to meet the obligations of our business. The Company may require additional amounts of capital for its future expansion and working capital, possibly from private placements of its common stock or borrowing, but there can be no assurance that such financing will be available, or that such financing will be available on acceptable terms.

Dependence on key personnel.

 

Our future performance depends in significant part upon the continued service of our Chief Executive Officer, Richard K. Pertile. The loss of Mr. Pertile’s services could have a material adverse effect on our business, prospects, financial condition and results of operations. The Company does not presently maintain key man life insurance on Mr. Pertile, but may obtain such insurance at the discretion of its board of directors for such term as it may deem suitable or desirable. Our future success may depend on our ability to attract and retain highly qualified technical, sales and managerial personnel. The competition for such personnel can be intense, and there can be no assurance that we can attract, assimilate or retain highly qualified technical, sales and managerial personnel for favorable compensations in the future.

 

Technological change.

 

Technology, particularly the ability to (i) stay abreast of and ahead of current production oil extraction technologies; (ii) successfully create and promote new products related to our industry; (iii) continue to take a leading role in maintenance and distribution of our planned GeoTraking technology as it relates to RFID tracking from seed to sale, HIPAA compliance across the board including in its proprietary PoS systems, and otherwise; and (iv) use the Internet to conduct business and allow several management functions, is characterized by rapidly changing technology, evolving industry standards, frequent new product and service announcements, introductions and enhancements, and changing customer demands. Our future success will to some degree depend on our ability to adapt to rapidly changing technologies, our ability to adapt its solutions to meet evolving industry standards and our ability to improve continually the performance, features and reliability of its solutions.   The failure of the Company to adapt successfully to such changes in a timely manner could have a material adverse effect on the Company’s business, results of operations and financial condition. Furthermore, there can be no assurance that the Company will not experience difficulties that could delay or prevent the successful implementation of solutions, or that any new solutions or enhancements to existing solutions will adequately meet the requirements of its current and prospective customers and achieve any degree of significant market acceptance. If the Company is unable, for technological or other reasons, to develop and introduce new solutions or enhancements to existing solutions in a timely manner or in response to changing market conditions or customer requirements, or if its solutions or enhancements do not achieve a significant degree of market acceptance, the Company’s business, results of operations and financial condition could be materially and adversely affected.

 

Competition.

 

Any industry served by the Company is likely to be highly competitive across the entire United States and the rest of the world. In particular, the cannabis industry, being the impetus of all the Company’s attention at this juncture, is very highly competitive and has drawn thousands of competing entities.  While the Company believes its technology, programs, and plans place it in a posture to compete at the highest levels, the sheer numbers of competitors must be recognized. The Company has elected to devote the majority of its efforts on production and sales of its products and services within the continental United States, but may institute operations in diverse countries.  Even so, the Company must be considered as currently competing with other companies in diverse countries than can potentially produce and sell competitive products at lower prices.  While the Company believes that there are other hurdles for those foreign entities to overcome, including the high cost of international shipping to U.S. buyers, we believe that they nonetheless can compete with us in our markets.  We will potentially compete with a variety of companies, both domestic and international, and as such will be subject to various levels of competition. There is no assurance the Company will be able to adhere to its plans or to engage in any acquisitions or mergers at all.  The Company will consider fielding opportunities to buy, sell or distribute its products in other countries.  

Control.

 

Our Chief Executive Officer and Chairman of the Board of Directors owns or controls a significant percentage of our outstanding voting securities which could reduce the ability of minority shareholders to effect certain corporate actions.

 

As of January 15, 2016, in subsequent actions related to the acquisition of assets of the MariJ Group of companies by the Company, our Chief Executive Officer and Chairman of the Board of Directors, Richard K. Pertile, was issued 1,014,000 new Common shares of the Company in exchange for his interests in the acquired entities. In addition, he was granted, from the CEO and Chairman of the Board of the Company until that date, Steven L. Sample, the right of first refusal to purchase 2,500,000 shares of Mr. Sample’s Common stock of the Company in a window between April 4 and May 4, 2019, and was also given a proxy to vote those shares in the interim.  As such, following those transactions, Mr. Pertile owned 6.57% of the Company’s issued and outstanding common stock and controlled through the proxy 2,500,000 additional votes, or 16.20% of the total issued and outstanding voting power of the Company for a combined 3,514,000 votes, or 22.77% of the total. As a result, he currently possesses significant influence and can elect a majority of our board of directors and authorize or prevent proposed significant corporate transactions. His effective control may also have the effect of delaying or preventing a future change in control, impeding a merger, consolidation, takeover or other business combination or discourage a potential acquirer from making a tender offer.  As of the same date, Mr. Sample, the outgoing CEO and Chairman of the Company, continued to control the dispositive voting power of his remaining personal shares of the Company, after accounting for those votes given to Mr. Pertile by proxy, of 3,015,479 shares, or 19.54% of all issued and outstanding votes of the Company. In the event Mr. Sample were to combine his votes on any issue with the votes held by Mr. Pertile, they would jointly possess 42.31% of the voting power of the Company, allowing them significant influence that could elect a majority of our board of directors and authorize or prevent proposed significant corporate transactions. As of that same date, all officers and directors of the Company owned a combined total 6,809,979 shares representing 44.26% of the Company’s issued and outstanding common stock and voting power. Based upon the Company’s current business plan, it is anticipated that Mr. Pertile will continue to have substantial influence over, if not effective control over the Company’s operations in the near future, including the election of a majority of its board of directors, the issuance of additional shares of equity securities, and other matters of corporate governance, perhaps even after some potential subsequent issuances by the Company of new common shares for capital raising activities, acquisitions, or merger activities.

 

We may, in the future, issue additional shares of common stock, which would reduce investors’ percentage of ownership and may dilute our share value.

 

Our Articles of Incorporation, as amended, authorize the issuance of 150,000,000 shares of common stock.  The future issuance of common stock may result in substantial dilution in the percentage of our common stock held by our then existing shareholders. We may value any common stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, and might have an adverse effect on any trading market for our common stock.

 

 Management of growth.

 

The Company is continually seeking to identify and acquire viable businesses. As a result, the Company must manage relationships with a growing number of third parties as it seeks to accommodate this goal. The Company’s management, personnel, systems, procedures and controls may not be adequate to support the Company’s future operations. The Company’s ability to manage its growth effectively will require it to continue to expand its operating and financial procedures and controls, to replace or upgrade its operational, financial and management information systems and to attract, train, motivate, manage and retain key employees. If the Company’s executives are unable to manage growth effectively, the Company’s business, results of operations and financial condition could be materially adversely affected. If successful in acquiring or combining with other operations, the Company anticipates it may inherit a substantial portion of the staff necessary to operate the new entities, but there is no assurance that will happen, or that if it does happen, that the staff will remain employed by the Company for any period of time. We may find that some of the personnel and management of any acquisition target(s) may not be suitable for continued employment, while other suitable candidates may elect to discontinue their employment or affiliation with the Company for various reasons. This can create a burden on the Company’s management as it seeks to fill key positions. Failure of the Company to do so in a timely manner can result in disruption of operations, loss of revenues, and an attendant reduction in profits or even substantial losses.

Risks associated with expansion.

 

The Company desires to start, acquire or combine with other businesses, perhaps in diverse locations and markets.  To date, the Company does not have substantial experience in developing services on a regional or national scale. There can be no assurance that the Company will be able to deploy successfully its goods or services in those markets. There are certain risks inherent in doing business in several diverse markets, such as; unexpected changes in regulatory requirements, potentially adverse tax consequences, local restrictions, controls relating to inter-company communications and technology, difficulties in staffing and managing distant operations, fluctuations in manpower availability, effects of local competition, weather and climactic trends, and customer preferences, any of which could have a material adverse effect on the success of the Company’s operations and, consequently, on the Company’s business, results of operations, and financial condition.

Check, credit card, and other fraud.

 

Our business could be harmed if we experience significant credit, wire transfer, draft, check, credit card, or other fraud. If we fail to adequately control fraudulent transactions, our revenues and results of operations could be harmed. The Company may attempt to obtain insurance as partial protections from such potential losses, but even while the Company’s exposure to loss in this event may be limited by the purchase of any such insurance, losses could nonetheless occur. Any losses sustained as a result of fraud or fraudulent activity would adversely affect the Company’s business and results of operations, and its financial condition could be materially adversely affected.

 

Liability claims.

 

The Company may face costly liability claims by consumers or other businesses. Any claim of liability by a client, employee, consumer or other entity against us, regardless of merit, could be costly financially and could divert the attention of our management. It could also create negative publicity, which would harm our business. Although we maintain certain forms of liability insurance, it may not provide protections in the event of certain liability claims, or may not be sufficient to cover a covered claim if one is made.

 

The Company may not be able to attain profitability without additional funding, which may be unavailable.

 

The Company has limited capital resources. Unless the Company begins to generate sufficient revenues to finance operations as a going concern, the Company may experience liquidity and solvency problems. Such liquidity and solvency problems may force the Company to cease operations if additional financing is not available. No known alternative resources of funds are available in the event we do not generate sufficient funds from operations.

Our lack of history in our current industry makes evaluating our business difficult.

We have a limited operating history in our current industry and we may not sustain profitability in the future.

To sustain profitability, we must:

 

·

develop and identify new clients in need of our product;

·

economically increase production output;

·

compete with larger, more established competitors in our industry;

·

maintain and enhance our brand recognition; and

·

adapt to meet changes in our markets and competitive developments.

 

We may not be successful in accomplishing these objectives. Further, our lack of operating history makes it difficult to evaluate our business and prospects. Our prospects must be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies in their early stages of development, particularly companies in highly competitive industries. The historical information in this report may not be indicative of our future financial condition and future performance. For example, we expect that our future annual growth rate in revenues will be moderate and likely be less than the growth rates experienced in the early part of our history.

Governmental Regulation.

 

We will seek to implement our acquisition strategy in certain industries that may have unknown risks due to governmental regulation. 

The Company, through its new subsidiaries, will operate in the medicinal cannabis sector.  In order to help our shareholders better understand the products it intends to employ in its business plans, we have provided certain explanations and definitions below.

The Company will initially extract and process a derivative of the cannabis plant known as CBD oil. CBD is one of dozens of compounds found in cannabis plants that belong to a class called cannabinoids. Of these compounds, CBD and THC are usually present in the highest concentrations, and have the most common practical applications in the medical field.  The Company’s subsidiaries currently give most attention to high-CBD/low-THC products.  Marijuana, unlike most modern-day medicine, contains a wide range of chemical compounds. Many other non-cannabinoid compounds are produced by the plant, but these are the compounds are most addressed as having a use by the medical community.

 

Terpenes, the molecules responsible for marijuana’s smell, have been shown to block some cannabinoid receptor sites in the brain while promoting cannabinoid binding in others. As a result, terpenes are believed to affect many aspects of how the brain takes in THC or CBD, while offering various therapeutic benefits of their own. In fact, while THC has gotten most of the attention, studies suggest many of the compounds in marijuana work together to produce a synergy of effects. This is known as the “entourage effect.”

 

CBD and THC levels tend to vary between different strains and varieties of cannabis.  By using selective breeding techniques, certain growers have managed to create varieties with high levels of CBD and THC, being the varieties currently employed for oil production by the Company’s MariJ Pharmaceuticals subsidiary.  That subsidiary also specialized in extracting oil from certified organic plants, rather than the standard non-organic varieties.

Unlike THC, CBD does not cause a high or hallucinogenic effect. The reason why CBD is non-psychoactive is due to its lack of affinity for CB1 receptors, such as are found in high concentrations in the brain, and which become the channels through which THC is able to port its psychoactive effects.

 

The medicinal cannabis industry faces very uncertain regulation in the light of the continuing deregulation of cannabis products in many states, either as high-CBD/low-THC products, or as high-THC products, or the continuing regulation of the cannabis industry by the federal government.  While the federal government has for several years chosen to not intervene in the cannabis business conducted legally within the states that have legislated such activities, there is nonetheless the potential that the federal government may at any time chose to begin enforcing its rules against the manufacturing, possession, or use of cannabis-based products.

 

Any new legislation or regulation, or the application of laws or regulations from jurisdictions whose laws do not currently apply to the Company’s business could have a material adverse effect on the Company’s business, results of operations and financial condition.  Current federal regulations adverse to the medicinal hemp and marijuana industries are generally contradictory to legislated approval of that industry in a number of states.  The disparity in those divergent governmental views has and will continue to lead to conflicts and confusions in the perceived legalities on many operations related to the industry unless they ultimately come to congruence.

Inherent risks currently exist in this industry as a result of the determination by many nationally-chartered banks that they would be operating outside federal regulations by accepting deposits from cannabis oil producers. Governmental regulation in this area may adversely affect the Company’s operations, or may eliminate this barrier to normalization of the capital controls function.

 

A majority of the states that have legalized the growing, production, and use of cannabis oil have legislated the use of high-CBD content and low-THC content oils.  As a result, and in keeping with regulations and laws in those venues, the Company, through its subsidiaries, intends to concentrate on those products unless and until the laws change to facilitate a wider range of grow and production opportunities.  The Company does have the technology and capability of extracting high-THC oils in those venues that do allow it, and will provide services to growers in those areas as contracted.

 

The Company, as with most other companies, is subject to various business regulations, permits and licenses. The Company, through its new subsidiaries, has enter a new business realm that may entail considerably more regulation than its previous endeavors, and faces uncertainties related to federal laws that are in conflict with state laws in which the Company’s subsidiaries now operate or may operate in the future. It is possible that the federal government will ease its regulations relating to the cannabis industry, or even legalize the operation of and transporting of products resulting from business operations in that sector.  However, it is also possible that the government may decide to harden its stance against cannabis related products.  In the event the federal government takes a harder stance against cannabis-related products, the Company could suffer impairment of its operations and could sustain substantial losses.  The Company cannot foresee what direction the federal government may take in these matters, if any, but sees a continuing evidence that various states are legalizing cannabis products, both high-CBD/low-THC compounds as well as compounds containing high levels of THC. The Company believes that it has complied with appropriate state requirements for operations and believes it has obtained all permits necessary to function under the current state regulations.

 

If we fail to effectively manage our growth, our business, brand and reputation, results of operations and financial condition may be adversely affected.

 

We may experience a rapid growth in operations, which may place significant demands on our management team and our operational and financial infrastructure. As we continue to grow, we must effectively identify, integrate, develop and motivate new employees, and maintain the beneficial aspects of our corporate culture. To attract top talent, we believe we will have to offer attractive compensation packages. The risks of over-hiring or over compensating and the challenges of integrating a rapidly growing employee base may impact profitability.

 

Additionally, if we do not effectively manage our growth, the quality of our services could suffer, which could adversely affect our business, brand and reputation, results of operations and financial condition. If operational, technology and infrastructure improvements are not implemented successfully, our ability to manage our growth will be impaired and we may have to make significant additional expenditures to address these issues. To effectively manage our growth, we will need to continue to improve our operational, financial and management controls and our reporting systems and procedures. This will require that we refine our information technology systems to maintain effective online services and enhance information and communication systems to ensure that our employees effectively communicate with each other and our growing base of customers. These system enhancements and improvements will require significant incremental and ongoing capital expenditures and allocation of valuable management and employee resources. If we fail to implement these improvements and maintenance programs effectively, our ability to manage our expected growth and comply with the rules and regulations that are applicable to publicly reporting companies will be impaired and we may incur additional expenses.

 

We may be subject to regulatory inquiries, claims, suits, or prosecutions that may impact our profitability.

 

Any failure or perceived failure by us to comply with applicable laws and regulations may subject us to regulatory inquiries, claims, suits and prosecutions. We can give no assurance that we will prevail in such regulatory inquiries, claims, suits and prosecutions on commercially reasonable terms or at all. Responding to, defending and/or settling regulatory inquiries, claims, suits and prosecutions may be time-consuming and divert management and financial resources or have other adverse effects on our business. A negative outcome in any of these proceedings may result in changes to or discontinuance of some of our services, potential liabilities or additional costs that could have a material adverse effect on our business, results of operations, financial condition and future prospects.

  

Expanding our product offerings or number of offices may not be profitable.

We may choose to develop new products to offer. Developing new offerings involves inherent risks, including:

·

our inability to estimate demand for the new offerings;

·

our inability to perfect the new products;

·

our ability to locate and identify new buyers for those products;

·

competition from more established market participants; and

·

a lack of market understanding.

In addition, expanding into new geographic areas and/or expanding current service offerings is challenging and may require integrating new employees into our culture as well as assessing the demand in the applicable market.

 

Risks Related To Our Common Stock.

 

Risks of low priced stocks.

 

Following its initial public offering of its common stock in 1996, the Company’s shares were originally traded on the NASDAQ Exchange into 2000 as Gibbs Construction, Inc. under the trading symbol GBSE. Gibbs encountered severe financial difficulties in 2000, after which it was moved from the NASDAQ Capital Markets to the OTC Pink Sheets. Following the resurrection of the Company’s operations in 2007 through the intervention and assistance of the Company’s CEO, Mr. Sample, its stock currently trades on the OTCQB exchange under the trading symbol ACCA. Most of the Company’s issued and outstanding common shares continue to be restricted shares resulting in a small “float”. For that and other reasons the Company’s securities have been thinly traded, and while a trading market for the Company’s common stock could develop further with its current or new operations and the further release of restrictions on registered shares, there can be no assurance that it will do so.

Following the acquisition of the MariJ Group of companies on January 15, 2016, the Company saw immediate and continuing increased activity in the trading of its stock, with trading volumes exceeding any for at least the past ten years.

 

The Securities and Exchange Commission (the “SEC” or “Commission”) has adopted regulations which define a “penny stock” to be any equity security, such as those of the Company, that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. In the event the Company determined to offer its common stock for sale, or elected to utilize its common stock in an acquisition of merger transaction, it would be required to advise the potential purchasers or parties to any such acquisition or merger transaction of the risks of penny stocks. For any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to any transaction involving a penny stock by a retail customer, of a disclosure schedule prepared by the Securities and Exchange commission relating to the penny stock market. Disclosure is also required to be made about commissions payable to both the broker/dealer and the registered representative and current quotations for the securities. Accordingly, market makers may be less inclined to participate in marketing the Company’s securities, which may have an adverse impact upon the liquidity of the Company’s securities.  

If the Company were successful in identifying a new business opportunity and/or identifying an acquisition or merger target, became successful in actually launching a new business or acquiring or merging with any such target, and was successful in bringing profitable operations to the Company, it would intend to seek to meet the new listing requirements of the NASDAQ Capital market and attempt to return to that Exchange, which listing requirements include minimal capitalization, share price, and other benchmark requirements.  There is no assurance the Company can successfully identify any suitable new business opportunity, acquisition or merger candidate, or if successful in identifying a new business opportunity or merger/acquisition candidate, that it can be successful in developing a new business or completing any acquisition or merger, or if successful in developing a new business or completing any acquisition or merger that the Company could be successful in meeting the new listing requirements of the NASDAQ, or if successful in meeting those requirements, that the NASDAQ would accept the Company as a member, or that if the Company were successful in achieving a listing on the NASDAQ exchange that its share values would improve.  Any attempt to return to the NASDAQ Exchange, even if the Company were successful in meeting the requirements to do so, could take as long as two years or more to complete.

 

We are subject to penny stock regulations and restrictions and you may have difficulty selling shares of our common stock.

 

The SEC has adopted regulations which generally define so-called “penny stocks” to be an equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions.  Our common stock is therefore considered a “penny stock”, and we are subject to Rule 15g-9 under the Exchange Act, or the “Penny Stock Rule”. This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers. For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to sale. As a result, this rule may affect the ability of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our securities in the secondary market.

 

For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in a penny stock, of a disclosure schedule prepared by the SEC relating to the penny stock market. Disclosure is also required to be made about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock.

 

No assurance of payment of dividends.

 

Should the Company acquire additional operations, and should the operations of the Company become profitable, it is likely that the Company would retain much or all of its earnings in order to finance future growth and expansion. Therefore, the Company does not presently intend to pay dividends, and it is not likely that any dividends will be paid in the foreseeable future.

 

Potential future capital needs.

 

The Company may not be successful in generating sufficient cash from its new operations or in raising capital in sufficient amounts or on acceptable terms to meet its capital needs. The failure to generate sufficient cash flows or to raise sufficient funds may require the Company to delay or abandon some or all of its development and expansion plans or otherwise forego market opportunities, and may make it difficult for the Company to respond to competitive pressures, any of which could have a material adverse effect on the Company’s business, results of operations, and financial condition. While the Company may seek to raise capital through the offering of common stock, there can be no assurance that it will be successful in doing so, or if successful in raising capital that the proceeds in any such offering will be sufficient to permit the Company to implement its proposed business plan, or that any assumptions relating to the implementation of such plan will prove to be accurate. To the extent that the proceeds of any such offering are not sufficient to enable the Company to generate sufficient revenues or achieve profitable operations, the inability to obtain additional financing will have a material adverse effect on the Company. There can be no assurance that any such financing will be available to the Company on commercially reasonable terms, or at all, or that the Company will be successful in finding new operations.

  

Implementation of business plan.

The Company currently does not have sufficient working capital to pursue our business plan in its entirety as described herein. Our ability to implement our business plan will depend on our ability to obtain sufficient working capital and to execute its business plans. No assurance can be given that we will be able to obtain additional capital, or, if available, that such capital will be available at terms acceptable to us, or that we will be able to generate profit from operations, or if profits are generated, that they will be sufficient to carry out our business plans, or that the plans will not be modified.

 

 

The Cannabis industry is extremely speculative and its legality is uncertain. 

The possession, consumption, production and sale of Cannabis has historically been, and continues to be, illegal under federal law and in virtually all state and local jurisdictions, other than certain exceptions such as recent legalization in the States of Colorado, Washington, Oregon, Alaska and Washington D.C., and for medical purposes in certain states such as New York, California and Florida. While management believes that legalization trends are favorable and create a compelling business opportunity for early movers, there is no assurance that those trends will continue and be realized, that existing limited markets will continue to be available or that any new markets for Cannabis and related products will emerge for the Company. Our business plan is based on the premise that Cannabis legalization will expand, that consumer demand for Cannabis will continue to exceed supply for the foreseeable future, and that consumer demand for Cannabis for medical and recreational uses will grow as it becomes legal to possess and consume it. There is no assurance that this premise will prove to be correct or that we will be profitable in the future.

 

We are subject to various federal, state and local laws affecting the possession, consumption, production, supply and sale of Cannabis. The Federal Trade Commission, the Federal Food and Drug Administration, the Federal Drug Enforcement Agency and equivalent state agencies regulate all aspects of Cannabis and the advertising and representations made by businesses in the sale of products, which will apply to us. Cannabis is categorized under federal law as a Schedule 1 drug. Accordingly, the cultivation, production, transport, export, import, distribution, sale, marketing and use of Cannabis is prohibited under federal law. Certain activities that comply with state law, such as medical Cannabis in states where it has been legalized, are treated by the federal government with a non-enforcement policy under the internal guidelines of the “Cole Memorandum” published by the US Department of Justice.  On August 29, 2013, Deputy Attorney General James Cole issued a memo (the “Cole Memo”) in response to certain states passing measures to legalized medical and adult-use of cannabis. The Cole Memo does not alter the Department of Justice’s authority to enforce Federal law, including Federal laws relating to cannabis, regardless of state law, but does recommend that U.S. Attorneys focus their time and resources on certain priorities, rather than businesses legally operating under state law. These guidelines focus on ensuring that cannabis does not cross state lines, keeping dispensaries away from schools and public facilities, and strict-enforcement of state laws by regulatory agencies, among other priorities.  On February 14, 2014, the Departments of Justice and Treasury issued a joint memo allowing banks and financial institutions to accept deposits from dispensaries operating legally under state law. In most cases, dispensaries have been forced to operate on a cash basis, presenting significant security and accounting issues. This act by the Departments of Justice and Treasury was a major step in legitimizing and accepting the cannabis industry on a national level. 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

 

Various statements in this prospectus contain or may contain forward-looking statements that are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived from utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including those discussed under “Risk Factors,” which could cause our actual results to differ from those projected in any forward-looking statements we make.

 

Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this prospectus in its entirety, including the risks described in “Risk Factors.” Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this prospectus, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.

USE OF PROCEEDS

 

This Prospectus relates to shares of our common stock that may be offered and sold from time to time by the Selling Stockholders.  We will receive no proceeds from the sale of shares of common stock by the Selling Stockholders in this Offering.  The proceeds from the sales will belong to the Selling Stockholders.  However, we will receive proceeds from the sale of the Purchase Shares to Peak One pursuant to the Equity Purchase Agreement.  We intend to use the proceeds that we may receive from the sale of Purchase Shares to Peak One for general corporate purposes and working capital requirements. There can be no assurance that we will sell any of the Purchase Shares.  We cannot provide any assurance that we will be able to draw down any or all of the Total Commitment Amount, such that the proceeds received would be a source of financing for us.  We intend to raise additional capital through equity and debt financing, as needed, though there cannot be any assurance that such funds will be available to us on acceptable terms, on an acceptable schedule, or at all.

DETERMINATION OF OFFERING PRICE

 The offering price has been determined Represents shares of common stock offered for resale by Peak One Opportunity Fund, L.P. (the “Selling Stockholder”), which shares are issuable by the registrant pursuant to the Equity Purchase Agreement, dated March 31, 2017 (“Equity Line”), between the registrant and the Peak One.  The Company’s calculation of the maximum number of shares that may be registered for resale under the Equity Line pursuant to this Registration Statement is based upon the purchase price per share which shall be 90% of the Market Price on such date on which the Purchase Price is calculated in accordance with the terms and conditions of the Equity Line which is for a maximum of $5,000,000.00.  Market Price shall mean the lesser of the (i) lowest closing price of the common stock on the principal market for any trading day during the ten (10) trading days immediately preceding the respective put date, or (ii) lowest closing bid price of the common stock on the principal market for any trading day during the valuation period. The Company estimates that the maximum number of shares to be issued under the Equity Line is an additional 3,015,000.  The figure also includes shares held by certain of our current shareholders.  On May 31, 2017, the last reported sale price of our common stock was $1.70.

MATERIAL TERMS OF EQUITY PURCHASE AGREEMENT WITH PEAK ONE

The Equity Line

On March 31, 2017 (the “Closing Date”), the Company entered into an equity purchase agreement (the “Purchase Agreement”) with Peak One Opportunity Fund, L.P., whereby, upon the terms and subject to the conditions thereof, the Buyer is committed to purchase shares of the Company’s common stock (the “Purchase Shares”) at an aggregate price of up to $5,000,000 (the “Total Commitment Amount”) over the course of its 24-month term. From time to time over the 24-month term of the Purchase Agreement, commencing on the date on which a registration statement registering the Purchase Shares (the “Registration Statement”) becomes effective, the Company may, in its sole discretion, provide Peak One with a put notice (each a “Put Notice”) to purchase a specified number of the Purchase Shares (each a “Put Amount Requested”) subject to the limitations discussed below and contained in the Purchase Agreement. Upon delivery of a Put Notice, the Company must deliver the Put Amount Requested as Deposit Withdrawal at Custodian (“DWAC”) shares to Peak One within two trading days.

 

The actual amount of proceeds the Company receives pursuant to each Put Notice (each, the “Put Amount”) is to be determined by multiplying the Put Amount Requested by the applicable purchase price. The purchase price for each of the Purchase Shares equals 90% of the “Market Price,” which is defined as the lesser of the (i) lowest closing bid price of our common stock for any trading day during the ten (10) trading days immediately preceding the date of the respective Put Notice, or (ii) lowest closing bid price of the common stock for any trading day during the seven trading days immediately following the clearing date associated with the applicable Put Notice (the “Valuation Period”). Within three trading days following the end of the Valuation Period, Peak One will deliver the Put Amount to the Company via wire transfer.

 

The Put Amount Requested pursuant to any single Put Notice must have an aggregate value of at least $15,000, and cannot exceed the lesser of (i) 250% of the average daily trading value of the common stock in the ten trading days immediately preceding the Put Notice or (ii) such number of shares of common stock that has an aggregate value of $150,000.

 

In order to deliver a Put Notice, certain conditions set forth in the Purchase Agreement must be met, as provided therein. In addition, the Company is prohibited from delivering a Put Notice if: (i) the sale of Purchase Shares pursuant to such Put Notice would cause the Company to issue and sell to Buyer, or Buyer to acquire or purchase, a number of shares of the Company’s common stock that, when aggregated with all shares of common stock purchased by Buyer pursuant to all prior Put Notices issued under the Purchase Agreement, would exceed the Total Commitment Amount; or (ii) the sale of the Purchase Shares pursuant to the Put Notice would cause the Company to issue and sell to Buyer, or Buyer to acquire or purchase, an aggregate number of shares of common stock that would result in Buyer beneficially owning more than 4.99% of the issued and outstanding shares of the Company’s common stock.

Unless earlier terminated, the Purchase Agreement will terminate automatically on the earlier to occur of: (i) 24 months after the initial effectiveness of the Registration Statement, (ii) the date on which the Buyer has purchased or acquired all of the Purchase Shares, or (iii) the date on which certain bankruptcy proceedings are initiated with respect to the Company. In connection with the execution of the Purchase Agreement, the Company agreed to issue 110,000 shares of its common stock (the “Commitment Shares”) to Buyer or Buyer’s designee as a commitment fee and such shares have been issued.

Registration Rights Agreement

 

On the Closing Date, and in connection with the Purchase Agreement, the Company also entered into a registration rights agreement (the “Registration Rights Agreement”) with Buyer whereby the Company is obligated to file the Registration Statement to register the resale of the Commitment Shares and Purchase Shares. Pursuant to the Registration Rights Agreement, the Company must (i) file the Registration Statement within thirty calendar days from the Closing Date, (ii) use reasonable efforts to cause the Registration Statement to be declared effective under the Securities Act of 1933, as amended (the “Securities Act”), as promptly as possible after the filing thereof, but in any event no later than the 90th calendar day following the Closing Date, and (iii) use its reasonable efforts to keep such Registration Statement continuously effective under the Securities Act until all of the Commitment Shares and Purchase Shares have been sold thereunder or pursuant to Rule 144. 

This prospectus will be used for the offering of shares of our common stock owned by selling security holders.  The selling security holders may offer for sale up to 16,537,031 shares of our common stock originally issued to them by subscription agreement or contract.  Our Selling Stockholders may offer for sale up to 13,412,031 shares of common stock owned by them.  Peak One may offer for sale up to 3,125,000 shares of our common stock, 110,000 shares of which have previously been issued to them pursuant to the terms of the Equity Line.  The shares of common stock were issued pursuant to Regulation D and Section 4(a)(2) of the Securities Act of 1933 and the exempt transaction provisions of applicable state law.  All shareholders are sophisticated investors who were personally known by our prior and/or current management. We will not receive any proceeds from such sales.  We will, however, receive proceeds from our sale of our shares of common stock under the Equity Line to Peak One.

The resale of the securities by the selling security holder is subject to the prospectus delivery and other requirements of the Securities Act.  All selling security holders have been advised to notify any purchaser of their shares that none of the proceeds from the sale of their stock will go to the Company.  All expenses of this offering are being paid for by us on behalf of selling security holders.  The following table sets forth information on our selling security shareholders.  Explanatory footnotes relating to the footnote references appearing in the headings of this table are set forth below.

The following table details the name of each Selling Stockholder, the number of shares owned by each Selling Stockholder and Peak One, and the number of shares that may be offered by each Selling Stockholder and Peak One.  Peak One is deemed an underwriter and therefore this offering is also considered an indirect primary offering.  Peak One may sell up to 3,125,000 shares, of which 110,000 have been issued and an additional 3,015,000 shares are issuable upon the exercise of our put rights with Peak One.  Peak One will not assign its obligations under the Equity Line of credit.

 

Name of Security Holder		Shares owned as of date of Prospectus (1)				Shares Beneficially owned as of date of prospectus (2)				Percentage owned as of date of Prospectus				Percentage owned after offering complete (3)				Maximum Number of shares to be sold				Shares beneficially owned after offering complete			Position, office or other material relationship to Company within last 3 years
247BILLING.COM LLC			125,000				125,000				0.69	%			0.00	%			125,000				0.00		investors
ABUNDANT LIFE CHURCH			30,000				30,000				0.16	%			0.00	%			30,000				0.00		investors
JEAN ALTHAUS			200				200				0.00	%			0.00	%			200				0.00		investors
JAKE ANDERSON			200				200				0.00	%			0.00	%			200				0.00		investors
PATRICIA ANN ARNOLD			95,000				95,000				0.52	%			0.00	%			95,000				0.00		friend of X CEO
JULIE AVERY			1,000				1,000				0.005	%			0.00	%			1,000				0.00		investors
WAYNE AVERY			1,000				1,000				0.005	%			0.00	%			1,000				0.00		investors
MARVIN D BARFIELD			688				688				0.003	%			0.00	%			688				0.00		investors

 

RONALD F BARNES			7,500				7,500				0.04	%			0.00	%			7,500				0.00		investors
MORIAH BARNHART			2,000				2,000				0.01	%			0.00	%			2,000				0.00		Friend
DAVID E BARTLEY			10,000				10,000				0.05	%			0.00	%			10,000				0.00		investors
FREDERICK A BAUER			3,333				3,333				0.01	%			0.00	%			3,333				0.00		investors
TIMOTHY A BRAUER			15,000				15,000				0.08	%			0.00	%			15,000				0.00		investors
DAVID W BRIGHAM & TERESA J BRIGHAM JT TEN			125				125				0.00	%			0.00	%			125				0.00		investors
ARTHUR J BUCHTEL & HELEN ANN BUCHTEL JT TEN			38				38				0.00	%			0.00	%			38				0.00		investors
SANTRICIA CAMPBELL			25,200				25,200				0.14	%			0.00	%			25,200				0.00		investors
JOHN R CARABELLO			388				388				0.00	%			0.00	%			388				0.00		investors
Oscar J Chastain III			76,302				76,302				0.42	%			0.00	%			76,302				0.00		investors
PAUL B CHEBI & MARIE LOUISE CHEBI TR THE PAUL B. CHEBI FAM. TRUST			250				250				0.00	%			0.00	%			250				0.00		investors
Constance K Chilton			3,000				3,000				0.02	%			0.00	%			3,000				0.00		investors
TIM CHRISTIAN & SANDRA CHRISTIAN JTWROS			150,000				150,000				0.82	%			0.00	%			150,000				0.00		Friend
JESSICA COONS			1,000				1,000				0.01	%			0.00	%			1,000				0.00		investors
PENNY COX			200				200				0.00	%			0.00	%			200				0.00		investors
Dale Howerton			17,100				17,100				0.09	%			0.00	%			17,100				0.00		Friend
Daniel Rossi			9,000				9,000				0.05	%			0.00	%			9,000				0.00		Friend
KINYADA DAVIS			200				200				0.00	%			0.00	%			200				0.00		investors
Debbie Pertile(4)			80,000				4,864,000				0.44	%			0.44	%			80,000				0.44		Wife of Affiliate
Dennis Cathcart & Linda Cathcart JT WROS			6,000				6,000				0.03	%			0.00	%			6,000				0.00		Friend
BRAD DINKINS REVOCABLE LIVING TRUST DTD 12-6-1993			25,000				25,000				0.14	%			0.00	%			25,000				0.00		investors
DANIEL C DORSEY JR			10,000				10,000				0.05	%			0.00	%			10,000				0.00		investors
Douglas Buchheit & JEANNINE BUCHHEIT JT WROS			60,000				60,000				0.33	%			0.00	%			60,000				0.00		Friend
Douglas Paul Jr.			15,000				15,000				0.08	%			0.00	%			15,000				0.00		Friend
Cede & Co (DWAC)			450,347				450,347				2.48	%			0.00	%			450,347				0.00		investors
E & B FAMILY ADVENTURE PARTNERSHIP			25,000				25,000				0.14	%			0.00	%			25,000				0.00		investors
MARK S ECKHAUS			110,000				110,000				0.60	%			0.00	%			110,000				0.00		Friend
EDWARD JONES & CO			1				1				0.00	%			0.00	%			1				0.00		investors
JOHN M EMBREE & RITA D EMBREE JT TEN			125				125				0.00	%			0.00	%			125				0.00		investors
EURASIAN CAPITAL LLC			6,466				6,466				0.04	%			0.00	%			6,466				0.00		Investor
Exsylent Enterprises, LLC			15,000				15,000				0.08	%			0.00	%			15,000				0.00		Friend
HARRY FARNSWORTH & BETTE A FARNSWORTH JT TEN			125				125				0.00	%			0.00	%			125				0.00		investors
CEDE & CO (FAST)			1,190,425				1,190,425				6.82	%			0.00	%			1,190,425				0.00		investors
PAUL D FEMIA			10,000				10,000				0.05	%			0.00	%			10,000				0.00		investors
FIRST BAPTIST CHURCH			30,000				30,000				0.16	%			0.00	%			30,000				0.00		investors
ROBERT A FORRESTER			10,000				10,000				0.05	%			0.00	%			10,000				0.00		Friend
DON FOWLER			1,000				1,000				0.01	%			0.00	%			1,000				0.00		Friend
GREGORY L GAMMONS			85,000				85,000				0.47	%			0.00	%			85,000				0.00		Family of X CEO

 

GERALD D GAMMONS & MARTHA ELLEN GAMMONS JT WROS			55,000				55,000				0.30	%			0.00	%			55,000				0.00		Family of X CEO
NORMA L GAMMONS			20,000				20,000				0.11	%			0.00	%			20,000				0.00		Family of X CEO
TIMOTHY R GAMMONS & KATHLEEN A GAMMONS JTWROS			15,000				40,000				0.08	%			0.00	%			15,000				0.00		Family of X CEO
KATHLEEN A GAMMONS			12,500				40,000				0.07	%			0.00	%			12,500				0.00		Family of X CEO
TIMOTHY R GAMMONS			12,500				40,000				0.07	%			0.00	%			12,500				0.00		Family of X CEO
LESLIE K GAMMONS			15,500				15,500				0.09	%			0.00	%			15,500				0.00		Family of X CEO
PENNY H GAMMONS			5,000				5,000				0.03	%			0.00	%			5,000				0.00		Family of X CEO
STEPHEN MARK GAMMONS			15,000				15,000				0.08	%			0.00	%			15,000				0.00		Family of X CEO
VICTOR GANIN			10,000				10,000				0.05	%			0.00	%			10,000				0.00		Investor
MAME GARNER			2,000				2,000				0.01	%			0.00	%			2,000				0.00		Investor
DON GARY & MARILYN GARY			200				200				0.00	%			0.00	%			200				0.00		Investor
Gary J. Roberts, Jr.			282,000				282,000				1.61	%			1.61	%			282,000				282,000		Affiliate
George Tucci & DOROTHY TUCCI JT WROS			45,000				45,000				0.25	%			0.00	%			45,000				0.00		Friend
DANNY R GIBBS			177,500				177,500				1.01	%			1.01	%			177,500				177,500		Affiliate
DENNIS GIERHART			169				169				0.00	%			0.00	%			169				0.00		Investor
ROBERT F GRABE			6,250				6,250				0.03	%			0.00	%			6,250				0.00		Investor
TRACY A GRABE			6,250				6,250				0.03	%			0.00	%			6,250				0.00		Investor
Green RX LLC			9,000				9,000				0.05	%			0.00	%			9,000				0.00		Friend
MARTIN GROVES			74,750				74,750				0.41	%			0.00	%			74,750				0.00		Friend
KEVIN J GRYL			1,250				1,250				0.01	%			0.00	%			1,250				0.00		Investor
Hal Mueller & JUDY MUELLER JT WROS			15,000				15,000				0.08	%			0.00	%			15,000				0.00		Friend
NANCY HALL			1,050				1,050				0.01	%			0.00	%			1,050				0.00		Investor
ROBERT HALL			1,050				1,050				0.01	%			0.00	%			1,050				0.00		Investor
SHARON HALL			1,050				1,050				0.01	%			0.00	%			1,050				0.00		Investor
THOMAS MICHAEL HALL			1,050				1,050				0.01	%			0.00	%			1,050				0.00		Investor
VIRGIL WELDON HEWITT			50,000				50,000				0.27	%			0.00	%			50,000				0.00		Investor
LORI A HICKMAN			10,000				10,000				0.05	%			0.00	%			10,000				0.00		Friend
JOHN M HINCHMAN			7,500				7,500				0.04	%			0.00	%			7,500				0.00		Investor
HENLEY CUSTIS HOGE IV			250				250				0.00	%			0.00	%			250				0.00		Investor
DALE HONEYCUTT			1,050				1,050				0.01	%			0.00	%			1,050				0.00		Investor
JULIE HONEYCUTT			1,050				1,050				0.01	%			0.00	%			1,050				0.00		Investor
William J Howe			13,671				13,671				0.08	%			0.00	%			13,671				0.00		Investor
DOW HUFFMAN			5,000				5,000				0.03	%			0.00	%			5,000				0.00		Investor
JAMES C HUNTER			55,000				55,000				0.30	%			0.00	%			55,000				0.00		Investor
Stacy Jacoby			70,000				70,000				0.38	%			0.00	%			70,000				0.00		Investor
Jeffrey McLean			45,000				45,000				0.25	%			0.00	%			45,000				0.00		Friend
Jeffrey McLean CUST SELF DIRECTED IND. IRA			30,000				30,000				0.16	%			0.00	%			30,000				0.00		Friend

 

Jennifer Kleinbart & Bryant sullivan JT WROS			15,000				15,000				0.08	%			0.00	%			15,000				0.00		Friend
Jennifer M. Nance & JAMES L. NANCE JY WROS			15,000				15,000				0.08	%			0.00	%			15,000				0.00		Friend
JMJ Holdings LTD			20,000				20,000				0.11	%			0.00	%			20,000				0.00		Investor
JOYCE MORTON & THERESA ADAMS JTWROS			25,000				25,000				0.14	%			0.00	%			25,000				0.00		Investor
Judith Ann Sena			18,750				18,750				0.10	%			0.00	%			18,750				0.00		Friend
Kim Edwards			214,250				214,250				1.18	%			1.18	%			214,250				214,250		Affiliate
Avin Kline			4,285				4,285				0.02	%			0.02	%			4,285				0.00		Investor
NIKOLA KRECAK			125				125				0.00	%			0.00	%			125				0.00		Investor
FRANK J LAWRENCE			450,000				450,000				2.58	%			0.00	%			450,000				0.00		Investor
Carmela Lee & John J. Lee JT TEN			100,000				100,000				0.55	%			0.00	%			100,000				0.00		Investor
Leo A Sullivan & Michele R Sullivan TTEE  UA. DTD 6/17/2014			15,000				15,000				0.08	%			0.00	%			15,000				0.00		Friend
LIBERTY MUTUAL INSURANCE COMPANY			100,000				100,000				0.55	%			0.00	%			100,000				0.00		Investor
DAVID LITTLER			45,000				45,000				0.25	%			0.00	%			45,000				0.00		Investor
LISA ANN LIVERS			1,050				1,050				0.01	%			0.00	%			1,050				0.00		Investor
BETHANY BAPTIST CHURCH OF LOUISVILLE			30,000				30,000				0.16	%			0.00	%			30,000				0.00		Investor
Love MTN Tops, LLC			15,000				15,000				0.08	%			0.00	%			15,000				0.00		friend
JOY LYNN LUCAS			1,050				1,050				0.01	%			0.00	%			1,050				0.00		Investor
MARK ALLEN LUCAS			1,050				1,050				0.01	%			0.00	%			1,050				0.00		Investor
MICHAEL NEAL LUCAS			1,050				1,050				0.01	%			0.00	%			1,050				0.00		Investor
STEVEN WAYNE LUCAS			1,050				1,050				0.01	%			0.00	%			1,050				0.00		Investor
SUSAN LESLIE LUCAS			1,050				1,050				0.01	%			0.00	%			1,050				0.00		Investor
Ludmilla Giacomelli or Marco Giaomelli JT WROS			18,750				18,750				0.10	%			0.00	%			18,750				0.00		Friend
DANNY LEE LUFKIN			1,050				1,050				0.01	%			0.00	%			1,050				0.00		Investor
LARRY DEAN LUFKIN			1,050				1,050				0.01	%			0.00	%			1,050				0.00		Investor
PATRICIA LEE LUFKIN			1,050				1,050				0.01	%			0.00	%			1,050				0.00		Investor
ROGER WAYNE LUFKIN			2,050				2,050				0.01	%			0.00	%			2,050				0.00		Investor
MARIANNE LYNCH			6,250				6,250				0.03	%			0.00	%			6,250				0.00		Investor
MICHAEL L LYNCH			6,250				6,250				0.03	%			0.00	%			6,250				0.00		Investor
GERALD A LYON			375				375				0.00	%			0.00	%			375				0.00		Investor
SIRIO MAGGIACOMO & LILIAN MAGGIACOMO JT WROS			55,000				55,000				0.30	%			0.00	%			55,000				0.00		Investor
ANDREW M MAHONEY			10,000				10,000				0.05	%			0.00	%			10,000				0.00		Investor
VIRGINIA LYNN MASIELLO			1,000				1,000				0.01	%			0.00	%			1,000				0.00		Investor
RANDY MATTHEWS			1,000				1,000				0.01	%			0.00	%			1,000				0.00		Investor
Bernard W McBee Jr & Margaret H. McBee JT WROS			10,000				10,000				0.05	%			0.00	%			10,000				0.00		Investor
LEO R MCCLEVE			38				38				0.00	%			0.00	%			38				0.00		Investor
TIFFANY ANN MCCOMBIE			50,000				50,000				0.27	%			0.00	%			50,000				0.00		Investor
THOMAS MCDONOUGH			1,000				1,000				0.01	%			0.00	%			1,000				0.00		Investor
SHAWN MCLAFFERTY			200				200				0.00	%			0.00	%			200				0.00		Investor
SUSAN C MCLEAN			10,000				10,000				0.05	%			0.00	%			10,000				0.00		Investor
Michael B. Adair TTEE. UA  DTD. 2/1/2001  Michael B. Adair Trust			15,000				15,000				0.08	%			0.08	%			15,000				0.00		Friend

 

Michael Hatch & Karen Hatch JT WROS			33,750				33,750				0.19	%			0.00	%			33,750				0.00		Friend
Michael McLaughlin			100,000				100,000				2.72	%			2.72	%			100,000				0.00		Friend
KATHIE MONNIER			50				50				0.00	%			0.00	%			50				0.00		Investor
JOHN A MORTON			6,667				6,667				0.04	%			0.00	%			6,667				0.00		Investor
HARRY K MYERS JR IRA			475,000				475,000				2.61	%			2.00	%			475,000				0.00		Investor
Nancy Black Stewart			45,000				45,000				0.25	%			0.00	%			45,000				0.00		Friend
Neil B. Gholson			125,000				125,000				0.69	%			0.69	%			55,000				0.69		Affiliate
Neil B.Gholson Cust. Self directed Individual IRA			115,000				115,000				0.63	%			0.63	%			115,000				0.63		Affiliate
NEW LIFE CHAPEL			30,000				30,000				0.16	%			0.00	%			30,000				0.00		Investor
LINDA D PATON & CLINTON W PATON & JEFFREY M PATON. JT TEN			2,750				2,750				0.02	%			0.00	%			2,750				0.00		Investor
Paul Lunter & Maria Lunter JT WROS			111,000				111,000				0.61	%			0.00	%			111,000				0.00		Friend
PEAK ONE INVESTMENTS LLC			55,000				55,000				0.30	%			0.00	%			55,000				0.00		Investor
PEAK ONE OPPORTUNITY FUND L P			55,000				55,000				0.30	%			0.00	%			55,000				0.00		Investor
DEBORAH ANN PEPPER			1,000				1,000				0.01	%			0.00	%			1,000				0.00		Investor
ROBERT PEPPER			1,000				1,000				0.01	%			0.00	%			1,000				0.00		Investor
ED PERRY			12,500				12,500				0.07	%			0.00	%			12,500				0.00		Investor
BRANDON D PERTILE			40,000				40,000				0.22	%			0.00	%			40,000				0.00		Family / Son
TYLER R PERTILE			40,000				40,000				0.22	%			0.00	%			40,000				0.00		Family / Son
EDWARD POWELL			1,500				1,500				0.01	%			0.00	%			1,500				0.00		Investor
SHERYL PRARIO			15,000				15,000				0.08	%			0.00	%			15,000				0.00		Investor
AARON L PRARIO			20,000				20,000				0.11	%			0.00	%			20,000				0.00		Investor
PIPER DIANNE RICHEY			1,050				1,050				0.01	%			0.00	%			1,050				0.00		Investor
Richard K Pertile(4)			4,784,000				4,864,000				26.29	%			26.29	%			4,784,000				26.29		Affiliate
RML & Associates, Inc.			19,500				19,500				0.11	%			0.00	%			19,500				0.00		Friend
Robert B. Amstadt			33,750				33,750				0.19	%			0.00	%			33,750				0.00		Friend
ANTHONY C ROBINSON			75				75				0.00	%			0.00	%			75				0.00		Investor
TEXAS BANK & TRUST CUST  FBO David L. Sadler MD SEP IRA			150,000				150,000				0.82	%			0.00	%			150,000				0.00		Investor
DAVID L SADLER MD SEP IRA			130,000				130,000				0.71	%			0.00	%			130,000				0.00		Investor
David L Sadler			26,552				431,552				0.15	%			0.00	%			26,552				0.00		Investor
Texas Bank & Trust CUST for David Sadler ND SEP IRA			125,000				125,000				0.69	%			0.00	%			125,000				0.00		Investor
SAINT PATRICK CHURCH			30,000				30,000				0.16	%			0.00	%			30,000				0.00		Investor
DERRICK E SAMPLE			2,000				2,000				0.01	%			0.00	%			2,000				0.00		Family of X CEO
MARCELLA SAMPLE			2,000				2,000				0.01	%			0.00	%			2,000				0.00		Family of X CEO
SAMUEL SAMPLE & Vickie Sample JT WROS			1,917				1,917				0.01	%			0.00	%			1,917				0.00		Family of X CEO
AVERIE RAINE SAMPLE			1,500				1,500				0.01	%			0.00	%			1,500				0.00		Family of X CEO
CLAIRE OLIVIA SAMPLE			1,500				1,500				0.01	%			0.00	%			1,500				0.00		Family of X CEO
EDWARD W SAMPLE			175,000				175,000				0.96	%			0.00	%			175,000				0.00		family of X CEO

ALICE L. SAMPLE			50,000				50,000				0.27	%			0.00	%			50,000				0.00		family of X CEO
ARGELIA SAMPLE			50,000				50,000				0.27	%			0.00	%			50,000				0.00		family of X CEO
ARGELIA SAMPLE			38,000				38,000				0.21	%			0.00	%			38,000				0.00		family of X CEO
CHRISTOPHER S SAMPLE & SHERYL F SAMPLE JT TEN			75,000				75,000				0.41	%			0.00	%			75,000				0.00		Family of X CEO
CHRISTOPHER SCOTT SAMPLE			68,000				68,000				0.37	%			0.00	%			68,000				0.00		Son of X CEO
SHERYL SAMPLE			55,000				55,000				0.30	%			0.00	%			55,000				0.00		family of X CEO
MARY SAMPLE			15,000				15,000				0.08	%			0.00	%			15,000				0.00		Family of X CEO
FRANK SANTILLI & MILDRED E SANTILLI JT TEN			73				73				0.00	%			0.00	%			73				0.00		investor
ERIN SCHINE			10,000				10,000				0.05	%			0.00	%			10,000				0.00		Family
JOSEPH DANIEL SCOTT JR			125				125				0.00	%			0.00	%			125				0.00		Investor
J ROBERT SHAVER			5,000				5,000				0.03	%			0.00	%			5,000				0.00		Investor
JOHN W SHAVER			5,000				5,000				0.03	%			0.00	%			5,000				0.00		Investor
Clarence Shivers & Shaquita Shivers JT TEN			10,000				10,000				0.05	%			0.00	%			10,000				0.00		Investor
RAY SLEPSKI			98				98				0.00	%			0.00	%			98				0.00		Investor
MICHAEL SMIAROWSKI			250				250				0.00	%			0.00	%			250				0.00		Investor
THOMAS O SMITH II			13				13				0.00	%			0.00	%			13				0.00		Investor
JAMES T SMITH			5,000				5,000				0.03	%			0.00	%			5,000				0.00		Investor
SOUTHCREST CHURCH			30,000				30,000				0.16	%			0.00	%			30,000				0.00		Investor
LOUIS SPIRO FAMILY TRUST			60,000				60,000				0.33	%			0.00	%			60,000				0.00		Friend
LOUIS SPIRO			238,000				323,000				1.31	%			1.00	%			238,000				0.00		Friend
LOUIS SPIRO TTEE UA DTD 6-23-04 Lou Spiro Family Trust			25,000				25,000				0.14	%			0.00	%			25,000				0.00		Friend
TREVOR SPIRO			110,000				110,000				0.60	%			0.00	%			110,000				0.00		Friend
ST JAMES EPISCOPAL CHURCH			30,000				30,000				0.16	%			0.00	%			30,000				0.00		Investor
JANICE STAFFORD			750				750				0.00	%			0.00	%			750				0.00		Investor
STANDARD & POORS COMPUSTAT			1				1				0.00	%			0.00	%			1				0.00		Investor
JORDAN G STANLEY			85,225				85,225				0.47	%			0.00	%			85,225				0.00		Investor
Stephen Zahn			15,000				15,000				0.08	%			0.00	%			15,000				0.00		Friend
ROBERT EDWARD TETLEY			2,100				2,100				0.01	%			0.00	%			2,100				0.00		Investor
VIRGINIA ELNA TETLEY			1,050				1,050				0.01	%			0.00	%			1,050				0.00		Investor
Texas Bank & Trust CUST for Kenneth E. Reesor ND.IRA			120,000				120,000				0.66	%			0.00	%			120,000				0.00		Investor
Texas Bank & Trust CUST for Jordon Stanley MD Under 401(k) Plan			50,000				50,000				0.27	%			0.00	%			50,000				0.00		Investor
Thomas Amstadt			24,750				24,750				0.14	%			0.00	%			24,750				0.00		Friend
CARL KEITH THORNE			7,500				7,500				0.04	%			0.00	%			7,500				0.00		Investor
Tim Christian & Sandra Christian JT WROS			48,000				48,000				0.26	%			0.00	%			48,000				0.00		Friend
TRI-VALLEY CHURCH OF CHRIST			60,000				60,000				0.33	%			0.00	%			60,000				0.00		Investor
GARY L TUNGET & REBECCA I TUNGET JTWROS			5,000				5,000				0.03	%			0.00	%			5,000				0.00		Investor
UPTICK CAPITAL LLC			33,492				33,492				0.18	%			0.00	%			33,492				0.00		Investor